BILL NUMBER: AB 653	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  AUGUST 5, 2013
	AMENDED IN ASSEMBLY  MAY 6, 2013
	AMENDED IN ASSEMBLY  MAY 1, 2013
	AMENDED IN ASSEMBLY  APRIL 16, 2013

INTRODUCED BY   Assembly Member V. Manuel Pérez
   (Coauthors: Assembly Members Daly,  Fox,  Fong,
 Fox,  Gorell, Gray,  Mullin,  Nestande, and Weber)

   (Coauthors: Senators Calderon, Galgiani, and Lieu)

                        FEBRUARY 21, 2013

   An act to amend Section 13997.6 of, and to add 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,   of  the Revenue and Taxation Code, relating
to economic development, making an appropriation therefor, and
declaring the urgency thereof, to take effect immediately.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 653, as amended, V. Manuel Pérez. Economic development.
   (1) 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. 
   (2) 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.  
   (3) 
    (2)  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,  and before January 1, 2019,  increase the credit
for research and development expenses, as provided. 
   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.  
   (4) 
    (3)  This bill would provide that the provisions of this
bill are severable. 
   (5) 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.  
   This bill would provide that the sales and use tax exemption
authorized by the bill does not apply to local sales and use taxes
and transactions and use taxes.  
   (6) 
    (4)  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   no  .


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.  Article 4.5 (commencing with Section 12097) is added to
Chapter 1.6 of Part 2 of Division 3 of Title 2 of the Government
Code, to read:

      Article 4.5.  California Innovation Initiatives


   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 shall set guidelines for approval, designation,
operation, reporting, and dedesignation of iHubs.
   (d) The office may designate specific regions throughout the state
as an iHub through a competitive application process.
   (1) An eligible applicant shall be one or more of the following:
   (A) A fully accredited institution of higher education.
   (B) A private nonprofit corporation engaged in economic
development activities.
   (C) A county or municipality in this state that has a preexisting
economic development department or program or both.
   (D) A public economic development institution, including a
workforce investment board or an economic development corporation.
   (2) An applicant's proposal for iHub designation shall include,
but shall not be limited to, all of the following information:
   (A) A statement of purpose.
   (B) A signed statement of cooperation and a description of the
roles and relationships of each entity involved in the partnership.
   (C) A list of goals to be achieved with the designation of the
iHub.
   (D) A list of iHub assets and resources.
   (E) A focus area of the iHub, including industry sectors or other
targeted areas for development and growth.
   (e) The office may designate an iHub for a term of not more than
five years. An iHub may reapply for a designation.
   (f) (1) The iHub designation shall not be official until a
memorandum of understanding is entered into by the applicant and the
office. The memorandum of understanding shall include goals and
performance standards and other related requirements as determined by
the office.
   (2) For an iHub designated by the office before January 1, 2014,
the iHub partnership shall have until September 1, 2014, to enter
into a memorandum of understanding with the office that meets the
requirements of this article.
   (g) More than one iHub may be designated in an area to the extent
that there is a clear distinction between the focus area of each
iHub.
   (h) An iHub shall, to the extent feasible, do one or more 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,
business, 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.
   (i) 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 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 development centers, microenterprise
development organizations, 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.
   (j) An iHub shall annually report to the office on its progress in
meeting the goals and performance standards as described in the
memorandum of understanding with the office. The office shall
annually post the information from these reports on the office's
Internet Web site and provide notice to the Governor and relevant
policy committees of the Legislature that the information is
available on the Internet Web site.
   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. 4.  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) 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. 5.    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 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) 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.
   (D) 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. The purchaser shall notify the State
Board of Equalization within 90 days of: (1) taking the tangible
personal property out of state, (2) converting the tangible personal
property to an ineligible use, or (3) using the tangible personal
property in a manner not qualifying for the exemption.
   (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.
   (h) Notwithstanding the Bradley-Burns Uniform Local Sales and Use
Tax Law (Part 1.5 (commencing with Section 7200)) and the
Transactions and Use Tax Law (Part 1.6 (commencing with Section
7251)), the exemption established by this section shall not apply
with respect to any tax levied by a county, city, or district
pursuant to, or in accordance with, either of those laws. 
   SEC. 6.   SEC. 5.   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,
 and before January 1, 2014,  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 is modified to read "18
percent."
   (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 "21
percent."
   (6) For each taxable year beginning on or after January 1, 2016,
and before January 1, 2017, the reference to "20 percent" in Section
41(a)(1) of the Internal Revenue Code is modified to read "24
percent."
   (7) For each taxable year beginning on or after January 1, 2017,
and before January 1, 2018, the reference to "20 percent" in Section
41(a)(1) of the Internal Revenue Code is modified to read "27
percent."
   (8) For each taxable year beginning on or after January 1, 2018,
 and before January 1, 2019,  the reference to "20 percent"
in Section 41(a)(1) of the Internal Revenue Code is modified to read
"30 percent." 
   (9) For each taxable year beginning on or after January 1, 2019,
the reference to "20 percent" in Section 41(a)(1) of the Internal
Revenue Code is modified to read "15 percent." 
   (c) Section 41(a)(2) of the Internal Revenue Code 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. 
  SEC. 7.    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 regionally accredited 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 nine 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, including, but not limited to:
   (A) Requiring the regionally accredited postsecondary institution
to provide the taxpayer with a tax credit certificate that the
taxpayer can use to document the contribution. The certificate shall
be on a form prescribed by the Franchise Tax Board.
   (B) Requiring the regionally accredited postsecondary institution
to annually provide a list to the Franchise Tax Board of each
taxpayer that made a contribution and was issued a certificate during
the tax year. The list shall include the name of the taxpayer, the
taxpayer's tax ID number, identification of the type of curriculum or
research to be developed, and the amount of money contributed.
   (C) Requiring the regionally accredited postsecondary institution
to retain a record of the contribution and use of the funds for 10
years following the first year in which the institution reported the
contribution pursuant to subparagraph (B).
   (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. 8.   SEC. 6.   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,
 and before January 1, 2014,  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.  
is modified to read "18 percent.   " 
   (B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read  "29  
"27  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  
"21  percent."
   (B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read  "34  
"30  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  
"24  percent."
   (B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read  "39  
"33  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  
"27  percent."
   (B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read  "40  
"36  percent."
   (8) For each taxable year beginning on or after January 1, 2018,
 and before January 1, 2019,  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  
"30  percent."
   (B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read  "25  
"39  percent." 
   (9) For each taxable year beginning on or after January 1, 2019,
both of the following shall apply:  
   (A) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code is modified to read "15 percent."  
   (B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "24 percent." 
   (c) (1) With respect to any expense paid or incurred after the
operative date of Section 6378, Section 41(b)(1) of the Internal
Revenue Code is modified to exclude from the definition of "qualified
research expense" any amount paid or incurred for tangible personal
property that is eligible for the exemption from sales or use tax
provided by Section 6378.
   (2) "Qualified research" and "basic research" shall include only
research conducted in California.
   (d) The provisions of Section 41(e)(7)(A) of the Internal Revenue
Code shall be modified so that "basic research," for purposes of this
section, includes any basic or applied research including scientific
inquiry or original investigation for the advancement of scientific
or engineering knowledge or the improved effectiveness of commercial
products, except that the term does not include any of the following:

