Starting or Growing Your Business in California? Check out these state and local tax incentives
Los Angeles (c) Jennifer Grady
For the entrepreneur beginning the process of establishing a Startup, one of the primary considerations is its location. It is crucial to evaluate the location, incentives available to the company, and the resources available when planning for the future success of the company.
The State of California, Silicon Valley, and Los Angeles County have a variety of incentive programs available to both small and large businesses. While incentives should not be the only reason why one should consider a location, incentives may be one of many factors that could help lead to a final location decision.
Incentive programs typically fall into two categories: legislated and discretionary. State and federal legislated incentives are “on the books” and available to any business that meets stated criteria. Discretionary incentives are customized and provided by certain cities and only for specific projects on a case-by-case basis. In almost every case, discretionary incentives come into play when a community is trying to attract a large business operation that brings significant investment into that community and will have a substantial impact on jobs created.
The Los Angeles County 2015/2016 Business Incentives and Resources Guide describes the federal, state and local business incentives; employee training; business assistance; financial assistance; and additional “green” resources that can help you locate to L.A. County and/or grow your business here. Read below for a sampling of the state level and local tax incentives for 2016.
To learn more about the pros and cons of moving your Startup to Silicon Valley, read this article.
I. STATE LEVEL TAX CREDITS
The California Competes Tax Credit is an income tax credit available to businesses that want to come to California or stay and grow in California. Tax credit agreements will be negotiated by GO-Biz and approved by a statutorily created “California Competes Tax Credit Committee,” consisting of the State Treasurer, the Director of the Department of Finance, the Director of GO-Biz, one appointee each by the Speaker of the Assembly and Senate Committee on Rules. http://www.business.ca.gov/Programs/CaliforniaCompetesTaxCredit.aspx
California Research Credit reduces income or franchise tax. You may qualify for the credit if you paid or incurred qualified research expenses while conducting qualified research in California. You receive 15 percent of the excess of current year research expenditures over a computed base amount. You may carry over any unused amount to future years until none remains. In addition, combined reporting group members may assign credit to an affiliated corporation that is a member of the same group. https://www.ftb.ca.gov/businesses/credits/rd/overview.shtml
The California Film and TV Production Tax Credit Program 2.0 offers an income/sales and use tax credit for “qualified motion pictures.” A credit of 20% – 25% is available. http://www.film.ca.gov/incentives.htm
The Sales and Use Tax Exclusion Program for Advanced Transportation and Alternative Sources Manufacturing Program may be available to businesses involved in the design, manufacture, production, or assembly of “clean technology.” http://www.treasurer.ca.gov/caeatfa/ste/
The Clean Vehicle Rebate Project may offer rebates to business owners who purchase or lease new eligible zero-emission or plug-in hybrid electric vehicles. http://energycenter.org/programs/clean_vehicle_rebate_project
The Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project may provide vouchers to help California fleets purchase hybrid and zero-emission trucks and buses. http://www.californiahvip.org/about-the-project
New Employment Tax Credit On July 11, 2013, California Governor Jerry Brown signed Assembly Bill 93 and Senate Bill 90, which created the California New Employment Credit, replacing the California Enterprise Zone program. This new program began on January 1, 2014, and will be in effect for 7 years through January 1, 2021. Eligible businesses could generate tax credits annually from this program by hiring new qualified employees. https://www.ftb.ca.gov/online/New_Employment_Credit_Reservation/
The California Small Business Loan Guarantee assists businesses with the creation and retention of jobs while encouraging investment into low- to moderate-income communities. The SBLGP enables small businesses to not only obtain a loan it could not otherwise obtain, but more importantly helps to establish a favorable credit history with a lender so the business may obtain loans in the future on its own without the assistance of the program. http://business.ca.gov/Programs/SmallBusiness/FinancialDevelopmentCorporationPrograms.aspx
II. LOCAL TAX CREDITS- CITIES IN LOS ANGELES COUNTY
New Business Tax Holiday. The New Business Tax Holiday exempts any new business from paying the City of Los Angeles gross receipts business tax during its first three years of operation. Expires 12/31/15. http://finance.lacity.org/content/NewBusinessExemptionFAQ.htm
Use Tax Rebate Program. Businesses that participate in the City’s Use Tax Rebate Program can qualify for a rebate of 20% on the additional State collected use tax (67.5%) remitted by the business. http://finance.lacity.org/content/UseTaxRebateProgram.htm
LADWP offers Utility Infrastructure Loans and Solar Incentives.
Retail Sales Tax Through this program, the City returns to an eligible business 50% of the sales tax generated by the business in excess of the first $50,000 in sales tax. This program is available to a business for the period of time necessary to offset construction or improvement costs to a new expanded business and is not to exceed 15 years. http://www.longbeach.gov/citymanager/economic-development/retail-sales-tax/
Citywide Incentive for R&D Incentives include priority plan check review and fee reductions (Construction Tax waiver) for research and development improvement projects throughout the City. http://ww4.cityofpasadena.net/economicdevelopment/tech-incentives/
CITY OF SANTA CLARITA:
Citywide Incentive for R&D Incentives include priority plan check review and fee reductions (Construction Tax waiver) for research and development improvement projects throughout the City.
Industrial Development Authority Being located in the City of Santa Clarita allows certain businesses access to tax-exempt private activity bonds to finance capital projects such as acquisition of land, construction, or rehabilitation of facilities, and the purchase of equipment.
Recycling Market Development Zone (RMDZ) The City of Santa Clarita is one of 40 Recycling Market Development Zones (RMDZ) in California. The zones are designed to encourage the use of recycled materials in product manufacturing, while encouraging reduction of waste from manufacturing. Qualifying businesses are eligible for low interest loans, financial assistance referrals, and waste exchange.
Use Tax Rebate Program If your business makes purchases that require you to submit use tax, you can take advantage of this program. All you need to do is administer the paperwork to designate the use tax that you already pay to the State of CA, to be distributed to Santa Clarita and you are eligible to have a portion of those funds returned to you. Participation in this program can mean a significant return to your business.
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