BILL NUMBER: AB 2506 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MARCH 29, 2012
INTRODUCED BY Assembly Member V. Manuel Pérez
(Coauthors: Assembly Members Fuentes, Galgiani, Logue, and
Nestande)
(Coauthors: Senators Calderon, Strickland, and Vargas)
FEBRUARY 24, 2012
An act to amend Section 11346.1 of, and to add
Article 5.5 (commencing with Section 11348.5) to Chapter 3.5 of Part
1 of Division 3 of Title 2 of , and to add Part 4.8
(commencing with Section 13999.7) to , Division 3
of Title 2 of, the Government Code, and to amend Sections 17052.12
and 23609 of, and to add Sections 6377, 17053.87, and 23687 to, the
Revenue and Taxation Code, relating to state government.
LEGISLATIVE COUNSEL'S DIGEST
AB 2506, as amended, V. Manuel Pérez. State government.
(1) The Administrative Procedure Act governs the procedure for the
adoption, amendment, or repeal of regulations by state agencies and
for the review of those regulatory actions by the Office of
Administrative Law.
This bill would also require state agencies to submit these
regulatory actions to the Joint Rules Committee of the
Legislature, which would be authorized to submit a regulatory action
to the appropriate policy committee in each house for review. The
bill would authorize the policy committee to either make
recommendations to the agency or to send the action to the floor of
either house, which could reject the regulatory action by a
majority vote resolution , as specified.
(2) Existing law provides for the establishment of the California
Travel and Tourism Commission as a nonprofit mutual benefit
corporation, as specified.
This bill would provide for the establishment of 6 regional
innovation and job creation boards as nonprofit mutual benefit
corporations, to perform certain functions, and would require the
Lieutenant Governor to appoint 12 members to each board, as
specified. The bill would require that the staff of each board be
employees solely of the commission.
(3) The Sales and Use Tax Law imposes a tax on retailers measured
by the gross receipts from the sale of tangible personal property
sold at retail in this state, or on the storage, use, or other
consumption in this state of tangible personal property purchased
from a retailer for storage, use, or other consumption in this state.
That law provides various exemptions from those taxes.
On and after January 1, 2013, this bill would exempt from those
taxes the sale of, and the storage, use, or other consumption in this
state of, tangible personal property, as defined, purchased for use
by a qualified person, as defined, primarily in any stage of
manufacturing, processing, refining, fabricating, or recycling of
tangible personal property, as specified.
(4) The Personal Income Tax Law and the Corporation Tax Law
authorize allow various credits against
the taxes imposed by those laws, including a credit for certain
research and development expenses, as provided.
This bill would, for taxable years commencing on and after January
1, 2013, increase the credit for research and development expenses,
as provided, and would require taxpayers utilizing these credits on
or after that date to report specified information to the Franchise
Tax Board.
This bill would, for taxable years beginning on or after January
1, 2013, authorize allow a credit
against those taxes for a qualified taxpayer, as defined, of 40% of
the amount of a qualified contract price that is paid to the
qualified taxpayer contribution, as defined, made
in that taxable year for a contract between
by a business entity and to
a postsecondary educational institution for the business
entity to provide curriculum or research leading to job
opportunities in the private sector, or consultation services
associated with the establishment of curriculum or research leading
to job opportunities in the private sector, where the business entity
and the postsecondary educational institution agree that there is a
substantial potential for the future employment of students as a
result of the contract contribution .
(5) This bill would provide that the provisions of this bill are
severable.
(6) Counties and cities are authorized to impose local
sales and use taxes in conformity with state sales and use taxes.
Exemptions from state sales and use taxes enacted by the Legislature
are incorporated into the local taxes. The
Bradley-Burns Uniform Local Sales and Use Tax Law authorizes counties
and cities to impose local sales and use taxes in conformity with
the Sales and Use Tax Law, and existing law authorizes districts, as
specified, to impose transactions and use taxes in accordance with
the Transactions and Use Tax Law, which conforms to the Sales and Use
Tax Law. Exemptions from state sales and use taxes are incorporated
into these laws.
