Every small business owner needs to understand Santa Rosa tax requirements if receiving the California Competes credits. The Franchise Tax Board of California has just reviewed all businesses in the state and provided a very clear set of guidelines that businesses receiving the credits need to follow.
California introduced the California Competes tax initiative this year. The new initiative is intended to help grow struggling businesses in the state. According to Governor Brown’s office, the state has allocated $151.1 million for eligible businesses. While the benefits of the California Competes credits are indisputable, many entrepreneurs have raised questions about receiving them.
In January, the Sacramento Business Journal reported that the Brown Administration had approved California Competes applications for 51 businesses throughout the state. However, many potentially eligible businesses are reluctant to file an application, because they don’t understand the legal requirements.
The Franchise Tax Board is trying to educate people about the new initiative and the eligibility criteria for applying. They have also spent several months reviewing participating businesses to ensure they are in compliance.
The Governor’s Office of Business and Economic Development is releasing some of the details about the new policy after finalizing their reviews. Here are some of the questions that they have answered.
Who is eligible for California Competes tax credits?
The tax credits are available to businesses that plan to stimulate the state economy and benefit local businesses. There are eleven criteria that the governor’s office takes into consideration while reviewing applications:
· Job creation
· Wages paid
· Duration of the project
· Potential for future growth
· Capital invested
· Unemployment rate in the given area (since the unemployment rate in Santa Rosa is higher in many areas, local businesses may receive higher tax credits)
· Other incentives available to the business
· Incentives offered by other states the business operates in
· Impact on the Santa Rosa and California economy
· Impact on helping the state reach other key goals
· Net value for the state after the credit is provided
Since there are so many factors involved, businesses should consult with a Santa Rosa tax expert before applying. They can help create a strategic plan to ensure they receive the highest possible credit.
How much can a business receive in tax credits?
The state has earmarked slightly over $150 million for businesses in the 2014/2015 fiscal year. The credits available to California businesses will increase to $200 million the following year. The state law allows a single business to receive up to 25% of the available tax credits (i.e. nearly $40 million in 2014/2015).
However, while extensive tax credits are available, businesses will need to demonstrate the cost-benefit impact on the state. Here is the formula that the Brown Administration uses:
Total credit sought / ( (Number of jobs created * average salary per job) + Total capital investment)
Companies that prove that they are providing the highest return for the state are given preference. You may want to consider requesting a smaller amount of money to fund a more obviously beneficial project if you hope to receive funding.
There are a number of factors that businesses need to be aware of while applying for a California Competes tax credit. You will need to make a good case if you hope to receive the funding that you are looking for. If you need help applying for California Competes tax credits, then you should contact Horne Financial. We offer a number of Santa Rosa tax services and look forward to assisting you!
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