BILL NUMBER: AB 1186	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  APRIL 10, 2007

INTRODUCED BY   Assembly Member Karnette

                        FEBRUARY 23, 2007

   An act to amend  Sections 17053.70 and 23612.2 
 Section 11294  of the Revenue and Taxation Code, relating
to taxation, to take effect immediately, tax levy.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 1186, as amended, Karnette.  Income and corporation tax
credits: qualified property.   Private Railroad Car Tax
Law: assessment factors.  
   The Private Railroad Car Tax Law requires, in lieu of an ad
valorem property tax, the State Board of Equalization to assess and
tax private railroad cars operated upon railroads in this state by
class based on the owner's acquisition cost, less depreciation, as
provided. That law requires the board to determine the average number
of each class of private railroad cars that are physically present
in the state during the calendar year immediately preceding the
fiscal year in which the tax is imposed, but excludes from this
determination time in which the car was undergoing specified
maintenance.  
   This bill would additionally require the board to exclude from
this determination the average dwell time for cars awaiting loading,
unloading, or loading and unloading.  
   The Personal Income Tax Law and the Corporation Tax Law authorize
various credits against the taxes imposed by those laws, including a
credit for the sales and use tax paid for the purchase of qualified
property, as defined, used by a qualified taxpayer, as defined, in
enterprise zones. Among other things, the credit is for the total
cost of qualified property purchased and placed in service in any
taxable year in an amount not to exceed $1,000,000 under the Personal
Income Tax Law and $20,000,000 under the Corporation Tax Law.
 
   This bill would apply those dollar limitations on a per enterprise
zone basis. 
   This bill would take effect immediately as a tax levy.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

   SECTION 1.    Section 11294 of the   Revenue
and Taxation Code   is amended to read: 
   11294.   (a)    In determining the averages
required in Section 11293, the board shall exclude from the
California factor  car   both of the following:
 
