BILL NUMBER: AB 653 INTRODUCED
BILL TEXT
INTRODUCED BY Assembly Member V. Manuel Pérez
FEBRUARY 21, 2013
An act to amend Sections 11346.1 and 13997.6 of, and to add
Article 5.5 (commencing with Section 11348.5) to Chapter 3.5 of Part
1 of Division 3 of Title 2 of, and Article 4.5 (commencing with
Section 12097) to Chapter 1.6 of Part 2 of Division 3 of Title 2 of,
the Government Code, and to amend Sections 17052.12 and 23609 of, and
to add Sections 6377, 17053.87, and 23687 to, the Revenue and
Taxation Code, relating to state government making an appropriation
therefor, and declaring the urgency thereof, to take effect
immediately.
LEGISLATIVE COUNSEL'S DIGEST
AB 653, as introduced, V. Manuel Pérez. State government.
(1) The Administrative Procedure Act governs the procedure for the
adoption, amendment, or repeal of regulations by state agencies and
for the review of those regulatory actions by the Office of
Administrative Law.
This bill would also require state agencies to submit these
regulatory actions to the Joint Rules Committee of the Legislature,
which would be authorized to submit a regulatory action to the
appropriate policy committee in each house for review. The bill would
authorize the policy committee to either make recommendations to the
agency or to send the action to the floor of either house, which
could reject the regulatory action by a resolution, as specified.
(2) The Economic Revitalization Act establishes the Governor's
Office of Business and Economic Development, also known as "GO-Biz,"
to, among other duties, serve the Governor as the lead entity for
economic strategy and the marketing of California on issues relating
to business development, private sector investment, and economic
growth. Existing law establishes the California Economic Development
Fund holding funds that, upon appropriation by the Legislature,
GO-Biz may use for economic development purposes, as specified.
This bill would create the California Innovation Hub Program (iHub
Program) within GO-Biz to create regional offices that would provide
specialized counseling, training, and networking services to assist
entrepreneurs establish and grow businesses for local and in-state
job retention, creation, and future expansion. This bill would
authorize GO-Biz, in collaboration with the Department of General
Services, to identify unoccupied and underutilized real property
owned or leased by the state, and use that real property to support
the iHub Program, as specified. This bill would modify the California
Economic Development Fund to be a continuously appropriated fund for
the economic development purposes of GO-Biz, and in doing so, would
make an appropriation.
(3) The Sales and Use Tax Law imposes a tax on retailers measured
by the gross receipts from the sale of tangible personal property
sold at retail in this state, or on the storage, use, or other
consumption in this state of tangible personal property purchased
from a retailer for storage, use, or other consumption in this state.
That law provides various exemptions from those taxes.
On and after January 1, 2014, this bill would exempt from those
taxes the sale of, and the storage, use, or other consumption in this
state of, tangible personal property, as defined, purchased for use
by a qualified person, as defined, primarily in any stage of
manufacturing, processing, refining, fabricating, or recycling of
tangible personal property, as specified.
(4) The Personal Income Tax Law and the Corporation Tax Law allow
various credits against the taxes imposed by those laws, including a
credit for certain research and development expenses, as provided.
This bill would, for taxable years commencing on and after January
1, 2014, increase the credit for research and development expenses,
as provided, and would require taxpayers utilizing these credits on
or after that date to report specified information to the Franchise
Tax Board.
This bill would, for taxable years beginning on or after January
1, 2014, allow a credit against those taxes for a qualified taxpayer,
as defined, of 40% of the amount of a qualified contribution, as
defined, made in that taxable year by a business entity to a
postsecondary educational institution for curriculum or research
leading to job opportunities in the private sector, or consultation
services associated with the establishment of curriculum or research
leading to job opportunities in the private sector, where the
business entity and the postsecondary educational institution agree
that there is a substantial potential for the future employment of
students as a result of the contribution.
(5) This bill would provide that the provisions of this bill are
severable.
(6) The Bradley-Burns Uniform Local Sales and Use Tax Law
authorizes counties and cities to impose local sales and use taxes in
conformity with the Sales and Use Tax Law, and existing law
authorizes districts, as specified, to impose transactions and use
taxes in accordance with the Transactions and Use Tax Law, which
conforms to the Sales and Use Tax Law. Exemptions from state sales
and use taxes are incorporated into these laws.
