Business Incentives, Grants, Loans and Tax Credits

Dear Friends,

I began my career by building my direct mail business from the ground-up. I speak from personal experience when I say that there are few things in life more challenging – or rewarding – than starting and running your own company.

Now that I have the honor to serve as your Senator, one of my top priorities is to empower Californians to pursue their dreams, grow their businesses, and create opportunities.

In this newsletter, I want to make sure that you are connected with the local support system and resources that can help you succeed – whether you work for, own, or are working towards owning a local business.

I hope you find this information helpful and if we are missing something that would be helpful to others, please share with me.

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Below content is provided by the San Diego Regional Economic Development Corporation:

Business Incentives and Support

Local Incentives

City of San Diego – Economic Development Agreement

The EDA provides assistance to businesses which provide revenue and jobs to the city in the form of: assistance with permits and approvals; crediting up to 45 percent of sales or use taxes paid by the business against City business license taxes and/or development related fees; rebating up to 25 percent of sales or use taxes paid by the business; or reducing water and sewer charges by $1,000 per equivalent dwelling unit.

San Diego Workforce Partnership

On-the-Job Training Program (OJT) is designed to assist businesses hire and train new employees who do not have sufficient experience and knowledge in the jobs for which they are being hired. The employer’s training expenses will be paid at a rate not to exceed 50 percent of the wages the new employee earns during the contracted training period.

Customized training and curriculum programs exist at the workforce investment board, community college, and university level to ensure we have the right programs to respond to and proactively address industry’s needs.

California State Incentives

Sales & Use Tax Savings on Purchases

Sales and Use Tax Exclusion offers a full sales and use tax exclusion (between 7.5 and 10 percent statewide) for advanced manufacturing and advanced transportation technologies.

Sales and Use Tax Exemption offers a partial sales and use tax exemption (4.2 percent) for manufacturing, process, refining, fabricating, or recycling, as well as research and development purchases.

Tax Credits

California Competes Tax Credit is an income tax credit made available to businesses that want to locate to and grow in California. The annual budget for this program is $150 million with designated application periods. For FY 2014-2015, the last application period runs from March 9 through April 6 with more than $31.1 million in funds available.

Research and Development Tax Credit is a 15 percent credit for qualified in-house research expenses and a 24% credit for basic research payments to an outside organization are offered to companies that conduct qualified research activities in California. A federal research credit is also available.

New Employment Credit is available to companies in designated geographic areas of the state who have a net increase in employment and hire qualified employees. The tax credit is up to 35 percent of qualified wages.

Property Tax Relief

Capital Investment Incentive Program provides for property tax rebates beyond the first $25 million of assessed property for industry codes 3364 (Aerospace Products and Parts Manufacturing) and 3359 (Other Electrical Equipment and Component Manufacturing), subject to approval by local jurisdictions.

Workforce Development Incentives

Employment Training Panel provides an opportunity for employers to get reimbursed for training their existing staff and new hires; options exist to either apply for your own contract or to contract with an existing contract holder.

Financing

Industrial Development Bonds offer tax-exempt securities of up to $10 million for the acquisition, construction, rehabilitation and equipping of manufacturing and processing facilities for private companies.

California Capital Access Program encourages financial institutions to make loans to small businesses that fall just outside their conventional underwriting standards by insuring up to 100 percent coverage on certain loan charge offs. Also as part of this program, Collateral Support pledges cash to cover the collateral shortfall of loans of $100,000 or more and provides up to 40 percent of the loan value, with the possibility of an additional 10 percent for businesses located in a Severely Affected Community.

California Pollution Control Financing Authority Tax-Exempt Bond Financing Program provides tax-exempt bond financing to California businesses for the acquisition, construction, or installation of qualified pollution control, waste disposal, waste recovery facilities, and the acquisition and installation of new equipment.

California Small Business Loan Guarantee Program provides loan guarantees for small businesses that can cover up to 90 percent of the loan amount.

Federal Incentives

Trade Incentives

Foreign Trade Zones are federally designated areas where companies can delay or reduce duty payments on foreign merchandise. There are two types of Foreign Trade Zones, general purpose and subzones (the latter is for a specific company or use). San Diego has one FTZ in the City of San Diego (No. 153).

Interest-Charge Domestic International Sales Corporation (IC-DISC) is a federal tax incentive for exporters of products made in the U.S. California manufacturers who receive 50 percent of their net income from foreign sales may be subject to a significantly reduced US income tax rate

SBA Export Loan Programs SBA has made it a priority to help small business exporters by providing a number of loan programs specifically designed to help develop or expand export activities.

Financing

EB-5 Financing provides foreign nationals the opportunity to become conditional residents for a period of two years upon making an investment of $1 million, or $500,000 in a designated Targeted Employment Area, in a new commercial enterprise. Each unit of investment must create at least ten new, direct or indirect jobs for U.S. workers.

Small Business Administration Loan Programs include general small business loans (7(a)), microloans, real estate and equipment loans, CDC/504, and disaster loans.

Workforce Development

Work Opportunity Tax Credit is available to employers for hiring individuals from certain target groups who have consistently faced significant barriers to employment.

Tax Credits

New Markets Tax Credit Program awards companies a tax credit against their Federal income in exchange for making equity investments in specialized financial institutions called Community Development Entities (CDEs). The credit totals 39 percent of the original investment amount and is claimed over a period of seven years.

