BILL ANALYSIS Ó
AB 2901
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GOVERNOR'S VETO
AB
2901 (Committee on Jobs, et al.)
As Enrolled July 11, 2016
2/3 vote
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|ASSEMBLY: |76-0 |(May 19, 2016) |SENATE: |37-0 |(June 30, 2016) |
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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
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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.
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: According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
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 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.
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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. This bill 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. This bill 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. Franchise Tax Board (FTB) 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. This bill codifies
posting this information on the GO-Biz Web site.
GOVERNOR'S VETO MESSAGE:
I am returning Assembly Bill 2901 without my signature.
This bill expands the reporting requirements of the California
Competes Tax Credit Program administered by the Governor's
Office of Business and Economic Development.
As currently drafted, this bill would chapter out specific
provisions in the recently enacted general government budget
trailer bill. Therefore, I cannot sign it at this time.
Analysis Prepared by:
Toni Symonds / J., E.D., & E. / (916) 319-2090
FN:
0003757
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