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How Much Do You Know About Two Important California Tax Credits?

Those who have invested the time, energy and resources into starting their own business obviously want to do everything in their power to ensure its continued success. As such, it's important for business owners to make a concerted effort to stay apprised of not just legal developments, but any legislative actions that could influence their bottom line.

This is especially true when it comes to tax-related issues, as business owners could stand to not just be adversely affected, but actually reap some very real benefits in this area.

To illustrate, consider two state tax credits currently available to California businesses: the California Competes Tax Credit and the Manufacturing and Research & Development Equipment Exemption.

The Manufacturing and Research & Development Equipment Exemption

Since last summer, certain California R&D firms and manufacturers have been eligible for a partial sales and use tax exemption that can be applied toward the purchase or lease of designated equipment.

In order to be eligible for the tax exemption, R&D firms and manufacturers must satisfy the following criteria:

  • Operate in certain types of business.
  • Buy qualified property.
  • Use that qualified property for designated activities.

Under the exemption, R&D firms and manufacturers would pay 3.3125 percent on the sale or lease of this qualified property, a significant drop from the standard 7.5 percent statewide sales and use tax rate, and a savings of $41.88 for every $1,000 spent.

California Competes Tax Credit

This income-tax credit program, which is currently accepting applications through April 6, is extended to those businesses looking to either come to the Golden State, or "stay and grow." Specifically, it's designed to foster both investment and new jobs.

Those businesses looking to reach a tax credit agreement will negotiate with the Governor's Office of Business and Economic Development, and any agreement reached will ultimately require approval from the California Competes Tax Credit Committee.

The state has set aside over $150 million for fiscal year 2015-2015, with 25 percent of funds earmarked for small businesses. There is upwards of $30 million remaining in the current funding cycle.

Here's hoping business owners take advantage of these opportunities …

To learn more about how our San Jose business lawyers can help your business, contact us.

Source: North Bay Business Journal, "New tax credits available for California businesses," March 11, 2015

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