Below content is provided by the North San Diego Small Business Development Center at MiraCosta College:

What Every Business Owner Should Know

The North San Diego Small Business Development Center (SBDC) hosted by MiraCosta College knows how daunting it can be surfing through the endless maze of websites looking for information you need to help you operate your business. There are many resources including the San Diego and Imperial Valley SBDCs that are available to small business owners at no cost to them that provide the training and advice needed to manage and expand a business profitably. Below is a list of tax credits, grants, loans and business resources to make your life easier and your small business succeed. Time is money and the North San Diego SBDC is here to help you so you can spend your time on the business.

The SBDC applauds small businesses for taking that leap of faith. There is assistance available to provide the support, knowledge, resources and skills to effectively manage and grow a small business.

Tax Credits Available for Small Businesses and Self-Employed Businesses

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Business-Tax-Credits
Type this link into your browser and it will take you to the Tax Credits Page. There are forms and information for each tax credit that you can download instantly with instructions.

Tax credits can provide significant savings. It reduces the amount of income tax you have to pay. Unlike a deduction, which reduces the amount of income subject to tax, a tax credit directly reduces the tax itself.

  • Business Credit
  • Investment Credit: This consists of the sum of the rehabilitation, energy, and reforestation credits.
  • American Samoa Economic Development Credit
  • Work Opportunity Credit
  • Alcohol and Cellulosic Biofuel Fuels
  • Increasing Research Activities
  • Low-Income Housing
  • Low-Income Housing Credit
  • Orphan Drug
  • Disabled Access Credit
  • Qualified Plug-In Electric and Electric Vehicle
  • Renewable Electricity, Refined Coal, and Indian Coal Production
  • Empowerment Zone and Renewal Community Employment
  • Indian Employment
  • Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips
  • Credit for Contributions to Selected Community Development Corporations
  • Biodiesel and Renewable Diesel Fuels
  • New Markets
  • Small Employer Pension Plan Startup Costs
  • Credit for Employer-Provided Childcare Facilities and Services
  • Low Sulfur Diesel Fuel Production
  • Qualified Railroad Track Maintenance
  • Distilled Spirits
  • Nonconventional Source Fuel
  • Energy Efficient Home
  • Alternative Motor Vehicle
  • Alternative Fuel Vehicle Refueling Property
  • Mine Rescue Team Training Credit

Tax Credits for Manufacturers

  • The Tax Relief and Job Creation Act of 2010 modifies and extends the energy efficient appliance credit for certain dishwashers, clothes washers, and refrigerators manufactured after December 31, 2010.
  • Manufacturer’s Energy Efficient Appliances
  • Tax Deductions for Commercial Buildings: The commercial building deduction appears at new section 179D, which was enacted in the Energy Policy Act of 2005.

Grants & Loans

Federal, state and local governments offer a wide range of financing programs to help small businesses start and grow their operations. These programs include low-interest loans, venture capital, and scientific and economic development grants.

Some business grants are available through state and local programs, nonprofit organizations and other groups. For example, some states provide grants for expanding child care centers; creating energy efficient technology; and developing marketing campaigns for tourism. These grants are not necessarily free money, and usually require the recipient to match funds or combine the grant with other forms of financing such as a loan. The amount of the grant money available varies with each business and each grantor.

Visit the SBA’s Loans and Grants Search tool at https://www.sba.gov/loans-grants/see-what-sba-offers to get a list of programs that may suit your business.

Small Business Administration Grants and Loans

https://www.sba.gov/category/navigation-structure/loans-grants

The SBA does NOT provide grants for starting and expanding a business. Government grants are funded by tax dollars and require very stringent compliance and reporting measures to ensure the money is well spent. SBA has authority to make grants to non-profit and educational organizations visit www.grants.gov.

Research Grants for Small Businesses

Small businesses engaged in scientific research and development (R&D), may qualify for federal grants under the Small Business Innovation Research (SBIR) and the Small Business Technology Transfer Program (STTR). These programs encourage small businesses to undertake R&D projects that: Meet federal R&D objectives and have high a potential for commercialization. Visit www.SBIR.gov for more Information about specific SBIR and STTR programs throughout the federal government. Businesses must be American-owned and independently operated; for-profit; principle researcher employed by business; company size cannot exceed 500 employees.

SBA Loans and Financing Programs

The SBA programs are many and varied. The qualifications for each are specific. SBA can help facilitate a loan for you with a third party lender, guarantee a bond, or help find venture capital. Understanding how SBA works is the first step towards receiving assistance. These Programs can be found at https://www.sba.gov/loans-grants/see-what-sba-offers

Resources to Grow Your Business

The below resources provides one-on-one business advising and training to help you start, manage and expand your business. There are no costs for most of these services to small business owner.

Small Business Administration
550 West C Street Suite 550
San Diego, CA 92101
United States
Phone: 619-557-7250 or 619-727-4883
www.sba.gov

San Diego and Imperial Valley Regional Small Business Development Centers

North San Diego Small Business Development Center (SBDC)
2075 Las Palmas Dr,
Carlsbad, CA 92011
Phone: 760-795-8740
Email: centerinfo@miracosta.edu

South San Diego Small Business Development Center (SBDC)
880 National City Boulevard Suite 103
National City, CA 91950
Phone: 619-482-6391
Email: sdsbdc@swccd.edu

SCORE Chapter
550 West C Street Suite 550
San Diego, CA 92101
Phone: 619-557-7272
https://sandiego.score.org/

Procurement & Technical Assistance Center
4007 Camino del Rio South Suite 210
San Diego, CA 92108
Phone: 619-285-7020
http://www.ptac-sandiego.org/

U.S. Export Assistance Center
9449 Balboa Avenue Suite 111
San Diego, CA 92123
Phone: 858-467-7043
http://export.gov/california/sandiego/