AB 1326, as introduced, Gorell. Sales and use taxes: exemptions: unmanned aerial vehicle manufacturing: income taxes: credits: hiring.
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, and provides various exemptions from the taxes imposed by that law.
This bill would provide an exemption from those taxes for the gross receipts from the sale of, and the storage, use, or other consumption of, tangible personal property, as defined, purchased for use in unmanned aerial vehicle manufacturing by a qualified person, as defined. 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 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.
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, and before January 1, 2024, allow a credit in an amount equal to a specified percentage of the qualified wages, as defined, paid or incurred by a taxpayer that manufactures unmanned aerial vehicles with respect to qualified employees, as defined, during the taxable year, not to exceed $20,000 per year, per qualified employee.
This bill would take effect immediately as a tax levy.
Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.
The people of the State of California do enact as follows:
Section 6376.6 is added to the Revenue and
2Taxation Code, to read:
(a) On and after January 1, 2014, and before January
41, 2024, there are exempted from the taxes imposed by this part
5the gross receipts from the sale of, and the storage, use, or other
6consumption in this state of, any of the following:
7(1) Tangible personal property purchased for use in unmanned
8aerial vehicle manufacturing by a qualified person to be used
9primarily in any stage of the manufacturing of property, beginning
10at the point any raw materials are received by the qualified person
11and introduced into the process and ending at the point at which
12the manufacturing has altered property to its completed form,
13including packaging, if required.
14(2) Tangible personal property
purchased by a contractor for
15use in the performance of a construction contract for the qualified
16person that will use the qualified tangible personal property as an
P3 1integral part of the manufacturing process, or as a facility for use
2in connection with the manufacturing process.
3(b) For purposes of this section:
4(1) “Manufacturing” means the activity of converting or
5conditioning property by changing the form, composition, quality,
6or character of the property for ultimate sale at retail or use in the
7manufacturing of a product to be ultimately sold at retail.
8Manufacturing includes any improvements to tangible personal
9property that result in a greater service life or greater functionality
10than that of the original property.
11(2) “Primarily” means tangible personal property used 50 percent
12or more of the time in an
activity described in subdivision (a).
13(3) “Process” means the period beginning at the point at which
14any raw materials are received by the qualified person and
15introduced into the manufacturing activity of the qualified person
16and ending at the point at which the manufacturing activity of the
17qualified person has altered tangible personal property to its
18completed form, including packaging, if required. Raw materials
19shall be considered to have been introduced into the process when
20the raw materials are stored on the same premises where the
21qualified person’s manufacturing activity is conducted. Raw
22materials that are stored on premises, other than where the qualified
23person’s manufacturing activity is conducted, shall not be
24considered to have been introduced into the manufacturing process.
25(4) (A) “Qualified person” means a person who is engaged in
26the
line of business described in Industry Group 336411 of the
27North American Industry Classification System (NAICS) published
28by the United States Office of Management and Budget (OMB),
292012 edition, that manufactures unmanned aerial vehicles.
30(B) An affiliate of a person qualified pursuant to subparagraph
31(A) shall also be considered a qualified person as long as the
32affiliate is included as a member of that person’s unitary group for
33which a combined report is required to be filed under Article 1
34(commencing with Section 25101) of Chapter 17 of Part”.
35(5) (A) “Tangible personal property,” as used in this section,
36includes, but is not limited to, all of the following:
37(i) Machinery and equipment, including component parts and
38contrivances such as belts, shafts, moving parts, and operating
39
structures.
P4 1(ii) All equipment or devices used or required to operate, control,
2regulate, or maintain the machinery, including, without limitation,
3computers, data processing equipment, and computer software,
4together with all repair and replacement parts with a useful life of
5one or more years, whether purchased separately or in conjunction
6with a complete machine and regardless of whether the machine
7or component parts are assembled by the qualified person or
8another party.
9(iii) Property used in pollution control that meets standards
10established by this state or any local or regional governmental
11agency within this state.
