BILL NUMBER: SB 1484 AMENDED
BILL TEXT
AMENDED IN SENATE MARCH 28, 2008
INTRODUCED BY Senator Alquist
FEBRUARY 21, 2008
An act relating to public resources. An
act to amend Sections 17052.12, 17260, 17681, 23609, 24423, and 24831
of, to add and repeal Sections 17059 and 23659 of, and to repeal
Sections 17052.8, 17681.6, 23604, and 24831.6 of, the Revenue and
Taxation Code, relating to taxation, to take effect immediately, tax
levy.
LEGISLATIVE COUNSEL'S DIGEST
SB 1484, as amended, Alquist. Public resources: clean
technology: business incentives. Income and
corporation taxes: oil producers: credits: clean energy technology.
The Personal Income Tax Law and the Corporation Tax Law allow
various credits and deductions in computing the income that is
subject to the taxes imposed by those laws, including credits and
deductions allowed to taxpayers engaged in the business of oil
production.
This bill would disallow those credits and deductions allowed to
taxpayers engaged in the business of oil production.
This bill would, under both laws, for taxable years beginning on
or after January 1, 2011, and ending before January 1, 2017, allow a
credit to a qualified taxpayer, as defined, equal to 50% of the
taxpayer's qualified costs related to clean energy technology, as
provided, up to $10,000.000.
This bill would take effect immediately as a tax levy.
Existing law generally regulates certain activities with regard to
the use of, or detriment to, public resources, including, but not
limited to, air and water resources and wildlife, coastal, and park
land.
This bill would declare the intent of the Legislature to create
incentives for clean technology developers to manufacture in
California.
Vote: majority. Appropriation: no. Fiscal committee: no
yes . State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 17052.8 of the
Revenue and Taxation Code is repealed.
17052.8. For each taxable year beginning on or after January 1,
1996, there shall be allowed as a credit against the "net tax" (as
defined by Section 17039) an amount determined as follows:
(a) (1) (A) The amount of the credit shall be equal to one-third
of the federal credit computed in accordance with Section 43 of the
Internal Revenue Code.
(B) If a taxpayer elects, under Section 43(e) of the Internal
Revenue Code, not to apply Section 43 for federal tax purposes, this
election is binding and irrevocable for state purposes, and for
purposes of subparagraph (A), the federal credit shall be zero.
(2) "Qualified enhanced oil recovery project" shall include only
projects located within California.
(3) The credit allowed under this subdivision shall not be allowed
to any taxpayer for whom a depletion allowance is not permitted to
be computed under Section 613 of the Internal Revenue Code by reason
of paragraphs (2), (3), or (4) of subsection (d) of Section 613A of
the Internal Revenue Code.
(b) Section 43(d) of the Internal Revenue Code shall apply.
(c) In the case where the credit allowed by this section exceeds
the "net tax," the excess may be carried over to reduce the "net tax"
for the succeeding 15 years.
(d) In the case where property which qualifies as part of the
taxpayer's "qualified enhanced oil recovery costs" also qualifies for
a credit under any other section in this part, the taxpayer shall
make an election on its original return as to which section applies
to all costs allocable to that item of qualified property. Any
election made under this section, and any specification contained in
that election, may not be revoked except with the consent of the
Franchise Tax Board.
(e) No deduction shall be allowed as otherwise provided in this
part for that portion of any costs paid or incurred for the taxable
year which is equal to the amount of the credit allowed under this
section attributable to those costs.
(f) The basis of any property for which a credit is allowed under
this section shall be reduced by the amount of the credit
attributable to the property. The basis adjustment shall be made for
the taxable year for which the credit is allowed.
(g) No credit may be claimed under this section with respect to
any amount for which any other credit has been claimed under this
part.
SEC. 2. Section 17052.12 of the Revenue
and Taxation Code is amended to read:
17052.12. For each taxable year beginning on or after January 1,
1987, there shall be allowed as a credit against the "net tax" (as
defined by Section 17039) for the taxable year an amount determined
in accordance with Section 41 of the Internal Revenue Code, except as
follows:
(a) For each taxable year beginning before January 1, 1997, the
reference to "20 percent" in Section 41(a)(1) of the Internal Revenue
Code is modified to read "8 percent."
