Greetings, entrepreneurs and business owners! Are you ready to turn the hiring dial up a notch and get rewarded for it? Today, we're diving into California's New Employment Credit (NEC)—a golden ticket for eligible businesses that not only supports growth but also puts some tax savings back in your pocket.
What Is the NEC? The NEC is a tax credit for businesses in specific industries and areas of California. It's designed to reward companies that hire qualified full-time employees and pay them well. The credit applies to hires made in what's known as a Designated Geographical Area (DGA).
Who's Eligible? Let's talk about the exciting part! The NEC now welcomes more businesses under its umbrella, thanks to recent amendments. Are you in semiconductor manufacturing or research, electric airplane manufacturing, lithium production, or lithium battery manufacturing? You may just be in luck. These sectors, nicknamed SEAL businesses, are the new kids on the block for this tax credit.
Understanding the SEAL Details
Semiconductor Businesses: If you're applying for federal CHIPS Act funding, listen up.
Electric Plane Makers: Got a sales and use tax exclusion as an eVTOL manufacturer? This is for you.
Lithium Pros: If you're all about Lithium, as defined by California laws, join in.
Lithium Battery Makers: Lithium batteries are your thing? If they make up 50% of your business, welcome aboard.
The No-Gos Certain businesses, like temporary help services or retail trade, typically don’t qualify—unless they’re small businesses with gross receipts under $2 million in California for the prior tax year.
How Does It Work? The mechanics are straightforward. If your business operates within the DGA and hires qualified employees, you could be due for some credit. But first, grab a Tentative Credit Reservation (TCR). It's like saving your seat at the tax credit table.
It's all about timing: You've got 30 days from when you hire to get that TCR. No rush, but...actually, yeah, a bit of a rush.
Pay well: We're talking more than 150% of California's minimum wage.
Play the long game: Your new hire could keep earning you credits for a good five years—excellent value!
Crunching Numbers: How Much Will You Get? Calculate your credit based on the qualified wages paid over the standard minimum wage, and apply a lovely 35%.
To keep it real, let's walk through a hypothetical. Meet Bob's Tech Innovations, hiring two tech wizards in 2023. One's a rockstar coder; the other’s an AI whiz. They pay them above the 150% minimum wage threshold and, voilà, grab a tentative credit reservation. If Bob's company keeps increasing its workforce, the full credit could be theirs. Less hiring means a portion, and no increase means "better luck next time, Bob."
Hiring in California could now be as rewarding as it is strategic. Whether you're just curious or seriously scrutinizing your industry's eligibility, the NEC could be the surprise benefit you didn't know you had. Have you hired recently? Are you planning to? It might just be time to make that strategic employment leap and save some tax while you’re at it!
Ready to put the New Employment Credit to work for your business? Connect with us today and discuss your eligibility—you never know just how beneficial this credit could be for you!