Section 2230 of the Revenue and Taxation Code provides that the
state will reimburse counties and cities for revenue losses caused by
the enactment of sales and use tax exemptions.
This bill would provide that, notwithstanding Section 2230 of the
Revenue and Taxation Code, no appropriation is made and the state
shall not reimburse local agencies for sales and use tax revenues
lost by them pursuant to this bill.
(7)This bill would declare that it is to take effect immediately
as an urgency statute.
Vote: 2/3. Appropriation: yes. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. This act shall be known, and may be cited, as the
California Innovation and Jobs Act.
SEC. 2. The Legislature hereby finds and declares:
(a) California, in the last 10 years has declined from the sixth
largest economy in the world to the ninth, now behind Brazil. During
that time, manufacturing declined in California from 1.865 million
jobs to 1.257 million jobs.
(b) California has experienced continual budget deficits beginning
with the "dot com" bust which occurred in 2000, and has never fully
recovered. Every year, the Legislature has had to grapple with too
few revenues to meet a continuing demand for public services.
(c) The solution to California's decline in its economic status,
and thus, lack of revenues, is not simply to cut the budget and raise
taxes. Instead, it lies in developing a long-term economic plan for
the state that envisions state government becoming a better working
partner to attract private sector capital to spur economic
development and job growth.
(d) California needs to compete globally. It needs to expand its
leadership as an exporter of goods. California needs to recognize its
biggest asset in combating a fatigued economy is its innovative
human capital; it needs to recognize that the private sector, through
the "Innovation Economy" must be incentivized to reach new heights
and growth potential. State and local government need to be the
Innovation Economy's partner and not a roadblock to success.
(e) California is uniquely positioned to unleash its full economic
potential. We see on a daily basis the convergence of innovative
technologies being integrated into our daily lives that most
Californians take for granted, because these technologies were
invented and developed in California: new advancements in
biopharmaceuticals that improve people's lives on a daily basis,
advancements in smart phone technology, and Internet Web sites that
allow Californians to be connected to the world have predominately
been developed in California.
(f) California needs to invest in the Innovation Economy by
eliminating roadblocks in state law and regulation and developing a
tax system that rewards capital expenditures in order to ensure that
the private sector will invest its financial capital in combination
with the intellectual capital that California has to offer through
its education system, in particular its universities.
SEC. 3. Section 11346.1 of the Government Code is amended to read:
11346.1. (a) (1) The adoption, amendment, or repeal of an
emergency regulation is not subject to any provision of this article
or Article 6 (commencing with Section 11349), except this section and
Sections 11349.5 11348.5, 11349.5, and
11349.6.
(2) At least five working days before submitting an emergency
regulation to the office, the adopting agency shall, except as
provided in paragraph (3), send a notice of the proposed emergency
action to every person who has filed a request for notice of
regulatory action with the agency. The notice shall include both of
the following:
(A) The specific language proposed to be adopted.
(B) The finding of emergency required by subdivision (b).
(3) An agency is not required to provide notice pursuant to
paragraph (2) if the emergency situation clearly poses such an
immediate, serious harm that delaying action to allow public comment
would be inconsistent with the public interest.
(b) (1) Except as provided in subdivision (c), if a state agency
makes a finding that the adoption of a regulation or order of repeal
is necessary to address an emergency, the regulation or order of
repeal may be adopted as an emergency regulation or order of repeal.
(2) Any finding of an emergency shall include a written statement
that contains the information required by paragraphs (2) to (6),
inclusive, of subdivision (a) of Section 11346.5 and a description of
the specific facts demonstrating the existence of an emergency and
the need for immediate action, and demonstrating, by substantial
evidence, the need for the proposed regulation to effectuate the
statute being implemented, interpreted, or made specific and to
address only the demonstrated emergency. The finding of emergency
shall also identify each technical, theoretical, and empirical study,
report, or similar document, if any, upon which the agency relies.
The enactment of an urgency statute shall not, in and of itself,
constitute a need for immediate action.
