Area Development
{{RELATEDLINKS}} Business Climate
California's Advantages
California offers unparalleled value to companies seeking the optimal business location. Our critical mass of business services, intellectual capital, financial acumen, transportation systems and market access enhance the corporate mission and make California the most efficient place to do business in the world. Why invest or create jobs in California? Because the long-term outlook for our economy and business climate is as sunny as the legendary climate.

Innovation and Intellectual Capital
California leads the nation in trends and innovation. New ideas are a way of life here. Californians have a strong need to express themselves and a long history of free thinkers conceiving the inconceivable. California supports creativity with a superior educational system and job training that produces an unrivaled and highly skilled labor force. Over 2.4 million students are enrolled in 416 public and private colleges and universities with over 200,000 college graduates per year. California possesses the nation's highest concentration of engineers, scientists, mathematicians and skilled technicians. Seven of the top 25 engineering schools are in California. Fifty-three California companies are ranked among Fortune Magazine's prestigious FORTUNE 500 list of America's largest corporations. California is a major center for design of automobiles, furniture, apparel, software, electronics, telecommunications services, computers and semiconductors. California boasts nearly 651 members of the National Academy of Sciences and 111 Nobel Laureates.

Nation's Leading High-Tech State
California's culture embraced technology as part of its founding DNA. Technological innovation powers the California economy. We're home to over 930,000 high-tech workers, larger than any other state, and 16% of all U.S. high-tech workers. High-tech exports totaled $48 billion, ranked first nationwide, and high-tech goods represent nearly 44% of the state's annual exports. California leads the nation in several strategic high-tech industry segments, comprising between 20-60% of U.S. market share in electronic components, commercial aerospace, medical instruments, biotechnology and transportation. California has been the #1 manufacturing state since 1977. In many ways, California's technology fortune has driven the nation's economic future. California leads the nation with 4 of "The top ten rankings for the preeminent high-tech metros in North America", a study conducted by the Milken Institute. In addition to leading the country in high-tech, California also leads in `Green Tech' and `Green Collar Jobs.' California is home to many types of renewable energies. Solar, wind and biodiesel are just a few of the technologies that are being researched, developed, and manufactured in the Golden State. California also topped the 2010 and 2011 CNBC's America's Top States for Business Rankings for Technology and Innovation

Research, Capital and Access to Financial Resources
California leads the nation in research and development (R&D) and benefits from receiving half of the nation's venture capital (VC) investment. In 2009, California companies received more than $8.8billion or 50% of all VC dollars invested in the U.S. Top sectors receiving VC funding are software, telecommunications, biotechnology, medical devices and semiconductors. California is home to more than 2,000 companies and more than 100 universities and private nonprofit research organizations that are engaged in biomedical R&D and manufacturing. The biomedical industry is one of the most recession resilient sectors in the state's economy, accounting for 274,000 California jobs. Among the state's high-tech industries, only the information technology sectors (computer and Internet-related services and computer and peripheral equipment industries) employ more people than the biomedical industry. California ranked 1st in "Access to Capital" in CNBC's America's Top States for Business Rankings for 2010 and 2011. California's biotech industry was ranked #1 by Business Facilities Magazine; they call the Golden State, "the birthplace of biotech." In 2009, California's biomedical companies completed 252 deals valued at $2.6 billion, down from 302 deals worth $3.5 billion in 2008 but still attracting more venture capital investment than any other sector in the state. California received the greatest amount of National Institutes of Health (NIH) funding of any state, receiving 7,228 grants totaling $3.15 billion in 2008. California's share of funding was approximately 40% more than the second largest grantee, Massachusetts, which received $2.2 billion. California ranks first in nanotechnology companies, holders of over 200 patents. More research and VC funding for this emerging industry is invested here than anywhere else. The Silicon Valley has established a Blue Ribbon Task Force on Nanotechnology and the National Science Foundation predicts industry revenue will reach $1 trillion by 2015. R&D expenditures at universities and colleges totaled $6.49 billion in 2006, while Industrial R&D exceeded $58.4 billion, ranked first in the nation. California offers a 15% R&D tax credit for inhouse research and 24% for contract research, the highest in the nation.

