12.18.14 |
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California Tax Credits Businesses Need to Know About

California JPGThe state of California has many options for businesses to capture tax credits that are often overlooked and underutilized. Some of these tax credit opportunities have been available for decades and others are new, but all of them can offer valuable incentives to businesses that can help boost their bottom line.

One of the unique opportunities available to Californians is available through the Enterprise Training Panel (ETP) Retraining Fund. This fund supports companies that compete in the global economy and reimburses them for the cost of training new employees in California. Since its implementation in 1982, the ETP has reimbursed more than $1 billion in training costs across 80,000 businesses, according to the ETP’s website. This program is meant to help California businesses that operate in highly competitive markets and might be threatened by competition outside California.

One of the newer tax credit options available to employers in California is the New Employment Credit (NEC), which encourages businesses to continue hiring new full-time California employees in order to contribute to California’s economy. Businesses that hire qualified full-time employees between January 1, 2014, and December 31, 2020, may qualify for a tax credit if their net full-time employees for that tax year have increased and qualified full-time employees work within specific designated geographic areas (DGA). Business must also receive a tentative credit reservation for the applicable full-time employees with respect to whom the credit is sought. Companies that meet these criteria are then required to provide an annual certification of employment for each qualified employee that was hired in the previous tax year.

Similarly, California also offers the Enterprise Zone Program, which incentivizes businesses to hire certain unemployed individuals who may be at a disadvantage while seeking employment. Tax credits are awarded to employers that hire and retain these workers over a five-year period, with the potential of earning a hiring credit of $37,440 or more per new hire. Although this program expired in December 2013, according to Corporate Tax Incentives, retroactive and current credits can still be captured. Employees hired prior to January 1, 2014, continue to qualify for the credit under the expired program; however, employers only have until December 31, 2014, to submit the voucher application and receive the final voucher from the respective enterprise zone coordinator on those eligible employees. Vouchered employees will continue to generate credit through the first five years of their employment. Finally, any credit not utilized in the year it is generated may be carried forward for up to 10 years.

These are just a few of the options among many others that provide tax incentives to businesses for hiring workers and contributing to the California job market. To learn more about how ADP can help your business capture and optimize these types of tax credit opportunities for which you may be eligible, visit the ADP SmartCompliance® Tax Credits module page.

The information provided in this blog post is for informational purposes only and not for the purpose of providing accounting, legal, or tax advice. The information and services ADP provides should not be deemed a substitute for the advice of any such professional. Such information is by nature subject to revision and may not be the most current information available.


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