In his final budget as Governor of California, Jerry Brown has proposed extending the California Competes Tax Credit Program (“Cal Competes”) for another five years, but at a somewhat reduced level.  March 26, 2018 marked the deadline to apply for the final round of Cal Competes credits in fiscal year 2017 - 2018. Unless the legislature reauthorizes the program, businesses will have no further opportunities to submit applications.  

Cal Competes is the state’s signature, discretionary economic development incentive. The California Governor’s Office of Business and Economic Development (GO-Biz) has requested tax credit allocation authority of $180 million per year (down from $200 million per year) through fiscal year 2022-23. Under the budget proposal credits could be claimed until January 1, 2030.  The Cal Competes budget proposal also:

• Eliminates the requirement that 25 percent of the total amount of available credits be awarded to small businesses (the Governor has made a separate proposal to provide assistance to small businesses); and
• Specifies that GO-Biz may consider the extent to which the credit will increase employment in the state when awarding tax credits.

The latter provision appears meant to address criticism that under the current Cal Competes program companies in non-traded sectors such as construction and accounting were eligible for, and able to claim credits for new jobs and investment that were never a flight risk.

The reauthorization of Cal Competes appears likely to be approved by the legislature as the Governor’s tax credit proposal is in alignment with the Assembly’s economic development priorities.  The legislature is constitutionally obligated to adopt a budget by June 15th. If approved, the newly-funded program is expected to again take applications and award tax credits three times each year, most likely adhering to the established July / January / March timeframes.

BLS & Co. is monitoring these changes and will keep our clients and friends up to date as important developments occur.

For more information about CalCompetes and other business incentives programs in California please send an email to ashapiro@BLSstrategies.com. For real-time updates on all state incentive programs please visit the BLS & Co website at www.BLSstrategies.com.