BILL NUMBER: AB 79	INTRODUCED
	BILL TEXT


INTRODUCED BY   Assembly Member Beall

                        JANUARY 3, 2011

   An act to add Article 7 (commencing with Section 92170) to Chapter
2 of Part 57 of Division 9 of Title 3 of the Education Code, and to
add Sections 17053.49 and 23649 to the Revenue and Taxation Code,
relating to qualified research expenses.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 79, as introduced, Beall. University of California: venture
development: tax credit.
   Existing law established the University of California under the
administration of the Regents of the University of California.
   This bill would authorize the regents to create a University
Venture Development Fund for each campus of the university for the
deposit of contributions made for purposes of paying for qualified
research expenses, as defined. The bill would require the funds in
each University Venture Development Fund to be used only for
qualified research expenses that are used for qualified research with
direct application to the biotech, nanotech, and cleantech
industries in California.
   The Personal Income Tax Law and the Corporation Tax Law authorize
various credits against the taxes imposed by those laws.
   This bill would authorize a credit against those taxes for each
taxable year beginning on or after January 1, 2011, in an amount
equal to 50% of the amount contributed during the taxable year to the
University of California for deposit into a University Venture
Development Fund, as specified.
   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.  Article 7 (commencing with Section 92170) is added to
Chapter 2 of Part 57 of Division 9 of Title 3 of the Education Code,
to read:

      Article 7.  University Venture Development Fund


   92170.  (a) (1) The regents may create a University Venture
Development Fund for each campus of the university for the deposit of
contributions made for purposes of paying for qualified research
expenses.
   (2) The regents are requested to do both of the following:
   (A) Notify the Franchise Tax Board of the establishment of each
fund.
   (B) Issue to each contributor a letter that certifies the
contribution and its use for qualified research expenses.
   (b) Funds in any University Venture Development Fund may be used
only for qualified research expenses.
   (c) For purposes of this section:
   (1) "Qualified research expenses" means any of the following:
   (A) Wages paid to or incurred by the university in regard to an
employee for qualified services performed by the employee.
   (B) Amounts paid or incurred for supplies used in the conduct of
qualified research.
   (C) Amounts paid or incurred to another person for the right to
use computers in the conduct of qualified research, except in regard
to the extent that the university receives or accrues any amount from
any other person for the right to use substantially identical
personal property.
   (2) (A) "Qualified services" means services consisting of either
of the following:
   (i) Engaging in qualified research.
   (ii) Engaging in the direct supervision or direct support of
research activities that constitute qualified research.
   (B) If substantially all of the services performed by an
individual for the university during the taxable year consist of
services meeting the requirements of subparagraph (A), the term
"qualified services" means all of the services performed by that
individual for the university during the taxable year.
   (3) (A) "Qualified research" means research that meets all of the
following requirements:
   (i) It is research with direct application to the biotech,
nanotech, and cleantech industries in California.
   (ii) It is research with respect to which expenditures may be
treated as expenses under Section 174 of the Internal Revenue Code.
   (iii) It is undertaken for the purpose of discovering information
that is technological in nature, and the application of which is
intended to be useful in the development of a new or improved
business component.
   (iv) Substantially all of the activities of the research
constitute elements of a process of experimentation for a purpose
that is a new or improved function, a performance, reliability, or
quality.
   (B) "Qualified research" shall not include any of the following:
   (i) Research conducted after the beginning of commercial
production of the business component.
   (ii) Research related to the adaptation of an existing business
component to a particular customer's requirement or need.
   (iii) Research related to the reproduction of an existing business
component, in whole or in part, from a physical examination of the
business component itself or from plans, blueprints, detailed
specifications, or publicly available information with respect to the
business component.
   (iv) An efficiency survey; activity relating to a management
function or technique; market research, testing, or development,
including advertising or promotions; routine data collection; and
routine or ordinary testing or inspection for quality control.
   (v) Research with respect to computer software that is developed
by, or for the benefit of, the university primarily for internal use
by the university, other than for use in an activity that constitutes
qualified research or a production process with respect to which the
requirements of subparagraph (A) are met.
  SEC. 2.  Section 17053.49 is added to the Revenue and Taxation
Code, to read:
   17053.49.  (a) (1) For each taxable year beginning on or after
January 1, 2011, there shall be allowed as a credit against the "net
tax," as defined in Section 17039, an amount equal to 50 percent,
subject to paragraph (2), of the amount contributed by the taxpayer
during the taxable year to any University Venture Development Fund
for purposes of qualified research expenses in accordance with
Article 7 (commencing with Section 92170) of Chapter 2 of Part 57 of
Division 9 of Title 3 of the Education Code.
   (2) The maximum aggregate amount of credit available under this
section and Section 23649 in all years for all taxpayers is two
hundred million dollars ($200,000,000).
   (b) No credit shall be allowed pursuant to this section unless the
taxpayer does both of the following:
   (1) Obtains and retains a letter from the Regents of the
University of California certifying that the contribution shall be
used only for qualified research expenses in accordance with Article
7 (commencing with Section 92170) of Chapter 2 of Part 57 of Division
9 of Title 3 of the Education Code.
   (2) Provides the Franchise Tax Board with the certification
described in paragraph (1), at the Franchise Tax Board's request.
   (c) The Franchise Tax Board shall allow credits under this section
and Section 23649 on a first-to-file basis until the maximum
aggregate credit amount, pursuant to paragraph (2) of subdivision
(a), is reached.
   (d) No credit shall be allowed under this section for any
contribution for which the taxpayer claims a credit or deduction
pursuant to any other section in this part.
   (e) 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
is exhausted.
  SEC. 3.  Section 23649 is added to the Revenue and Taxation Code,
to read:
   23649.  (a) (1) For each taxable year beginning on or after
January 1, 2011, there shall be allowed as a credit against the "tax,"
as defined in Section 23036, an amount equal to 50 percent, subject
to paragraph (2), of the amount contributed by the taxpayer during
the taxable year to any University Venture Development Fund for
purposes of qualified research expenses in accordance with Article 7
(commencing with Section 92170) of Chapter 2 of Part 57 of Division 9
of Title 3 of the Education Code.
   (2) The maximum aggregate amount of credit available under this
section and Section 17053.49 in all years for all taxpayers is two
hundred million dollars ($200,000,000).
   (b) No credit shall be allowed pursuant to this section unless the
taxpayer does both of the following:
   (1) Obtains and retains a letter from the Regents of the
University of California certifying that the contribution shall be
used only for qualified research expenses in accordance with Article
7 (commencing with Section 92170) of Chapter 2 of Part 57 of Division
9 of Title 3 of the Education Code.
   (2) Provides the Franchise Tax Board with the certification
described in paragraph (1), at the Franchise Tax Board's request.
   (c) The Franchise Tax Board shall allow credits under this section
and Section 17053.49 on a first-to-file basis until the maximum
aggregate credit amount, pursuant to paragraph (2) of subdivision
(a), is reached.
   (d) No credit shall be allowed under this section for any
contribution for which the taxpayer claims a credit or deduction
pursuant to any other section of this part.
   (e) 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
is exhausted.