Eighth-Largest Market in the World
California has the largest, most robust and most resilient economy in the United States. The Golden State produced $1.9 trillion in goods and services in 2010, a 1.8% increase over 2009. Our economy represents 13% of United States gross domestic product. Our population exceeded 37.3 million (2010 census) and is growing dramatically in size and diversity. It represents 12% of U.S. population, one out of every nine persons. California is the number one state for attracting foreign direct investment. The state has the largest consumer markets for high technology, biotechnology, food and agriculture, apparel, entertainment and is a bellwether for the nation's economy. Currently, only three minority markets at the state level exceed $100 billion in buying power annually, and two of them are in California. Hispanic buying power comprises $228 billion in California and California's Asian consumer market totals $150 billion.

Pacific Gateway
California is globally connected with world-class infrastructure. More than 15,000 miles of highways and freeways carry billions of tons of freight per year. Twelve cargo airports carry more than 3 million tons of freight per year and California leads the nation with eleven cargo seaports. The ports of Los Angeles (#1), Long Beach (#2), and Oakland (#5) are among the busiest in the country.

California has 17 Foreign Trade Zones (FTZ) which allow tenants to delay or forgo import and export duties on goods and raw materials until they enter U.S. commerce. If the goods are warehoused in an FTZ, then exported to other countries, no duties are paid at all. In addition, California has 42 Enterprise Zones (EZ) and 8 Local Agency Military Base Recovery Areas (LAMBRA).

Twenty-five freight railroads in California operate over 5,000 miles of track to form an integral part of the global transportation network. Mixed freight, food, glass and stone, chemicals and primary metal products make up the bulk of the originated and terminated tonnage carried by the extensive railroad network.

California is a global export leader with over $134 billion in sales of goods and services. International-related commerce accounts for a large percentage of the state's economy. Exports from California to 228 foreign markets accounted for 11% of total U.S. exports. California's top trading partners are Mexico, Canada, Japan, China and South Korea. California trade and exports translate into high-paying jobs for over one million Californians.

California Lifestyle
Californians lead an enviable life that for the last five years ranks #1 in the Harris Poll asking respondents to name the number one most desirable state in which to live. Residents enjoy one of the highest life expectancies in the country, a median age of 34.7 years and receive the best health care. Californians enjoy natural beauty right in their backyards, featuring towering forests, snow-capped mountains, beautiful beaches and serene deserts. The Golden State is home to over 1,000 golf courses, 45 snow resorts, 21 professional sports teams, 31 national parks, 280 state parks, 134 wilderness areas, 1,100 miles of coastline, and over 900 wineries.

California leads the nation in tourism with over 200 million visitors and $95.1 billion in revenues in 2010.

Innovation Hubs
In an effort to harness and enhance California's innovative spirit, the State of California launched a forward-thinking Innovation Hub (iHub) initiative in early 2010. The Governor's iHub initiative seeks to improve the state's national and global competitiveness by stimulating partnerships, economic development and job creation around specific research clusters throughout the state.

What is an iHub? Initiative Impact GO-Biz/California Business Investment Services Unit

California Business Investment Services (CalBIS) assists companies and investors interested in employing Californians. Major state-level incentives are described in this section. Note that many incentives are site driven and/or negotiated with local government on a case-by-case basis or under an existing local economic development policy. As needed, "A-Teams" comprised of state and local officials are assembled to bring public and private resources together to assist investors or companies interested in the Golden State.

Franchise Tax Board – New Employment Credit
The New Employment Credit is available for business located in newly identified census tracts, as well as the former Enterprise and LAMBRA Zones. The New Employment Credit (NEC) is available for each taxable year beginning on or after January 1, 2014, and before January 1, 2021, to a qualified taxpayer that hires a qualified full-time employee on or after January 1, 2014, and pays or incurs qualified wages attributable to work performed by the qualified full-time employee in a designated census tract or economic development area [herein referred to as a designated geographic area (DGA)], and that receives a tentative credit reservation for that qualified full-time employee. In order to be allowed a credit, the qualified taxpayer must have a net increase in the total number of full-time employees in California.

