BILL ANALYSIS Ó
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UNFINISHED BUSINESS
Bill No: SB 718
Author: Roth (D) and Knight (R), et al.
Amended: 8/7/14
Vote: 27 - Urgency
PRIOR SENATE VOTES NOT RELEVANT
SENATE GOVERNANCE & FINANCE COMMITTEE : 7-0, 8/12/14 (Pursuant
to Senate Rule 29.10)
AYES: Wolk, Knight, Beall, DeSaulnier, Hernandez, Liu, Walters
ASSEMBLY FLOOR : 75-0, 8/11/14 - See last page for vote
SUBJECT : Capital investment incentive programs: corporation
tax credit: new advanced strategic aircraft program
SOURCE : Author
DIGEST : This bill expands the definition of a proponent
eligible for financial incentives under a local government
capital investment incentive program (CIIP) and modifies the
current aerospace tax credit by, among other things, including a
prime contractor within the definition of a qualified taxpayer
eligible for the credit.
Assembly Amendments delete the Senate version of the bill, and
instead add the current language.
ANALYSIS :
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Existing law:
1. Authorizes the governing body of a county, city and county,
or city, by means of an ordinance or resolution, to establish
a CIIP. Specifically authorizes the payment of a "capital
investment incentive amount" to the "proponent" of a
"qualified manufacturing facility" for up to 15 consecutive
fiscal years.
2. Provides that the consecutive fiscal years during which a
"capital investment incentive amount" is to be paid shall
begin with the first fiscal year commencing after the date
upon which the "qualified manufacturing facility" is
certified for occupancy, as specified.
3. Provides that the annual payment to a "proponent" of each
"capital investment incentive amount" shall be contingent
upon the "proponent's" payment of a "community services fee."
4. Defines a "capital investment incentive amount" as an amount
up to the amount of ad valorem property tax revenue derived
by the participating local agency from the taxation of that
portion of the total assessed value of the facility's real
and personal property that exceeds $25 million.
5. Defines a "proponent" as a party that meets specified
criteria, including that the party will be the fee owner of
the "qualified manufacturing facility" upon the facility's
completion.
6. Defines a "qualified manufacturing facility" as a proposed
manufacturing facility that meets all of the following
criteria:
A. The "proponent's" initial investment in that facility,
as specified, exceeds $150 million.
B. The facility is to be located within the jurisdiction
of the electing county, city and county, or city.
C. The facility is operated by any of the following:
(1) A business described within the 2012 North
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American Industry Classification System Manual Code
3359 or 3364;
(2) A business engaged in the recovery of minerals
from geothermal resources, as specified; or
(3) A business engaged in the manufacturing of parts
or components related to the production of electricity
using solar, wind, biomass, hydropower, or geothermal
resources, as specified.
A. The "proponent" is currently engaged in any of the
following:
(1) Commercial production;
(2) The perfection of the manufacturing process; or
(3) The perfection of a product intended to be
manufactured.
1. Allows various tax credits under both the Personal Income
Tax Law and the Corporation Tax (CT) Law. These credits are
generally designed to provide relief to taxpayers who incur
specified expenses or to encourage socially beneficial
behavior.
2. Allows an aerospace tax credit under the CT Law.
Specifically allows, for taxable years beginning on or after
January 1, 2015, and before January 1, 2030, a first-tier
aerospace subcontractor a credit equal to 17.5% of qualified
wages paid to qualified full-time employees multiplied by an
"annual full-time equivalent ratio."
This bill:
1. Expands the definition of a "proponent" eligible for
financial incentives under a local government CIIP to include
specified lessees or occupants of a "qualified manufacturing
facility" (instead of only facility owners per existing law).
Specifically expands the definition to include lessees or
occupants under a government-owned contractor operator
enhanced use lease agreement.
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2. Modifies the definition of a "capital investment incentive
amount" payable to a proponent under a local government CIIP.
Specifically excludes from the calculation revenue transfers
required by Revenue and Taxation Code (R&TC) Sections 97.2
and 97.3.
3. Modifies the definition of a "qualified taxpayer" under the
aerospace tax credit program to include, in addition to a
first-tier subcontractor, a taxpayer that is a prime
contractor awarded a prime contract to manufacture property
for ultimate use in, or as a component of, a new advanced
strategic aircraft for the United States Air Force (USAF). A
"prime contractor" is defined as a contractor that was
awarded a prime contract for the manufacturing of a new
advanced strategic aircraft for the USAF.