(b) (1) For each taxable year beginning on or after January 1,
1997, and before January 1, 1999, the reference to "20 percent" in
Section 41(a)(1) of the Internal Revenue Code is modified to read "11
percent."
(2) For each taxable year beginning on or after January 1, 1999,
and before January 1, 2000, the reference to "20 percent" in Section
41(a)(1) of the Internal Revenue Code is modified to read "12
percent."
(3) For each taxable year beginning on or after January 1, 2000,
the reference to "20 percent" in Section 41(a)(1) of the Internal
Revenue Code is modified to read "15 percent."
(c) Section 41(a)(2) of the Internal Revenue Code, relating to
basic research payments, shall not apply.
(d) "Qualified research" shall include only research conducted in
California.
(e) In the case where the credit allowed under this section
exceeds the "net tax," the excess may be carried over to reduce the
"net tax" in the following year, and succeeding years if necessary,
until the credit has been exhausted.
(f) (1) With respect to any expense paid or incurred after the
operative date of Section 6378, Section 41(b)(1) of the Internal
Revenue Code is modified to exclude from the definition of "qualified
research expense" any amount paid or incurred for tangible personal
property that is eligible for the exemption from sales or use tax
provided by Section 6378.
(2) For each taxable year beginning on or after January 1, 1998,
the reference to "Section 501(a)" in Section 41(b)(3)(C) of the
Internal Revenue Code, relating to contract research expenses, is
modified to read "this part or Part 11 (commencing with Section
23001)."
(g) (1) For each taxable year beginning on or after January 1,
2000:
(A) The reference to "2.65 percent" in Section 41(c)(4)(A)(i) of
the Internal Revenue Code is modified to read "one and forty-nine
hundredths of one percent."
(B) The reference to "3.2 percent" in Section 41(c)(4)(A)(ii) of
the Internal Revenue Code is modified to read "one and ninety-eight
hundredths of one percent."
(C) The reference to "3.75 percent" in Section 41(c)(4)(A)(iii) of
the Internal Revenue Code is modified to read "two and forty-eight
hundredths of one percent."
(2) Section 41(c)(4)(B) shall not apply and in lieu thereof an
election under Section 41(c)(4)(A) of the Internal Revenue Code may
be made for any taxable year of the taxpayer beginning on or after
January 1, 1998. That election shall apply to the taxable year for
which made and all succeeding taxable years unless revoked with the
consent of the Franchise Tax Board.
(3) Section 41(c)(6) of the Internal Revenue Code, relating to
gross receipts, is modified to take into account only those gross
receipts from the sale of property held primarily for sale to
customers in the ordinary course of the taxpayer's trade or business
that is delivered or shipped to a purchaser within this state,
regardless of f.o.b. point or any other condition of the sale.
(h) Section 41(h) of the Internal Revenue Code, relating to
termination, shall not apply.
(i) Section 41(g) of the Internal Revenue Code, relating to
special rule for passthrough of credit, is modified by each of the
following:
(1) The last sentence shall not apply.
(2) If the amount determined under Section 41(a) of the Internal
Revenue Code for any taxable year exceeds the limitation of Section
41(g) of the Internal Revenue Code, that amount may be carried over
to other taxable years under the rules of subdivision (e); except
that the limitation of Section 41(g) of the Internal Revenue Code
shall be taken into account in each subsequent taxable year.
(j) This section shall not apply to a taxpayer engaged in the
business of oil production.
SEC. 3. Section 17059 is added to the
Revenue and Taxation Code , to read:
17059. (a) (1) For taxable years beginning on and after January
1, 2011, and ending before January 1, 2016, subject to the limitation
in paragraph (2), there shall be allowed to a qualified taxpayer as
a credit against the "net tax," as defined in Section 17039, an
amount equal to 50 percent of the qualified amount.
(2) The credit allowed by paragraph (1) shall not exceed ten
million dollars ($10,000,000).
