Documents provided in downloadable PDF format. For printed copies e-mail njames@cityofsacramento.org

The state has a variety of incentives in place to encourage business investment and reduce the cost of starting and operating a business in California. A representative of the SacSites Team, together with the Sacramento Office of the California Trade & Commerce Agency can meet with your firm to tailor a state incentive package to meet your business' specific needs.

• California Tax Profile
• Partial Sales or Use Tax Exemption
• In-Lieu Sales or Use Tax Refund
• Research and Development Tax Credit
• Net Operating Loss Carryover
• Child Care Tax Credit
• California Communities Programs
• California Export Loan
• California Infrastructure and Economic Development Bank
• Employment Training Panel

California Tax Profile (back to top)

California's tax burden is effectively less than other states because our tax system is based largely on economic activity, not real and personal property. Also, California has no business inventory, mineral severance or inheritance tax. State government is financed by income and sales taxes and local governments are financed by property taxes, a portion of sales taxes and local taxes, assessments, and fees.

California is very conscious of the need to maintain a stable, predictable tax structure, one that enhances the competitiveness of our state's major industries. California has enacted a number of tax credits to further assist businesses that locate in Sacramento.

Partial Sales or Use Tax Exemption (back to top)

California also provides "new" or start up companies the option of a 5% partial sales or use tax exemption on all qualifying manufacturing property purchased or leased generally during the company's first three years of operation.

Purchases eligible for an exemption include tangible personal property used in manufacturing, processing, refining, fabricating or recycling. Research and development activities as described in Section 174 of the Internal Revenue Code and property used in maintaining, repairing, measuring or testing the above noted property are also eligible. Tax imposed above 5% remains due. "Special purpose buildings" and leases of tangible personal property that are subject to tax measured by rentals may qualify. If qualified, the partial exemption is applicable for a period of six years from the date of inception of the lease.

The partial sales tax exemption is available as an option to the MIC on an item-by-item basis. Commercial aircraft parts, maintenance and related labor are now exempt from sales tax.

In-Lieu Sales or Use Tax Refund (back to top)

The company might prefer to claim an in-lieu sales or use tax refund equal to the MIC available for the current year. Under this program, the company can elect to file a claim for refund equal to the amount of MIC that the company could have used to offset current year franchise or income tax liability (and can be claimed no sooner than the MIC could have been claimed).

Research and Development Tax Credit (back to top)

Designed to encourage companies to increase their basic research and development activities in California, the research and development tax credit allows companies to receive a credit of 12% for qualifying research expenses (research done in-house) and 24% for basic research payments (payments to an outside company), making it the highest in the nation. To qualify, research must be conducted within California and must not include research for the purpose of improving a commercial product for style, taste, cosmetic, or seasonal design factors.

Net Operating Loss Carryover (back to top)

California tax law allows businesses that experience a loss for the year to carry this loss forward to the next year in order to offset income in the following year. New businesses can carryover 100% of their losses over eight years if the loss is in their first year of operation, 100% over seven years if in their second year of operation and 100% over six years if in their third year of operation. Existing California businesses can carryover 50% of their losses for five years.

Child Care Tax Credit (back to top)

Employers who pay or incur costs for the start up of a child care program or construction of an on-site child care facility are eligible for a credit against state income taxes equal to 30% of its costs, up to a maximum of $50,000 in one year. Excess credits may be carried over to succeeding years.

California Communities Programs (back to top)

California Communities provides local governments, non-profits, and private industry access to low-cost, tax-exempt debt financing for projects that create jobs, help communities prosper, and improve the quality of life in California. Projects that qualify for California Communities financing include facilities and equipment for government, non-profit agencies, manufacturing and solid waste businesses, housing and other exempt projects meeting the requirements for tax-exempt financing under the Internal Revenue Code.

For more information on California Communities programs contact:

California Communities
1470 Maria Lane, Suite 400
Walnut Creek, CA 94596
(800) 635-3993
www.cacommunities.com/

California Export Loan (back to top)

California Export Finance Office (CEFO) is one of several economic development programs provided by the International Trade and Investment division of California's Technology, Trade and Commerce Agency. CEFO issues working capital loan guarantees to banks securing export loans for qualified small and mid-sized California companies looking to obtain short-term capital loans for specific export orders. CEFO guarantees to cover pre-shipment, post-shipment, or combination loans -- up to 90% of bank loans up to $833,000. Basic eligibility requirements include one year in business to demonstrate company performance and 51% California content on the total shipment.

For more information on the California Export Loan program visit the California Technology, Trade, and Commerce Agency Web site at or contact:

California Export Finance Office
Northern California Office
Techmart Building
5201 Great America Parkway, Suite 350
Santa Clara, CA 95054
Phone: (408) 986-8373
Fax: (408) 980-0280

California Infrastructure and Economic Development Bank (back to top)

The California Infrastructure and Economic Development Bank was created in 1994 to promote economic revitalization, enable future development, and encourage a healthy climate for jobs in California. The Infrastructure Bank operates pursuant to the Bergeson-Peace Infrastructure and Economic Development Bank Act contained in the California Government Code Sections 63000 et seq. The Infrastructure Bank is located within the California Technology, Trade and Commerce Agency and is governed by a three-member Board of Directors.

The Infrastructure Bank has broad authority to issue tax-exempt and taxable revenue bonds, provide financing to public agencies, provide credit enhancements, acquire or lease facilities, and leverage State and Federal funds. The Infrastructure Bank's current programs include the Infrastructure State Revolving Fund (ISRF) Program and the Conduit Revenue Bond Program.

The ISRF Program, which received a combined total of $475 million of funding in the 1998/1999 and 1999/2000 State Budgets, is a new program that provides low-cost financing to public agencies for a wide variety of infrastructure and public improvements. When additional financing capital is needed, the Bank intends to issue revenue bonds to significantly leverage the funding for the ISRF program.

The Conduit Revenue Bond Program issues industrial development bonds for manufacturing companies, 501(c)(3) bonds for non-profit organizations, exempt facility bonds and other types of revenue bonds.

For more information about this program visit the program Web Site or contact:

California Infrastructure & Economic Development Bank
801 K Street, Suite 1700
Sacramento, CA 95814
Phone: (916) 322-1399
Fax: (916) 322-6314
ciedb@commerce.ca.gov

California Employment Training Panel (back to top)

Employers choosing to participate in the Employment Training Program (ETP)can utilize the cash reimbursements provided by the ETP to offset the cost of developing and implementing customized training programs for their current or new employees. Training may be done on site by the employer or through other training organizations of choice. Reimbursements are made to the company for each employee that completes training and remains on the job for 90 days.

For more information about this program visit the program Web Site or contact:

Polo Enriquez
California Technology, Trade and Commerce Agency
Northern California Regional Office
1102 Q Street Sacramento, CA 95814
(916) 322-3562

Financing for Child Care Facilities (back to top)

Do you need financing to acquire or expand and existing child care facility, or construct a new facility? Facility financing through direct loans or loan guarantees are now available for licensed child care centers and licensed family day care homes serving more than six children.

For more information about this program visit the program Web Site or contact