Section 2230 of the Revenue and Taxation Code provides that the
state will reimburse counties and cities for revenue losses caused by
the enactment of sales and use tax exemptions.
This bill would provide that, notwithstanding Section 2230 of the
Revenue and Taxation Code, no appropriation is made and the state
shall not reimburse local agencies for sales and use tax revenues
lost by them pursuant to this bill.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. This act shall be known, and may be
cited, as the California Innovation and Jobs Act.
SECTION 1. SEC. 2. The Legislature
hereby finds and declares:
(a) California, in the last 10 years has declined from the sixth
largest economy in the world to the ninth, now behind Brazil. During
that time, manufacturing declined in California from 1.865 million
jobs to 1.257 million jobs.
(b) California has experienced continual budget deficits beginning
with the "dot com" bust which occurred in 2000, and has never fully
recovered. Every year, the Legislature has had to grapple with too
few revenues to meet a continuing demand for public services.
(c) The solution to California's decline in its economic status,
and thus, lack of revenues, is not simply to cut the budget and raise
taxes. Instead, it lies in developing a long-term economic plan for
the state that envisions state government becoming a better working
partner to attract private sector capital to spur economic
development and job growth.
(d) California needs to compete globally. It needs to expand its
leadership as an exporter of goods. California needs to recognize its
biggest asset in combating a fatigued economy is its innovative
human capital; it needs to recognize that the private sector, through
the "Innovation Economy" must be incentivized to reach new heights
and growth potential. State and local government needs
need to be the Innovation Economy's partner and
not a roadblock to success.
(e) California is uniquely positioned to unleash its full economic
potential. We see on a daily basis the convergence of innovative
technologies being integrated into our daily lives that most
Californian's Californians take for granted,
because they these technologies were
invented and developed in California: new advancements in
biopharmaceuticals that improve people's lives on a daily basis,
advancements in smart phone technology, and Internet Web sites that
allow Californians to be connected to the world have predominately
been developed in California.
(f) California needs to invest in the Innovation Economy by
eliminating roadblocks in state law and regulation and developing a
tax system that rewards capital expenditures in order to
ensure that the private sector will invest its financial
capital in combination with the intellectual capital that California
has to offer through its education system, in particular its
universities.
SEC. 2. SEC. 3 . Section
11346.1 of the Government Code is amended to read:
11346.1. (a) (1) The adoption, amendment, or repeal of an
emergency regulation is not subject to any provision of this article
or Article 6 (commencing with Section 11349), except this section and
Sections 11348.5, 11349.5, and 11349.6.
(2) At least five working days before submitting an emergency
regulation to the office, the adopting agency shall, except as
provided in paragraph (3), send a notice of the proposed emergency
action to every person who has filed a request for notice of
regulatory action with the agency. The notice shall include both of
the following:
(A) The specific language proposed to be adopted.
(B) The finding of emergency required by subdivision (b).
(3) An agency is not required to provide notice pursuant to
paragraph (2) if the emergency situation clearly poses such an
immediate, serious harm that delaying action to allow public comment
would be inconsistent with the public interest.
(b) (1) Except as provided in subdivision (c), if a state agency
makes a finding that the adoption of a regulation or order of repeal
is necessary to address an emergency, the regulation or order of
repeal may be adopted as an emergency regulation or order of repeal.
(2) Any finding of an emergency shall include a written statement
that contains the information required by paragraphs (2) to (6),
inclusive, of subdivision (a) of Section 11346.5 and a description of
the specific facts demonstrating the existence of an emergency and
the need for immediate action, and demonstrating, by substantial
evidence, the need for the proposed regulation to effectuate the
statute being implemented, interpreted, or made specific and to
address only the demonstrated emergency. The finding of emergency
shall also identify each technical, theoretical, and empirical study,
report, or similar document, if any, upon which the agency relies.
The enactment of an urgency statute shall not, in and of itself,
constitute a need for immediate action.