   (1) Basic research conducted outside California.
   (2) Basic research in the social sciences, arts, or humanities.
   (3) Basic research for the purpose of improving a commercial
product if the improvements relate to style, taste, cosmetic, or
seasonal design factors.
   (4) Any expenditure paid or incurred for the purpose of
ascertaining the existence, location, extent, or quality of any
deposit of ore or other mineral (including oil and gas).
   (e) (1) In the case of a taxpayer engaged in any biopharmaceutical
research activities that are described in codes 2833 to 2836,
inclusive, or any research activities that are described in codes
3826, 3829, or 3841 to 3845, inclusive, of the Standard Industrial
Classification (SIC) Manual published by the United States Office of
Management and Budget, 1987 edition, or any other biotechnology
research and development activities, the provisions of Section 41(e)
(6) of the Internal Revenue Code shall be modified to include both of
the following:
   (A) A qualified organization as described in Section 170(b)(1)(A)
(iii) of the Internal Revenue Code and owned by an institution of
higher education as described in Section 3304(f) of the Internal
Revenue Code.
   (B) A charitable research hospital owned by an organization that
is described in Section 501(c)(3) of the Internal Revenue Code, is
exempt from taxation under Section 501(a) of the Internal Revenue
Code, is not a private foundation, is designated a "specialized
laboratory cancer center," and has received Clinical Cancer Research
Center status from the National Cancer Institute.
   (2) For purposes of this subdivision:
   (A) "Biopharmaceutical research activities" means those activities
that use organisms or materials derived from organisms, and their
cellular, subcellular, or molecular components, in order to provide
pharmaceutical products for human or animal therapeutics and
diagnostics. Biopharmaceutical activities make use of living
organisms to make commercial products, as opposed to pharmaceutical
activities that make use of chemical compounds to produce commercial
products.
   (B) "Other biotechnology research and development activities"
means research and development activities consisting of the
application of recombinant DNA technology to produce commercial
products, as well as research and development activities regarding
pharmaceutical delivery systems designed to provide a measure of
control over the rate, duration, and site of pharmaceutical delivery.

   (f) In the case where the credit allowed by this section exceeds
the "tax," the excess may be carried over to reduce the "tax" in the
following year, and succeeding years if necessary, until the credit
has been exhausted.
   (g) For each taxable year beginning on or after January 1, 1998,
the reference to "Section 501(a)" in Section 41(b)(3)(C) of the
Internal Revenue Code, relating to contract research expenses, is
modified to read "this part or Part 10 (commencing with Section
17001)."
   (h) (1) For each taxable year beginning on or after January 1,
2000:
   (A) The reference to "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. 
  SEC. 9.    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 regionally accredited 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 nine 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, including, but not limited to:
   (A) Requiring the regionally accredited postsecondary institution
to provide the taxpayer with a tax credit certificate that the
taxpayer can use to document the contribution. The certificate shall
be on a form prescribed by the Franchise Tax Board.
   (B) Requiring the regionally accredited postsecondary institution
to annually provide a list to the Franchise Tax Board of each
taxpayer that made a contribution and was issued a certificate during
the tax year. The list shall include the name of the taxpayer, the
taxpayer's tax ID number, identification of the type of curriculum or
research to be developed, and the amount of money contributed.
   (C) Requiring the regionally accredited postsecondary institution
to retain a record of the contribution and use of the funds for 10
years following the first year in which the institution reported the
contribution pursuant to subparagraph (B).
   (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.   SEC. 7.    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. 11.    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. 12.  SEC. 8.   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.