BILL NUMBER: AB 927 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 8, 2013
AMENDED IN ASSEMBLY APRIL 1, 2013
INTRODUCED BY Assembly Member Muratsuchi
FEBRUARY 22, 2013
An act to add and repeal Sections
6377.6, 17053.81 , and and
23623.1 of to the Revenue and Taxation
Code, relating to taxation, to take effect immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
AB 927, as amended, Muratsuchi. Income taxes: credits:
hiring: sales and use taxes: exemption: manufacturing: research and
development. hiring.
Existing sales and use tax laws impose 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.
Those laws provides various exemptions from those taxes.
This bill would exempt from those taxes, on and after January 1,
2014, and before January 1, 2018, the gross receipts from the sale
of, and the storage, use, or other consumption of, qualified tangible
personal property purchased for use by a qualified person, as
defined, for use primarily in any stage of manufacturing, processing,
refining, fabricating, or recycling of property, as specified, or
for use primarily in research and development, as specified, or to
maintain, repair, measure, or test that property. The bill would also
exempt from those taxes the gross receipts from the sale of, and the
storage, use, or other consumption of, tangible personal property
purchased for use by a contractor, as specified, for a qualified
person. The bill would require the purchaser to furnish the retailer
with an exemption certificate, as specified.
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
conformity 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.
This bill would specify that this exemption does not apply to
local sales and use taxes and transactions and use taxes.
The Personal Income Tax Law and the Corporation Tax Law allow
various credits against the taxes imposed by those laws.
This bill would, under both laws, for taxable years beginning on
or after January 1, 2014, allow a credit to a qualified employer, as
defined, in an amount equal to $3,000 for each net increase in
qualified full-time employee hired during the taxable year by a
qualified employer, and an additional $1,000 per qualified full-time
employee hired during the taxable year by a qualified employer if the
qualified full-time employee is a veteran or an additional $2,000
per qualified full-time employee hired during the taxable year by a
qualified employer if the qualified full-time employee is a
service-connected disabled veteran, as provided. This bill would
limit the total amount of credit allowed to a qualified
employer to an amount not to exceed $5,000,000 for all taxable years.
This bill would cap the total amount of credit which may be
allocated allowed under those
provisions to $____ for any calendar year to
$35,000,000 .
This bill would take effect immediately as a tax levy.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. It is the intent of the Legislature to create a
competitive tax policy for businesses involved with research,
development, and manufacturing.
SEC. 2. Section 6377.6 is added to the Revenue
and Taxation Code, to read:
6377.6. (a) Beginning January 1, 2014, and before January 1,
2018, 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, all of the following:
(1) Qualified 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
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) Qualified tangible personal property purchased for use by a
qualified person to be used primarily in research and development.
(3) Qualified tangible personal property purchased for use by a
qualified person to be used primarily to maintain, repair, measure,
or test any qualified tangible personal property described in
paragraph (1) or (2).
(4) Qualified tangible personal property purchased for use by a
contractor purchasing that property for use in the performance of a
construction contract for the qualified person, who will use the
property as an integral part of the manufacturing, processing,
refining, fabricating, or recycling process, or as a storage facility
for use in connection with those processes.
(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 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 property.
(3) "Primarily" means 50 percent or more of the time.
(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 who is primarily engaged in those lines of business
classified in Industry Groups 3111 to 3399, inclusive, Industry Group
5112, NAICS Industry 22111, or NAICS Industry 541711 of the North
American Industry Classification System (NAICS) published by the
United States Office of Management and Budget, 2012 edition.
(B) An affiliate of a person who is a qualified person pursuant to
subparagraph (A) if the affiliate is included as 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) (A) "Qualified tangible personal property" includes, but is
not limited to, all of the following:
(i) Machinery and equipment, including component parts and
contrivances such as belts, shafts, moving parts, and operating
structures.
(ii) Equipment or devices used or required to operate, control,
regulate, or maintain the machinery and equipment, 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, 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 party.
(iii) Qualified tangible personal property used in pollution
control that exceeds standards established by this state or any local
or regional governmental agency within this state.
(iv) Special purpose buildings and foundations used as an integral
part of the manufacturing, processing, refining, fabricating, or
recycling process, or that constitute a research or storage facility
used during those processes. Buildings used solely for warehousing
purposes after completion of those processes are not included.
(B) "Qualified tangible personal property" does not include any of
the following:
(i) Consumables with a useful life of less than one year.