A finding of emergency based only upon expediency, convenience,
best interest, general public need, or speculation, shall not be
adequate to demonstrate the existence of an emergency. If the
situation identified in the finding of emergency existed and was
known by the agency adopting the emergency regulation in sufficient
time to have been addressed through nonemergency regulations adopted
in accordance with the provisions of Article 5 (commencing with
Section 11346), the finding of emergency shall include facts
explaining the failure to address the situation through nonemergency
regulations.
(3) The statement and the regulation or order of repeal shall be
filed immediately with the office.
(c) Notwithstanding any other provision of law, no emergency
regulation that is a building standard shall be filed, nor shall the
building standard be effective, unless the building standard is
submitted to the California Building Standards Commission, and is
approved and filed pursuant to Sections 18937 and 18938 of the Health
and Safety Code.
(d) The emergency regulation or order of repeal shall become
effective upon filing or upon any later date specified by the state
agency in a written instrument filed with, or as a part of, the
regulation or order of repeal.
(e) No regulation, amendment, or order of repeal initially adopted
as an emergency regulatory action shall remain in effect more than
180 days unless the adopting agency has complied with Sections
11346.2 to 11347.3, inclusive, either before adopting an emergency
regulation or within the 180-day period. The adopting agency, prior
to the expiration of the 180-day period, shall transmit to the office
for filing with the Secretary of State the adopted regulation,
amendment, or order of repeal, the rulemaking file, and a
certification that Sections 11346.2 to 11347.3, inclusive, were
complied with either before the emergency regulation was adopted or
within the 180-day period.
(f) If an emergency amendment or order of repeal is filed and the
adopting agency fails to comply with subdivision (e), the regulation
as it existed prior to the emergency amendment or order of repeal
shall thereupon become effective and after notice to the adopting
agency by the office shall be reprinted in the California Code of
Regulations.
(g) If a regulation is originally adopted and filed as an
emergency and the adopting agency fails to comply with subdivision
(e), this failure shall constitute a repeal of the regulation and
after notice to the adopting agency by the office, shall be deleted.
(h) The office may approve not more than two readoptions, each for
a period not to exceed 90 days, of an emergency regulation that is
the same as or substantially equivalent to an emergency regulation
previously adopted by that agency. Readoption shall be permitted only
if the agency has made substantial progress and proceeded with
diligence to comply with subdivision (e).
SEC. 3. SEC. 4. Article 5.5
(commencing with Section 11348.5) is added to Chapter 3.5 of Part 1
of Division 3 of Title 2 of the Government Code, to read:
Article 5.5. Legislative Review of Proposed Regulations
11348.5. (a) (1) Every state agency subject to Section 11346.9
shall submit the information described in Section 11346.9 to the
Joint Rules Committee of the Legislature 60 days prior to
submitting that information to the office pursuant to Section
11346.9.
(2) Every state agency required to submit a statement and
regulation or order of repeal to the office pursuant to paragraph (3)
of subdivision (b) of Section 11346.1 shall concurrently submit the
statement and regulation or order of repeal to the Joint Rules
Committee of the Legislature.
(b) The Joint Rules Committee of the Legislature may
refer information submitted pursuant to subdivision (a) to the
appropriate policy committee in each house of the Legislature, which
may review the information and take any of the following actions:
(1) Make recommendations regarding the regulatory action to the
agency. In the event that recommendations are made, they shall not be
binding and shall not preclude the operation of any other provision
of this chapter.
(2) Refer the regulatory action to the floor of either house,
which may reject the regulatory action by a resolution of that
house, a majority vote of the house
concurring . If the regulatory action is rejected pursuant to
this paragraph, it shall be returned to the agency, and may be
rewritten and resubmitted within 120 days of the rejection. If the
regulatory action is not rejected pursuant to this paragraph, it
shall not be deemed approved and it shall not preclude the
application of any other provision of this chapter.
(3) Take no action regarding the regulatory action.
SEC. 4. SEC. 5. Part 4.8 (commencing
with Section 13999.7) is added to Division 3 of Title 2 of the
Government Code, to read:
PART 4.8. Innovation and Job Creation Boards
13999.7. The following innovation and job creation boards are
hereby established as nonprofit mutual benefit corporations, and may
apply for tax exempt status under Section 501(c)(3) of the Internal
Revenue Code, if otherwise eligible:
(a) The San Diego County Innovation and Job Creation Board.
