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Frequently Asked Questions - California Competes Credit

  1. What taxable years is the California Competes Credit (CCC) available?
  2. Can the CCC reduce tax below tentative minimum tax?
  3. Is this credit refundable?
  4. Can the credit be carried forward to future years?
  5. Can this credit be assigned to an affiliated corporation under R&TC 23663?
  6. Will Franchise Tax Board review the taxpayer's books and records to ensure compliance with the terms and conditions of the written agreement?
  7. Will this review of the books and records to ensure compliance with the written agreement be the same as a normal audit of my tax return?
  8. If the taxpayer is not in compliance with the written agreement, will the credit or portion of the credit be recaptured?
  9. How will the recapture be reported by the taxpayer?
  10. If my business receives a CCC allocation, am I eligible to also claim the New Employment Credit (NEC)?

  1. What taxable years is the California Competes Credit (CCC) available?

    The CCC is available for each taxable year beginning on and after January 1, 2014, and before January 1, 2025.

  2. Can the CCC reduce tax below tentative minimum tax?

    No.

  3. Is this credit refundable?

    No.

  4. Can the credit be carried forward to future years?

    Yes. In the case where the credit allowed exceeds the “tax,” the excess may be carried over to reduce the “tax” in the following year, and the succeeding five years if necessary, until exhausted.

  5. Can this credit be assigned to an affiliated corporation under R&TC 23663?

    Yes. A credit or carryover earned by members of a combined reporting group may be assigned to an affiliated corporation that is a member of the same combined reporting group that meets the provisions of an eligible assignee. The eligible assignee shall be treated as if it originally generated the assigned credit. Any credit limitations or restrictions that applied to the eligible assignor will also apply to the eligible assignee. Get more information about credit assignment.

  6. Will Franchise Tax Board review the taxpayer's books and records to ensure compliance with the terms and conditions of the written agreement?

    Yes. Except for a “small business” as explained below, the Franchise Tax Board shall review the books and records of all taxpayers allocated a credit pursuant to this section to ensure compliance with the terms and conditions of the written agreement between the taxpayer and GO-Biz.

    In the case of a taxpayer that is a “small business,” as defined below, the Franchise Tax Board shall review the books and records of the taxpayer to ensure compliance with the terms and conditions of the written agreement between the taxpayers and GO-Biz when a review of those books and records is appropriate or necessary in the best interests of the state. This determination is made by Franchise Tax Board.

    A “small business” means a trade or business that has aggregate gross receipts, less returns and allowances reportable to this state, of less than two million dollars ($2,000,000) during the previous taxable year. For this purpose, “gross receipts, less returns and allowances reportable to this state,” means the sum of the gross receipts from the production of business income, as defined in subdivision (a) of R&TC Section 25120, and the gross receipts from the production of nonbusiness income, as defined in subdivision (d) of R&TC Section 25120.

  7. Will this review of the books and records to ensure compliance with the written agreement be the same as a normal audit of my tax return?

    No. These reviews are separate from our normal audits of the tax return and will not preclude FTB from auditing your tax return for items other than the CCC.

  8. If the taxpayer is not in compliance with the written agreement, will the credit or portion of the credit be recaptured?

    If there is a possible breach of the written agreement by a taxpayer, the Franchise Tax Board shall provide detailed information to GO-Biz regarding the basis for that determination. The California Competes Tax Credit Committee shall determine if the credit will be recaptured and the amount of the recapture. GO-Biz will notify the taxpayer and the Franchise Tax Board of the amount to be recaptured.

  9. How will the recapture be reported by the taxpayer?

    Any recapture, in whole or in part, shall be treated as a mathematical error appearing on the return. Any amount of tax resulting from that recapture shall be assessed by the Franchise Tax Board in the same manner as provided by R&TC Section 19051. The amount of tax resulting from the recapture shall be added to the tax otherwise due by the taxpayer for the taxable year in which the committee’s recapture determination occurred.

  10. If my business receives a CCC allocation, am I eligible to also claim the New Employment Credit (NEC)?

    There is nothing to prohibit taking both credits if the business is allocated a CCC from GO-Biz, and also meets the qualifications for the NEC. For more information on the NEC, see New Employment Credit.