A simple step to grow quantum and fusion jobs in California

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OPINION – California invented the modern startup. From the semiconductor shops of the 1950s to today’s fusion energy labs and quantum computing companies, this state has been the birthplace of industries that reshape the world. However, a single flaw in one of California’s signature economic development programs is quietly pushing the next generation of those companies out the door.

Currently, tax credits from the California Competes Tax Credit (CalCompetes) program are inaccessible for early-stage start-ups. Many of these startups are in cutting-edge sectors like quantum computing, fusion energy, semi-conductors and zero-emission vehicles. Without action, California jeopardizes its leadership in core industries and risks letting other states reap the economic benefits.

SB 1120, authored by Sen. Jerry McNerney and sponsored by the Silicon Valley Leadership Group, would extend CalCompetes tax credits to early-stage companies and startups. This is a simple fix to a successful program.

Since its 2013 launch, CalCompetes has has benefitted more than 1,000 businesses and helped create an estimated 164,000 jobs. Two peer-reviewed studies confirm it clears a bar many incentive programs fail: it creates jobs that would not exist otherwise. It is a high ROI force multiplier, lifting up entire communities and spurring economic development.

In its current form, CalCompetes provides credits only to offset taxes that a company already owes. This structure locks the credits away from early-stage start-ups building toward profitability, which have no tax liability to offset.

A system based on tax liability works for an established, profitable business. But for a pre-revenue startup developing a quantum computing platform or a commercial fusion reactor, the model does not work. They earn the credit but cannot actually use it.

The state acknowledged this problem when it created the CalCompetes Grant Program, designed for companies with “little to no tax liability.” That program ran on one-time funding and is now gone. The underlying problem remains.

Texas, Arizona, and others are actively recruiting California’s frontier-tech companies. When a startup is deciding where to scale, a state with an incentive they can access will beat an unusable credit every time.

SB 1120 covers industries at the forefront of technological change. Quantum computing, fusion energy, advanced semiconductors and biotech will define the global economy in the coming decades. California companies are among the world leaders in all of them. The state should be doing everything it can to keep them here so that we can grow jobs and opportunity in our region and state.

SB 1120 does not expand CalCompetes or create new spending. Companies eligible for the refundable credit would have already won a competitive award and met their milestones. This is not new spending. It is unlocking capital that has already been authorized and is sitting idle.

When these companies eventually reach profitability – and the ones that succeed in fusion and quantum will be enormously profitable – they will generate substantial tax revenue and high-wage employment for decades. A temporary credit costs far less than letting frontier industries, and their accompanying job and economic growth, build elsewhere.

The legislature has already decided these companies are worth backing. SB 1120 makes that investment real. The California legislature should open this funding and pass the bill.

Ahmad Thomas is the CEO of the Silicon Valley Leadership Group.