BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 2900


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          CONCURRENCE IN SENATE AMENDMENTS


          AB  
          2900 (Committee on Jobs, et al.)


          As Amended  August 19, 2016


          Majority vote


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          Original Committee Reference:  J., E.D., & E.


          SUMMARY:  Expands the reporting requirements of the California  
          Competes tax Credit Program, which is administered through the  
          Governor's Office of Business and Economic Development, to  
          include the following information:


          1)The primary location of the facility(s) for which the taxpayer  
            is applying for credits.  The primary location shall be listed  
            by city or, in the case of unincorporated areas, by county;


          2)Information that identifies each tax credit award that was  
            given a priority for being located in a high unemployment or  
            poverty area, as specified; and


          Information that identifies each tax credit award that is being  
          counted toward the requirement that each fiscal year, 25% of the  








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          aggregate amount of credits allocated are required to be  
          reserved for small business, as defined.


          The Senate amendments remove the provisions relating to state  
          contracts and add reporting requirements to the California  
          Competes Tax Credit Program.  These provisions are substantially  
          similar to AB 2901 (Jobs, Economic Development and the Economy  
          Committee) of the current legislative session, which was vetoed  
          by the Governor for technical reasons.  This bill contains the  
          technical corrections to address the Governor's concerns.


          EXISTING LAW establishes the California Competes Tax Credit for  
          the purpose of awarding $780 million in individually negotiated  
          tax credits to businesses that operate in California.  Tax  
          credits are authorized to be awarded beginning in tax year 2014  
          through 2017.


          FISCAL EFFECT:  The current language in the bill was contained  
          in AB 2901, which passed through Senate Appropriations pursuant  
          to 28.8.


          COMMENTS:  In March 2015, the Assembly Committee on Jobs,  
          Economic Development, and the Economy (JEDE) held the first in a  
          series of program reviews of the Governor's Office of Business  
          and Economic Development (GO-Biz) programs.  A second hearing is  
          planned in the future to hear about the California Competes Tax  
          Credit program.  The content of this bill was developed as part  
          of the JEDE Committee's research for that hearing.  This measure  
          codifies the reporting of key elements of the tax credit  
          program, including the identification of business or project  
          location, credits awarded to small businesses, and credit awards  
          that received priority consideration.


          Each of these new reporting requirements represents a key  
          element of the tax credit program and is essential to providing  
          appropriate oversight and program transparency.  These elements  
          include information to identify:  areas that are not currently  








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          being served; whether the requirements of the small business set  
          aside are being met; and which areas of the state are benefiting  
          from the priority application requirements for high unemployment  
          and high poverty.  The policy committee analysis includes  
          further background on the California Competes Tax Credit  
          Program.  


          Background on Creation of the Program:  The California Competes  
          Tax Credit was established in 2013.  It was part of a package of  
          bills that eliminated the California Enterprise Zones Program  
          and its related tax credits, including the New Hire Credit and  
          the Sales and Use Tax Credit, among others.  The approximately  
          $750 million in tax incentives associated with those defunct  
          programs was redirected to the California Competes Tax Credit, a  
          more limited New Hire Credit, and a broader Sales and Use  
          Tax-based incentive.  Since inception, $303 million tax credits  
          have been awarded to businesses who committed to investing $10  
          billion in California and adding 51,721 net new jobs.


          Public Reporting:  Statute requires GO-Biz to post information  
          on its Internet Web site relating to each tax credit award,  
          including the taxpayer's name, estimated amount of each  
          taxpayer's investment, estimated number of jobs created or  
          retained, the amount of the credit allocated to the taxpayer,  
          and the amount of any recaptured credit.  When meeting this  
          statutory requirement, GO-Biz has chosen to also include the  
          city and industry sector.  AB 2901 codifies the practice of  
          reporting on the general geographic location of a credit award.


          Poverty Alleviation:  The only statutory priority for the  
          California Competes Tax Credit Programs is for applications  
          which come from taxpayers with projects or businesses located in  
          areas of high unemployment or poverty.  GO-Biz defines high  
          poverty as the taxpayer location being in an area with an income  
          level at or above the federal poverty rate or at or above the  
          state unemployment rate.  GO-Biz does not currently report on  
          these projects.  Given the significance of the priority, it is  
          important that the public and the Legislature have access to  
          this information.  AB 2901 requires reporting on this priority. 








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          Small Business Mandate:  At least 25% of the tax credits are  
          required to be reserved for small businesses on an annual basis.  
           A small business is defined as having gross receipts (less  
          returns and allowances) of greater than $0 but less than $2  
          million in the prior tax year.  The Franchise Tax Board is  
          responsible for providing GO-Biz with the information as to  
          whether a taxpayer qualifies as a "small business."  Since  
          inception, GO-Biz has awarded 22.0% of the tax credits to small  
          businesses.  Relative to the number of taxpayers receiving  
          credits, 35.2% were small businesses.  AB 2901 codifies posting  
          this information on the GO-Biz Web site.  


          Source of Tax Credit Provisions:  The reporting requirements for  
          the California Competes Tax Credit are identical to those in AB  
          2901, which was vetoed by the Governor in July 2016 due to  
          technical issue.  The issue has been corrected and the  
          provisions are being returned to the Governor for his further  
          consideration.  AB 2901 passed both Houses of the Legislature  
          without receiving any "no" votes.  Its fiscal impact was  
          determined to be not significant and AB 2901 moved from the  
          Senate Appropriations Committee to the Senate Floor pursuant to  
          Senate Rule 28.8. 


          Analysis Prepared by:                                             
                          Toni Symonds / J., E.D., & E. / (916) 319-2090    
                                                                    FN:  
          0004811



















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