The program is designed to serve both business attraction and retention purposes. Once awarded, the tax credit is used against the income tax due the Franchise Tax Board with 6 tax year carryover. The credit can offset Alternative Minimum Tax as well.

1. California Competes Tax Credit
Overview
7.27.2016

2. Cal Competes Tax Credit
• Started March 2014, administered by Go-BIZ
• One of three programs replacing Enterprise Zone
• For businesses that want to stay and grow in CA
– Net increase in FT employees
– Investments in equipment, facilities
– 5 year period projection
• Competitive application & award process

3. Cal Competes Tax Credit (cont.)
• Companies are exempted from paying state income
taxes in amount awarded
• 6 tax year carryover
• Non-refundable
• Tied to achieving contractual (hiring/investment)
milestones
• Recapture provision

4. Availability
• Amount of credits available FY 2016-17:
- $243.3 million total
- 3 application periods
• No more than 20% may go to any one
applicant per fiscal year
• 25% of total amount each FY reserved for
small businesses (> $0 - $2 million)

5. Two Phase Evaluation Process
• Phase I is an automated process in which the applicant's
requested tax credit, aggregate employee compensation, and
aggregate investment are evaluated to determine a cost-
benefit ratio (return on investment) for the state
• Phase II evaluates applicants based on eight additional factors
including the Phase I ratio calculation
Applications from small businesses will be compared to applications from
other small businesses
Applicants certifying that absent award of the credit the project will/may occur
in another state will automatically move to Phase II

6. Phase I Evaluation
Amount of Credit Requested
Aggregate Employee
Compensation
Aggregate
Investment
Cost- Benefit Ratio:
Applicants with most advantageous cost-benefit ratio advance to Phase II
Review of top 200% of applicants

7. Historic Ratios for Phase I
1 All small businesses advanced into the Phase II evaluation in this application period.

8. Phase II Evaluation
• Phase I information
• Extent of unemployment / poverty
• Other incentives available
• Economic impact
• Strategic importance
• Number of retained employees
• Opportunity for growth/expansion
• Salary / benefits
• Other information requested

9. Application Process
• Three 4-week windows in each FY
- July 24 – Aug 22, 2016 ($75 million)
- Jan 2 – Jan 23 ($100 million)
- Mar 6 – Mar 27 ($68.3 million + leftover)
• Online application – 11 sections
• 90-day review/selection process

10. Documents
• Payroll records for full-time employees employed by the applicant
in its prior tax year
• Projected number, dates, and salaries for new FT employees in
current and next 4 tax years, and employee attrition projection or
known future reductions of FT employees
• Project investments of “real” and “personal” property related to the
project that will be purchased or leased after application deadline
• Costs or value of proposed investments – annual lump sums/year in
Phase I; breakdown of expenditures in Phase II

11. Agreements
• Terms and conditions of the agreements include:
- Minimum employee compensation and retention
period
- Credit distribution period
- Recapture provisions if applicant fails to meet
commitments
• Tax credit agreements must be approved by
California Competes Tax Credit Committee

12. 2015-16 Recipient Examples
Company Net increase
FT employees
Investments Credit
Faraday & Future, Inc. 1,990 $311,117,460 $12,725,000
I.A. Cosmetics 101 $8,400,000 $700,000
Southwest Medical
Resources
21 $1,260,155 $200,000
Outback Solutions 1 $144,000 $20,000
Canyon Plastics 45 $4,800,000 $350,000
Santa Clarita Valley Recipient – 2014-15

13. Questions?
Online application submission:
https://www.calcompetes.ca.gov
Notices and technical assistance:
www.business.ca.gov/CalCompetes.aspx