Board of Equalization – (Partial) Sales Tax Exemption
A new law beginning on July 1, 2014 allows manufacturers to obtain a partial exemption of sales and use tax on certain manufacturing and research and development equipment purchases. To be eligible under this law, you must meet all three of these conditions:
1. Be engaged in certain types of business, also known as a “qualified person.”
2. Purchase “qualified property.”
3. Use that qualified property for the uses allowed by this law.

Governor’s Office of Business and Economic Development – California Competes Credit
The Governor's Office of Business and Economic Development (GO-Biz) administers the California Competes Tax Credit. It is an income tax credit available to businesses that want to come to California, or stay and grow in California.

Franchise Tax Board - California Research Credit
Designed to encourage businesses to increase their basic research and development activities in California, the research and development tax credit allows companies to receive a 15% credit against their bank and corporation tax liability for qualified in-house research expenses, and a 24% credit for basic research payments to outside organizations. Qualified research expenses generally include wages, supplies and contract research costs. To qualify, a taxpayer's research must be conducted within California and include basic or applied research of scientific inquiry, original investigation for the advancement of scientific or engineering knowledge or improved function of a business component.

California Film Commission – Film & Television Production Credit
The California Film Commission offers a tax credit incentive program to qualified motion pictures. $100 million has been allocated annually beginning in fiscal year 2009-2010 through 2016-2017 on a first-come first-served basis. The Program allows a 20% tax credit for qualified production related expenses to a taxpayer against State income taxes. The program offers a special 5% additional tax credit bonus for those TV series that return from out of state and to “independent films”. A qualified taxpayer may, in lieu of claiming the credit, apply the credit amount against sales and use taxes.

California Alternative Energy and Advanced Transportation Financing Authority – (Full) Sales Tax Exclusion
The California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA) provides a sales and use tax exclusion for advanced manufacturers and manufacturers of alternative source and advanced transportation products, components or systems. The STE Program was originally authorized by Senate Bill 71 (Padilla, 2010), which allowed CAEATFA to provide a sales tax exclusion for manufactures of alternative source and advanced transportation products. The STE Program was recently expanded by Senate Bill 1128 (Padilla, 2012) to include advanced manufacturing projects.

Employee Training
Job Referral and Placement

California's Employment Development Department (EDD) works with businesses to access the state's entire workforce, as well as to coordinate recruitment activities with local community-based job training and placement organizations called "One-Stop Career Centers." EDD, in cooperation with the One-Stop network, will help to customize and deliver pre-employment and on-the-job training; recruit, screen, and assess workers for specific skills sets; and assist employers to maximize California Enterprise Zone and federal hiring tax credits.

Also, through its CalJOBS system, EDD's Job Service offers a statewide network that provides an instant link between employers and job seekers anywhere in California. This network provides employers with quick access to the largest available pool of job-ready applicants. SM system, EDD's Job Service offers a statewide network that provides an instant link between employers and job seekers anywhere in California. This network provides employers with quick access to the largest available pool of job-ready applicants.
Learn more here

California Employment Training Panel
A skilled workforce is key to a company's ability to remain competitive. The Employment Training Panel (ETP) assists employer efforts to effectively train workers and maintain skilled workforces capable of responding to changing business and industry needs. ETP-funded training works because employers make decisions about their own training programs: training investments help companies become more profitable, and performance-based contracting ensures success. eTP job training funds are available to all California manufacturing companies, companies that face out-of-state competition and business are and expanding or relocating to California from other states or countries. In addition to the manufacturing industry, and California's small business employers, the Panel also prioritizes: For more information regarding ETP, visit their website at or e-mail them at

Financial Assistance
Industrial Development Bonds

Industrial Development Bond (IDB) financing maybe the most competitive financing option available for the acquisition of manufacturing facilities and equipment. IDBs provide a method for middle market manufacturers to access the private capital markets at tax-exempt rates. The IDB interest rate is significantly lower than bank financing because the interest paid to the investor is exempt from state and federal income tax, resulting in substantial savings to the borrower, depending on the amount financed.

The IDB issuance process can be pursued concurrently with the bank credit approval process. The entire process can be easily completed within 90 days and from the borrower's standpoint should not be much different than conventional financing. The most frequent source of delay is, in fact, the letter of credit bank's credit approval process.