(ii) Furniture, inventory, and equipment used in the extraction
process, or equipment used to store finished products that have
completed the manufacturing, processing, refining, fabricating, or
recycling process.
(iii) Tangible personal property used primarily in administration,
general management, or marketing.
(8) "Refining" means the process of converting a natural resource
to an intermediate or finished product.
(9) "Research and development" means those activities defined in
Section 174 of the Internal Revenue Code or in any regulations
thereunder.
(10) "Useful life" for tangible personal property that is treated
as having a useful life of one or more years for state income or
franchise tax purposes shall be deemed to have a useful life of one
or more years for purposes of this section. "Useful life" for
tangible personal property that is treated as having a useful life of
less than one year for state income or franchise tax purposes shall
be deemed to have a useful life of less than one year for purposes of
this section.
(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 and furnishes the exemption certificate to
the board upon request. The exemption certificate shall contain the
sales price of the qualified tangible personal property.
(d) Notwithstanding any provision of the Bradley-Burns Uniform
Local Sales and Use Tax Law (Part 1.5 (commencing with Section 7200))
or 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.
(e) (1) Notwithstanding subdivision (a), the exemption provided by
this section shall not apply to any sale or use of tangible personal
property that, within one year from the date of purchase, is either
removed from California, 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 the exemption. The taxpayer
that has received the exemption under this section for purchasing
qualifying tangible personal property shall notify the board if the
property is either removed from California, converted from an exempt
use under subdivision (a) within one year from the date of purchase,
or used in a manner not qualifying for the exemption.
(2) 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, and within one year from
the date of purchase, the purchaser (1) removes that property
outside California, (2) converts that property for use in a manner
not qualifying for the exemption, or (3) uses that 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 property at the
time the property is so removed, converted, or used, and the sales
price of the property to the purchaser shall be deemed the gross
receipts from that retail sale.
(f) 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, a form
of exemption certificate that contains information that would assist
them in complying with this part with respect to the exemption
established by this section.
(g) This section shall remain in effect only until January 1,
2018, and as of that date is repealed.
SEC. 3. SEC. 2. Section 17053.81 is
added to the Revenue and Taxation Code, to read:
17053.81. (a) (1) For each taxable year beginning on or after
January 1, 2014, there shall be allowed to a qualified employer a
credit against the "net tax," as defined in Section 17039, in an
amount described in paragraph (2).
(2) The amount of credit allowed under this section is as follows:
(A) (i) Three thousand dollars ($3,000) for
each net increase in qualified full-time employee hired during the
taxable year by a qualified employer.
(B)
(ii) An additional one thousand dollars ($1,000) per
qualified full-time employee hired during the taxable year by a
qualified employer if the qualified full-time employee is a veteran
or an additional two thousand dollars ($2,000) per qualified
full-time employee hired during the taxable year by a qualified
employer if the qualified full-time employee is a service-connected
disabled veteran.
(B) The total amount of credits allowed under this section to a
qualified employer shall not exceed five million dollars ($5,000,000)
for all taxable years.
(b) For purposes of this section:
(1) "Annual full-time equivalent" means either of the following:
(A) In the case of a full-time employee paid hourly qualified
wages, "annual full-time equivalent" means the total number of hours
worked for the taxpayer by the employee (not to exceed 2,000 hours
per employee) divided by 2,000.
(B) In the case of a salaried full-time employee, "annual
full-time equivalent" means the total number of weeks worked for the
taxpayer by the employee divided by 52.
(2) "Qualified full-time employee" means either of the following:
(A) An employee who was paid wages subject to Division 6
(commencing with Section 13000) of the Unemployment Insurance Code by
the qualified employer for services of not less than an average of
35 hours per week.
(B) An employee who was a salaried employee and was paid
compensation during the taxable year for full-time employment, within
the meaning of Section 515 of the Labor Code, by the qualified
employer.
(3) "Qualified employer" means a taxpayer who employed qualified
full-time employees who are located in this state and meets any of
the following:
(A) The taxpayer manufactures, assembles, tests, renovates, or
converts aircraft and spacecraft.
(B) The taxpayer manufactures or designs aircraft or spacecraft
engines and engine parts.
(C) The taxpayer manufactures or designs aircraft and spacecraft
auxiliary components, including detection equipment, navigation, and
guidance systems.