4. Modifies the definition of "New Advanced Strategic Aircraft
Program" under the aerospace tax credit program to exclude a
contract awarded by the USAF prior to August 1, 2014, and to
exclude a program to upgrade, modernize, sustain, or
otherwise modify a current USAF bomber program, including,
but not limited to, the B-52, B-1, or B-2 programs.
5. Modifies the method of calculating the tax credit under the
aerospace tax credit program for qualified wages paid by
deleting the "annual full-time equivalent ratio" formula and
instead provides that the aggregate number of total annual
full-time equivalents of all qualified taxpayers with respect
to which a credit amount may be allowed for a calendar year
may not exceed 1,100.
6. Defines "total annual full-time equivalents" under the
aerospace tax credit program as the number of a qualified
taxpayer's qualified full-time employees computed on an
annual full-time equivalent basis for the taxable year.
7. Provides that the Franchise Tax Board (FTB) shall allocate
the aerospace tax credit to qualified taxpayers on a
first-come-first-served basis, determined by the date the
qualified taxpayer's timely filed original tax return is
received by the FTB. If the returns of two or more qualified
taxpayers are received on the same day and the amount of
credit remaining to be allocated is insufficient to be
allocated fully to each, the credit remaining shall be
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allocated to those qualified taxpayers on a pro-rata basis.
8. Provides that the date a return is received shall be
determined by the FTB, and that the determination may not be
reviewed in any administrative or judicial proceeding.
9. Provides that a disallowance of the aerospace tax credit
shall be treated as a mathematical error appearing on the
return, and any amount of tax resulting from that
disallowance may be assessed by the FTB in the same manner as
provided by R&TC Section 19051.
NOTE: For detailed background see Senate Governance and
Finance Committee analysis.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 8/12/14)
Antelope Valley Board of Trade
Azusa Chamber of Commerce
California Chamber of Commerce
Cities of El Segundo, Lancaster, Palmdale, and Redondo Beach
CONNECT
El Segundo Chamber of Commerce
Irwindale Chamber of Commerce
Lancaster Chamber of Commerce
Los Angeles Area Chamber of Commerce
Los Angeles Economic Development Corporation
Manhattan Beach Chamber of Commerce
Northrop Grumman
Redondo Beach Chamber of Commerce
San Diego Mayor Kevin L. Faulconer
San Diego Regional Chamber of Commerce
San Diego Regional Economic Development Corporation
San Gabriel Valley Chambers of Commerce
San Gabriel Valley Economic Partnership
South Bay Association Chambers of Commerce
Southwest Defense Alliance
West Valley-Warner Center Chamber of Commerce
Yuba-Sutter Chamber of Commerce
ARGUMENTS IN SUPPORT : According to the author, "The aerospace
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industry in Southern California began roughly 100 years ago.
Over the last century, early aviation pioneers in the region
transitioned from small workshops to large factories that
produced bombers and fighters and employed tens of thousands of
Southern Californians. However, with the end of the Cold War in
the late 1980s came defense budget cuts and military base
closures. In response, the industry's largest firms contracted
in a wave of consolidations and, as a result, many smaller,
second and third tier contractors were forced to close their
doors. This bill has the potential to be of significant
benefit to California. The size of this incentive program, $25
million to $31 million per year for 15 years, and its focus on
aerospace is seen as an opportunity to position California once
again as a national leader in supporting the aerospace industry
by growing the industry by approximately 1,100 direct jobs,
[and] 5,500 indirect and induced jobs."
ASSEMBLY FLOOR : 75-0, 8/11/14
AYES: Achadjian, Alejo, Allen, Ammiano, Bigelow, Bloom,
Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian
Calderon, Campos, Chau, Chávez, Conway, Cooley, Dababneh,
Dahle, Daly, Dickinson, Donnelly, Fong, Fox, Frazier, Beth
Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gorell, Gray,
Grove, Hagman, Hall, Harkey, Roger Hernández, Holden, Jones,
Jones-Sawyer, Levine, Linder, Logue, Lowenthal, Maienschein,
Mansoor, Medina, Melendez, Mullin, Muratsuchi, Nazarian,
Nestande, Olsen, Pan, Patterson, Perea, John A. Pérez, V.
Manuel Pérez, Quirk, Quirk-Silva, Rendon, Ridley-Thomas,
Rodriguez, Salas, Stone, Ting, Wagner, Waldron, Weber,
Wieckowski, Wilk, Williams, Atkins
NO VOTE RECORDED: Chesbro, Eggman, Skinner, Yamada, Vacancy
AB:k 8/12/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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