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State & Local Tax Bulletin (February 2014)

February 18th Deadline for Comments on
California Competes Tax Credit Regulations




By Michael J. Cataldo, a counsel in the San Francisco office of Pillsbury Winthrop Shaw Pittman LLP.

If you have or can obtain the Acrobat Reader, or have an Acrobat-enabled web browser, you may wish to download or view our February 2014 State & Local Tax Bulletin (a 255K pdf file), containing a printed version of this article and also available via ftp at:

    ftp.pmstax.com/state/bull402.pdf.

This bulletin concerning state and local tax matters is part of the Tax Page, a World Wide Web demonstration project, no portion of which is intended and cannot be construed as legal or tax advice. Comments are welcome on the design or content of this material.

March 20, 2014 Update: On March 18, 2014, Go-Biz notified the public that it will only accept California Competes Credit applications for the current fiscal year between March 19, 2014 and April 14, 2014.

On January 31, 2014, the Governor's Office of Business and Economic Development ("GO-Biz") released final proposed regulations for the California Competes Credit ("CCC").[fn. 1] Since GO-Biz will proceed with these regulations under the emergency regulation provisions of the Administrative Procedures Act ("APA"),[fn. 2] the public has until February 18, 2014, to submit written comments.[fn. 3]

While most of the changes from the draft proposed regulations are relatively minor, Go-Biz added a section to the final proposed regulations to protect from public disclosure certain confidential information submitted by taxpayers during the application process. Specifically, section 8020(e) of the final proposed regulations states:

    Any information submitted to GO-Biz that the applicant considers to be trade secret, confidential, privileged or otherwise exempt from disclosure under the Public Records Act (California Government Code Section 6250, et seq.) shall not be publically disclosed by GO-Biz unless it is required to do so by court order or applicable law. An applicant shall assert a claim of exemption by identifying each of the items to be restricted and the section of law that provides for the exemption (i.e. Government Code Section 6254.15) at the time its application form is submitted to GO-Biz. In the event GO-Biz is required to publically disclose information identified by the applicant as a trade secret, confidential, privileged or otherwise exempt from disclosure, GO-Biz shall notify the applicant at least five (5) business days prior to the release of such information in order to allow the applicant to seek an injunction, if applicable.

Taxpayers should identify any confidential information as it is submitted in the application process and cite to the applicable law providing for non-disclosure of that information to assert a claim that the information is exempt from public disclosure.

Some of the other changes made to the draft proposed regulations include:

  • expansion of employee benefits to be considered in the application process to include nontaxable benefits and benefits paid for an employee's spouse or dependents,

  • disclosure of entities or persons with at least 25 percent ownership interest in the applicant (changed from disclosure of those with at least 5 percent ownership interests in the applicant),

  • clarification that GO-Biz may have multiple application periods for a single fiscal year CCC allocation,

  • specification that Go-Biz may require applications be submitted either in paper form or electronically, and

  • clarification that pending applications may be amended until the last day of the application period.

Taxpayers interested in submitting written comments to the final proposed regulations should begin preparing those comments now, as they must be received by the OAL by February 18, 2014.

Notes

  1. The final proposed regulations can be found at:

    http://business.ca.gov/Portals/0/Users/038/38/38/California%20Competes%20Regs%201_31_14.pdf

    Please see our December 2013 State & Local Tax Bulletin for details of the California Competes Credit and proposed regulations pertaining thereto.[return to text]

  2. See GO-Biz Notice of Emergency Regulations at:

    http://business.ca.gov/Portals/0/Users/038/38/38/Notice%20of%20Emergency%20Regs.pdf

    [return to text]

  3. The public comment period for proposed emergency regulations is five (5) calendar days after they are posted on the website of the Office of Administrative Law ("OAL"). CA.Govt.Code § 11349.6(b).The final proposed regulations were posted on the OAL website on February 10, 2014. Since February 15, 2014, falls on a weekend and February 17, 2014 is a state holiday, comments must be submitted by February 18th.[return to text]


This material is not intended to constitute a complete analysis of all tax considerations. Internal Revenue Service regulations generally provide that, for the purpose of avoiding United States federal tax penalties, a taxpayer may rely only on formal written opinions meeting specific regulatory requirements. This material does not meet those requirements. Accordingly, this material was not intended or written to be used, and a taxpayer cannot use it, for the purpose of avoiding United States federal or other tax penalties or of promoting, marketing or recommending to another party any tax-related matters.


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