A finding of emergency based only upon expediency, convenience,
best interest, general public need, or speculation, shall not be
adequate to demonstrate the existence of an emergency. If the
situation identified in the finding of emergency existed and was
known by the agency adopting the emergency regulation in sufficient
time to have been addressed through nonemergency regulations adopted
in accordance with the provisions of Article 5 (commencing with
Section 11346), the finding of emergency shall include facts
explaining the failure to address the situation through nonemergency
regulations.
(3) The statement and the regulation or order of repeal shall be
filed immediately with the office.
(c) Notwithstanding any other provision of law, no emergency
regulation that is a building standard shall be filed, nor shall the
building standard be effective, unless the building standard is
submitted to the California Building Standards Commission, and is
approved and filed pursuant to Sections 18937 and 18938 of the Health
and Safety Code.
(d) The emergency regulation or order of repeal shall become
effective upon filing or upon any later date specified by the state
agency in a written instrument filed with, or as a part of, the
regulation or order of repeal.
(e) No regulation, amendment, or order of repeal initially adopted
as an emergency regulatory action shall remain in effect more than
180 days unless the adopting agency has complied with Sections
11346.2 to 11347.3, inclusive, either before adopting an emergency
regulation or within the 180-day period. The adopting agency, prior
to the expiration of the 180-day period, shall transmit to the office
for filing with the Secretary of State the adopted regulation,
amendment, or order of repeal, the rulemaking file, and a
certification that Sections 11346.2 to 11347.3, inclusive, were
complied with either before the emergency regulation was adopted or
within the 180-day period.
(f) If an emergency amendment or order of repeal is filed and the
adopting agency fails to comply with subdivision (e), the regulation
as it existed prior to the emergency amendment or order of repeal
shall thereupon become effective and after notice to the adopting
agency by the office shall be reprinted in the California Code of
Regulations.
(g) If a regulation is originally adopted and filed as an
emergency and the adopting agency fails to comply with subdivision
(e), this failure shall constitute a repeal of the regulation and
after notice to the adopting agency by the office, shall be deleted.
(h) The office may approve not more than two readoptions, each for
a period not to exceed 90 days, of an emergency regulation that is
the same as or substantially equivalent to an emergency regulation
previously adopted by that agency. Readoption shall be permitted only
if the agency has made substantial progress and proceeded with
diligence to comply with subdivision (e).
SEC. 4. Article 5.5 (commencing with Section 11348.5) is added to
Chapter 3.5 of Part 1 of Division 3 of Title 2 of the Government
Code, to read:
Article 5.5. Legislative Review of Proposed Regulations
11348.5. (a) (1) Every state agency subject to Section 11346.9
shall submit the information described in Section 11346.9 to the
Joint Rules Committee of the Legislature 60 days prior to submitting
that information to the office pursuant to Section 11346.9.
(2) Every state agency required to submit a statement and
regulation or order of repeal to the office pursuant to paragraph (3)
of subdivision (b) of Section 11346.1 shall concurrently submit the
statement and regulation or order of repeal to the Joint Rules
Committee of the Legislature.
(b) The Joint Rules Committee of the Legislature may refer
information submitted pursuant to subdivision (a) to the appropriate
policy committee in each house of the Legislature, which may review
the information and take any of the following actions:
(1) Make recommendations regarding the regulatory action to the
agency. In the event that recommendations are made, they shall not be
binding and shall not preclude the operation of any other provision
of this chapter.
(2) Refer the regulatory action to the floor of either house,
which may reject the regulatory action by a resolution of that house,
a majority of the house concurring. If the regulatory action is
rejected pursuant to this paragraph, it shall be returned to the
agency, and may be rewritten and resubmitted within 120 days of the
rejection. If the regulatory action is not rejected pursuant to this
paragraph, it shall not be deemed approved and it shall not preclude
the application of any other provision of this chapter.
(3) Take no action regarding the regulatory action.
SEC. 5. Article 4.5 (commencing with Section 12097) is added to
Chapter 1.6 of Division 3 of Title 2 of the Government Code, to read:
Article 4.5. California Innovation Hub Program
12097. (a) The California Innovation Hub Program, also known as
the "iHub Program," is established within the office.
