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Invest in California

Top Industries in California by FDI

Top Investors in California by Country

Northern California's Economic Growth and Prospects

California Incentives for FDI

Additional Resources for Foreign Investors Interested in CA

The federal and state governments recognize the enormous benefits of FDI in California and, along with numerous organizations, have worked hard to make California a more attractive and accessible international market through various means:

• 18 Foreign Trade Zones (FTZs) across the state (such as San Francisco , San Diego , West Sacramento, Los Angeles , San Jose , and Oakland ) let tenants postpone or forgo import and export duties on goods and raw materials until they enter U.S. Commerce (areas outside of the FTZ). Merchandise entering a FTZ can be stored, tested, sampled, relabeled, repackaged, repaired, manufactured, salvaged, destroyed, or processed without customs duties or government excise taxes.[1]

  • The state offers four types of Economic Development Areas (EDAs): Enterprise Zones; Local Agency Military Base Recovery Areas (LAMBRA); Manufacturing Enhancement Areas (MEA); and Targeted Tax Areas (TTA). The following information can be found in CalBIS’ California Investment Guide on page seven:

      - Enterprise Zones: Companies located within the boundaries of one of California ’s 39 Enterprise Zones are eligible for tax credits. The first major Enterprise Zone tax credit is equivalent to the sales and use taxes paid on the first $20 million of qualified new or used manufacturing equipment purchased each year. Qualified machinery is machinery or parts used to:

- Manufacture, process, fabricate, or otherwise assemble a product;

- Produce renewable energy resources; or

- Control air or water pollution.

The second major Enterprise Zone benefit is a credit equal to a percentage of the wages paid to a qualified employee. The credit is based on the lesser of the actual hourly wage or 150 percent of the state-established minimum wage. The credit is provided over a five-year period with 50 percent of the wages creditable in the first year of employment, 40 percent the second year, 30 percent the third year, 20 percent the fourth year, and 10 percent the fifth year. If the employee stays with the company for the entire five-year period, the company receives credits totaling nearly $32,000 per qualified employee. If the employee is terminated prior to 270 days of employment, the credit is recaptured. Other Enterprise Zone benefits that may apply in certain cases include:

- A 15-year carryover of up to 100 percent of net operating losses.

 - Expensing of certain depreciable property.

Lender interest income from loan to zone businesses is deductible. LAMBRAs, MEAs, and TTAs are detailed here.

  • California Business Investment Services (CalBIS) directly assists companies and investors interested in employing Californians.

  • Net loss carryover: California tax law allows businesses that experience a loss for the year to carry this loss forward to the next year in order to offset income in the following years. New businesses can carry over 100 percent of their losses for 10 years if the loss is in their first year of operation, 100 percent over seven years if the loss is in their second year of operation, and 100 percent over six years if the loss is in their third year of operation. Existing California business can carry over 50 percent of their losses for five years.

  • The New Markets Tax Credit (NMTC) Program permits taxpayers to receive a credit against federal income taxes for qualified equity investments in designated Community Development Entities (CDEs).

  • The California Pollution Control Financing Authority (CPCFA), located in the State Treasurer's Office, provides businesses in California with financing for pollution abatement equipment and waste disposal and resource recovery facilities for the management of environmental pollution hazards.

  • The Employment Training Panel (ETP) assists businesses in acquiring and retraining a highly skilled work force with expertise in very specific fields in order to increase competitiveness and productivity. The ETP will enter into a performance based customized training contract, for new or existing employees, that is managed by either an approved training agency or the company itself. As the training is completed, the costs for developing, implementing, and completing the training are reimbursed. Averaging about $1,500 per employee, reimbursements are made to the company for each employee that completes training and remains on the job for 90 days.

  • U.S. Federal Government-designated Empowerment Zones in California provide the following benefits:

- Employer wage credits of 20 percent for the first $15,000 in wages paid to an individual who resides in the EZ up to $3,000;

- Section 179 deduction allowing businesses to deduct all or part of the cost of eligible property (machinery, furniture, equipment, and computers) up to an additional $20,000;

- Availability of low interest rate tax exempt private activity bonds to finance industrial projects typically between $1-$3 million (some zones have substantially larger limits), often with fewer restrictions than those normally associated with tax-exempt bond financing;

- Possible city business tax exemptions; and,

- Postponement of capital gains on the sale of EZ/EC assets.

  • California ’s vast ports and harbors, handling over one third of the nation’s waterborne cargo, are spending over one billion dollars annually to upgrade their facilities to accommodate international trade.[2]

  • The federal government is additionally spending tens of millions of dollars to maintain and upgrade the navigation channels in California .[3]

  • Many local governments have a record of applying a common sense approach to permitting new facilities with a strong commitment to environmental quality and economic vitality, resulting in quick, unobtrusive permitting.[4]

  • The U.S. Department of Commerce, along with regional trade associations including the Northern California World Trade Center , provides a wide array of free or low cost information and services to assist investments, imports, and exports in the state. Tradeport is a very helpful free resource provided by an alliance of California ’s trade associations.

California boasts many other favorable economic conditions for foreign investment. In addition to being a creative and intellectual hub (California is the nation’s #1 high-tech state and over 27% of residents have a Bachelor’s degree or higher), California is also home to leading venture, investment banking, and private equity firms, providing extensive access to financial resources. The state also emphasizes a high-spending consumer lifestyle with a population generally characteristic of high relative purchasing power. As of 2005, California ’s workers are 15% more productive than the national average.[5]