Marcum LLP
Tax & Business

Tax Credits & Incentives - California

Watch and Money

Business Credits

New Employment Tax Credit

The New Employment Credit is a California income tax credit available to qualified employers for taxable years beginning on or after January 1, 2014, and before January 1, 2021. This credit is available for taxpayers that hire and pay qualified full-time employees in an elected economic development area or census tract.

Qualified Employee (meets any of the following conditions):

  • Unemployed for six months or more, not having completed a degree or course of study.
  • Unemployed for six months or more, and completed a degree or course of study more than 12 months prior to hire.
  • Veteran, separated from armed forces within 12 months.
  • Recipient of the federal Earned Income Credit in the previous taxable year.
  • Current recipient of CalWORKS or county general assistance.

Qualified Employer:

  • Each qualified full-time hourly employee is paid wages for of at least 35 hours per week.
  • Each qualified full-time employee who is a salaried employee was paid compensation during the year for full-time employment within the meaning of Section 515 of the Labor Code.
  • Employer is engaged in trade or business within a designated geographic area.
  • The qualified taxpayer has a net increase in its total number of full-time employees working in California when compared to its base year, both based on annual full-time equivalents.

The credit is based on 35% of qualified wages, or wages between 150% and 350% of minimum wage, and there is no cap on the total available credit or on the amount of credit available to a single employer. This credit can be carried forward for five years.

New California Motion Picture and Television Production Credit

This tax credit is for businesses in the film industry. This credit serves to reduce tax below the tentative minimum for expenditures incurred for business film and television productions. The California Film Commission (CFC) will allocate $330 million towards this program for 2016 and 2017.  In order to claim the credit, qualified taxpayers must apply to the California Film Commission.
Credit Amount:

  • 25% of the qualified expenditures attributable to the production of either a television series that relocated to California in its first year of receiving a tax credit allocation or an independent film.
  •  20% of the qualified expenditures attributable to the production of a qualified motion picture in California or a television series that relocated to California that is in its second or subsequent year of receiving a tax credit allocation.

Additional credits, not to exceed a total of 5% of qualified expenditures, may be allowed:

  • 5% of qualified expenditures relating to music scoring or music track recording attributable to the production of a qualified motion picture in California.
  • 5% of qualified expenditures relating to qualified visual effects attributable to the production of a qualified motion picture in California.
  • 5% of qualified expenditures relating to original photography outside the "Los Angeles Zone."

Independent Films
Additionally, qualified taxpayers are able to sell credits attributable to an independent film to an unrelated party. In order to be eligible, the film must have a minimum budget of $1 million and a maximum budget of $10 million.

Community Development Financial Institutions Tax Credit Program

This program allows businesses to receive tax credits allocated by the Department of Insurance when they invest in Community Development Financial Institutions (CDFI). An investment can either be a deposit or a loan that does not earn interest, an equity investment, or an equity-like debt instrument. Each year, $10 million in tax credits are distributed to investors, supporting $50 million in community development investments.  Under the program, investors receive a tax credit worth 20% of their investment in one of the COIN-certified CDFIs. Every $5 of private investment in certified CDFIs is eligible for $1 in state tax credits. This credit can be applied to the state personal income tax, corporation tax or insurer premium tax. 

California Research Credit

The California Research Credit reduces income or franchise tax for companies that paid or incurred qualified research expenses while conducting qualified business deduction research in California. The qualified research must be undertaken to discover information which is technological in nature, and this information must be intended to develop a new or improved business component.

The business will receive 15% of the excess of current year research expenditures over a computed base amount. Any unused amount may carry forward to future years until none remains.

College Access Tax Credit

The College Access Tax Credit (CATC) is a credit available to individuals and business entities that contribute to the CATC Fund administered by the California Educational Facilities Authority (CEFA). The credit can be used to reduce tax below the tentative minimum beginning on or after January 1, 2014.  The CATC is available until the taxable year of 2017. The credit is a percentage of the amount contributed each taxable year. The percentages for the following open tax years are:

  • 60 percent for 2014.
  • 55 percent for 2015.
  • 50 percent for 2016.
  • 50 percent for 2017.