(b) The iHub Program shall be under the authority of the director.
(c) The office may designate specific regions throughout the state
as an Innovation Hub, also known as an "iHub", through a competitive
application process.
(d) An iHub shall, to the extent feasible, do all of the
following:
(1) Work in collaboration with the activities of the office as its
primary statewide partner.
(2) Coordinate activities with the Employment Training Panel, the
California Workforce Investment Board, the California Community
Colleges Chancellor's Office, the University of California, the
California State University, and other state and local economic and
workforce development programs.
(3) Provide assistance to the office relating to the attraction,
relocation, and expansion of businesses within the state and
international trade opportunities.
(4) Report to the office on the status of the state's innovation
economy and provide general advice and support on policy issues
related to innovation, technology, entrepreneurship, and small
business assistance.
(e) The duties of an iHub shall include, but not be limited to,
all of the following:
(1) Provide specialized one-on-one counseling and technical
assistance in the areas of entrepreneurial business planning and
management, financing, and marketing for small businesses with the
greatest potential for local and in-state job retention, creation,
and future in-state expansion.
(2) Provide expert business startup advice to entrepreneurs,
including, but not limited to, advising on the tools for starting a
business and how to access to financing opportunities and other key
resources.
(3) Conduct business workshops, seminars, and conferences with
local partners, including, but not limited to, state universities,
community colleges, local governments, state and federal service
providers, private industry, workforce investment boards and
agencies, small business service agencies, economic development
organizations, and chambers of commerce.
(4) Provide services to link technology startups and businesses to
research and development institutions for the purposes of
transferring new technology to a new or an expanding business sector,
or accessing scientific knowledge and equipment.
12097.1. (a) The office shall collaborate with the Department of
General Services to identify unoccupied and underutilized real
property owned or leased by the state that may be allowed by the
Constitution and other applicable laws to be used as provided in this
section by the iHub program. Upon approval by the director,
identified property may be used by the iHub Program for purposes
including, but not limited to, assisting iHub regions to establish
proof of concept and research and development centers, incubators,
accelerators, and demonstration sites, thereby promoting and
enhancing the state's innovation economy, entrepreneur communities,
and bringing economic, environmental, or social value to the state.
(b) In-lieu of a cash match, the fair market lease value of
nonoccupied or underutilized real property owned or leased by the
state as identified pursuant to subdivision (a) may be used as
in-kind matching funds to enhance an iHub proposal to increase the
likelihood of qualifying for federal funding opportunities.
12097.2. (a) In any year state owned or leased real property is
utilized pursuant to Section 12097.1, the office shall issue a report
to the Legislature by April 1 of the following year on the use of
the real property by office in relation to the activities and
performance goals of the iHub Program, in compliance with Section
9795. The report shall also be posted on the office's Internet Web
site.
(b) To the extent the information is available, the report
pursuant to subdivision (a) shall also include the number of
businesses assisted and the manner in which they were assisted, the
number of employees employed by the businesses, the number of jobs
created, the number of jobs retained, the industry sectors of the
businesses assisted, identification of the partnerships with state,
federal, and local agencies that led to increased entrepreneurial and
innovation-based economic activity, and the amount of federal grant
funding received by the iHubs during the reporting period.
SEC. 6. Section 13997.6 of the Government Code is amended to read:
13997.6. (a) The California Economic Development Fund is hereby
created in the State Treasury for the purpose of receiving federal,
state, local, and private economic development funds, and receiving
repayment of loans or grant proceeds and interest on those loans or
grants.
(b) Upon appropriation by the Legislature,
Notwithstanding Section 13340, moneys in the fund may be
expended by the Governor's Office of Business and Economic
Development , without regard to fiscal year, to provide
matching funds for loans or grants to public agencies, nonprofit
organizations, and private entities, and for other economic
development purposes, consistent with the purposes for which the
moneys were received.