(b) For purposes of this section:
(1) "Clean energy technology" means an energy supply or end-use
technology that, over its life cycle and compared to a similar
technology already in commercial use in the United States, meets all
of the following conditions:
(A) Is reliable, affordable, economically viable, socially
acceptable, and compatible with the needs and norms of California and
the United States.
(B) Results in reduced emissions of greenhouse gases, increased
geological sequestration, or energy efficiency.
(C) May substantially lower emissions of air pollutants and
generate substantially smaller or less hazardous quantities of solid
or liquid waste.
(2) "Qualified amount" means the total amount paid or incurred by
the qualified taxpayer for either of the following:
(A) Machinery, equipment, or devices, or any addition to,
reconstruction of, or improvement of, machinery, equipment, or
devices that are acquired, constructed, or installed in connection
with the processing or manufacturing of clean energy technology that
are located and remain within California.
(B) Capital investments in a qualified facility.
(3) "Qualified facility" means a facility that meets both of the
following conditions:
(A) The qualified taxpayer has provided the California Energy
Commission with all the pertinent information needed to certify the
facility and remitted any certification fees to the California Energy
Commission.
(B) The California Energy Commission has certified the facility as
a facility where all of the processed or manufactured items are
clean energy technology, excluding any byproducts, like waste heat,
chemicals, or recyclable materials that may be sold.
(4) "Qualified taxpayer" means a taxpayer who is engaged in those
lines of business described in Codes 3111 to 3399, inclusive, of the
North American Industrial Classification System (NAICS) published by
the United States Office of Management and Budget (OMB), 2007
edition, on or after January 1, 2009 who has been engaged in the
processing or manufacture of clean energy technology products in this
state for five years or less.
(c) No credit shall be allowed pursuant to this section unless the
qualified taxpayer provides, upon the request of the Franchise Tax
Board, any additional information relating to the credit for
disclosure to the Legislative Analyst for the limited purpose of
evaluation of the impact and effectiveness of the credit.
(d) The Franchise Tax Board shall promulgate rules and regulations
necessary to establish procedures, processes, requirements, and
rules required to implement this section.
(e) In the case where the credit allowed exceeds the "net tax,"
the excess may be carried over to reduce the "net tax" in the
following year, and succeeding years if necessary, until the credit
has been exhausted.
(f) This section shall remain in effect only until January 1,
2017, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2017, deletes or extends
that date.
SEC. 4. Section 17260 of the Revenue
and Taxation Code is amended to read:
17260. (a) No deduction , other than depreciation,
shall be allowed for expenditures for tertiary injectants
as provided by Section 193 of the Internal Revenue Code.
(b) Section 263(a) 263 of the
Internal Revenue Code shall not apply to
expenditures for which a deduction is allowed under Section 17266 or
17267.2 to any oil producer .
SEC. 5. Section 17681 of the Revenue
and Taxation Code is amended to read:
17681. (a) Subchapter I of Chapter 1 of
Subtitle A of the Internal Revenue Code, relating to natural
resources, shall apply, except as otherwise provided.
(b) Subchapter I of Chapter 1 of Subtitle A of the Internal
Revenue Code shall not apply to a taxpayer engaged in the business of
oil production.
SEC. 6. Section 17681.6 of the Revenue
and Taxation Code is repealed .
17681.6. Section 613A(c)(6)(H) of the Internal Revenue Code,
relating to temporary suspension of taxable income limit with respect
to marginal production, shall not apply.
SEC. 7. Section 23604 of the Revenue
and Taxation Code is repealed.
23604. For each taxable year beginning on or after January 1,
1996, there shall be allowed as a credit against the "tax" (as
defined by Section 23036) an amount determined as follows:
(a) (1) (A) The amount of the credit shall be equal to one-third
of the federal credit computed in accordance with Section 43 of the
Internal Revenue Code.
(B) If a taxpayer elects, under Section 43(e) of the Internal
Revenue Code, not to apply Section 43 for federal tax purposes, this
election is binding and irrevocable for state purposes, and for
purposes of subparagraph (A), the federal credit shall be zero.
