Go-Biz, the California Governor‚Äôs Office of Business and Economic Development, has issued a briefing explaining the components of the state‚Äôs proposed revision of economic development incentives.
The proposal called ‚ÄúNEW TOOLS FOR A NEW ECONOMY‚Äù was a part of the May Budget, and redirects around $750 million from the Enterprise Zone program to statewide incentives.
It includes proposals such as a manufacturing equipment sales tax exemption, a hiring credit, and investment incentives called the California Competes Incentive Credit which gives Go-Biz more flexibility for negotiations.
Leslie McBride, deputy director for Business Investment Services for GO-Biz, pointed out that two of the three proposed incentives will be available statewide, which she said makes all of California an Enterprise Zone.
The existing sales tax credit offered by California is limited to basic manufacturing equipment for companies in an Enterprise Zone, and excludes R&D spending. The new sales tax exemption will be available to companies located anywhere in the state and includes R&D equipment purchases by manufacturing and biotech industries.
Starting Jan 2014, qualified companies will be exempted from state sales tax for their first $200 million worth of equipment purchases. California estimates that it will need to provide exemptions worth around $400 million annually under the new system.
Under the existing system, companies can only claim the sales tax exemption in their annual income tax return. Under the proposed system, they are not required to pay the tax when they purchase equipment.
The second proposed incentive is a Hiring Credit, available to businesses located in areas with the 25 percent highest share of poverty and unemployment in the state. This five year credit offers 35 percent of annual wages (five year total of 175 percent) between 1.5 to 3.5 times the minimum wage, and is available for hiring unemployed workers and veterans, and people who are eligible for the federal earned income tax credit.
The Hiring Credit is not available for replacing existing employees, and is only valid for new jobs created. Small businesses must get at least 25 percent of the allotted credits. The state expects to have to provide at least $100 million per year in hiring credits.
The third proposed incentive is the California Competes Credit, to be administered by Go-Biz and approved by an impartial committee in order to secure economic development projects involving job creation and new capital investments.
The California Competes Credit will be available for statewide projects, with 25 percent going to small businesses. The state expects to provide between $100 million to $200 million of these credits per year.
Read the full Go-Biz briefing on California‚Äôs proposed new business incentives ‚Äì Download (pdf)