The recently signed, $99.4 billion California state budget will provide significant tax relief for businesses, especially start-up technology companies, small businesses, and the self-employed, according to Bruce Larsen, tax partner in the OC office of Ernst & Young.
“The 2000-2001 state budget includes legislation that provides tax relief for motorists, families and seniors, as well as important provisions that will ease the tax burdens for smaller companies and the self-employed,” said Larsen. “Since these are the types of seedling ventures that have fueled the Orange County economy, the new tax breaks and tax simplifications will serve to boost our local economy.”
Some of the most significant tax relief items include:
n Research and Development Credit: To encourage long-term investment in the state, the research and development credit will increase from 12% to 15%. In addition, the alternative incremental research credit will increase from 80% to 90% of the June 30, 1999, federal credit percentages. Both R & D; tax credits are important for Orange County’s growing base of technology companies.
n Refundable Child Care and Dependent Care Credit: A refundable child care and dependent care credit will be made available if the costs are related to employment. The credit limitation has been increased to a maximum of 63% of the allowable federal credit.
n Net Operating Loss Carry-Forward: New provisions are in place that increase the net operating loss which businesses can carry forward to 65% by the year 2004; and extends the carry-forward period from five years to 10 years. It is anticipated that these provisions will save California businesses $745 million during the next decade.
n Vehicle License Fee Rebates: The budget permanently reduces vehicle license fees by 67.5%, with a portion of that reduction provided in the form of rebates for the 2001 and 2002 calendar years. Vehicle owners will benefit from additional vehicle license fee tax relief totaling $887 million in 2000-01. According to the California Chamber of Commerce, one-third of vehicle license fees are collected from businesses for commercial vehicles.
The budget also includes some new programs intended to boost the media and tech industries in the state. These include:
n Film California First: $15.3 million is being allocated to create the Film California First program to reduce location costs to productions filming in California.
n New Economy Initiative: $14.6 million is being allocated to support the administration’s New Economy Initiative. The funding includes $3.4 million for space commerce and aeronautics, $5 million in grant funds to match federal and private funds for Next Generation Internet Centers, $2.2 million for the California Technology Investment Partnership Program, and $2 million for the Manufacturing Technology Program.
