California has created a new California Competes Grant (CalCompetes Grant) Program, with the first application period occurring from January 3 to January 24, 2022. $120 million of funds will be available, with $36 million potentially available to a single awardee. A business of any size is eligible to apply if it satisfies at least one of the following criteria: (1) creates at least 500 new full-time jobs in California, (2) makes capital investments of at least $10 million, or (3) the project will take place in an area of high unemployment or poverty as defined in the California Competes Tax Credit regulations.
As an above-the-line cash grant as opposed to a tax credit, the CalCompetes Grant is intended to benefit a broader range of companies, including those that have little or no tax liability, smaller businesses, startups, and flow-through entities.
A one-page flyer from GO-Biz with the evaluation and eligibility criteria is available here. Grant guidelines, application instructions, FAQs, webinar schedule, and other technical assistance documents are expected to be available on the GO-Biz website in mid-November.
The takeaway: California’s establishment of a new CalCompetes Grant Program and expansion of the existing CalCompetes Tax Credit Program offer opportunities for taxpayers considering expanding their footprint in California. The grant program may be attractive to taxpayers because of the $5 million annual credit limitation during tax years 2020 to 2022.
Companies that are either conducting multi-state site selection analyses for future growth or considering whether to stay and grow in California should consider the California Competes Grant Program regardless of whether they expect to pay cash tax in California.
The primary goal of the CalCompetes Grant Program is to incentivize businesses to choose California for investment and to stimulate the creation of quality, full-time jobs in the state. A significant objective for the new grant program is to make resources available to businesses for whom a non-refundable tax credit would not provide a significant financial benefit. The Program seeks to expand the pool of businesses that generally would qualify for tax credits by including companies with significant research and development credits and net operating loss carryforwards, smaller businesses with relatively low tax liabilities, and startups with little to no tax liability.
Applicants for the CalCompetes Grant must satisfy one or more of the following criteria:
The application window for the CalCompetes Grant will be from January 3, 2022, to January 24, 2022, with $120 million available. The grant will be awarded by GO-Biz on a competitive basis. Evaluation factors include:
The CalCompetes Grant Program is modeled after the existing California Competes Tax Credit (CCTC) Program. The CCTC is an income tax credit awarded by GO-Biz on a competitive basis to incentivize businesses to invest in California and stimulate the creation of quality, full-time jobs in the state. Over the history of the program, awardees have received awards ranging from $20,000 to as much as $39.5 million in tax credits. California has increased funding for the CCTC program from $231 million available in the 2020-2021 fiscal year to $394 million available in the current 2021-2022 fiscal year.
The following CCTC application periods remain for fiscal year 2021-2022:
Jon Anthony Sperring
Partner, State and Local Tax, PwC US