(b) The Orange County Innovation and Job Creation Board.
(c) The Los Angeles County Innovation and Job Creation
Board.
(d) The Silicon Valley (Santa Clara County) Innovation and Job
Creation Board.
(e) The Bay and South Bay Area (San Francisco, Alameda, Contra
Costa, and San Mateo Counties) Innovation and Job Creation Board.
(f) The Central Valley (Stanislaus, Fresno, and Merced Counties)
Innovation and Job Creation Board.
13999.71. The Lieutenant Governor shall appoint the members of
each board, which shall consist of the following:
(a) One startup entrepreneur representative.
(b) One representative of a mature industry.
(c) One biopharmaceutical or pharmaceutical industry
representative.
(d) One entertainment industry representative.
(e) One venture capital representative.
(f) One technology industry representative.
(g) One representative of a business incubator.
(h) One local government elected official.
(i) One small business representative.
(j) One transportation industry representative.
(k) One energy industry representative.
(l) One organized labor representative.
13999.72. Each board shall be a separate, independent California
nonprofit mutual benefit corporation. The staff of each board shall
be employees solely of the commission, and the procedures adopted by
each board shall not be subject to the Administrative Procedure Act
(Chapter 3.5 (commencing with Section 11340) of Part 1).
13999.73. The State of California and any of its officers,
agents, or employees shall not be liable in any manner for any act or
omission of the boards or of their directors, officers, agents, or
employees.
13999.74. The boards are created to perform the following
functions:
(a) Provide a local forum in which to exchange ideas regarding the
improvement of innovation, technology, and economic job growth in
their designated geographic areas.
(b) Provide ideas in the form of proposed legislation and local
ordinances that will improve job growth and development in their
designated areas.
(c) Assist in collecting data concerning economic growth and
development in their designated areas.
SEC. 5. SEC. 6. Section 6377 is added
to the Revenue and Taxation Code, to read:
6377. (a) (1) On and after January 1, 2013, there are exempted
from the taxes imposed by this part the gross receipts from the sale
of, and the storage, use, or other consumption in this state of
tangible personal property purchased for use by a qualified person to
be used primarily in any stage of the manufacturing, processing,
refining, fabricating, or recycling of tangible personal property,
beginning at the point any raw materials are received by the
qualified person and introduced into the process and ending at the
point at which the manufacturing, processing, refining, fabricating,
or recycling has altered property to its completed form, including
packaging, if required.
(2) The exemption established by this section shall not apply to
the gross receipts from the sale of, or the storage, use, or other
consumption of, any of the following:
(A) Tangible personal property that is used primarily in
administration, general management, or marketing.
(B) Consumables with a useful life of less than one year.
(C) Furniture or inventory or equipment used in the extraction
process, or equipment used to store finished products that have
completed the manufacturing process.
(b) For purposes of this section:
(1) "Fabricating" means to make, build, create, produce, or
assemble components or property to work in a new or different manner.
(2) "Manufacturing" means the activity of converting or
conditioning tangible personal property by changing the form,
composition, quality, or character of the tangible personal property
for ultimate sale at retail or use in the manufacturing of a product
to be ultimately sold at retail. Manufacturing includes any
improvements to tangible personal property that result in a greater
service life or greater functionality than that of the original
tangible personal property. Manufacturing includes the generation of
electricity.
(3) "Primarily" means 50 percent or more of the time. For purposes
of subdivision (a), "primarily" means tangible personal property
used 50 percent or more of the time in an activity described in
subdivision (a).
(4) "Process" means the period beginning at the point at which any
raw materials are received by the qualified person and introduced
into the manufacturing, processing, refining, fabricating, or
recycling activity of the qualified person and ending at the point at
which the manufacturing, processing, refining, fabricating, or
recycling activity of the qualified person has altered tangible
personal property to its completed form, including packaging, if
required. Raw materials shall be considered to have been introduced
into the process when the raw materials are stored on the same
premises where the qualified person's manufacturing, processing,
refining, fabricating, or recycling activity is conducted. Raw
materials that are stored on premises other than where the qualified
person's manufacturing, processing, refining, fabricating, or
recycling activity is conducted, shall not be considered to have been
introduced into the manufacturing, processing, refining,
fabricating, or recycling process.
