Manufacturers Research and Development Tax Credit Alert
By State Senator Lou Correa
I am pleased to share with you some good news that is expected to help grow the economy effectively by encouraging and rewarding the entrepreneurial spirit that made our state so great.
In 2013, legislation that was passed to reform tax credits and allowed California to effectively compete with other states and nations by redirecting approximately $750 million for job creation credits targeted toward high unemployment and high poverty areas of the state; establishing a new manufacturing sales tax exemptions; and establishing economic incentives for business who located anywhere in the state.
Major components of that legislation went into effect starting July 1st of 2014. Business are now allowed to exclude the first $200 Million in equipment purchases from 4.19 percent of the sales tax (the state share of the sales tax). I believe that these investments toward tax incentives help California manufacturing and biotech industries, and create of a transparent system for hiring credits to get more Californians back to work with middle-class jobs. To learn more about the eligibility requirements for these economic incentives please go to: http://www.boe.ca.gov/sutax/ manufacturing_exemptions.htm
This policy has tangible results. Recently, Boeing is Seal Beach, California will move roughly 1,000 engineering jobs from Puget Sound, Washington to Long Beach and Seal Beach over the next two years as part of a plan to realign its engineering operations and centralize its customer support. These are high wage earning jobs that yield an average of over $100,000 annually, which benefit our community and state.
Other components of last year’s legislation were a $200 Million Hiring Creditavailable for hiring of individuals meeting any of four criteria: veterans who are unemployed, people who have been unemployed for six months or more, those whose income qualifies them for the federal Earned Income Tax Credit, and ex-offenders. To qualify for these credits, businesses must have a net increase in jobs and be located in areas with the highest 25% of state unemployment. The maximum credit allowed is $56,000 per employee, compared to $36,000 under the current Enterprise Zone program.
Additionally,$100-$200 Million “CA Competes Incentive Credit”were made available to a business located in California. Administered by GO-Biz in the Governor’s office, the competition was based on the number of jobs to be created or retained, the extent of poverty in an area, limitations on minimum compensation, a set period of retaining the jobs, and new capital investment. All awards will be fully transparent, made publicly available with information posted on the Go-Biz website. If a business fails to fulfill the contract, that business may be required to refund those credits to the state.
Just recently, the Governor’s Office of Business and Economic Development (GO-Biz) announced that applications for California Competes Tax Credits are being accepted. For more information about application periods, please go here.
While our state’s economy is showing some signs of improvement, we have much more to do to get Californians back to work and encourage and keep businesses thriving in our great state. I hope that you find this information helpful and please contact my Sacramento or district office for more information.
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E-mail: Senator Lou Correa