12(iv) Special purpose buildings and foundations used as an
13integral part of the manufacturing process, or that constitute a
14research or storage facility used during the manufacturing process.
15
Buildings used solely for warehousing purposes after completion
16of the manufacturing process are not included.
17(v) Fuels used or consumed in the manufacturing process.
18(B) “Tangible personal property” shall not include any of the
19following:
20(i) Consumables with a normal useful life of less than one year,
21except as provided in clause (v) of subparagraph (A).
22(ii) Furniture, inventory, and equipment used in the extraction
23process, or equipment used to store finished products that have
24completed the manufacturing process.
25(iii) Tangible personal property used primarily in administration,
26general management, or marketing.
27(c) An
exemption shall not be allowed under this section unless
28the purchaser furnishes the retailer with an exemption certificate,
29completed in accordance with any instructions or regulations as
30the board may prescribe, and the retailer subsequently furnishes
31the board with a copy of the exemption certificate. The exemption
32certificate shall contain the sales price of the machinery or
33equipment, the sale of, or the storage, use, or other consumption
34of which is exempt pursuant to subdivision (a).
35(d) Notwithstanding subdivision (a), the exemption provided
36by this section shall not apply to any sale or use of property which,
37within one year from the date of purchase, is removed from
38California, converted from an exempt use under subdivision (a)
39to some other use not qualifying for the exemption, or used in a
40manner not qualifying for the exemption.
P5 1(e) If a purchaser certifies in writing
to the seller that the
2property purchased without payment of the tax will be used in a
3manner entitling the seller to regard the gross receipts from the
4sale as exempt from the sales tax, and within one year from the
5date of purchase, the purchaser removes that property outside
6California, converts that property for use in a manner not qualifying
7for the exemption, or uses that property in a manner not qualifying
8for the exemption, the purchaser shall be liable for payment of
9sales tax, with applicable interest, as if the purchaser were a retailer
10making a retail sale of the property at the time the property is so
11removed, converted, or used, and the sales price of the property
12to the purchaser shall be deemed the gross receipts from that retail
13sale.
14(f) This section shall remain in effect only through and including
15December 31, 2023, and is repealed on January 1, 2024.
Section 17053.83 is added to the Revenue and Taxation
17Code, to read:
(a) For each taxable year beginning on or after
19January 1, 2014, and before January 1, 2024, there shall be allowed
20as a credit against the “net tax,” as defined in Section 17039, an
21amount equal to the following:
22(1) Fifty percent of qualified wages paid or incurred during any
23taxable year beginning on or after January 1, 2014, and before
24January 1, 2016.
25(2) Forty percent of qualified wages paid or incurred during any
26taxable year beginning on or after January 1, 2016, and before
27January 1, 2018.
28(3) Thirty percent of qualified wages paid or incurred during
29any taxable year beginning on or after January 1, 2018,
and before
30January 1, 2020.
31(4) Twenty percent of qualified wages paid or incurred during
32any taxable year beginning on or after January 1, 2020, and before
33January 1, 2022.
34(5) Ten percent of qualified wages paid or incurred during any
35taxable year beginning on or after January 1, 2022, and before
36January 1, 2024.
37(b) For purposes of this section:
38(1) “Qualified taxpayer” means any taxpayer who is engaged
39in the line of business described in Industry Group 336411 of the
40North American Industry Classification System (NAICS) published
P6 1by the United States Office of Management and Budget (OMB),
22012 edition, that manufactures unmanned aerial vehicles.
3(2) “Qualified employee” means an
individual whose services
4for the qualified taxpayer are performed in this state and are at
5least 90 percent directly related to the qualified taxpayer’s line of
6business described in Industry Group 336411 of the North
7American Industry Classification System (NAICS) published by
8the United States Office of Management and Budget (OMB), 2012
9edition, manufacturing unmanned aerial vehicles.
10(3) “Qualified wages” means that portion of wages paid or
11incurred by the qualified taxpayer during the taxable year with
12respect to qualified employees that are direct costs as defined in
13Section 263A of the Internal Revenue Code allocable to property
14manufactured in this state by the qualified taxpayer.