The financing structure is fairly straightforward. A governmental entity will issue bonds and loan the proceeds to the company. The company's obligation to repay the loan is secured by a direct-pay Letter of Credit from a bank rated 'A' or better. The interest rate on the bonds is adjustable and is reset weekly by the underwriter in its capacity as remarketing agent.

IDBs can be issued by the California Infrastructure and Economic Development Bank (I-Bank), cities, counties, and joint powers authorities. IDB s do not constitute an obligation of either the state or the local government issuer.

The issuer's staff and the borrower's finance team of experienced professionals assist the business through each stage of the process. The finance team usually comprises a bond counsel, financial advisor (who assists in packaging and structuring the financing), letter of credit bank, underwriter, and trustee.

IDB Guidlelines: Incentive and tax information is provided to Area Development by each state's economic development or commerce agency for information purposes only and is subject to revision at any time by the state government. Please contact the state agency directly for full requirements and offerings. This information was last updated November 2014.

{{RELATEDLINKS}}California Alternative Energy & Advanced Transportation Authority (CAEATFA):
Sales & Use Tax Exemptions for Clean Tech Manufacturing
California leads the world in environmental technology as the home to 10,209 clean-tech companies and home base to the innovative minds and year-round sunshine that power the clean technology industry. SB 71 will allow California to maintain this competitive edge by expanding the range of projects which may be approved for a sales tax exemption to include all clean-tech manufacturers.

Previously, CAEATFA could provide a sales tax exemption for the purchase of new manufacturing equipment for zero-emission vehicles (ZEV); under SB 71 they will now be able to provide an exemption for all clean-tech manufacturers.

The CAEATFA Board has directed authority staff to explore proposals for providing sales and use tax exemptions for the purchase of ZEV and clean-tech manufacturing equipment. The goal of this program is to create a strong new clean-tech industry within California that reduces green house gas emissions and creates new long-term high value-added jobs.

Businesses must apply for the tax exemption and once approved would be able to make tax-exempt clean-tech manufacturing equipment. CAEATFA will send project approval in the form of a letter authorizing the Executive Director to enter into a contract with the participating business. The participating business will issue an exemption certificate (provided by CAEATFA) to the vendor at the time of purchase. This certificate will state that the business party is exempt from paying taxes on the equipment at time of purchase. Once the participating party purchases the project equipment from its vendors, the Conveyance/Reconveyance contract takes over. Under the contract, the participating business will convey title to CAEATFA along with a list of equipment purchased, and CAEATFA will convey it back to the participating business. The business party is not allowed to use the equipment until it receives the reconveyed title from CAEATFA.
The Board of Equalization (BOE) oversees statesales and use tax issues and would be consulted in the process.

Pollution Control Financing:
The CPCFA provides tax-exempt bond financing for pollution control projects. Their Tax-Exempt Bond Financing Program gives California businesses help with acquisition or construction of qualified pollution control, waste disposal or waste recovery facilities, and the acquisition and installation of new equipment. They also offer a Sustainable Communities Grant and Loan Program that assists communities implementing "smart growth strategies," and the CalReUSE Program that offers low-interest, forgivable loans to assist public and private partners in redeveloping contaminated brownfields. The California Capital Access Program (CalCAP) helps small business borrowers obtain loans.

Alternative and Renewable Fuel and Vehicle Technology Program (AB 118)
Assembly Bill 118 (Núñez, Chapter 750, Statutes of 2007) created the California Energy Commission's Alternative and Renewable Fuel and Vehicle Technology Program. The statute, subsequently amended by Assembly Bill 109 (Núñez, Chapter 313, Statutes of 2008), authorizes the Energy Commission to develop and deploy alternative and renewable fuels and advanced transportation technologies to help attain the state's climate change policies. The Energy Commission has an annual program budget of approximately $100 million to support projects that: The statute allows the Energy Commission to use grants, loans, loan guarantees, revolving loans,and other appropriate measures. Eligible recipients include: public agencies, private businesses, public-private partnerships, vehicle and technology consortia, workforce training partnerships and collaboratives, fleet owners, consumers, recreational boaters, and academic institutions. The Energy Commission must prepare and adopt an Investment Plan and convene an Advisory Committee to assist in preparing the Investment Plan.