The credit is claimed on the state income tax return. In order to apply for the credit, taxpayers must receive a certificate from CEFA.

Low Income Housing Credit

California allows a tax credit for construction or rehabilitation of low-income housing in California. The credit is equal to 30% of the amount invested and is claimed over four years. In order to receive this credit, a taxpayer must obtain an allocation from the Tax Credit Allocation Committee, and the rents must be maintained at low-income levels for 30 years.

California Competes Tax Credit

This is an income tax credit available to businesses that relocate to California. GO-Biz is responsible for negotiating tax credit agreements, and the California Competes Tax Credit Committee approves them. Businesses will commit to certain employment or project investment requirements, also referred to as "milestones," as part of the credit agreements. The amount of the credit will be based on the following factors:

  • The number of jobs the business will create or retain in this state.
  • The proposed or paid compensation by the business to its employees, including wages, benefits, and fringe benefits.
  • The amount of investment by the business.
  • The extent of unemployment or poverty where the business is located.
  • The incentives available to the business in this state from the state, local government and other entities.
  • The incentives available to the business in other states.
  • The duration of the business' proposed project and the duration the business commits to remain in this state.
  • The overall economic impact.
  • The strategic importance of the business to the state, region, or locality.
  • The opportunity for future growth and expansion in this state by the business.
  • The extent to which the anticipated benefit to the state exceeds the projected benefit to the business from the tax credit.

GO-Biz will allocate credits based on the number of applicants. $200 million has been allocated for fiscal years 2015-16 through 2017-18

California Environmental Tax Credit

The California Environmental Tax Credit is available to small refineries in California that produce ultra-low sulfur diesel fuel for each taxable year until January 1, 2018. The environmental tax credit is equal to five cents ($0.05) for each gallon produced during the taxable year at any facility located in California. The credit for any taxable year with respect to the facility cannot exceed 25% of the qualified capital costs incurred by the small refiner, reduced by the aggregate credits for all prior taxable years.

Ultra-low sulfur diesel fuel is defined as:

  • Diesel fuel with a sulfur content of 15 parts per million or less.
  • Vehicular diesel fuel produced and sold by a small refiner on or after June 1, 2006.

 Small refiner is any refiner that owns or operates a refinery in California that:

  • Has had at all times since January 1, 1978, a crude oil capacity of not more than 55,000 barrels per stream day.
  • Has not been at any time since September 1, 1988, owned or controlled by any refiner that at the same time owned or controlled refineries in California with a total combined crude oil capacity of more than 55,000 barrels per stream day.
  • Has not been at any time since September 1, 1988, owned or controlled by any refiner that at the same time owned or controlled refineries in the United States with a total combined crude oil capacity of more than 137,500 barrels per stream day.


To qualify for this credit, a small refiner must request certification.

For more information, visit:
https://www.ftb.ca.gov/businesses/bustaxcredit.shtml.

Individual

Earned Income Tax Credit

This is a new refundable tax credit that financially helps California's working families and individuals. The credit is available to California households with adjusted gross incomes of less than $6,850 if there are no qualifying children; less than $9,880 if there is one qualifying child; or less than $13,870 if there are two or more qualifying children. Children must meet certain criteria to qualify.

Non- Refundable Renter's Credit

A nonrefundable renter's credit can be used to reduce income tax for renters who have a personal income tax liability. The credit is equal to $60 for a single or married renter filing separately or $120 for head of household, widow, married/ RDP filing jointly.

Child and Dependent Care Expenses Credit

This credit is allowed for certain household and dependent care expenses acquired during the year due to employment. In order to claim this credit, the taxpayer's adjusted gross income must be less than $100,000 and have expenses related to a qualifying individual which includes one of the following:

  • A dependent of the taxpayer who is under 13 years old and for whom the taxpayer is entitled to a dependent exemption credit.
  • The spouse of the taxpayer, if he or she is physically or mentally unable to care for him or herself.
  • A dependent of the taxpayer who is physically or mentally unable to care for him or herself and for whom the taxpayer was entitled to a dependent exemption credit without regard to the gross income limitation.