(5) "Processing" means the physical application of the materials
and labor necessary to modify or change the characteristics of
tangible personal property.
(6) "Qualified person" means either of the following:
(A) A person that is primarily engaged in those lines of business
classified in Industry Groups 3111 to 3399, inclusive, Industry Group
5112, NAICS Industry 221119, or NAICS Industry 541711 of the North
American Industry Classification System (NAICS) published by the
United States Office of Management and Budget (OMB), 2007 edition.
(B) An affiliate of a person described in subparagraph (A)
provided that the affiliate is a member of the qualified person's
unitary group for which a combined report is required to be filed
under Article 1 (commencing with Section 25101) of Chapter 17 of Part
11.
(7) "Refining" means the process of converting a natural resource
to an intermediate or finished product.
(8) "Tangible personal property" includes, but is not limited to,
all of the following:
(A) Machinery and equipment, including component parts and
contrivances such as belts, shafts, moving parts, and operating
structures.
(B) All equipment or devices used or required to operate, control,
regulate, or maintain the machinery, including, without limitation,
computers, data processing equipment, and computer software, together
with all repair and replacement parts with a useful life of one or
more years therefor, whether purchased separately or in conjunction
with a complete machine and regardless of whether the machine or
component parts are assembled by the qualified person or another
person.
(C) Tangible personal property used in pollution control that
meets or exceeds standards established by this state or any local or
regional governmental agency within this state.
(D) Special purpose buildings and foundations used as an integral
part of the manufacturing, processing, refining, or fabricating
process, or that constitute a research or storage facility used
during the manufacturing process. Buildings used solely for
warehousing purposes after completion of the manufacturing process
are not included.
(E) Tangible personal property used in recycling.
(c) An exemption shall not be allowed under this section unless
the purchaser furnishes the retailer with an exemption certificate,
completed in accordance with any instructions or regulations as the
board may prescribe, and the retailer retains the exemption
certificate in its records. The exemption certificate shall contain
the sales price of the tangible personal property, the sale of, or
the storage, use, or other consumption of which is exempt pursuant to
subdivision (a) and shall be furnished to the board upon request.
(d) Notwithstanding subdivision (a), the exemption provided by
this section shall not apply to any sale or use of tangible personal
property which, within one year from the date of purchase, is either
removed from California or converted from an exempt use under
subdivision (a) to some other use not qualifying for the exemption or
used in a manner not qualifying for exemption.
(e) If a purchaser certifies in writing to the seller that the
tangible personal property purchased without payment of the tax will
be used in a manner entitling the seller to regard the gross receipts
from the sale as exempt from the sales tax pursuant to this section,
and within one year from the date of purchase, the purchaser (1)
removes that tangible personal property outside California, (2)
converts that tangible personal property for use in a manner not
qualifying for the exemption, or (3) uses that tangible personal
property in a manner not qualifying for the exemption, the purchaser
shall be liable for payment of sales tax, with applicable interest,
as if the purchaser were a retailer making a retail sale of the
tangible personal property at the time the tangible personal property
is so removed, converted, or used, and the sales price of the
tangible personal property to the purchaser shall be deemed the gross
receipts from that retail sale.
(f) The exemption established by this section shall apply to a
lease of tangible personal property classified as a "continuing sale"
or "continuing purchase" in accordance with Section 6006.1 or
6010.1, and to the rentals payable pursuant to such a lease, provided
the lessee is a qualified person and the tangible personal property
is used in an activity described in subdivision (a).
(g) At the time necessary information technologies and electronic
data warehousing capabilities of the board are sufficiently
established, the board shall determine an efficient means by which
qualified persons may electronically apply for, and receive, an
exemption certificate that contains information that would assist
them in complying with this part with respect to the exemption
established by this section.
