BILL ANALYSIS Ó
AB 2900
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB
2900 (Committee on Jobs, Economic Development, and the Economy)
As Amended August 19, 2016
Majority vote
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|ASSEMBLY: |79-0 |(June 1, 2016) |SENATE: |39-0 |(August 24, |
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|COMMITTEE VOTE: | 9-0 |(August 29, |RECOMMENDATION: |concur |
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(J., E.D., & E.)
Original Committee Reference: J., E.D., & E.
SUMMARY: Expands the reporting requirements of the California
Competes tax Credit Program, which is administered through the
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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
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), 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,
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Economic Development, and the Economy held the first in a series
of program reviews of 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
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
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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.
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. 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 website.
Source of Tax Credit Provisions: The reporting requirements for
the California Competes Tax Credit are identical to those in AB
2901 (Jobs, Economic Development, and the Economy Committee),
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.
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Analysis Prepared by:
Toni Symonds / J., E.D., & E. / (916) 319-2090
FN:
0004986