BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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                                    THIRD READING


          Bill No:  AB 93
          Author:   Assembly Budget Committee
          Amended:  6/25/13 in Senate
          Vote:     27 - Urgency

           
           SENATE BUDGET & FISCAL REVIEW COMMITTEE  :  9-5, 6/24/13
          AYES:  Leno, Beall, Block, DeSaulnier, Hancock, Jackson,  
            Monning, Roth, Torres
          NOES:  Emmerson, Anderson, Berryhill, Nielsen, Wyland
          NO VOTE RECORDED:  Price, Wright

           ASSEMBLY FLOOR :  Not relevant


           SUBJECT  :    Economic development:  taxation:  credits,  
          deductions, and net 
                      operating losses

           SOURCE  :     Author


           DIGEST  :    This is an Economic Development bill that makes  
          various changes in the state tax system beginning in 2013-14.   
          The proposed statutory changes are related to the Governor's  
          Budget proposal to address budgetary aspects of one of the  
          state's largest and fastest growing tax expenditure programs,  
          and provide additional tax incentive programs to encourage  
          economic development.  This bill makes substantial changes to  
          the state tax system, relating to the personal income tax (PIT),  
          corporation tax (CT), and sales and use tax (SUT).  This bill  
          results in phasing-out and ending certain tax provisions  
          relating to taxpayers located in enterprise zones (EZs) and  
                                                                CONTINUED





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          similar tax incentive areas, ending the current New Jobs Credit  
          tax incentive program, and instituting two major tax programs-an  
          SUT exemption for equipment and similar purchases, and a hiring  
          tax credit under the PIT and CT for employment in specified  
          geographic areas.  This bill also provides for allocating income  
          tax credits through the Governor's Office of Business and  
          Economic Development (GO-Biz) to assist in retaining existing  
          and attracting new business activity in the state.  

           Senate Floor Amendments  of 6/25/13 (1) add "ex-offender" as  
          currently defined in the EZ program as a qualified employee"  
          under hiring credit; (2) add a 10-year carry-forward for all  
          existing EZ, local agency military base recovery area (LAMBRA),  
          and targeted tax area (TTA) credits.  These credits are in the  
          current programs; (3) allow the sales and use tax exemption for  
          seven years (instead of 4 1/2 ) in EZs and census tracts only;  
          (4) extends the hiring credit to seven years (from five); and  
          (5) add poverty as a GO-Biz criterion for consideration for the  
          incentive credits.

           ANALYSIS  :    

           Existing Law
           
          The state imposes a tax on the sale and use of tangible personal  
          property, a tax on personal income, and a CT based on income.   
          For each tax, there are various special tax expenditure programs  
          designed to encourage or reward particular economic activities.   
          The state's taxes and tax expenditure programs affected by this  
          bill are outlined below:

          1.  SUT  .  California's SUT law imposes the sales tax on the sale  
             of tangible personal property in the state and the use tax on  
             the storage, use, or other consumption of tangible personal  
             property in the state, except where a specific exemption is  
             provided.  Generally, the SUT applies to the purchase or use  
             of tangible personal property, such as equipment, that is  
             used to manufacture, produce or process tangible personal  
             property.  Thus, the tax is generally imposed on equipment  
             used in manufacturing and research and development.  The tax  
             is not applied to sales of tangible personal property when it  
             is physically incorporated in a manufactured item that will  
             be sold.  The current statewide SUT rate is 7.5% and includes  
             rates for the state General Fund, various special funds, and  







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             local governments.  In addition, local governments may impose  
             voter-approved add-on rates.  An allocated exclusion from  
             this tax is provided by the California Alternative Energy and  
             Advanced Transportation Financing Authority for purchases of  
             tangible personal property for approved manufacturing  
             projects.  The Board of Equalization (BOE) administers the  
             SUT.

          2.  EZ programs  .  California levies the PIT on all  
             California-sourced income.  The PIT is paid by all California  
             residents and nonresidents who receive income from sources in  
             the state, unless such income is specifically excluded from  
             taxation.  The state also imposes the CT based on all income  
             derived from or attributable to California, and levies the  
             SUT on the sale of use of tangible personal property in the  
             state.
           
