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Lucrative tax credit offered to firms

The deadline to apply is coming up quickly

Posted: April 6, 2014 2:00 a.m.
Updated: April 6, 2014 2:00 a.m.

After Gov. Jerry Brown put a stop to any new Enterprise Zone tax hiring credit for companies, he launched the California Competes Tax Credit program as an incentive to encourage business growth and higher-paying jobs.

Loosely structured, the door may have been left open to award state tax credits to any existing company – or one considering relocating to the state – that shows real promise in elevating economic productivity in the state.

The program is flexible for companies, as well, one sign that Brown is serious about helping businesses grow through incentives.

Companies actually negotiate how much of a tax credit they’re requesting – up to millions of dollars worth - and the tax credits may be carried over up to five years.

A business may apply again, and receive credits, even after having already received a tax credit award.

“It’s a negotiated tax credit,” said Brady Bryan, founder of Brayn Consulting of Santa Clarita. “California wants to stop the bleeding and exodus of good jobs leaving the state.”

The program is not industry-specific or geographically related like the Enterprise Zone was. It’s really opening the process up to help any business in California grow and compete, he said. Bryan’s company helps companies with the application process.

The taxes saved help to hire more people, maintain better paid workforce, add higher-paying jobs, lease more space, buy equipment, upgrade equipment or machines or even complete an expansion plan, he said.

“It’s a better strategy,” Bryan said. “It gives California the flexibility to deal with companies in every industry and geography. It gives them the tools to incentivize any business.”

But, the deadline for applying in this first go-round is April 14.

Although companies can ask for tax credits in the millions, Bryan said his firm anticipates most companies will ask for credit ranging from $100,000 to $400,000 in credits.

The approval process is a two-part one, with the entire process expected to take only 90 days, according the governor’s Go-Biz website from the Office of Business and Economic Development.

Applicants not awarded a credit during the application period will automatically be considered during the next enrollment period as long as it’s within the same fiscal year, according to the state’s fact sheet.

If an applicant passes round one, the review process, the company moves into phase two. At that point, the company needs to demonstrate any number of factors such as the number of full time jobs it will create, the level of compensation, the amount of money the company is investing in its business, opportunity for growth or expansion, or even strategic importance to the state, region or locality.

Letters of support from local government will be taken into consideration during this phrase, according to the state.

A committee reviews all applicants which consist of the State Treasurer, Director of the Department of Finance, Director of GO-Biz, and one appointee each from the Senate and Assembly.

Funding for the new program is $30 million, jumping to $150 million in the 2014/2015 fiscal year for the state, and then $200 million for each of the following two years.

“It’s a lucrative incentive for those companies that do qualify,” Bryan said. “And we want to see some SCV companies on this first list of companies that benefit.”


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