California – FTB Releases Guidance Regarding the New Economic Development Initiatives

SALT Report 2974 – The California Franchise Tax Board issued guidance regarding Governor Brown’s economic development initiative that was enacted by Assembly Bill 93 and Senate Bill 90.  Together the Bills:

AB 93 repealed and made changes to the following credits and incentives:

  • The Geographically Targeted Economic Development Area (G-TEDA) Tax Incentives
  • The Enterprise Zones (EZ)
  • The Local Agency Area Military Base Recovery Areas (LAMBRA)
  • The Targeted Tax Areas (TTA), and
  • The Manufacturing Enhancement Areas (MEA)

Prior to January 1, 2014, all G-TEDA hiring and sales or use tax credits were carried over until exhausted. Therefore, for any taxable year beginning on or after January 1, 2014, the time period for taking a carryover has changed to 10 years. In addition, the EZ Employee Credit and the New Jobs Credit were repealed as of January 1, 2014.

EZ and LAMBRA Sales or Use Tax Credits

The EZ and LAMBRA sales and use tax credit and business expense deduction will expire on January 1, 2014, and may only be claimed for property purchased and placed in to service prior to 2014.  However, the MEA and TTA sales and use tax credit and the TTA business expense deduction expired on January 1, 2013, and may only be claimed for property purchased and placed in service prior to 2013.

Sales or use tax credit carryovers may still be claimed on the business income apportioned to the repealed or expired EZ or LAMBRA. Any portion of the credit remaining may be carried over until January 1, 2024 or, until the credit is exhausted.

TTA Sales or Use Tax Credits

The TTA expired on December 31, 2012. Therefore, taxpayers engaged in a trade or business in an expired TTA may only claim the sales or use tax credit for qualified property purchased and placed into service on or before December 31, 2012. The sales or use tax credit may not be applied to any assets purchased and placed in to service on or after January 1, 2013.

Sales or use tax credit carryovers may still be claimed on the business income apportioned to the expired TTA.  Any portion of the credit remaining may be carried over until January 1, 2024 or, until the credit is exhausted

The FAQ’s also addresses the new employee credit, the new jobs credit, the California competes credit/Go-Biz credit, net operating loss deductions for all credits, the TTA business expense deduction, TTA and MEA hiring credits, and the EZ and LAMBRA hiring credits.

For Further Information

California Franchise Tax Board – Repeal of Geographically Targeted Economic Development Area Tax Incentives