             The Department of Housing and Community Development (HCD) may  
             designate certain geographic areas as EZs, thus providing  
             access to tax incentives for businesses that conduct  
             activities in these zones.  Cities and counties may apply to  
             HCD for zone designation based on unemployment rates,  
             residents' participation in subsidized meal programs, median  
             resident income, recent experience with plant closures, and  
             certain other socio-economic characteristics.  Statutory  
             authority allows for the creation by HCD of up to 42 zones,  
             each for a 15-year period.  Currently, the state has 40  
             designated zones; two zones were allowed to expire in 2012.   
             EZs are widespread throughout the state and result in  
             potential tax benefits for virtually all types of industries.  
              With exceptions for certain tax programs, these tax  
             incentives are generally available for certain other  
             designated geographic areas, comprising LAMBRAs, TTAs,  
             manufacturing enhancement areas, and the Los Angeles  
             Revitalization Zone.  These later areas constitute a minor  
             portion of the geographically-based tax incentive program.

             Taxpayers with business activities located in an EZ can claim  
             various tax incentives through both the PIT and CT.  The  
             available tax incentive programs include tax credits for  
             hiring certain qualified individuals, sales taxes paid on  
             equipment purchases, and net interest deductions for banks  
             making loans to an EZ business.  In addition, EZ businesses  
             may benefit from accelerated depreciation of equipment and  







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             the carry-over of 100% of business losses to future tax  
             years.  The specific programs are:

             A.     EZ hiring credit  .  The largest EZ-related incentive is  
                the hiring credit. California law provides a credit to  
                taxpayers that employ qualified employees in an EZ during  
                the taxable year equal to (1) 50% of qualified wages in  
                the first year of employment; (2) 40% of qualified wages  
                in the second year of employment; (3) 30% of qualified  
                wages in the third year of employment; (4) 20% of  
                qualified wages in the fourth year of employment; and (5)  
                10% of qualified wages in the fifth year of employment.   
                In general, qualified wages means wages that do not exceed  
                150% of the minimum wage.  Such wages must be paid to a  
                qualified employee who works at least 90% of the time on  
                activities directly related to the business located in an  
                EZ and whose services must be at least 50% performed  
                within the boundaries of an EZ.  Qualified employees  
                include economically disadvantaged individuals, dislocated  
                workers, disabled individuals, ex-offenders, recipients of  
                certain federal or state aid, members of a  
                federally-recognized Indian tribes, or residents of a  
                defined "targeted employment area" (TEA), where more than  
                50% of the residents are low- and moderate-income.  To  
                qualify for the hiring credit, the taxpayer must obtain a  
                certification, or voucher, indicating that the employee  
                meets the eligibility criteria specified above.  Taxpayers  
                are required to retain a copy of this voucher and provide  
                it upon request to the Franchise Tax Board (FTB), the  
                state agency charged with administering the CT and the  
                PIT.

             B.     SUT credit  .  Taxpayers engaged in a trade or business  
                within an EZ may take a credit equal to the SUT paid  
                during the taxable year in connection with the purchase of  
                qualified property.  Qualified property includes specified  
                machinery and machinery parts, data processing and  
                communications equipment, and motion picture manufacturing  
                equipment central to production and postproduction.  The  
                total cost of qualified property permitted for purposes of  
                claiming this credit may not exceed 
             $1 million for PIT filers and $20 million for CT filers.   
                Moreover, the qualified property must be used by the  
                taxpayer exclusively in an EZ.







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             C.     Net interest deduction  .  California law provides for  
                the deduction of net interest income on loans made to a  
                trade or business located solely within an EZ.  For  
                purposes of the EZ net interest deduction, a qualified  
                taxpayer (creditor) is defined as an entity that loans  
                funds on or after the designation date of the EZ to a  
                qualified business (debtor) and receives interest payments  
                thereon.  The taxpayer (creditor) does not have to be  
                located in the EZ to take advantage of the net interest  
                deduction; only the debtor needs to operate within the EZ.

             D.     Accelerated depreciation  .  Existing law allows EZ  
                taxpayers to treat 40% of the cost of specified property  
                as an expense not chargeable to the taxpayer's capital  
                account.  Any such cost may be allowed as a deduction for  
                the taxable year in which the taxpayer places the property  
                in service.  Such property must be for exclusive use in a  
                trade or business conducted within an EZ.

             E.     Employee tax credit  .  Existing law allows a PIT or CT  
                credit equal to 5% of "qualified wages," as defined,  
                received by a qualified EZ employee during the taxable  
                year.  However, for each dollar of income received by the  
                employee in excess of qualified wages, the credit is  
                reduced by nine cents.

