‘California Competes’ Application Periods Announced for FY 2022-2023

July 2022

BY

Tanya ErbeManaging Director, State and Local Tax

Brian SzymanskiSenior Manager, State and Local Tax

The California Competes Tax Credit has been extended and is available for all taxable years that begin on or after January 1, 2014, and before January 1, 2030. The amount of available credit for each fiscal year is capped at a particular amount, which makes the application process very competitive. For the 2022-2023 fiscal year, the state has allocated $304,727,233 in tax credits and $120,000,000 in grant funding. The application due dates for this period are as follows:
  1. July 25, 2022 – August 15, 2022 ($85 million in credits and $120 million in grants available).
  2. January 3, 2023 – January 23, 2023 ($120 million in tax credits available).
  3. March 6, 2023 – March 20, 2023 ($99.7 million plus any remaining unallocated amounts from previous periods).
To begin the application process, taxpayers must submit an online application with the Governor of California’s Office of Business and Economic Development, commonly referred to as GO-Biz. Applications are accepted only during certain application periods. 
 
Once submitted, the application begins a two-step evaluation process. The first step of the process includes an analysis of the amount of credit requested relative to the taxpayer’s proposed employment and project investment. The top-ranking applications (i.e., those with the best ratios) are moved forward to the second step of the process, which considers the taxpayer’s plans for creating and retaining jobs; compensation to be paid, including wages, benefits, and fringe benefits; duration of the proposed project; the opportunity for future growth; training opportunities offered by applicant to its employees; and the extent to which the credit will influence the taxpayer’s ability, willingness or both to create jobs in this state that might not otherwise be created in the state by the applicant.
 
When the evaluation process is complete, selected taxpayers will be given the opportunity to negotiate the terms and conditions of a credit contract. This tax credit agreement, which expressly defines the taxpayer’s commitment to certain employment or project investment requirements, referred to as “milestones,” is negotiated between the taxpayer and GO-Biz and then must be approved by the California Competes Tax Credit Committee. The Committee meets only during certain periods. For the 2022-23 fiscal year, the Committee meets on the following schedule: 
  1. November 17, 2022.
  2. April 27, 2023.
  3. June 15, 2023.
Once approved, if the taxpayer meets its milestones for a taxable year as specified in the credit agreement, then the credit for that year is earned and may be claimed on its tax return. If the milestones for a taxable year are not met, the credit is not earned for that taxable year.
 

Who Is Eligible?

 
Any business may apply (i.e., there are no industry or size restrictions). Further, to help ensure that credits are available to more taxpayers, no more than 20% of the total available credits may be granted to a single taxpayer.
 
Finally, it is worth noting that taxpayers should be encouraged to apply even if it appears that they will be unable to utilize 100% of the credits granted for any particular year. Although the credit is nonrefundable, it may be carried forward up to six (6) years.
 

Targets

 Targets for the program include anyone looking to expand headcount or capital expenditures in California and anyone for which receiving the credit will prevent lay-offs or relocation from California.