SEC. 7. Section 6377 is added to the Revenue and Taxation Code, to
read:
6377. (a) (1) On and after January 1, 2014, there are exempted
from the taxes imposed by this part the gross receipts from the sale
of, and the storage, use, or other consumption in this state of
tangible personal property purchased for use by a qualified person to
be used primarily in any stage of the manufacturing, processing,
refining, fabricating, or recycling of tangible personal property,
beginning at the point any raw materials are received by the
qualified person and introduced into the process and ending at the
point at which the manufacturing, processing, refining, fabricating,
or recycling has altered property to its completed form, including
packaging, if required.
(2) The exemption established by this section shall not apply to
the gross receipts from the sale of, or the storage, use, or other
consumption of, any of the following:
(A) Tangible personal property that is used primarily in
administration, general management, or marketing.
(B) Consumables with a useful life of less than one year.
(C) Furniture or inventory or equipment used in the extraction
process, or equipment used to store finished products that have
completed the manufacturing process.
(b) For purposes of this section:
(1) "Fabricating" means to make, build, create, produce, or
assemble components or property to work in a new or different manner.
(2) "Manufacturing" means the activity of converting or
conditioning tangible personal property by changing the form,
composition, quality, or character of the tangible personal property
for ultimate sale at retail or use in the manufacturing of a product
to be ultimately sold at retail. Manufacturing includes any
improvements to tangible personal property that result in a greater
service life or greater functionality than that of the original
tangible personal property. Manufacturing includes the generation of
electricity.
(3) "Primarily" means 50 percent or more of the time. For purposes
of subdivision (a), "primarily" means tangible personal property
used 50 percent or more of the time in an activity described in
subdivision (a).
(4) "Process" means the period beginning at the point at which any
raw materials are received by the qualified person and introduced
into the manufacturing, processing, refining, fabricating, or
recycling activity of the qualified person and ending at the point at
which the manufacturing, processing, refining, fabricating, or
recycling activity of the qualified person has altered tangible
personal property to its completed form, including packaging, if
required. Raw materials shall be considered to have been introduced
into the process when the raw materials are stored on the same
premises where the qualified person's manufacturing, processing,
refining, fabricating, or recycling activity is conducted. Raw
materials that are stored on premises other than where the qualified
person's manufacturing, processing, refining, fabricating, or
recycling activity is conducted, shall not be considered to have been
introduced into the manufacturing, processing, refining,
fabricating, or recycling process.
(5) "Processing" means the physical application of the materials
and labor necessary to modify or change the characteristics of
tangible personal property.
(6) "Qualified person" means either of the following:
(A) A person that is primarily engaged in those lines of business
classified in Industry Groups 3111 to 3399, inclusive, Industry Group
5112, NAICS Industry 221119, or NAICS Industry 541711 of the North
American Industry Classification System (NAICS) published by the
United States Office of Management and Budget (OMB), 2007 edition.
(B) An affiliate of a person described in subparagraph (A)
provided that the affiliate is a member of the qualified person's
unitary group for which a combined report is required to be filed
under Article 1 (commencing with Section 25101) of Chapter 17 of Part
11.
(7) "Refining" means the process of converting a natural resource
to an intermediate or finished product.
(8) "Tangible personal property" includes, but is not limited to,
all of the following:
(A) Machinery and equipment, including component parts and
contrivances such as belts, shafts, moving parts, and operating
structures.
(B) All equipment or devices used or required to operate, control,
regulate, or maintain the machinery, including, without limitation,
computers, data processing equipment, and computer software, together
with all repair and replacement parts with a useful life of one or
more years therefor, whether purchased separately or in conjunction
with a complete machine and regardless of whether the machine or
component parts are assembled by the qualified person or another
person.
(C) Tangible personal property used in pollution control that
meets or exceeds standards established by this state or any local or
regional governmental agency within this state.
(D) Special purpose buildings and foundations used as an integral
part of the manufacturing, processing, refining, or fabricating
process, or that constitute a research or storage facility used
during the manufacturing process. Buildings used solely for
warehousing purposes after completion of the manufacturing process
are not included.
(E) Tangible personal property used in recycling.
(c) An exemption shall not be allowed under this section unless
the purchaser furnishes the retailer with an exemption certificate,
completed in accordance with any instructions or regulations as the
board may prescribe, and the retailer retains the exemption
certificate in its records. The exemption certificate shall contain
the sales price of the tangible personal property, the sale of, or
the storage, use, or other consumption of which is exempt pursuant to
subdivision (a) and shall be furnished to the board upon request.
