BILL ANALYSIS Ó
SENATE COMMITTEE ON
BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT
Senator Jerry Hill, Chair
2015 - 2016 Regular
Bill No: AB 2901 Hearing Date: June 13,
2016
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|Author: |Committee on Jobs, Economic Development, and the |
| |Economy |
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|Version: |April 12, 2016 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant|Nicole Billington |
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Subject: Income taxation: credits: California Competes Tax
Credit Committee: GO-Biz
SUMMARY: Creates three additional disclosure requirements for the
California Competes Tax Credit Program (Program) under the
Governor's Office of Business and Economic Development (GO-Biz).
Existing law:
1)Establishes GO-Biz to serve as the lead state entity for
economic strategy and marketing of California on issues
relating to business development, private sector investment,
and economic growth. (Government Code (GC) §§ 12096 -
12098.5)
2)Requires GO-Biz to post information on its website relating to
the Program including: (Revenue and Taxation Code (RTC) §
17059.2 and § 23689)
a) The name of each taxpayer allocated a credit
pursuant to this section;
b) The estimated amount of the investment by each
taxpayer;
c) The estimated number of jobs created or retained;
AB 2901 (Committee on Jobs, Economic Development, and the
Economy) Page 2 of ?
d) The amount of the credit allocated to the taxpayer;
and
e) The amount of the credit recaptured from the
taxpayer, if applicable.
3)Requires that priority for the Program be given to
applications from taxpayers with projects or businesses
located in high unemployment or high poverty areas.
(RTC § 17059.2(c)(1) and § 23689(c)(1))
4)Requires that at least 25 percent of the Program's tax credits
be awarded to small businesses annually. (RTC §
17059.2(g)(2)(3) and § 23689(g)(2)(3))
This bill:
1) Expands the reporting requirements of the Program to include,
on its website, the following information:
a) The primary location of the facility(s) for which the
taxpayer is applying for credits listed by city or, in the
case of unincorporated areas, by county;
b) 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
c) Information that identifies each tax credit award that
is being counted toward the requirement that, each fiscal
year, 25 percent of the aggregate amount of credits
allocated are required to be reserved for small business,
as defined.
FISCAL
EFFECT: According to the Assembly Appropriations Committee
analysis dated April 12, 2016, this measure would result in
minor and absorbable cost to GO-Biz.
AB 2901 (Committee on Jobs, Economic Development, and the
Economy) Page 3 of ?
COMMENTS:
1. Purpose. The Assembly Committee on Jobs, Economic
Development, and the Economy (JEDE) is the Author and sponsor
of this bill. According to JEDE, in March 2015, the
committee held the first in a series of reviews of GO-Biz
programs. The content of this bill was developed as part of
the JEDE Committee's research for that hearing. According to
the Author, the bill "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."
2. California Competes Tax Credit Program. The Program 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.
The California Competes Tax Credit is a competitive tax
credit that rewards companies for job creation and new
investments made in the state. This includes conducting
outreach workshops statewide to potential applicants,
assisting applicants through the application process,
analyzing applicant information, and making recommendations
to the California Competes Tax Credit Committee on potential
awardees.
AB 2901 (Committee on Jobs, Economic Development, and the
Economy) Page 4 of ?
The Program negotiates credits on an individual basis, the
value of which is determined by the California Competes Tax
Credit Committee. Each award is documented through a written
agreement between GO-Biz and the taxpayer; however, no
taxpayer may receive more than 20 percent of the total annual
allocation. Enforcement of the individual commitments is the
responsibility of the Franchise Tax Board (FTB), which is
directed to review the books and records of every non-small
business taxpayer who receives a credit. FTB has the
authority, but is not mandated, to review the books and
records of small business tax payers.
Program priority is given to taxpayers whose project or
business is located or proposed to be located in an area of
high unemployment or high poverty. High poverty areas are
those that are at or above the federal poverty rate at the
time of the tax credit award. High unemployment areas are
those that are at or above the state unemployment rate at the
time of the tax credit award.
At least 25 percent of the tax credits are required to be
awarded to small businesses on an annual basis. A small
business is defined as having net revenues of less than $5
million in the prior five tax years. The FTB is responsible
for providing GO-Biz with confirmation that a taxpayer is a
"small business." Since inception, GO-Biz has awarded 24.4
percent of the tax credits to small businesses. Relative to
the number of taxpayers receiving credits, 33.7 percent were
small businesses.
3. Prior Related Legislation. AB 29 (Pérez, Chapter 475,
Statutes of 2011) established GO-Biz within the Governor's
Office to serve as the lead entity for economic strategy and
marketing of California on issues relating to business
development, private sector investment, and economic growth.
AB 93 (Assembly Committee on Budget, Chapter 69, Statutes of
2013) instituted three new tax programs including the
California Competes Tax Credit through GO-Biz for the purpose
of attracting and retaining major employers. Additionally,
the bill resulted in the cessation of certain tax provisions
AB 2901 (Committee on Jobs, Economic Development, and the
Economy) Page 5 of ?
related Enterprise Zones and similar tax incentive areas and
ending the Small Business New Jobs Credit tax incentive
program.
SB 90 (Galgiani, Chapter 70, Statutes of 2013) made various
technical changes related to the Program.
SB 100 (Senate Committee on Budget and Finance, Chapter 360,
Statutes of 2013) was a trailer bill that, among other
things, made various technical changes related to the
Program.
SUPPORT AND OPPOSITION:
Support:
None on file as of June 7, 2016.
Opposition:
None on file as of June 7, 2016.
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