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State of California Franchise Tax Board

Frequently Asked Questions - California Competes Credit

The Governor's Office of Business and Economic Development (GO-Biz) administers the California Competes Tax Credit (CCTC). Applications for the credit are available to businesses that want to locate or stay and grow in California. Tax credit agreements are negotiated between taxpayers and GO-Biz and are approved by the California Competes Tax Credit Committee (Committee). The Committee consists of the State Treasurer, the Director of the Department of Finance, the Director of GO-Biz, and one appointee each by the Speaker of the Assembly and Senate Committee on Rules. For more information on how to obtain a credit agreement, visit the GO-Biz website.

Businesses will commit to certain employment or project investment requirements, we refer to as "milestones," as part of the credit agreements. The legislation that enacted this credit requires us to review certain businesses books and records to ensure that businesses are in compliance with the agreed upon milestones. 

We designed these Frequently Asked Questions (FAQs) to assist businesses with the credit and our review process. The GO-Biz website has additional FAQs available.

General Credit Information

  1. What taxable years is the credit available?
  2. Can the credit reduce tax below tentative minimum tax?
  3. Is this credit refundable?
  4. Can my business carry the credit forward to future years?
  5. Can my business assign the credit to an affiliated corporation under R&TC Section 23663?

Credit Usage

  1. The credit agreement requires my business to meet the project milestones before it earns a credit. How do I report the credit?
  2. How does my business claim the credit on its tax return?

CCTC Reviews

  1. Once my business obtains a credit agreement from GO-Biz, what is FTB's role?
  2. Which businesses will be subject to a review?
  3. What is a "small business" for CCTC purposes?
  4. Is the CCTC Review the same as when your Department audits my business tax return?
  5. My business provided GO-Biz with a lot of information when it applied and will continue to provide it to them during the entire agreement period.  Will your Department have access to this information?
  6. What is the purpose of the review?
  7. What are some examples of acceptable records to show that my business met the milestones?
  8. What procedures and guidelines will your Department follow for these reviews?
  9. Will your Department perform a review only once or multiple times?
  10. How will your Department contact me for a review?
  11. What happens during a review?
  12. Will the information I provide to your Department during the review remain confidential?

Breaches and Recapture 

  1. What happens if your Department determines that my business is not in compliance with the credit agreement?
  2. What does GO-Biz consider a breach?
  3. What happens after your Department notifies GO-Biz of a possible breach?
  4. Who decides on a credit recapture?
  5. How does my business report a recapture on its tax return?

Miscellaneous Information


General Credit Information

  1. What taxable years is the credit available?

    It is available for all taxable years that begin on and after January 1, 2014, and before January 1, 2025.

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

    Yes.

  3. Is the credit refundable?

    No.

  4. Can my business carry the credit forward to future years?

    Yes, the carry forward period is 6 years.

  5. Can my business assign the credit to an affiliated corporation under R&TC Section 23663?

    Yes, get more information about credit assignment.

Credit Usage

  1. The credit agreement requires my business to meet the project milestones before it earns a credit. How do I report the credit? 

    In general, if your business meets the milestones for a taxable year as specified in the credit agreement, then the credit for that year is earned and may be claimed on its tax return. If the milestones for a taxable year are not met, the credit is not earned for that taxable year.

  2. How does my business claim the credit on its tax return?

    They use credit code 233 to claim it.

CCTC Reviews  

  1. Once my business obtains a credit agreement from GO-Biz, what is FTB's role?  

    We may review your business’ books and records to determine compliance with the credit agreement. We call this review activity a "CCTC Review" or "review."

  2. Which businesses will be subject to a review?  

    We must review every business that receives a credit agreement, unless it is a small business. We may review a small business when it is appropriate.

  3. What is a "small business" for CCTC purposes?

    In general, it is a trade or business with less than $2 million gross receipts. GO-Biz specifies if a credit agreement is for a small business.

  4. Is the CCTC Review the same as when your Department audits my business tax return?

    No. The CCTC review is to determine if your business is in compliance with the credit agreement. It is not an income tax audit. Your business tax return remains subject to audit.

  5. My business provided GO-Biz with a lot of information when it applied and will continue to provide it to them during the entire agreement period. Will your Department have access to this information?

    The information you provide to GO-Biz is available to us. We use it during our review to determine if your business is in compliance with the credit agreement.

  6. What is the review’s purpose?

    The review’s purpose is to determine credit agreement compliance. The credit agreement has yearly milestones for California full-time employment, salary levels, and project investment. Our primary focus is to verify these milestones.

  7. What are some examples of acceptable records to show that my business met the milestones?

    Employment and Compensation Levels

    Payroll reports and records to support:

    • Hire dates, hours, or weeks worked.
    • Wages and salary levels for new employees and compensation paid.

    Project Investment

    • Authorization for expenditures, invoices, deeds, contracts, lease/rental agreements etc.
    • Project documents, timelines, capitalized costs, schedule of project costs etc.
    • Summary analysis of changes in property, plant, and equipment.
    • Depreciation records.
    • General ledger records.

    The above is not all inclusive. Acceptable records depend upon the specific project. We may also consider alternative documents.

  8. What procedures and guidelines will your Department follow for these reviews?

    We will follow the procedures and guidelines in FTB Notice 2014-02.

  9. Will your Department perform a review only once or multiple times?

    In general, the credit agreements are for 5 years with an additional 3 years to maintain employment increases and salary levels. Since the credit agreement period may be up to 8 years, we may conduct a review once or multiple times.

  10. How will your Department contact me for a review?

    We will send you a contact letter to begin a review.  It will include the reviewer and supervisor contact information.

  11. What happens during a review?

    We will request information to determine if your business is in compliance with the credit agreement. When we finish the review, we will send you a letter that states whether your business is in compliance with the credit agreement or there is a possible breach.

  12. Will the information I provide to your Department during the review remain confidential?

    Yes. We consider any information that you provide during the review confidential. However, in the event that we determine that your business is not in compliance with the credit agreement, we will provide GO-Biz with information that explains the basis for our determination.

Breaches and Recapture

  1. What happens if your Department determines that my business is not in compliance with the credit agreement?

    We would consider this a possible breach. We will provide information to you and GO-Biz that explains the basis for our determination.

  2. What does GO-Biz consider a breach?

    A breach includes one or more of the following:

    • Failure to furnish us or GO-BIZ with information.
    • Material misstatements in any information your business provided to GO-Biz.
    • Failure to materially satisfy or maintain the milestones.
  3. What happens after your Department notifies GO-Biz of a possible breach?

    In general, GO-Biz will contact you and allow you some time to resolve it. If you are unable to resolve the breach, GO-Biz may recommend a recapture to the Committee.

  4. Who decides on a credit recapture?

    GO-Biz will recommend a credit recapture to the Committee. If the Committee makes the decision to recapture a credit, GO-Biz will notify you and us about the recapture and the amount.

  5. How does my business report a recapture on its tax return?

    Your business will report it on its tax return for the taxable year the Committee makes the recapture decision. If your business does not report it on its tax return, we will send you a bill. 

Miscellaneous Information

If I have questions about our CCTC review process, who do I contact?

Email us at:  GEDI@ftb.ca.gov

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