          3. New Jobs Credit  .  Under the PIT and the CT, a tax credit of  
             up to $3,000 for each additional full-time employee hired is  
             available to small businesses with 20 or fewer employees,  
             beginning January 1, 2009.  The credit is prorated on an  
             annual full-time equivalent basis for employees employed less  
             than a full year.  To qualify, each qualified full-time  
             hourly employee must be paid wages for not less than an  
             average of 35 hours per week and each qualified full-time  
             employee that is a salaried employee must be paid  
             compensation during the year for full-time employment.  

             Generally, an employer may not claim the credit for those  
             employees who are certified as a qualified employee in an EZ  
             or similar incentive area, or for an employee whose wages are  
             included in calculating any other credit allowed.  In  
             addition, there must be a net increase in qualified full-time  
             employees compared to the number of full-time employees  







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             employed in the preceding taxable year.  For taxpayers who  
             first commence doing business in California during the  
             taxable year, the number of qualified full-time employees  
             considered employed in the preceding year would be generally  
             be zero, unless certain special rules apply.

             The credit is an allocated credit and the total amount of  
             credit available to be claimed by all taxpayers is capped at  
             $400 million.  The credit must be claimed on a timely filed  
             original return received by the FTB on or before a cut-off  
             date specified by the FTB.

          4.  GO-Biz  .  GO-Biz was created to serve as a single point of  
             contact for economic development and job creation efforts.   
             It offers a range of services to businesses including  
             business attraction, retention and expansion services; site  
             location selection; permit assistance; regulatory filing and  
             approval assistance; small business assistance; international  
             trade development; and assistance with state government.   
             Under the Governor's Reorganization Plan No. 2 (GRP 2), the  
             Infrastructure Development Bank, the California Film  
             Commission, the Office of Tourism, and the Small Business  
             Loan Guarantee Program will be transitioned from the  
             Business, Transportation and Housing Agency to GO-Biz,  
             effective July 1, 2013.

          This bill institutes several new tax programs that will result  
          in tax reductions for certain purchases of tangible personal  
          property and for increasing employment in specific designated  
          areas.  In addition, provides for the allocation of tax credits  
          in exchange for investments and employment in California.   
          Results in the elimination of EZ and related area tax incentives  
          and the New Jobs Credit.

          1.  SUT exemption  .  Allows for an exemption from the state  
             portion (General Fund and Education Protection Fund) of the  
             SUT, beginning July 1, 2014 and before January 1, 2021, for  
             certain purchases by qualified purchasers that are used in  
             designated activities.  These combined rates are currently  
             4.19%.  The exemption will be limited annually to the first  
             $200 million of otherwise eligible purchases by a qualified  
             purchaser.  Qualified purchasers that will be eligible for  
             the SUT exemption are identified by designated codes of the  
             North American Industry Classification System (NAICS), but  







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             excluding extractive industries:

                   NAICS Codes 3111 through 3399 include all  
                establishments primarily engaged in manufacturing  
                activities.  This encompasses manufacturers in the  
                aerospace sector, textiles, pharmaceuticals, printing,  
                food and others.

                   NAICS Code 541711 includes establishments primarily  
                engaged in conducting biotechnology research and  
                experimental development.  This encompasses industries  
                using microorganisms and cellular and bio-molecular  
                processes to develop or alter materials.

                   NAICS Code 541712 includes establishments primarily  
                engaged in conducting research and experimental  
                development in the physical, engineering and life  
                sciences.  This encompasses activities in agriculture,  
                electronics, environmental biology, botany, computers,  
                chemistry, food, fisheries, forest, geology, health,  
                mathematics, medicine, oceanography, pharmacy, physics,  
                veterinary and other allied fields.

             Qualified tangible personal property must be used at least  
             50% of the time by the qualified purchaser in any stage of  
             manufacturing, processing, refining, fabricating, or  
             recycling of tangible personal property; for purposes of  
             research and development; to maintain, repair, measure, or  
             test tangible personal property; and, if purchased by a  
             contractor, used as an integral part of the manufacturing,  
             processing, refining, fabricating, or recycling process, or  
             as a research and storage facility for use in connection with  
             those processes.