For more information, please contact:
Alternative and Renewable Fuel & Vehicle Technology Program
Fuels & Transportation Division
California Energy Commission
Phone: 916-654-4634

Small Business Loan Guarantee
California Small Business Loan Guarantee Program: Allows a business to not only acquire a loan it could not otherwise obtain, but to establish a favorable credit history with a lender so that the business may obtain future financing on its own.
Eligible Applicants: Any small business as defined by the U. S. Small Business Administration (typically businesses that employ one hundred people or less).
Eligible Uses: Proceeds must be used primarily in California and for any standard business purpose beneficial to the applicant's business, such as expansion into new facilities or purchase of new equipment. Guarantee Amount: Guarantees can cover up to 90% of the loan amount, with the guaranteed portion of the loan not exceeding $500,000. The guaranteed percentage varies and subject to negotiation between the FDC and the lender.

Loan Information: The term of the loan guarantee may extend up to seven years: Market Development and Expansion Grant Program:
The Department of Conservation provides up to $20 million annually to increase beverage container recycling in California and to improve processing and manufacturing with recycled aluminum, glass and plastic. It encourages projects that advance environmentally and economically sustainable containers, packaging and other products. The program supports research and development of new technologies and helps reduce greenhouse gas emissions by strengthening green industries in the state.

Specific objectives include: Beverage Container Recycling Grant Program:
The Department of Conservation provides funding annually in the form of grants for beverage container recycling and litter reduction programs. The Department typically seeks projects that provide convenient beverage container recycling opportunities in California. However, the focus may change with each new solicitation. Grant proposals are evaluated on criteria set forth in each year's Grant Solicitation. There are no restrictions on who can apply for the grants. For more information, visit the Department of Conservation's website or call 1-800-RECYCLE.

Beverage Container Recycling Infrastructure Loan Guarantee Program:
The Department of Conservation provides continuous funding in the form of loan guarantees for up to $10 million for capital expenditures for new infrastructure that would add recycling capacity, re-use and/or remanufacture beverage container materials into new products. Uses: equipment costs, building and facilities, rent and utilities, travel, contractual services, salaries and benefits, other operating and non-operating costs. Private companies, non-governmental organizations, governmental agencies, manufacturers and trade associations are eligible to apply. For more information, visit the Department of Conservation's website at:

Recycling Market Development Zone Revolving Loan Program:
The Recycling Market Development Zone (RMDZ) Revolving Loan Program makes capital available for California manufacturers located in RMDZ's. The program provides direct loans to eligible businesses that manufacture recycled raw materials, produce new recycled products, or that reduce waste from the manufacture of a product. These loans promote market development for post consumer and secondary waste materials and divert waste from non-hazardous California landfills. Funds may be used to acquire equipment, make leasehold improvements, purchase recycled raw materials and inventory, or acquire real property. Applicants may borrow a maximum of 75 percent of the cost of a project, or $2 million. Terms are generally 10 years, and low interest rates are fixed.

Local Revolving Loan Funds:
Enterprising communities throughout California have recognized that Revolving Loan Funds (RLF) are important economic development tools. The United States Economic Development Administration, Department of Agriculture, and Housing and Urban Development's Community Development Block Grant Program typically capitalize RLF's. Their proceeds often provide critical capital to deserving small businesses, which in turn provide needed jobs in urban and rural areas throughout California.

Certain businesses may be targeted for assistance and most often the loan will be provided as part of an overall package in the form of gap financing.

RLF's are guided by policies that outline loan or loan guarantee sizes, uses, rates, terms, special conditions and participation levels.

The goals, objectives and priorities of the program are weighed against the portfolio's requirements, and loans are approved or denied by a Loan Administration Board. Conventional lending is required, with the RLF taking a second or third mortgage position. Personal and/or corporate guarantees are required. Contact your local city or county for more information.

Incentive and tax information is provided to Area Development by each state's economic development or commerce agency for information purposes only and is subject to revision at any time by the state government. Please contact the state agency directly for full requirements and offerings.