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Clarifications From GO-Biz Regarding California Competes Tax Credit

The Sacramento Bee reported on the email distributed by GO-Biz describing the applications received in the first ever application round for the new California Competes Credit. Within that article, the Bee referred to my original post on the subject:

There are 149 applicants that qualified for the second round of the California Competes selection process, representing about $155 million in requested credits.

Go Biz said 10 percent of the applications seek retention credits. That is much less than the figure – 60 percent – reported by the EZ Policy Blog, which follows the program.

The California Competes Tax Credit Committee will consider companies’ requests for tax credits on June 19. Officials will consider the types of jobs created, potential future growth and other criteria.

I had originally written:

Applications for so-called “retention” projects represent over 60% of the applications accepted into the second round. Applications totaling $155,097,747 in tax credits were accepted into the second round. At most, $30,000,000 will be awarded, which is just 19% of the second round of the application process and just 5% of the initial applications.

However, based on the information provided by GO-Biz, my initial conclusion was correct. GO-Biz was kind enough to respond to my queries for clarification, and the result is the following more accurate picture of the application pool:

The 10% referred to in the SacBee article was referring to the percentage of the number initial applications, not the tax credit value requested. Therefore, about 38 of the initial 396 applications were for businesses claiming a retention issue. GO-Biz now says that 149 applications asking for $149 million (as opposed to $155 million stated in their original email) were moved into Phase II. Of that total, $60 million were from businesses selected based on their credit to investment ratios. This is the 200% of tax credit available referred to in the regulations. In addition to that, another $69 million in applications were moved into Phase II based on the retention issue. Therefore 46% (69,000,000 / 149,000,000) of the tax credit value accepted into Phase II was for retention projects, even though those projects only made up 10% of the initial applications. And GO-Biz has confirmed this 46% number.

According to GO-Biz, the remaining $20 million in applications were for additional small businesses since the initial $60 million was apparently over-represented by larger businesses.

The CCC regulations say:

Each applicant shall be listed according to the lowest percentage of the cost-benefit ratio, with the lowest percentage being positioned the highest and so forth. Based an this order, GO-Biz shall then work down the list and engage the most competitive applicants to move forward to Phase II, specifically including a pooled review of the most competitive applicants whose aggregate California competes credit requested is at least two hundred percent of the tax credit available for the application period.

By stating “at least two hundred percent,” GO-Biz have provided themselves with tremendous flexibility to accept applications into Phase II, which they have apparently exercised in this first round.

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