15(c) The credit allowed by this section shall not exceed twenty
16thousand dollars ($20,000) per year, per qualified employee. For
17employees that are qualified employees for part of a taxable year,
18
the credit shall not exceed twenty thousand dollars ($20,000)
19multiplied by a fraction, the numerator of which is the number of
20months of the taxable year that the employee is a qualified
21employee and the denominator of which is 12.
22(d) In the case where the credit allowed by this section exceeds
23the “net tax,” the excess may be carried over to reduce the “net
24tax” in the following year, and seven succeeding years if necessary,
25until the credit is exhausted.
26(e) The Franchise Tax Board may prescribe rules, guidelines,
27or procedures necessary or appropriate to carry out the purposes
28of this section.
29(f) This section shall remain in effect only until December 1,
302024, and as of that date is repealed.
Section 23623.3 is added to the Revenue and Taxation
32Code, to read:
(a) For each taxable year beginning on or after
34January 1, 2013, and before January 1, 2023, there shall be allowed
35as a credit against “tax,” as defined in Section 23036, an amount
36equal to the following:
37(1) Fifty percent of qualified wages paid or incurred during any
38taxable year beginning on or after January 1, 2014, and before
39January 1, 2016.
P7 1(2) Forty percent of qualified wages paid or incurred during any
2taxable year beginning on or after January 1, 2016, and before
3January 1, 2018.
4(3) Thirty percent of qualified wages paid or incurred during
5any taxable year beginning on or after January 1, 2018, and before
6
January 1, 2020.
7(4) Twenty percent of qualified wages paid or incurred during
8any taxable year beginning on or after January 1, 2020, and before
9January 1, 2022.
10(5) Ten percent of qualified wages paid or incurred during any
11taxable year beginning on or after January 1, 2022, and before
12January 1, 2024.
13(b) For purposes of this section:
14(1) “Qualified taxpayer” means any taxpayer who is engaged
15in the line of business described in Industry Group 336411 of the
16North American Industry Classification System (NAICS) published
17by the United States Office of Management and Budget (OMB),
182012 edition, that manufactures unmanned aerial vehicles.
19(2) “Qualified employee” means an individual whose
services
20for the qualified taxpayer are performed in this state and are at
21least 90 percent directly related to the qualified taxpayer’s line of
22business described in Industry Group 336411 of the North
23American Industry Classification System (NAICS) published by
24the United States Office of Management and Budget (OMB), 2012
25edition, manufacturing unmanned aerial vehicles.
26(3) “Qualified wages” means that portion of wages paid or
27incurred by the qualified taxpayer during the taxable year with
28respect to qualified employees that are direct costs as defined in
29Section 263A of the Internal Revenue Code allocable to property
30manufactured in this state by the qualified taxpayer.
31(c) The credit allowed by this section shall not exceed twenty
32thousand dollars ($20,000) per year, per qualified employee. For
33employees that are qualified employees for part of a taxable year,
34the credit shall
not exceed twenty thousand dollars ($20,000)
35multiplied by a fraction, the numerator of which is the number of
36months of the taxable year that the employee is a qualified
37employee and the denominator of which is 12.
38(d) In the case where the credit allowed by this section exceeds
39the “net tax,” the excess may be carried over to reduce the “net
P8 1tax” in the following year, and seven succeeding years if necessary,
2until the credit is exhausted.
3(e) The Franchise Tax Board may prescribe rules, guidelines,
4or procedures necessary or appropriate to carry out the purposes
5of this section.
6(f) This section shall remain in effect only until December 1,
72024, and as of that date is repealed.
Notwithstanding Section 2230 of the Revenue and
9Taxation Code, no appropriation is made by this act and the state
10shall not reimburse any local agency for any sales and use tax
11revenues lost by it under this act.
This act provides for a tax levy within the meaning of
13Article IV of the Constitution and shall go into immediate effect.
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