For more information, please visit:
https://www.ftb.ca.gov/individuals/faq/credits.shtml


 

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Forbes tapped the expertise of Tax Partner Janis Cowhey for an article about smart ways to tap your retirement money early.

Ideally, you'll leave the money in your retirement accounts growing untouched until you retire. Uncle Sam imposes a 10% penalty on some early withdrawals to ....

Window for California Competes Tax Credit is Fast Approaching


Tax Flash - Tax Credits & Incentives

Window for California Competes Tax Credit is Fast Approaching

The California Competes Tax Credit program is an award-based program that is funded through the state's general fund. The purpose of the California Competes Tax ....

Research and Development Credit - R&D Expense IRS Directive


Research & Development Credit

Research and Development Credit - R&D Expense IRS Directive

Effective September 11, 2017, the Internal Revenue Service introduced a Research and Development Credit Directive for taxpayers that report R&D costs on GAAP audited financial ....

NBC Nightly News interviewed New York Tax Leader Maury Cartine for a story about how much President Trump stands to potentially save under the GOP tax plan.


As Seen In

NBC Nightly News interviewed New York Tax Leader Maury Cartine for a story about how much President Trump stands to potentially save under the GOP tax plan.

NBC Nightly News interviewed New York Tax Leader Maury Cartine for a story about how much President Trump stands to potentially save under the GOP ....

The New York Times spoke with Philadelphia Tax Partner-in-Charge Ed Reitmeyer about the treatment of pass-through income under the House Tax Cuts & Jobs bill.


As Seen In

The New York Times spoke with Philadelphia Tax Partner-in-Charge Ed Reitmeyer about the treatment of pass-through income under the House Tax Cuts & Jobs bill.

The rewrite of the tax code, which the House passed on Thursday, proposed a 25 percent tax rate for small businesses for owners who report ....

NBC News asked Marcum to analyze the impact of the House Tax Cuts & Jobs Act on the 2005 federal tax return of Donald Trump, and reported the Firm's findings.


As Seen In

NBC News asked Marcum to analyze the impact of the House Tax Cuts & Jobs Act on the 2005 federal tax return of Donald Trump, and reported the Firm's findings.

President Donald Trump has insisted, for months, that the Republican tax plan he supports won't benefit him. In fact, Trump and his heirs potentially could ....

Senate Committee on Finance Issues Version of Tax Cuts and Jobs Act


Tax Flash

Senate Committee on Finance Issues Version of Tax Cuts and Jobs Act

Last week, the Senate Finance Committee issued its version of the recently released House Tax Cuts and Jobs Act.

Avoid Double Taxation in Tennessee


State & Local Taxation

Avoid Double Taxation in Tennessee

Many Tennessee businesses have an interest in flow through entities subject to Tennessee taxation. The flow through income is reported by both the parent and ....

2017 Marcum Year-End Tax Guide Now Available


Press Release

2017 Marcum Year-End Tax Guide Now Available

Marcum LLP has issued its 2017 Year-End Tax Guide in the midst of Congressional efforts to reform the national tax code. This year's tax guide ....

Bloomberg Markets spoke with Tax Partner Shaun Blogg, Marcum's office managing partner in West Palm Beach, FL, about the impact of tax reform for businesses and individual taxpayers.


As Seen In

Bloomberg Markets spoke with Tax Partner Shaun Blogg, Marcum's office managing partner in West Palm Beach, FL, about the impact of tax reform for businesses and individual taxpayers.

Shaun Blogg, Marcum's office managing partner in West Palm Beach, FL, discussed the impact of tax reform for businesses and individual taxpayers with Bloomberg Markets.

Bloomberg Markets asked Tax Principal Michael D'Addio onto the program to discuss the prospects for the House and Senate tax bills.


As Seen In

Bloomberg Markets asked Tax Principal Michael D'Addio onto the program to discuss the prospects for the House and Senate tax bills.

Bloomberg Markets asked Tax Principal Michael D'Addio onto the program to discuss the prospects for the House and Senate tax bills.

The Philadelphia Inquirer interviewed Jeffrey Winkleman, partner-in-charge of corporate taxation, and Steve Brett, president of Marcum Financial Services, for an article about the proposed cap on 401(k) contributions.