             Qualified tangible personal property eligible for the  
             exemptions include machinery and equipment, including  
             component parts such as belts, shafts, moving parts and  
             operating structures; equipment or devices used or required  
             to operate and control machinery such as computers, data  
             processing equipment, software; pollution control equipment  
             that meets state and federal standards; and special purpose  
             buildings used as an integral part of manufacturing,  
             processing, refining, fabricating or recycling process, not  
             including storage.  Eligible property must have a useful life  







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             in excess of one year and excludes items such as furniture,  
             equipment used for extraction or storage, or property used  
             for administration, management or marketing.

             The SUT exemption will be provided if the purchaser furnishes  
             a seller with an exemption certificate, which will be kept by  
             the seller and furnished to the BOE upon request.  Qualifying  
             purchases that are removed from the state, or used for  
             unqualified activities, within one year of the purchase will  
             be subject to a 'claw-back' equal to the value of the SUT  
             exemption.  The purchaser of the property will be liable for  
             the payment of the sales or use tax that would otherwise have  
             been collected from the seller absent the provision of the  
             exemption.

          2.  Hiring credit  .  Initiates a new hiring tax credit under the  
             PIT and CT, from January 1, 2014 to January 1, 2021, for  
             additional hiring of employees in defined geographic areas of  
             the state.  The hiring credit will be available in the  
             geographic areas largely covered by the existing EZs (except  
             certain census tracts with low unemployment), two recently  
             expired EZs located in Antelope Valley and Watsonville, and  
             in designated census tracts that have a civilian unemployment  
             rate and a poverty rate in the top 25% of all census tracts  
             in the state.  The credit percentages for all hiring credits  
             are 35% per year for five years for wages between 150% and  
             350% of the minimum wage (currently between $12 and $28 per  
             hour).  The credit is available for full-time employees who  
             perform at least 50% of their activities in the designated  
             areas.  Generally, (except for small businesses that claim  
             the credit), the following apply:  (a) taxpayers from a  
             temporary agency, retailer, restaurant or drinking  
             establishment, as defined by the NAICS codes are prohibited  
             from receiving the hiring credit; and (b) taxpayers that move  
             into an EZ are required to provide an "offer of transfer" to  
             its employees with comparable compensation.  Important  
             features of the hiring credit include the following:

                    Employee characteristics  .  Employees would have to  
                meet one of the following characteristics:  (a) have been  
                previously unemployed for six months; (b) received the  
                Earned Income Tax Credit; (c) was an ex-offender; or (d)  
                have served in the United States Military.  Credit  
                reservation requests from a qualified taxpayer who submits  







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                a tentative tax credit reservation request for an eligible  
                employee (under one of the three eligibility categories)  
                who also happens to reside in a TEA would be expedited.

                    Net new jobs  .  Requires that in order to qualify for  
                any credit, the taxpayer must have experienced an increase  
                in total jobs throughout the state from one year to the  
                next.  Taxpayers are only allowed the credit for the  
                number of new jobs provided in the state.  For example, if  
                a company shows it has hired 100 employees statewide, the  
                company may receive total credits for up to 100 employees.  
                 Alternatively, if a taxpayer hires 50 new employees in  
                one area but laid-off 25 employees in another part of the  
                state, the taxpayer would only be eligible for credits for  
                25 qualified employees.

                    Small business provisions  .  Requires that 25% of the  
                hiring credits be reserved for small business, defined as  
                businesses with annual gross receipts of under $2 million.  
                 Small business must comply with all requirements except  
                the offer of transfer and the industry limitations noted  
                above.

                    Credit administration  .  Taxpayers may only qualify for  
                the credit if it is on the original filed timely return  
                with the FTB; no credit may be claimed on an amended  
                return.  Taxpayers, with qualified employees that meet the  
                net new jobs test, must reserve a credit with the FTB.   
                The credit is then claimed on an original filed timely  
                return.  Requires the FTB to compile a list of the hiring  
                credit vouchers claimed and number of new jobs created for  
                each taxable year.
            
