California – (GoBiz) “California Competes Tax Credit” Proposed Emergency Regulations Under Review (deadline for written comments 2/15/14)

SALT Report 3243 –The proposed regulations governing the “California Competes Tax Credit” have been submitted to the Office of Administrative Law (OAL).  This begins a 5 day period expiring on February 15, 2014 (Saturday) where taxpayers may submit written comments on the proposed emergency regulations to the OAL at calcompetes@gov.ca.gov.  These emergency regulations were approved on February 20, 2014 and are in effect until August 20,2014.  They are subject to two 90 day extensions.

This is an income tax incentive that is negotiated with the state of California through the GoBiz program.  The amount of credit is dependent on a number of factors beginning with a 50 question application process that is to be used as the basis for Two Phase analysis (Section 8030).

Phase I contains a mathematical calculation based on “the amount of tax credit requested, aggregate employee compensation package and aggregate investment package provided on the application form.”  This will be used to determine the rate of return and eventually the order in which the applications will be reviewed by GoBiz.  “Each applicant will be listed according to the lowest percentage of the cost-benefit-ratio, with the lowest percentage being positioned the highest and so forth.  Based on this order, GoBiz will then work down the list and engage the most competitive applicants to move forward to Phase II.”  It should also be noted that the regulations provide for a corporate officer to petition (certify in writing) to move into the Phase II directly on the basis of employee termination or relocation risk.

Phase II factors to be considered include:

  1. Unemployment of poverty in the area
  2. Other state incentives
  3. Economic impact on California
  4. Strategic importance of applicants business
  5. Employee retention in California
  6. Future growth or expansion in California
  7. Employee benefits and fringe benefits
  8. Any other information requested

It should be noted that negotiation of the tax incentive is emphasized basically looking to make sure the tax relief is a good deal for California and the taxpayer.

For Further Information:

CCTC Regulations 8000 through 8070