As Seen In

The Philadelphia Inquirer interviewed Jeffrey Winkleman, partner-in-charge of corporate taxation, and Steve Brett, president of Marcum Financial Services, for an article about the proposed cap on 401(k) contributions.

Wall Street can't be happy about Congress' proposal to cap our yearly 401k contributions at $2,400 - thats the tax-deferred amount we would be able ....

Forbes interviewed Tax Partner Janis Cowhey about the increased lifetime estate and gift tax exemption.


As Seen In

Forbes interviewed Tax Partner Janis Cowhey about the increased lifetime estate and gift tax exemption.

Its official. For 2018, the estate and gift tax exemption is $5.6 million per individual, up from $5.49 million in 2017. That means an individual ....

Employee Retention Credits under the Disaster Tax Relief and Airport and Airway Extension Act of 2017


Tax Flash

Employee Retention Credits under the Disaster Tax Relief and Airport and Airway Extension Act of 2017

On September 29, 2017, the Disaster Tax Relief and Airport and Airway Extension Act of 2017 was signed into law, providing certain temporary tax relief ....

IRS and Treasury to Withdraw Proposed Regulations that Would Affect Discounts Applied to Transfers of Family-Owned Businesses


Tax Flash

IRS and Treasury to Withdraw Proposed Regulations that Would Affect Discounts Applied to Transfers of Family-Owned Businesses

On October 2, 2017, The Trump Administration issued Executive Order 13789. Included in this Executive Order, the IRS and the Treasury establish that they will ....

The New York Post interviewed Tax Leader Joseph Perry about the impact of potentially losing the deductions for mortgage interest, property taxes, and state and local taxes.


As Seen In

The New York Post interviewed Tax Leader Joseph Perry about the impact of potentially losing the deductions for mortgage interest, property taxes, and state and local taxes.

Homeowners would get a choice between deducting property taxes or mortgage interest on their federal tax returns as Republicans on Tuesday discussed modifications to the ....

Financial Advisor magazine spoke with Tax Partner John Mezzanotte about how to help clients save taxes on required minimum distributions from IRA accounts.


As Seen In

Financial Advisor magazine spoke with Tax Partner John Mezzanotte about how to help clients save taxes on required minimum distributions from IRA accounts.

Once your client reaches age 70 1/2, he or she must take required minimum distributions (RMDs) annually from taxable IRA and 401(k) accounts.

WCBS-TV 2 interviewed Tax Partner Robert Spielman about the impact of the new Tax Reform Framework on Long Island homeowners.


As Seen In

WCBS-TV 2 interviewed Tax Partner Robert Spielman about the impact of the new Tax Reform Framework on Long Island homeowners.

President Donald Trump calls his tax reform plan a middle class miracle. But the elimination of most deductions, including state and local taxes, has some ....

The Long-Awaited Tax Proposal: The Unified Framework for Fixing our Broken Tax Code


Tax Flash

The Long-Awaited Tax Proposal: The Unified Framework for Fixing our Broken Tax Code

On September 27, 2017, the Trump Administration and Republican leaders released a unified framework for tax reform that would make changes to both individual and ....

Tax Partner Robert Spielman wrote about maximizing your charitable contributions for his latest column in the Coconut Creek City News.


As Seen In

Tax Partner Robert Spielman wrote about maximizing your charitable contributions for his latest column in the Coconut Creek City News.

There is seemingly no end to the solicitations we receive from qualified charitable organizations seeking our assistance.

CNBC spoke with Trusts & Estates Co-Leader David First about the proposed repeal of the estate tax.


As Seen In

CNBC spoke with Trusts & Estates Co-Leader David First about the proposed repeal of the estate tax.

Donald Trump rallied the working class, but he is also championing one benefit favoring only the super-rich: eliminating the federal estate tax.

IRS Tax Relief for Hurricane Irma Victims


Tax Flash

IRS Tax Relief for Hurricane Irma Victims

The IRS is providing help to the victims of Hurricane Irma. Special tax relief and assistance is available to taxpayers in the Presidential Disaster Areas. ....