(d) Notwithstanding subdivision (a), the exemption provided by
this section shall not apply to any sale or use of tangible personal
property which, within one year from the date of purchase, is either
removed from California or converted from an exempt use under
subdivision (a) to some other use not qualifying for the exemption or
used in a manner not qualifying for exemption.
(e) If a purchaser certifies in writing to the seller that the
tangible personal property purchased without payment of the tax will
be used in a manner entitling the seller to regard the gross receipts
from the sale as exempt from the sales tax pursuant to this section,
and within one year from the date of purchase, the purchaser (1)
removes that tangible personal property outside California, (2)
converts that tangible personal property for use in a manner not
qualifying for the exemption, or (3) uses that tangible personal
property in a manner not qualifying for the exemption, the purchaser
shall be liable for payment of sales tax, with applicable interest,
as if the purchaser were a retailer making a retail sale of the
tangible personal property at the time the tangible personal property
is so removed, converted, or used, and the sales price of the
tangible personal property to the purchaser shall be deemed the gross
receipts from that retail sale.
(f) The exemption established by this section shall apply to a
lease of tangible personal property classified as a "continuing sale"
or "continuing purchase" in accordance with Section 6006.1 or
6010.1, and to the rentals payable pursuant to such a lease, provided
the lessee is a qualified person and the tangible personal property
is used in an activity described in subdivision (a).
(g) At the time necessary information technologies and electronic
data warehousing capabilities of the board are sufficiently
established, the board shall determine an efficient means by which
qualified persons may electronically apply for, and receive, an
exemption certificate that contains information that would assist
them in complying with this part with respect to the exemption
established by this section.
SEC. 8. 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."
(4) For each taxable year beginning on or after January 1, 2014,
and before January 1, 2015, the reference to "20 percent" in Section
41(a)(1) of the Internal Revenue Code shall not be modified.
(5) For each taxable year beginning on or after January 1, 2015,
and before January 1, 2016, the reference to "20 percent" in Section
41(a)(1) of the Internal Revenue Code is modified to read "25
percent."
(6) For each taxable year beginning on or after January 1, 2016,
the reference to "20 percent" in Section 41(a)(1) of the Internal
Revenue Code is modified to read "30 percent."
(c) Section 41(a)(2) of the Internal Revenue Code 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 "3 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 "4 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 "5 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)(7) 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.
(4) Section 41(c)(5) of the Internal Revenue Code, relating to
election of alternative simplified credit, shall not apply.
(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) Section 41(a)(3) of the Internal Revenue Code shall not apply.
(k) Section 41(b)(3)(D) of the Internal Revenue Code, relating to
amounts paid to eligible small businesses, universities, and federal
laboratories, shall not apply.
( l ) Section 41(f)(6), relating to energy research
consortium, shall not apply.
(m) For taxable years commencing on and after January 1, 2014, a
taxpayer utilizing a credit pursuant to this section shall report to
the Franchise Tax Board, in a separate line item, the following
information:
(1) Total research and development expenditures made in the tax
year subject to the credit and the total research and development
expenditures not subject to the credit.
(2) For the total research and development expenditures subject to
the credit, a breakdown of the total amount of the credit
attributable to each of the following:
(A) Gross wages.
(B) Capital expenditures.
(C) Outside consultants and services.
SEC. 9. Section 17053.87 is added to the Revenue and Taxation
Code, to read:
17053.87. (a) For each taxable year beginning on or after January
1, 2014, there shall be allowed to a qualified taxpayer as a credit
against the "net tax," as defined in Section 17039, an amount equal
to 25 percent of the amount of a qualified contribution that is made
by a qualified taxpayer in that taxable year.
(b) For purposes of this section, the following terms have the
following meanings:
(1) "Qualified contribution" means a monetary contribution by a
business entity to a postsecondary educational institution for
curriculum or research leading to job opportunities in the private
sector, or consultation services associated with the establishment of
curriculum or research leading to job opportunities in the private
sector, where the business entity and the postsecondary educational
institution agree that there is a substantial potential for the
future employment of students as a result of the contribution.