(D) The taxpayer provides aircraft and spacecraft support
services, including launching, operating, and retrieving air and
space vehicles.
(E) The taxpayer is a military contractor that is involved with
aerospace defense, including the manufacturing of missiles and
military airplanes.
(c) The net increase in qualified full-time employees of a
qualified employer shall be determined as provided by this
subdivision:
(1) (A) The net increase in qualified full-time employees shall be
determined on an annual full-time equivalent basis by subtracting
from the amount determined in subparagraph (C) the amount determined
in subparagraph (B).
(B) The total number of qualified full-time employees employed in
the preceding taxable year by the taxpayer and by any trade or
business acquired by the taxpayer during the preceding taxable year.
(C) The total number of full-time employees employed in the
current taxable year by the taxpayer and by any trade or business
acquired during the current taxable year.
(2) For taxpayers who first commence doing business in this state
during the taxable year, the number of full-time employees for the
immediately preceding prior taxable year shall be zero.
(d) For purposes of this section:
(1) All employees of the trades or businesses that are treated as
related under either Section 267, 318, or 707 of the Internal Revenue
Code shall be treated as employed by a single taxpayer.
(2) In determining whether the taxpayer has first commenced doing
business in this state during the taxable year, the provisions of
subdivision (f) of Section 17276, without application of paragraph
(7) of that subdivision, shall apply.
(e) (1) (A) Credit under this section and Section 23623.1 shall be
allowed only for credits claimed on timely filed original returns
received by the Franchise Tax Board on or before the cut-off date
established by the Franchise Tax Board.
(B) For purposes of this paragraph, the cut-off date shall be the
last day of the calendar quarter within which the Franchise Tax Board
estimates it will have received timely filed original returns
claiming credits under this section and Section 23623.1 that
cumulatively total ____ dollars ($____) for all taxable years.
(e) (1) The aggregate amount of credits that may be allowed for
any calendar year under this section and Section 23623.1 shall not
exceed an amount equal to thirty-five million dollars ($35,000,000).
(2) The credits allowed under this section and Section 23623.1
shall be allowed to a taxpayer on a first-come, first-served basis.
(3) The taxpayer shall claim the credit on a timely filed original
return.
(2)
(4) The date a return is received shall be determined by
the Franchise Tax Board.
(3)
(5) (A) The determinations of the Franchise Tax Board
with respect to the cut-off date, the date a
return is received , and whether a return has been
timely filed for purposes of this subdivision may not be reviewed in
any administrative or judicial proceeding.
(B) Any disallowance of a credit claimed due to a determination
under this subdivision, including the application of the limitation
specified in paragraph (1), shall be treated as a mathematical error
appearing on the return. Any amount of tax resulting from such
disallowance may be assessed by the Franchise Tax Board in the same
manner as provided by Section 19051.
(4)
(6) The Franchise Tax Board shall periodically provide
notice on its Web site with respect to the amount of credit under
this section and Section 23623.1 claimed on timely filed original
returns received by the Franchise Tax Board.
(f) 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 year, and succeeding years if necessary, until the
credit is exhausted.
(g) (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.
(h) This section shall remain in effect only until December 1 of
the calendar year after the year of the cut-off date, and as of that
December 1 is repealed.
SEC. 4. SEC. 3. Section 23623.1 is
added to the Revenue and Taxation Code, to read:
23623.1. (a) (1) For each taxable year beginning on or after
January 1, 2014, there shall be allowed to a qualified employer a
credit against the "tax," as defined in Section 23036, in an amount
described in paragraph (2).
(2) The amount of credit allowed under this section is as follows:
(A) (i) Three thousand dollars ($3,000) for
each net increase in qualified full-time employee hired during the
taxable year by a qualified employer.
(B)
(ii) An additional one thousand dollars ($1,000) per
qualified full-time employee hired during the taxable year by a
qualified employer if the qualified full-time employee is a veteran
or an additional two thousand dollars ($2,000) per qualified
full-time employee hired during the taxable year by a qualified
employer if the qualified full-time employee is a service-connected
disabled veteran.
(B) The total amount of credits allowed under this section to a
qualified employer shall not exceed five million dollars ($5,000,000)
for all taxable years.
(b) For purposes of this section:
(1) "Annual full-time equivalent" means either of the following:
(A) In the case of a full-time employee paid hourly qualified
wages, "annual full-time equivalent" means the total number of hours
worked for the taxpayer by the employee (not to exceed 2,000 hours
per employee) divided by 2,000.