(2) "Qualified enhanced oil recovery project" shall include only
projects located within California.
(3) The credit allowed under this subdivision shall not be allowed
to any taxpayer for whom a depletion allowance is not permitted to
be computed under Section 613 of the Internal Revenue Code by reason
of paragraphs (2), (3), or (4) of subsection (d) of Section 613A of
the Internal Revenue Code.
(b) Section 43(d) of the Internal Revenue Code shall apply.
(c) In the case where the credit allowed by this section exceeds
the "tax," the excess may be carried over to reduce the "tax" for the
succeeding 15 years.
(d) In the case where property which qualifies as part of the
taxpayer's "qualified enhanced oil recovery costs" also qualifies for
a credit under any other section in this part, the taxpayer shall
make an election on its original return as to which section applies
to all costs allocable to that item of qualified property. Any
election made under this section, and any specification contained in
that election, may not be revoked except with the consent of the
Franchise Tax Board.
(e) No deduction shall be allowed as otherwise provided in this
part for that portion of any costs paid or incurred for the taxable
year which is equal to the amount of the credit allowed under this
section attributable to those costs.
(f) The basis of any property for which a credit is allowed under
this section shall be reduced by the amount of the credit
attributable to the property. The basis adjustment shall be made for
the taxable year for which the credit is allowed.
(g) No credit may be claimed under this section with respect to
any amount for which any other credit has been claimed under this
part.
SEC. 8. Section 23609 of the Revenue and
Taxation Code is amended to read:
23609. For each taxable year beginning on or after January 1,
1987, there shall be allowed as a credit against the "tax" (as
defined by Section 23036) an amount determined in accordance with
Section 41 of the Internal Revenue Code, except as follows:
(a) For each taxable year beginning before January 1, 1997, both
of the following modifications shall apply:
(1) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code is modified to read "8 percent."
(2) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "12 percent."
(b) (1) For each taxable year beginning on or after January 1,
1997, and before January 1, 1999, both of the following modifications
shall apply:
(A) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code is modified to read "11 percent."
(B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "24 percent."
(2) For each taxable year beginning on or after January 1, 1999,
and before January 1, 2000, both of the following shall apply:
(A) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code is modified to read "12 percent."
(B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "24 percent."
(3) For each taxable year beginning on or after January 1, 2000,
both of the following shall apply:
(A) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code is modified to read "15 percent."
(B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "24 percent."
(c) (1) With respect to any expense paid or incurred after the
operative date of Section 6378, Section 41(b)(1) of the Internal
Revenue Code is modified to exclude from the definition of "qualified
research expense" any amount paid or incurred for tangible personal
property that is eligible for the exemption from sales or use tax
provided by Section 6378.
(2) "Qualified research" and "basic research" shall include only
research conducted in California.
(d) The provisions of Section 41(e)(7)(A) of the Internal Revenue
Code, shall be modified so that "basic research," for purposes of
this section, includes any basic or applied research including
scientific inquiry or original investigation for the advancement of
scientific or engineering knowledge or the improved effectiveness of
commercial products, except that the term does not include any of the
following:
(1) Basic research conducted outside California.
(2) Basic research in the social sciences, arts, or humanities.
(3) Basic research for the purpose of improving a commercial
product if the improvements relate to style, taste, cosmetic, or
seasonal design factors.
(4) Any expenditure paid or incurred for the purpose of
ascertaining the existence, location, extent, or quality of any
deposit of ore or other mineral (including oil and gas).
(e) (1) In the case of a taxpayer engaged in any biopharmaceutical
research activities that are described in codes 2833 to 2836,
inclusive, or any research activities that are described in codes
3826, 3829, or 3841 to 3845, inclusive, of the Standard Industrial
Classification (SIC) Manual published by the United States Office of
Management and Budget, 1987 edition, or any other biotechnology
research and development activities, the provisions of Section 41(e)
(6) of the Internal Revenue Code shall be modified to include both of
the following:
(A) A qualified organization as described in Section 170(b)(1)(A)
(iii) of the Internal Revenue Code and owned by an institution of
higher education as described in Section 3304(f) of the Internal
Revenue Code.