(2) "Qualified taxpayer" means a business entity that makes a
qualified contribution to a postsecondary educational institution.
(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"
in the following taxable year, and succeeding taxable years if
necessary, until the credit is exhausted.
(d) (1) The Franchise Tax Board may prescribe rules, guidelines,
or procedures necessary or appropriate to carry out the purposes of
this section.
(2) Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code does not apply to any
standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the Franchise Tax Board pursuant
to this section.
SEC. 10. 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."
(4) For each taxable year beginning on or after January 1, 2014,
and before January 1, 2015, both of the following shall apply:
(A) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code shall not be modified.
(B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "29 percent."
(5) For each taxable year beginning on or after January 1, 2015,
and before January 1, 2016, 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 "25 percent."
(B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "34 percent."
(6) For each taxable year beginning on or after January 1, 2016,
and before January 1, 2017, 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 "30 percent."
(B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "39 percent."
(7) For each taxable year beginning on or after January 1, 2017,
and before January 1, 2018, 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 "35 percent."
(B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "40 percent."
(8) For each taxable year beginning on or after January 1, 2018,
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 "40 percent."
(B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "25 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, 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 "3 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 "4 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 "5 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)(7) 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.
(4) Section 41(c)(5) of the Internal Revenue Code, relating to
election of the alternative simplified credit, shall not apply.
(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) Section 41(a)(3) of the Internal Revenue Code shall not apply.
( l ) Section 41(b)(3)(D) of the Internal Revenue Code,
relating to amounts paid to eligible small businesses, universities,
and federal laboratories, shall not apply.
(m) Section 41(f)(6) of the Internal Revenue Code, relating to
energy research consortium, shall not apply.
(n) For taxable years commencing on and after January 1, 2014, a
taxpayer utilizing a credit pursuant to this section shall report to
the Franchise Tax Board, in a separate line item, the following
information:
(1) Total research and development expenditures made in the tax
year subject to the credit and the total research and development
expenditures not subject to the credit.
(2) For the total research and development expenditures subject to
the credit, a breakdown of the total amount of the credit
attributable to each of the following:
(A) Gross wages.
(B) Capital expenditures.
(C) Outside consultants and services.
SEC. 11. Section 23687 is added to the Revenue and Taxation Code,
to read:
23687. (a) For each taxable year beginning on or after January 1,
2014, there shall be allowed to a qualified taxpayer as a credit
against the "tax," as defined in Section 23036, an amount equal to 25
percent of the amount of a qualified contribution that is made by a
qualified taxpayer in that taxable year.
(b) For purposes of this section, the following terms have the
following meanings:
(1) "Qualified contribution" means a monetary contribution by a
business entity to a postsecondary educational institution for
curriculum or research leading to job opportunities in the private
sector, or consultation services associated with the establishment of
curriculum or research leading to job opportunities in the private
sector, where the business entity and the postsecondary educational
institution agree that there is a substantial potential for the
future employment of students as a result of the contribution.
(2) "Qualified taxpayer" means a business entity that makes a
qualified contribution to a postsecondary educational institution.
(c) 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 taxable year, and succeeding taxable years if necessary,
until the credit is exhausted.
(d) (1) The Franchise Tax Board may prescribe rules, guidelines,
or procedures necessary or appropriate to carry out the purposes of
this section.
(2) Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code does not apply to any
standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the Franchise Tax Board pursuant
to this section.
SEC. 12. The provisions of this act are severable. If any
provision of this act or its application is held invalid, that
invalidity shall not affect other provisions or applications that can
be given effect without the invalid provision or application.
SEC. 13. Notwithstanding Section 2230 of the Revenue and Taxation
Code, no appropriation is made by this act and the state shall not
reimburse any local agency for any sales and use tax revenues lost by
it under this act.
SEC. 14. This act is an urgency statute necessary for the
immediate preservation of the public peace, health, or safety within
the meaning of Article IV of the Constitution and shall go into
immediate effect. The facts constituting the necessity are:
In order to support the innovation and entrepreneurial activity
that is critical to the state's economic growth and prosperity, it is
necessary that this act take effect immediately.