IRS has Provided Significant Relief for Taxpayers Affected by Hurricane Harvey


Tax Flash

IRS has Provided Significant Relief for Taxpayers Affected by Hurricane Harvey

As a result of the devastation caused by Hurricane Harvey, IRS has granted two significant forms of relief for those affected by the storm. The ....

The Tax Advisor published a semiannual review of recent developments in individual taxation, co-authored by Tax Director Don Zidik.


As Seen In

The Tax Advisor published a semiannual review of recent developments in individual taxation, co-authored by Tax Director Don Zidik.

The IRS issued proposed regulations that update the definition of dependent to be consistent with Sec. 152 and reverse the IRS's previous position regarding when ....

Bloomberg TV's Daybreak America invited Tax Leader Joseph Perry back to the program to discuss Washington's agenda for tax reform.


As Seen In

Bloomberg TV's Daybreak America invited Tax Leader Joseph Perry back to the program to discuss Washington's agenda for tax reform.

Joseph Perry, tax and business services leader at Marcum LLP, discusses the issues that he feels need to be tackled in order to achieve U.S. ....

Internal Use Software Regulations for the Research Tax Credit


Research & Development

Internal Use Software Regulations for the Research Tax Credit

In 2016, the Internal Revenue Service issued final regulations (T.D. 9786) regarding guidance on software that is developed primarily for a taxpayer’s internal use in ....

Tax Partner Paul Graney discussed a revision of the Pennsylvania Department of Revenue ruling on software support tax with Bloomberg BNA.


As Seen In

Tax Partner Paul Graney discussed a revision of the Pennsylvania Department of Revenue ruling on software support tax with Bloomberg BNA.

The Pennsylvania Department of Revenue has revised a controversial letter ruling on computer software support, dialing back guidance in an earlier version that implied training ....

CNBC.com interviewed Tax Partner Janis Cowhey about funding pre-school education for grandchildren.


As Seen In

CNBC.com interviewed Tax Partner Janis Cowhey about funding pre-school education for grandchildren.

Here's a way for boomers to share the wealth with their children and grandkids: Cover the cost of preschool and shake off gift taxes to ....

New Businesses or Start-Ups: Get Ready for the New Research and Development Credit Payroll Tax Offset


Tax Flash

New Businesses or Start-Ups: Get Ready for the New Research and Development Credit Payroll Tax Offset

The passing of the Protecting Americans from Tax Hike (PATH) Act of 2015 introduced many exciting changes related to the Research and Development (R&D) Tax ....

Tax Benefits of Hiring Veterans


Tax Credits & Incentives

Tax Benefits of Hiring Veterans

Our nation's veterans can provide businesses with various benefits, from leadership skills to work ethic and attention to detail. However, hiring veterans can also provide businesses ....

IRS Announces Guidance on Refundable Payroll Taxes of Research and Development Tax Credit Claims


Tax Credits & Incentives

IRS Announces Guidance on Refundable Payroll Taxes of Research and Development Tax Credit Claims

The IRS recently announced guidance regarding filing, claiming and reporting requirements related to the refundable Payroll Tax Credit provisions of the Research and Development (R&D) tax ....

Research & Development Tax Credit: Consider the Extension and Changes to Law When Preparing 2015 and 2016 Tax Returns


Tax Flash

Research & Development Tax Credit: Consider the Extension and Changes to Law When Preparing 2015 and 2016 Tax Returns

In December 2015, the Protecting Americans from Tax Hikes Act of 2015 ("Tax Extenders Bill") was signed into Law. The law includes an expansion of ....

New Florida R&D Tax Credit


Tax Flash

New Florida R&D Tax Credit

Tax Credits & Incentives Brochure

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Contacts

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Peter Downing, National Principal-in-Charge, Tax Credits and Incentives, Tax & Business

National Principal-in-Charge
Tax Credits and Incentives
Tax & Business
Irvine, CA
John Eckweiler, Partner-in-Charge, Tax Services -  California, Tax & Business

Partner-in-Charge
Tax Services - California
Tax & Business
Irvine, CA
 
2018 YEAR-END TAX GUIDE

The Marcum 2018 Year-End Tax Guide continues our tradition of providing timely tax guidance for the upcoming year.

 
 
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