Small businesses are the lifeblood of California’s economy; our 3.4 million small businesses account for 99 percent of the state’s employers and employ more than half of our workforce.
That’s why we’ve created incentives to help businesses thrive, such as tax credits aimed at job creation, and established a state office dedicated to economic and business development.
A prime example of our efforts to support small businesses is the California Research Credit. It was created in 1987 for companies to earn a tax credit to reinvest in research and development. Unfortunately, some businesses have been unable to use these credits.
Data from the Franchise Tax Board show that in 2012, there was $100 million in tax credits generated, but only $13 million worth of those credits were used.
These businesses earned the tax credits, but weren’t able to use them due to lack of tax liability or not enough taxes owed to the state. That’s money that businesses would otherwise use to invest in research and development, which lead to more jobs, more innovation and an expanded economy.
To remedy this, I’ve introduced legislation that will help these businesses by allowing them to receive a grant from the research and development tax credits they have earned and reinvest their resources. That could mean additional $50 million annually would be reinvested in to California’s small businesses.
AB 437 will allow small businesses to reinvest real dollars in further research and development projects as well as business expansion.
This bill will also allow eligible businesses to receive grants based on tax credits earned in 2014 and 2015.
Life science organizations BayBio and Biocom and business groups such as the California Chamber of Commerce, the National Federation of Independent Businesses and Small Business California support this legislation because it’s a common sense measure that removes a barrier that’s blocking a resource that companies have already earned.
Small businesses are important to the viability of California’s economy, and we need to be creative in helping these job creators start and succeed.
The California Research Credit is already available and this bill helps businesses get tangible benefits from the research and development tax credits they’ve earned. It’s time we simplify matters and make sure that this tool is being used to support growth for our economy.
These small businesses are a large part of our state’s economic vitality — and a part of the California innovation that leads the country and drives us forward.