Preparing for the California Competes Tax Credit in Fiscal Year 2024-2025
Tax @ Armanino
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Issue No: 2024-12
On March 18, 2024, the California Governor's Office of Economic and Business Development (Go-Biz) closed the final application window for the California Competes Tax Credit (CCTC) for fiscal year 2023 – 2024. Go-Biz will begin to review and accept CCTC applications for the subsequent fiscal year 2024 – 2025 starting this summer in the June – August timeframe, with final application dates expected to be issued by Go-Biz in May.
In Detail
As companies continue to evaluate the high operational costs and overall decisions to make it economically feasible to relocate from California or expand and remain in the state, they should consider the CCTC program. The CCTC is one of the primary incentive tools provided by California and may provide valuable savings to new and existing California companies.
The CCTC provides a tax credit to new and existing businesses that are considering an expansion or retention project in California. The CCTC is a discretionary program that requires prior approval from Go-Biz through an application review, award allocation, and entering an incentive agreement with the State. This competitive tax credit program is provided to incentivize businesses to expand or remain in California through the retention of existing jobs, creation of new full-time jobs, and incurring investments in the state.1
Go-Biz and project applications administering the CCTC are considered on a case-by-case basis that provide the greatest benefit to California. The CCTC applications are completed in a phased approach and CCTC may provide allocations for project applications based on various qualitative and quantitative factors.2
Go-Biz will have approval to allocate up to $180M in annual credits for each fiscal year through 2027 – 2028, including any additional unallocated or recaptured amounts from prior years.3 The actual allocation for the 2024 – 2025 fiscal year will be announced in May. We have substantial experience assisting businesses in demonstrating the need for a CCTC award to reduce ongoing costs for continuing to expand or operate in California and secure CCTC allocations to make it viable to sustain operations in the state.
Insights
As businesses are constantly reviewing ways to maximize cost savings for their California operations, the CCTC may provide a lucrative incentive to reduce costs and generate a favorable ROI related to a new or existing location in California.
With an estimated $180M of credit allocation available annually, businesses considering a project in California that may create or retain jobs along with having investment in the state should consider the CCTC program and apply in the fiscal 2024 – 2025 period. An application may allow them to secure a portion of the available $180M CCTC awards along with any other state and local incentives that may be available in California.
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Contact the SALT NOW team with any questions regarding the CCTC program for an initial assessment of a potential project or any other California state tax matters. Our team has robust experience with the CCTC program and may assist in program viability, application, and securing an award agreement.
Alex Thacher , SALT Partner
Mike Shaikh , SALT Partner
Sharvil S. , Director, Credits & Incentives Leader
Sources
1 Cal. Rev. & Tax. Code § 17059.2, §18410.2, and §23689; Cal. Code. Regs. tit. 10, § 8020 and §8030.
2 Cal. Code. Regs. tit. 10, § 8030(k)
3 Cal. Rev. & Tax. Cd. § 23689(g)(1)(A)(B)(C)