(B) A charitable research hospital owned by an organization that
is described in Section 501(c)(3) of the Internal Revenue Code, is
exempt from taxation under Section 501(a) of the Internal Revenue
Code, is not a private foundation, is designated a "specialized
laboratory cancer center," and has received Clinical Cancer Research
Center status from the National Cancer Institute.
(2) For purposes of this subdivision:
(A) "Biopharmaceutical research activities" means those activities
that use organisms or materials derived from organisms, and their
cellular, subcellular, or molecular components, in order to provide
pharmaceutical products for human or animal therapeutics and
diagnostics. Biopharmaceutical activities make use of living
organisms to make commercial products, as opposed to pharmaceutical
activities that make use of chemical compounds to produce commercial
products.
(B) "Other biotechnology research and development activities"
means research and development activities consisting of the
application of recombinant DNA technology to produce commercial
products, as well as research and development activities regarding
pharmaceutical delivery systems designed to provide a measure of
control over the rate, duration, and site of pharmaceutical delivery.
(f) In the case where the credit allowed by this section exceeds
the "tax," the excess may be carried over to reduce the "tax" in the
following year, and succeeding years if necessary, until the credit
has been exhausted.
(g) For each taxable year beginning on or after January 1, 1998,
the reference to "Section 501(a)" in Section 41(b)(3)(C) of the
Internal Revenue Code, relating to contract research expenses, is
modified to read "this part or Part 10 (commencing with Section
17001)."
(h) (1) For each taxable year beginning on or after January 1,
2000:
(A) The reference to "2.65 percent" in Section 41(c)(4)(A)(i) of
the Internal Revenue Code is modified to read "one and forty-nine
hundredths of one percent."
(B) The reference to "3.2 percent" in Section 41(c)(4)(A)(ii) of
the Internal Revenue Code is modified to read "one and ninety-eight
hundredths of one percent."
(C) The reference to "3.75 percent" in Section 41(c)(4)(A)(iii) of
the Internal Revenue Code is modified to read "two and forty-eight
hundredths of one percent."
(2) Section 41(c)(4)(B) shall not apply and in lieu thereof an
election under Section 41(c)(4)(A) of the Internal Revenue Code may
be made for any taxable year of the taxpayer beginning on or after
January 1, 1998. That election shall apply to the taxable year for
which made and all succeeding taxable years unless revoked with the
consent of the Franchise Tax Board.
(3) Section 41(c)(6) of the Internal Revenue Code, relating to
gross receipts, is modified to take into account only those gross
receipts from the sale of property held primarily for sale to
customers in the ordinary course of the taxpayer's trade or business
that is delivered or shipped to a purchaser within this state,
regardless of f.o.b. point or any other condition of the sale.
(i) Section 41(h) of the Internal Revenue Code, relating to
termination, shall not apply.
(j) Section 41(g) of the Internal Revenue Code, relating to
special rule for passthrough of credit, is modified by each of the
following:
(1) The last sentence shall not apply.
(2) If the amount determined under Section 41(a) of the Internal
Revenue Code for any taxable year exceeds the limitation of Section
41(g) of the Internal Revenue Code, that amount may be carried over
to other taxable years under the rules of subdivision (f), except
that the limitation of Section 41(g) of the Internal Revenue Code
shall be taken into account in each subsequent taxable year.
(k) This section shall not apply to a taxpayer engaged in the
business of oil production.
SEC. 9. Section 23659 is added to the
Revenue and Taxation Code , to read:
23659. (a) (1) For taxable years beginning on and after January
1, 2011, and ending before January 1, 2016, subject to the limitation
in paragraph (2), there shall be allowed to a qualified taxpayer as
a credit against the "tax," as defined in Section 23036, an amount
equal to 50 percent of the qualified amount.
(2) The credit allowed by paragraph (1) shall not exceed ten
million dollars ($10,000,000).