   (1) The average dwell time for cars awaiting loading, unloading,
or loading and unloading. 
    (2)     Car  mileage, car days or such
other data  which   that  occurs while
cars are not qualified for revenue service and are in a repair
facility in this state requiring and undergoing or awaiting
remodeling, overhaul, renovation, conversion or repair which
necessitates total labor in excess of 10 man-hours. 
   Car 
    (b)    Car  days excluded pursuant to
this section shall not exceed 90 days per car unless the claimant
provides substantiation of the necessity for the additional days in
such form as prescribed by the board.
   SEC. 2.    This act provides for a tax levy within
the meaning of Article IV of the Constitution and shall go into
immediate effect.  
  SECTION 1.    Section 17053.70 of the Revenue and
Taxation Code is amended to read:
   17053.70.  (a) There shall be allowed as a credit against the "net
tax" (as defined in Section 17039) for the taxable year an amount
equal to the sales or use tax paid or incurred during the taxable
year by the taxpayer in connection with the taxpayer's purchase of
qualified property.
   (b) For purposes of this section:
   (1) "Taxpayer" means a person or entity engaged in a trade or
business within an enterprise zone.
   (2) "Qualified property" means:
   (A) Any of the following:
   (i) Machinery and machinery parts used for fabricating,
processing, assembling, and manufacturing.
   (ii) Machinery and machinery parts used for the production of
renewable energy resources.
   (iii) Machinery and machinery parts used for either of the
following:
   (I) Air pollution control mechanisms.
   (II) Water pollution control mechanisms.
   (iv) Data processing and communications equipment, including, but
not limited, to computers, computer-automated drafting systems, copy
machines, telephone systems, and faxes.
   (v) Motion picture manufacturing equipment central to production
and postproduction, including, but not limited to, cameras, audio
recorders, and digital image and sound processing equipment.
   (B) The total cost of qualified property purchased and placed in
service in any taxable year that may be taken into account by any
taxpayer for purposes of claiming this credit shall not exceed one
million dollars ($1,000,000) per each enterprise zone.
   (C) The qualified property is used by the taxpayer exclusively in
an enterprise zone.
   (D) The qualified property is purchased and placed in service
before the date the enterprise zone designation expires, is no longer
binding, or becomes inoperative.
   (3) "Enterprise zone" means the area designated as an enterprise
zone pursuant to Chapter 12.8 (commencing with Section 7070) of
Division 7 of Title 1 of the Government Code.
   (c) If the taxpayer has purchased property upon which a use tax
has been paid or incurred, the credit provided by this section shall
be allowed only if qualified property of a comparable quality and
price is not timely available for purchase in this state.
   (d) In the case where the credit otherwise allowed under this
section exceeds the "net tax" for the taxable year, that portion of
the credit that exceeds the "net tax" may be carried over and added
to the credit, if any, in succeeding taxable years, until the credit
is exhausted. The credit shall be applied first to the earliest
taxable years possible.
   (e) Any taxpayer who elects to be subject to this section shall
not be entitled to increase the basis of the qualified property as
otherwise required by Section 164(a) of the Internal Revenue Code
with respect to sales or use tax paid or incurred in connection with
the taxpayer's purchase of qualified property.
   (f) (1) The amount of the credit otherwise allowed under this
section and Section 17053.74, including any credit carryover from
prior years, that may reduce the "net tax" for the taxable year shall
not exceed the amount of tax that would be imposed on the taxpayer's
business income attributable to the enterprise zone determined as if
that attributable income represented all of the income of the
taxpayer subject to tax under this part.
   (2)  Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the
enterprise zone. For that purpose, the taxpayer's business income
attributable to sources in this state first shall be determined in
accordance with Chapter 17 (commencing with Section 25101) of Part
11. That business income shall be further apportioned to the
enterprise zone in accordance with Article 2 (commencing with Section
25120) of Chapter 17 of Part 11, modified for purposes of this
section in accordance with paragraph (3).
   (3) Business income shall be apportioned to the enterprise zone by
multiplying the total California business income of the taxpayer by
a fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is two. For purposes of
this paragraph:
   (A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the enterprise zone during the
taxable year, and the denominator of which is the average value of
all the taxpayer's real and tangible personal property owned or
rented and used in this state during the taxable year.
   (B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the enterprise zone during
the taxable year for compensation, and the denominator of which is
the total compensation paid by the taxpayer in this state during the
taxable year.
   (4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "net tax" for the
taxable year, as provided in subdivision (d).
   (g) The amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 1998.  
  SEC. 2.    Section 23612.2 of the Revenue and
Taxation Code is amended to read:
   23612.2.  (a) There shall be allowed as a credit against the "tax"
(as defined by Section 23036) for the taxable year an amount equal
to the sales or use tax paid or incurred during the taxable year by
the taxpayer in connection with the taxpayer's purchase of qualified
property.
   (b) For purposes of this section:
   (1) "Taxpayer" means a corporation engaged in a trade or business
within an enterprise zone.
   (2) "Qualified property" means:
   (A) Any of the following:
   (i) Machinery and machinery parts used for fabricating,
processing, assembling, and manufacturing.
   (ii) Machinery and machinery parts used for the production of
renewable energy resources.
   (iii) Machinery and machinery parts used for either of the
following:
   (I) Air pollution control mechanisms.
   (II) Water pollution control mechanisms.
   (iv) Data-processing and communications equipment, including, but
not limited to, computers, computer-automated drafting systems, copy
machines, telephone systems, and faxes.
   (v) Motion picture manufacturing equipment central to production
and postproduction, including, but not limited to, cameras, audio
recorders, and digital image and sound processing equipment.
   (B) The total cost of qualified property purchased and placed in
service in any taxable year that may be taken into account by any
taxpayer for purposes of claiming this credit shall not exceed twenty
million dollars ($20,000,000) per each enterprise zone.
   (C) The qualified property is used by the taxpayer exclusively in
an enterprise zone.
   (D) The qualified property is purchased and placed in service
before the date the enterprise zone designation expires, is no longer
binding, or becomes inoperative.
   (3) "Enterprise zone" means the area designated as an enterprise
zone pursuant to Chapter 12.8 (commencing with Section 7070) of
Division 7 of Title 1 of the Government Code.
   (c) If the taxpayer has purchased property upon which a use tax
has been paid or incurred, the credit provided by this section shall
be allowed only if qualified property of a comparable quality and
price is not timely available for purchase in this state.
   (d) In the case where the credit otherwise allowed under this
section exceeds the "tax" for the taxable year, that portion of the
credit which exceeds the "tax" may be carried over and added to the
credit, if any, in the following year, and succeeding years if
necessary, until the credit is exhausted. The credit shall be applied
first to the earliest taxable years possible.
   (e) Any taxpayer who elects to be subject to this section shall
not be entitled to increase the basis of the qualified property as
otherwise required by Section 164(a) of the Internal Revenue Code
with respect to sales or use tax paid or incurred in connection with
the taxpayer's purchase of qualified property.
   (f) (1) The amount of credit otherwise allowed under this section
and Section 23622.7, including any credit carryover from prior years,
that may reduce the "tax" for the taxable year shall not exceed the
amount of tax which would be imposed on the taxpayer's business
income attributable to the enterprise zone determined as if that
attributable income represented all of the income of the taxpayer
subject to tax under this part.
   (2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the
enterprise zone. For that purpose, the taxpayer's business income
attributable to sources in this state first shall be determined in
accordance with Chapter 17 (commencing with Section 25101). That
business income shall be further apportioned to the enterprise zone
in accordance with Article 2 (commencing with Section 25120) of
Chapter 17, modified for purposes of this section in accordance with
paragraph (3).
   (3) Business income shall be apportioned to the enterprise zone by
multiplying the total California business income of the taxpayer by
a fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is two. For purposes of
this paragraph:
   (A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the enterprise zone during the
taxable year, and the denominator of which is the average value of
all the taxpayer's real and tangible personal property owned or
rented and used in this state during the taxable year.
   (B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the enterprise zone during
the taxable year for compensation, and the denominator of which is
the total compensation paid by the taxpayer in this state during the
taxable year.
   (4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "tax" for the taxable
year, as provided in subdivision (d).
   (g) The amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 1998.  
  SEC. 3.    This act provides for a tax levy within
the meaning of Article IV of the Constitution and shall go into
immediate effect.