          3.  GO-Biz  .  Establishes the California Competes Tax Credit  
             Committee (CCTCC), consisting of the State Treasurer,  
             Director of the Department of Finance (DOF), the Director of  
             GO-Biz, and a representative of the Senate and Assembly.  The  
             CCTCC would approve or reject written agreements for the  
             allocation of California Competes tax credits under the PIT  
             and the CT after the receipt of fully executed written  
             agreements between the taxpayer and GO-Biz.  Under the  
             program, up to $30 million would be allocated in 2013-14,  
             $150 million in 2014-15 and $200 million from 2015-16 through  
             2018-19.  The amounts actually allocated will be subject to  







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             restrictions based on the total value of SUT exemptions and  
             hiring credits claimed relative to the amount of $750  
             million.  25% of the credits will be reserved for small  
                   businesses and priority will be given to projects proposed  
             for location in areas of high unemployment or poverty.  

             The agreement to award credits would take into consideration,  
             but not be limited to, the number of jobs created; the  
             compensation paid to employees; amount of investment by the  
             taxpayer in the state; amount of unemployment or poverty in  
             the area according to the U.S. census; other incentive  
             available to the taxpayer in this state and other states;  
             duration of the project; overall economic impact of the  
             project; strategic importance of the project; opportunity for  
             future expansion in the state by the taxpayer; and the extent  
             to which state benefits exceed state costs.  In the event  
             that a taxpayer fails to perform under the written agreement,  
             the credit would be subject to recapture.  Requires GO-Biz to  
             provide information to FTB regarding the effectiveness of the  
             credits as measured by job creation, additional investment  
             and other metrics.

          4.  EZ programs  .  Programs related to tax incentives for  
             activities in EZs and similar areas, will generally no longer  
             be effective beginning January 1, 2014.  However, with  
             respect to the EZ hiring credit, for employees employed by  
             the qualified taxpayer prior to January 1, 2014, the wages  
             paid with respect to those employees will continue to qualify  
             for the credit for any remainder of the five-year period.  In  
             addition, credits claimed, or earned, under the EZ program  
             and carried-over from prior years, could continue to be  
             applied to tax liabilities for up to 10 years, or through  
             December 2019.

          5.  New Jobs Credit  .  Under the proposed statute, the 2009 New  
             Jobs Credit will cease to be operative for taxable years  
             beginning on or after January 1, 2014, and repealed.

          6.  Legislative Intent  .  Indicates that the Legislature finds and  
             declares the goal of California's economic development policy  
             should be designed to create good jobs with middle class  
             wages and benefits; target for assistance individuals with  
             barriers to employment; and encourage businesses to invest  
             and create jobs in California.







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          7.  Legislative reporting  .  Requires the following program  
             evaluations be provided to the Joint Legislative Budget  
             Committee (JLBC) annually.  The reports will include  
             discrepancies between initial estimates and actual credit or  
             exemption usage under the programs and identify options for  
             program changes in the event usage is below expectations.   
             The evaluations presented to the JLBC will be provided by FTB  
             for the hiring credit; BOE for the SUT exemption; and GO-Biz  
             for the California Competes credits.

          8.  Severability  .  Provides a severability clause that will allow  
             for the continued operation of other provisions of the  
             statute in the event that the establishment of the GO-Biz  
             California Competes credit is found to be an unlawful  
             delegation of legislative authority.  Contains language that  
             precludes the operation of the SUT exemption and the hiring  
             credit in the event the repeal of the EZ program and the New  
             Jobs Credit are overturned and instead remain operative.

          9.  Appropriation  .  An appropriation to DOF and the CCTCC is  
             provided for the costs of administering the provisions of  
             this bill.  The allocation of funds under this appropriation  
             would be effective 30 days after the notification by the  
             Director of DOF to the JLBC.

           Comments
           
          According to the Senate Budget and Fiscal Review Committee, from  
          an economic perspective, the core of the proposed policy changes  
          represent an improvement in overall state tax policy.  The SUT  
          exemption, although limited to particular industries, represent  
          a fundamental policy improvement by addressing the phenomenon of  
          "tax pyramiding"-that is, when inputs to production are taxed as  
          well as the outputs.  While this aspect of the proposal  
          represents good tax policy, broad application would result in  
          significant revenue loses; however, this possibility is dealt  
          with by targeting the exemption to particular industries.   
          Regarding the EZ programs, the general intent of the PIT and CT  
          tax incentives in the EZ program is to generate, in designated  
          areas, economic activity-such as additional investment and  
          employment-that would otherwise not occur.  However, the  
          effectiveness of the EZ program in this regard has been the  
          subject of substantial criticism.  A broad body of economic and  







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          tax research indicates that the program offers a poor return on  
          the state's sizable investment, largely as a consequence of the  
          ineffectiveness and inefficiencies inherent in tax incentive  
          programs of this type.  On balance, the proposal represents a  
          significant step forward for state policy, while still retaining  
          certain incentive benefits for disadvantaged areas of the state.

