BILL ANALYSIS
AB 2640
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Date of Hearing: May 28, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 2640 (Arambula) - As Amended: May 18, 2010
Policy Committee: Revenue and
Taxation Vote: 6-3
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill repeals the personal income tax exclusion for
employer-subsidized parking and establishes an allocated income
tax credit for manufacturers' purchases of equipment and other
property subject to the sales tax. Specifically, this bill:
1)Repeals the exclusion for employer-provided subsidies for
parking at or near the job site or van-pool site.
2)Allows a personal income tax and corporation tax credit for
equipment and other qualifying property purchased by
manufacturers for use in California. Provides that the credit
is equal to the General Fund portion of the sales taxes paid
on the purchase of the property (currently equal to 6% of the
purchase price).
3)Provides that the manufacturers' credit will be capped at $100
million in 2011, with the cap adjusted for inflation in
succeeding years.
4)Provides that the credit will be allocated by the FTB on a
first-come-first-served basis. Under this system, the business
would apply for credit reservations, and those applying after
the $100 million cap is reached would be put on a waiting list
to claim the credit the following year.
5)Applies to taxable years 2011 through 2015.
FISCAL EFFECT
AB 2640
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1)According to FTB, the bill will result in a net increase in
revenues of $34 million in 2010-11, $20 million in 2011-12,
and $15 million in 2012-13.
a) The provision eliminating the exclusion for parking
would raise revenues by $55 million in 2010-11, $100
million in 2011-12, and $110 in 2012-13.
b) The provision authorizing a credit for qualify purchases
by manufacturers would reduce revenues by $21 million in
2010-11, $80 million in 2011-12, and $95 million in
2012-13. (The amounts are less than the full $100 million
allocation because not all credits that are allocated will
be used by the business.)
2)Administrative costs to FTB for allocating the manufacturers'
credit would be about $1.2 million annually.
COMMENTS
1)Rationale . According to the author, the bill is intended to
eliminate the exclusion for subsidized parking, since such an
exemption is no longer consistent with the state's broader
environmental policy goals, and use the increased revenues to
provide an incentive for businesses to invest and expand
operations in this state.
2)Background - exclusion for employer subsidized parking.
Existing federal and state laws allow an employee to exclude
from income qualified transportation fringe benefits,
including transportation in a vanpools, the value of a transit
pass, and qualified parking near the employer's business
premises or location from which the employee commutes to work
by mass transit or hired commuter vehicle. The exclusion is
limited to the fair market value of the benefits received but
may not exceed a certain amount as prescribed by federal law.
For the 2009 tax year, the maximum exclusion amount allowed
to an employee for qualified parking provided by his/her
employer was $230 per month.
3)Background - manufacturers' exemption from sales tax .
California imposes a sales and use tax on the purchase of
tangible personal property, including purchases of equipment
and supplies used in a trade or business. For a 10-year
AB 2640
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period ending December 31, 2003, California provided an
exemption from the sales tax purchases of equipment and
machinery by new manufacturers, and an income tax credit for
existing manufacturers' investment in equipment. The amount
of the income tax credit was equal to 6% of the gross receipts
or sales price on purchases of tangible personal property.
This credit is broader than the previous credit, in that it
applies to tangible property purchases other than equipment.
The current credit is also allocated on a first-come
first-served basis.
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081