(B) In the case of a salaried full-time employee, "annual
full-time equivalent" means the total number of weeks worked for the
taxpayer by the employee divided by 52.
(2) "Qualified full-time employee" means either of the following:
(A) An employee who was paid wages subject to Division 6
(commencing with Section 13000) of the Unemployment Insurance Code by
the qualified employer for services of not less than an average of
35 hours per week.
(B) An employee who was a salaried employee and was paid
compensation during the taxable year for full-time employment, within
the meaning of Section 515 of the Labor Code, by the qualified
employer.
(3) "Qualified employer" means a taxpayer who employed qualified
full-time employees who are located in this state and meets any of
the following:
(A) The taxpayer manufactures, assembles, tests, renovates, or
converts aircraft and spacecraft.
(B) The taxpayer manufactures or designs aircraft or spacecraft
engines and engine parts.
(C) The taxpayer manufactures or designs aircraft and spacecraft
auxiliary components, including detection equipment, navigation, and
guidance systems.
(D) The taxpayer provides aircraft and spacecraft support
services, including launching, operating, and retrieving air and
space vehicles.
(E) The taxpayer is a military contractor that is involved with
aerospace defense, including the manufacturing of missiles and
military airplanes.
(c) The net increase in qualified full-time employees of a
qualified employer shall be determined as provided by this
subdivision:
(1) (A) The net increase in qualified full-time employees shall be
determined on an annual full-time equivalent basis by subtracting
from the amount determined in subparagraph (C) the amount determined
in subparagraph (B).
(B) The total number of qualified full-time employees employed in
the preceding taxable year by the taxpayer and by any trade or
business acquired by the taxpayer during the preceding taxable year.
(C) The total number of full-time employees employed in the
current taxable year by the taxpayer and by any trade or business
acquired during the current taxable year.
(2) For taxpayers who first commence doing business in this state
during the taxable year, the number of full-time employees for the
immediately preceding prior taxable year shall be zero.
(d) For purposes of this section:
(1) All employees of the trades or businesses that are treated as
related under either Section 267, 318, or 707 of the Internal Revenue
Code shall be treated as employed by a single taxpayer.
(2) In determining whether the taxpayer has first commenced doing
business in this state during the taxable year, the provisions of
subdivision (f) of Section 17276, without application of paragraph
(7) of that subdivision, shall apply.
(e) (1) (A) Credit under this section and Section 17053.81 shall
be allowed only for credits claimed on timely filed original returns
received by the Franchise Tax Board on or before the cut-off date
established by the Franchise Tax Board.
(B) For purposes of this paragraph, the cut-off date shall be the
last day of the calendar quarter within which the Franchise Tax Board
estimates it will have received timely filed original returns
claiming credits under this section and Section 17053.81 that
cumulatively total ____ dollars ($____) for all taxable years.
(e) (1) The aggregate amount of credits that may be allowed for
any calendar year under this section and Section 17053.81 shall not
exceed an amount equal to thirty-five million dollars ($35,000,000).
(2) The credits allowed under this section and Section 17053.81
shall be allowed to a taxpayer on a first-come, first-served basis.
(3) The taxpayer shall claim the credit on a timely filed original
return.
(2)
(4) The date a return is received shall be determined
by the Franchise Tax Board.
(3)
(5) (A) The determinations of the Franchise Tax Board
with respect to the cut-off date, the date a
return is received , and whether a return has been
timely filed for purposes of this subdivision may not be reviewed in
any administrative or judicial proceeding.
(B) Any disallowance of a credit claimed due to a determination
under this subdivision, including the application of the limitation
specified in paragraph (1), shall be treated as a mathematical error
appearing on the return. Any amount of tax resulting from such
disallowance may be assessed by the Franchise Tax Board in the same
manner as provided by Section 19051.
(4)
(6) The Franchise Tax Board shall periodically provide
notice on its Web site with respect to the amount of credit under
this section and Section 17053.81 claimed on timely filed original
returns received by the Franchise Tax Board.
(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
is exhausted.
(g) (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.
(h) This section shall remain in effect only until December 1 of
the calendar year after the year of the cut-off date, and as of that
December 1 is repealed.
SEC. 5. SEC. 4. This act provides
for a tax levy within the meaning of Article IV of the Constitution
and shall go into immediate effect.