BILL NUMBER: SB 943 CHAPTERED 08/31/99 CHAPTER 274 FILED WITH SECRETARY OF STATE AUGUST 31, 1999 APPROVED BY GOVERNOR AUGUST 30, 1999 PASSED THE SENATE AUGUST 16, 1999 PASSED THE ASSEMBLY JULY 15, 1999 AMENDED IN ASSEMBLY JULY 8, 1999 AMENDED IN SENATE MAY 25, 1999 AMENDED IN SENATE APRIL 27, 1999 INTRODUCED BY Senator Dunn FEBRUARY 25, 1999 An act to amend Section 5108 of the Revenue and Taxation Code, relating to taxation. LEGISLATIVE COUNSEL'S DIGEST SB 943, Dunn. Property taxation. Existing property tax law provides for the levy of an annual ad valorem tax on personal property, with certain exceptions, based upon the full value of that property. Existing property tax law, until January 1, 2000, permits local agencies, excluding school districts, to rebate property tax revenue received from economic revitalization manufacturing property, as defined, for a period of 5 fiscal years from the date the property was placed in service, commencing with the 1994-95 fiscal year. Economic revitalization manufacturing property is defined as tangible personal property meeting certain requirements. The Personal Income Tax Law and the Bank and Corporation Tax Law allow to qualified taxpayers a manufacturing investment credit against taxes imposed by those laws in an amount equal to 6% of the amount paid or incurred during the taxable or income year for qualified property that is placed in service in this state and, in general, includes specified types of tangible personal property used in connection with manufacturing activities. This bill would revise the definition of economic revitalization manufacturing property to also require that it is property described as "qualified property" for purposes of the manufacturing investment tax credit under the Personal Income and Bank and Corporation Tax Laws. This bill would extend the repeal date until January 1, 2003. This bill would require the Legislative Analyst to report to the Legislature, on or before January 1, 2002, with respect to these property tax rebate provisions. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 5108 of the Revenue and Taxation Code is amended to read: 5108. (a) For the 1994-95 fiscal year and each fiscal year thereafter, the governing body of a local agency shall have the authority, by a majority vote of that governing body, to rebate some or all of the property tax revenue that the local agency would receive from economic revitalization manufacturing property for a period of five fiscal years from the date the property was placed in service. For purposes of this section, a redevelopment agency shall obtain the approval, by a majority vote of the governing bodies of the city and the county in which the redevelopment agency is located, prior to having the authority to rebate some or all of that property tax revenue. (b) For purposes of this section: (1) "Economic revitalization manufacturing property" means tangible personal property that meets all of the following requirements: (A) The property is directly involved in the manufacturing process in this state, and not in a preliminary or subsequent activity, or one incidental to manufacturing. (B) Use of the property will lead to the creation of at least 10 new full-time manufacturing jobs or positions at salary levels of at least ten dollars ($10) per hour (twenty thousand dollars ($20,000) per year), and those jobs or positions will continue in existence for a continuous five-year period. (C) A majority of the governing body of the local agency makes a finding, in its sole discretion, that the property is used in conjunction with the establishment or expansion of a manufacturing project or facility within the local agency's jurisdiction, and that the property meets the requirements of subparagraphs (A) and (B). In this connection, a majority of the governing body is hereby authorized, but not required, to make the finding specified herein, and thereby authorize the rebate provided pursuant to this section. (D) The property is "qualified property" for purposes of the manufacturing investment credit under subdivision (d) of Sections 17053.49 and 23649. (2) "Manufacturing process" means the activity of converting or conditioning property by changing the form, composition, quality, or character of the property for ultimate sale at retail or use in the manufacturing of a product to be ultimately sold at retail. (3) "Ten or more new employees" means a net increase by 10 or more of the total number of employees, as defined in Section 621 of the Unemployment Insurance Code, employed by the taxpayer in this state. The increase in the total number of employees employed in this state shall be determined by subtracting the total number of employees the taxpayer employed in the previous fiscal year from the total number of employees the taxpayer employed in the current fiscal year. The total number of employees employed in this state shall equal the sum of both of the following: (A) The total number of hours worked by employees in this state for the taxpayer who are paid an hourly wage divided by the applicable hours per workyear. (B) The total number of months worked by salaried employees in this state for the taxpayer divided by the applicable months per workyear. (4) "Applicable workyear" means with respect to a worker paid an hourly wage, 2,000 paid hours and, with respect to a salaried employee, a total of 12 paid months. The applicable workyear, in the case of a manufacturing project or facility that becomes operational during the year, shall be the amounts in the foregoing sentence multiplied by a fraction, the numerator of which is the number of months of the year that the project or facility was operational and the denominator of which is 12. An employee shall be deemed to be employed at a manufacturing project or facility if he or she utilizes the project or facility as his or her principal place of business. (5) "Local agency" means a city, county, city and county, redevelopment agency, or special district, excluding any school district. (c) If at any time within five years after granting a rebate pursuant to this section, the governing body finds that the recipient taxpayer has not complied with the conditions of paragraph (1) of subdivision (b), the governing body may recapture from that taxpayer all or any portion of the amount rebated. (d) This section shall apply only to property that is placed in service on or after January 1, 1994. (e) (1) On or before January 1, 2002, the Legislative Analyst shall prepare a report for the Legislature, which shall include, but not be limited to, the following information with respect to this section: (A) A list of local agencies that have utilized the tax rebate provisions. (B) The dollars expended by each agency utilizing the tax rebate provisions. (C) The number of jobs created by each of the local agencies utilizing the tax rebate provisions. (D) A reasoned estimate of the number of jobs created that, but for these provisions, would have been located outside the state. (E) A reasoned estimate of the number of jobs that, but for these provisions, would have been located in another jurisdiction within the state. (2) By granting this tax rebate, the granting agency agrees to cooperate fully with the Legislative Analyst. (3) Beginning in 2000, each participating agency shall provide the Legislative Analyst annually with a complete set of data for the program, including all of the information required in paragraph (1). (4) The final report by the Legislative Analyst, provided pursuant to paragraph (1), shall include an analysis of the cost per job of jobs created pursuant to this section, a comparison of this program to other economic development tools, and a recommendation as to whether this program should be continued in its present form, restructured, or eliminated. (f) A local agency may enter into an agreement with a taxpayer to implement this section and the agreement shall be valid notwithstanding the subsequent repeal of this section. (g) Nothing in this section shall be deemed to eliminate or reduce the obligation of a redevelopment agency to comply with Section 33334.2, 33334.6, 33607.5, or 33607.7 of the Health and Safety Code. (h) This section shall remain in effect only until January 1, 2003, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2003, deletes or extends that date.