BNA’s “Incentive Watch” on the next round of California Competes credit and the ongoing legal controversy regarding regulating consulting fees:
As the deadline looms for another round of California Competes tax credit applications, demand is certainly going to outpace the supply of available credits. With recently issued final regulations for the credit, taxpayers have new considerations in submitting their applications, including a divisive requirement that applicants must disclose contingency fee arrangements.
The California Competes tax credit, first available to taxpayers in 2014, is aimed at fostering business relocation and expansion in California, and replaces the Enterprise Zone Tax Credit in California, which has been phased out. It gives credits to businesses based on several criteria, including job creation. For the most recent application period that closed Feb. 2, the California Competes program received 253 applications, requesting a total of $289 million. Unfortunately for applicants, the Governor’s Office of Business and Economic Development (GO-Biz) will only award $75 million in tax credits during the February application period. California will also award $31.1 million in credits, plus any unallocated funds from previous applications periods, for the final round of applications, which are being accepted starting March 9.
In the January application round, GO-Biz received 286 applications requesting $329 million in credits. Ultimately, 56 companies received $31 million in tax credits. This brought the total amount of credits awarded through the program up to $60 million.
In February, final regulations governing the California Competes credit took effect. Although the final regulations are similar to emergency regulations adopted last year, there are a few changes, including a provision that allows companies to apply for the credit multiple times, provided they meet additional investment and employment requirements.
One of the more controversial regulations is the requirements regarding contingency fee arrangements between applicants and third parties that prepare the credit application. Not only are applicants required to disclose these fee arrangements, but the arrangements will be reviewed by GO-Biz to ensure that fees are reasonable. This regulation led to a lawsuit by Ryan LLC, a tax services firm headquartered in Dallas, Texas, challenging the contingency fee disclosure requirements.
This is not the first time that California has tried to restrict contingency fees. According to the complaint in the Ryan case, California has twice introduced legislation that restricts contingency fee arrangements in tax-related matters, but neither was enacted into law. On the federal level, the DC District Court, in Ridgely v. Lew, invalidated the I.R.S. Circular 230 contingency fee ban on tax practitioners.
The Ryan complaint alleges that GO-Biz abused their rulemaking powers by adopting regulations which conflict with California law. The complaint alleges that California law specifies the factors used in determining which businesses receive California Competes credits and that consideration of the contingency fee arrangement imposes an additional condition on tax credit applicants. California issued an answer to the complaint on Feb. 20.
AB 437, sponsored by California Assembly Speaker Toni Atkins, would provide businesses with less than $5 million in gross receipts to receive a cash grant for between 10 and 15 percent of any unused R&D tax credits. According to the […]
In March of 2013, because of Congress’ retroactive authorization of the WOTC program, the IRS allowed a brief period of “transition relief” to allow taxpayers to file WOTC applications for employees hired in 2012 retroactively. Normally, the WOTC program requires […]
The Ways and Means Committee today passed H.R. 880 making the R&D tax credit permanent. A similar bill was passed by the House last year, and despite the President calling for the same policy,* has little chance of passage on […]
GO-Biz updated its FAQ for the California Competes Credit on Feb. 6. Among the changes is an updated table of investment to tax credit ratios that were accepted into the second round: In addition, final regulations were approved on 2/5/2015, […]
According to Politico: Chairman Paul Ryan during the [Ways and Means Committee] hearing said he wants to pass extenders earlier this year rather than waiting until the end of the year and making everyone frantic about whether they’ll be continued.
California’s GO-Biz just sent out the following press release: Sacramento, Calif. – Building on the state’s effort to help businesses expand and create new jobs, the Governor’s Office of Business and Economic Development (GO-Biz) today announced that it received a […]
The Department of the Treasury’s document, “General Explanations of the Administration’s Fiscal Year 2016 Revenue Proposals,” on pages 51-53, explains the President’s budget proposal regarding WOTC and the Indian Employment Credit: Reasons for Change The Indian employment credit and the […]
The Senate Finance Committee will consider today H.R. 22, the Hire More Heroes Act. H.R. 22 was passed by the House to exempt veterans from being taken into account for purposes of determining the employers to which the employer mandate […]
U.S. Reps. Bill Pascrell, Jr. (D-NJ) and Tom Reed (R-NY), both members of the House Ways and Means Committee, today announced the reintroduction of H.R.481, the Long-term Unemployed Hiring Incentive Act, legislation that would extend the successful Work Opportunity Tax […]
On Friday, January 16, 2015, the Treasury and IRS released proposed regulations (REG-153656-03) governing the R&D tax credit as it regards the development of computer software. The proposed regulations: 1. Clarify the definition of internal use software (IUS); 2. Retain […]
On January 15, the California Competes Tax Credit Committee met to make final determinations on the second ever round of California Competes applications. All 56 agreements considered were awarded for a total of about $31 million. A 57th applicant who […]
Representative David Jolly (R-FL) has introduced H.R. 145 to make WOTC permanent. We don’t have any expectation that this bill will go anywhere, but it is positive to see legislators focus on the program.
The Senate Finance Committee announced today the formation of five working groups to examine the tax code with the goal of achieving tax reform. According to the <a href=”http://www.finance.senate.gov/newsroom/chairman/release/?id=2ea8c8e5-c892-4230-9d1a-db7522a920be” target=”_blank”>press release</a>: <blockquote>Each of the bipartisan groups will work directly with […]
While Congress passed, and the President signed, the extension to expired tax provisions several weeks ago, states do not typically start start issuing WOTC certificates that were submitted during a hiatus until they hear from the Department of Labor. The […]
The largest ever <a href=”http://www.business.ca.gov/Programs/CaliforniaCompetesTaxCredit.aspx” target=”_blank”>California Competes</a> tax credit application round starts today with $75 million available. This is the second of three rounds anticipated for the 2014/2015 fiscal year. GO-Biz recently updated their <a href=”http://www.business.ca.gov/Portals/0/CA%20Competes/Docs/CCTC_FAQ.pdf” target=”_blank”>FAQ</a> with updated information […]
The Senate has passed H.R. 5771 extending a collection of tax breaks retroactively for 2014. Tax credits such as WOTC, Empowerment Zones and the Research credit are included in the legislation. All of the provisions will now expire again on […]
Future Ways and Means Chairman Paul Ryan, speaking at the Wall Street Journal’s CEO council meeting, said: There is one inescapable conclusion, no matter how you slice it, which is: if we’re going to lower our tax rates, and we’re […]
Congressional Republicans are proposing a new tax extender bill which would simply extend all tax provisions that expired on 12/31/2013 through 12/31/2014. The bill, H.R. 5771 introduced by Ways and Means Chairman Dave Camp, can be found here. Here is […]
- Post Edited: BNA Incentives Watch on California Competes taxcreditology.com/2015/03/04/bna…
about 7 hours ago
- New post: BNA Incentives Watch on California Competes taxcreditology.com/2015/03/04/bna…
about 7 hours ago
- New post: California Bill Would Provide Small Businesses With Cash Grant For Unused R&D Tax Credits taxcreditology.com/2015/02/27/cal…
about 5 days ago