Small businesses in Sonoma County vie for new tax credits

$50,000 for a few hours of work?

No, it’s not some skeezy infomercial. Instead, that’s the pitch the Sonoma County Economic Development Board is using to alert local companies to more than $31 million in tax credits that are still available from a new state program.

Under legislation signed by Gov. Jerry Brown in 2013, the California Competes Tax Credit is available to all companies that want to expand, whether by new hires or investment. The program is operated out of the governor’s office and will allocate more than $150 million this year, with 25 percent designated for small businesses with gross revenues of $2 million or less.

Tim Ricard, program manager for the Sonoma County Economic Development Board, said the application typically only takes a few hours to complete and could produce a significant tax credit, which is more valuable than a tax deduction because it reduces the overall amount a company owes on its state taxes. It’s nonrefundable.

“You can possibly get $50,000 for a few hours’ work,” Ricard said. “That’s a pretty good return.”

The board is hosting a Feb. 24 workshop on the tax credit at the Petaluma Community Center for businesses to learn more about the program.

MAC Thin Films Inc. in Santa Rosa became the first local business to get one of the tax credits, receiving $100,000 that will be doled out over four years if the company meets its hiring targets. That’s a significant tax break as MAC Thin Films, which launched in June out of the remnants of a former JDSU unit, expects to have revenue of more than $10 million in its first year.

The company, which makes mirrors for copiers and scanners as well as anti- reflective glass for cockpits, plans to hire more employees in the next five years, going from 45 to 87.

“That’s the really hard part, knowing how many employees we are going to hire and how much investment as well,” said Julie Leonhard, chief financial officer at MAC Thin Films. “I opted to be a little conservative.”

Leonhard added that she thought her company had a few advantages in the process given that it is a startup, it pays workers an average annual salary of $50,000, and that Sonoma County has not recovered from the recession as quickly as some other areas, such as San Francisco.

Business executives must specifically request the size of tax credit they want, making it a tough exercise akin to bidding on a house. A large request can potentially make it harder to land the tax credit or come with difficult metrics to meet, while a small request can leave money on the table.

All the tax credits are merit-based. They are awarded on the basis of such factors as the number of jobs created, pay levels and the extent of unemployment in the local area.

The board has worked with about five local companies on their applications, and Ricard recently urged one local owner to boost his request by $30,000.

“I think they were a little too conservative,” he said. “He was about to hit send, and we talked it over and they decided to go for a bigger number.”

You can reach Staff Writer Bill Swindell at 521-5223 or bill.swindell@pressdemocrat.com. On Twitter @BillSwindell.