(b) For purposes of this section:
(1) "Clean energy technology" means an energy supply or end-use
technology that, over its life cycle and compared to a similar
technology already in commercial use in the United States, meets all
of the following conditions:
(A) Is reliable, affordable, economically viable, socially
acceptable, and compatible with the needs and norms of California and
the United States.
(B) Results in reduced emissions of greenhouse gases, increased
geological sequestration, or energy efficiency.
(C) May substantially lower emissions of air pollutants and
generate substantially smaller or less hazardous quantities of solid
or liquid waste.
(2) "Qualified amount" means the total amount paid or incurred by
the qualified taxpayer for either of the following:
(A) Machinery, equipment, or devices, or any addition to,
reconstruction of, or improvement of, machinery, equipment, or
devices that are acquired, constructed, or installed in connection
with the processing or manufacturing of clean energy technology that
are located and remain within California.
(B) Capital investments in a qualified facility.
(3) "Qualified facility" means a facility that meets both of the
following conditions:
(A) The qualified taxpayer has provided the California Energy
Commission with all the pertinent information needed to certify the
facility and remitted any certification fees to the California Energy
Commission.
(B) The California Energy Commission has certified the facility as
a facility where all of the processed or manufactured items are
clean energy technology, excluding any byproducts, like waste heat,
chemicals, or recyclable materials that may be sold.
(4) "Qualified taxpayer" means a taxpayer who is engaged in those
lines of business described in Codes 3111 to 3399, inclusive, of the
North American Industrial Classification System (NAICS) published by
the United States Office of Management and Budget (OMB), 2007
edition, on or after January 1, 2009 who has been engaged in the
processing or manufacture of clean energy technology products in this
state for five years or less.
(c) No credit shall be allowed pursuant to this section unless the
qualified taxpayer provides, upon the request of the Franchise Tax
Board, any additional information relating to the credit for
disclosure to the Legislative Analyst for the limited purpose of
evaluation of the impact and effectiveness of the credit.
(d) The Franchise Tax Board shall promulgate rules and regulations
necessary to establish procedures, processes, requirements, and
rules required to implement this section.
(e)
In the case where the credit allowed exceeds the "tax," the excess
may be carried over to reduce the "tax" in the following year, and
succeeding years if necessary, until the credit has been exhausted.
(f) This section shall remain in effect only until January 1,
2017, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2017, deletes or extends
that date.
SEC. 10. Section 2 4423 of the
Revenue and Taxation Code is amended to read:
24423. (a) Notwithstanding Section 24422, regulations shall be
prescribed by the Franchise Tax Board under this part corresponding
to the regulations which granted the option to deduct as expenses
intangible drilling and development costs in the case of oil and gas
wells and which were recognized and approved by the Congress in House
Concurrent Resolution 50, Seventy-ninth Congress.
(b) The provisions of Section 263(i)
24423. The provisions of Section 263 of the
Internal Revenue Code, relating to special rules for
intangible drilling and development costs incurred outside the United
States capital exp enditures , shall
apply to costs paid or incurred after December 31, 1986
taxpayers engaged in the business of oil production
.
SEC. 11. Section 24831 of the Revenue
and Taxation Code is amended to read:
24831. (a) Subchapter I of Chapter 1 of
Subtitle A of the Internal Revenue Code, relating to natural
resources, shall apply, except as otherwise provided.
(b) Subchapter I of Chapter 1 of Subtitle A of the Internal
Revenue Code shall not apply to taxpayers engaged in the business of
oil production.
SEC. 12. Section 24831.6 of the Revenue
and Taxation Code is repealed.
24831.6. Section 613A(c)(6)(H) of the Internal Revenue Code,
relating to temporary suspension of taxable income limit with respect
to marginal production, shall not apply.
SEC. 13. The Legislature declares that the
decrease in state tax revenues under this act is intended to be equal
to the increase in state tax revenues under this act.
SEC. 14. This act provides for a tax levy within
the meaning of Article IV of the Constitution and shall go into
immediate effect.
SECTION 1. It is the intent of the Legislature
to create incentives for clean technology developers to manufacture
in California.