           FISCAL EFFECT  :    Appropriation:  Yes   Fiscal Com.:  Yes    
          Local:  No

          The bill contains provisions that will result in revenue  
          increases and decreases.  Revenue decreases will result from the  
          SUT exemption, tax credits for additional hiring created, and  
          tax incentives provided by GO-Biz.  Increases in revenues will  
          stem from the repeal of certain tax credits and other tax  
          incentives related to EZs and similar tax incentive areas, and  
          cessation of the 2009 New Jobs Credit.  The table below  
          indicates the revenue impacts of isolated components of the  
          proposal and the total impact of the bill over the next four  
          years:

                           Revenue Impacts (In Millions $)

           ---------------------------------------------------------- 
          |                     |         |        |        |        |
          |Tax Provision        |  2013-14| 2014-15| 2015-16| 2016-17|
          |                     |         |        |        |        |
          |---------------------+---------+--------+--------+--------|
          |                     |         |        |        |        |
          |SUT Exemption        |        0|    -486|    -521|    -531|
          |                     |         |        |        |        |
          |---------------------+---------+--------+--------+--------|
          |                     |         |        |        |        |
          |Hiring Credit        |       -7|     -34|     -70|    -110|
          |                     |         |        |        |        |
          |---------------------+---------+--------+--------+--------|
          |                     |         |        |        |        |
          |GO-Biz Incentives    |        0|     -32|     -83|    -134|
          |                     |         |        |        |        |
          |---------------------+---------+--------+--------+--------|
          |                     |         |        |        |        |
          |Enterprise Zone      |       95|     375|     635|     805|
          |Repeal               |         |        |        |        |
          |                     |         |        |        |        |







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          |---------------------+---------+--------+--------+--------|
          |                     |         |        |        |        |
          |New Jobs Credit      |       75|       0|       0|       0|
          |Repeal               |         |        |        |        |
          |                     |         |        |        |        |
          |---------------------+---------+--------+--------+--------|
          |                     |         |        |        |        |
          |Total                |      163|    -177|     -39|30      |
          |                     |         |        |        |        |
          |                     |         |        |        |        |
           ---------------------------------------------------------- 

          Estimates from the BOE and the FTB provide the basis for the  
          revenue estimates shown the table.  DOF then made additional  
          adjustments in these estimates to account for specific policy  
          design aspects of the proposal, assumptions regarding behavioral  
          shifts, and anticipated future actions.

          In particular, the BOE provided base estimates of the revenue  
          loss due to SUT exemptions which do not account for certain  
          adjustments required to incorporate behavioral changes,  
          interactions with other programs, and limitations on the  
          availability of the exemption.  DOF's most significant  
          adjustment to the BOE estimates is a downward adjustment  
          resulting from the $200 million per-firm limitation.  A review  
          of California data indicates that, while few firms exceed the  
          $200 million threshold, those that do contribute a  
          disproportionate share of capital purchases-almost 22% of  
          equipment purchases are attributable to purchases in excess of  
          $200 million by firms with more than $200 million in purchases.   
          This adjustment results in a reduction in the revenue loss from  
          this component.

          Similarly, the FTB provided base estimates for the elimination  
          of EZ credits and those for similar zones.  FTB's estimates did  
          not account for anticipated revenue impacts of regulatory  
          decisions by the Administration, through audit procedures or  
          other administrative steps that would, as a matter of course,  
          work to reduce the impact of the EZ tax incentive programs.  Not  
          accounting for these anticipated actions would tend to overstate  
          the positive revenue implications in this bill attributable to  
          ending EZ tax incentive programs.  Thus, the DOF adjustment  
          results in a reduction in the revenue gain associated with the  
          proposal. 







                                                                      AB 93
                                                                     Page  
          14


          DOF's revenue impact projections are based on available  
          California data and account for historical patterns of equipment  
          purchases for various firms.  The available state-level data  
          used is based on a reasonable period from which to sample.   
          While there will always be variations from estimated revenues  
          due to changing circumstances and events for which forecasting  
          tools cannot account, the revenue estimates seem reasonable.




          MW:km  6/25/13   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  NONE RECEIVED

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