SEC. 6. SEC. 7. Section 17052.12 of
the Revenue and Taxation Code is amended to read:
17052.12. For each taxable year beginning on or after January 1,
1987, there shall be allowed as a credit against the "net tax" (as
defined by Section 17039) for the taxable year an amount determined
in accordance with Section 41 of the Internal Revenue Code, except as
follows:
(a) For each taxable year beginning before January 1, 1997, the
reference to "20 percent" in Section 41(a)(1) of the Internal Revenue
Code is modified to read "8 percent."
(b) (1) For each taxable year beginning on or after January 1,
1997, and before January 1, 1999, the reference to "20 percent" in
Section 41(a)(1) of the Internal Revenue Code is modified to read "11
percent."
(2) For each taxable year beginning on or after January 1, 1999,
and before January 1, 2000, the reference to "20 percent" in Section
41(a)(1) of the Internal Revenue Code is modified to read "12
percent."
(3) For each taxable year beginning on or after January 1, 2000,
the reference to "20 percent" in Section 41(a)(1) of the Internal
Revenue Code is modified to read "15 percent."
(4) For each taxable year beginning on or after January 1, 2013,
and before January 1, 2014, the reference to "20 percent" in Section
41(a)(1) of the Internal Revenue Code shall not be modified.
(5) For each taxable year beginning on or after January 1, 2014,
and before January 1, 2015, the reference to "20 percent" in Section
41(a)(1) of the Internal Revenue Code is modified to read "25
percent."
(6) For each taxable year beginning on or after January 1, 2015,
and before January 1, 2016, the reference to "20 percent" in Section
41(a)(1) of the Internal Revenue Code is modified to read "30
percent."
(7) For each taxable year beginning on or after January 1, 2016,
and before January 1, 2017, the reference to "20 percent" in Section
41(a)(1) of the Internal Revenue Code is modified to read "35
percent."
(8) For each taxable year beginning on or after January 1, 2017,
the reference to "20 percent" in Section 41(a)(1) of the Internal
Revenue Code is modified to read "40 percent."
(c) Section 41(a)(2) of the Internal Revenue Code shall not apply.
(d) "Qualified research" shall include only research conducted in
California.
(e) In the case where the credit allowed under this section
exceeds the "net tax," the excess may be carried over to reduce the
"net tax" in the following year, and succeeding years if necessary,
until the credit has been exhausted.
(f) (1) With respect to any expense paid or incurred after the
operative date of Section 6378, Section 41(b)(1) of the Internal
Revenue Code is modified to exclude from the definition of "qualified
research expense" any amount paid or incurred for tangible personal
property that is eligible for the exemption from sales or use tax
provided by Section 6378.
(2) For each taxable year beginning on or after January 1, 1998,
the reference to "Section 501(a)" in Section 41(b)(3)(C) of the
Internal Revenue Code, relating to contract research expenses, is
modified to read "this part or Part 11 (commencing with Section
23001)."
(g) (1) For each taxable year beginning on or after January 1,
2000:
(A) The reference to "3 percent" in Section 41(c)(4)(A)(i) of the
Internal Revenue Code is modified to read "one and forty-nine
hundredths of one percent."
(B) The reference to "4 percent" in Section 41(c)(4)(A)(ii) of the
Internal Revenue Code is modified to read "one and ninety-eight
hundredths of one percent."
(C) The reference to "5 percent" in Section 41(c)(4)(A)(iii) of
the Internal Revenue Code is modified to read "two and forty-eight
hundredths of one percent."
(2) Section 41(c)(4)(B) shall not apply and in lieu thereof an
election under Section 41(c)(4)(A) of the Internal Revenue Code may
be made for any taxable year of the taxpayer beginning on or after
January 1, 1998. That election shall apply to the taxable year for
which made and all succeeding taxable years unless revoked with the
consent of the Franchise Tax Board.
(3) Section 41(c)(7) of the Internal Revenue Code, relating to
gross receipts, is modified to take into account only those gross
receipts from the sale of property held primarily for sale to
customers in the ordinary course of the taxpayer's trade or business
that is delivered or shipped to a purchaser within this state,
regardless of f.o.b. point or any other condition of the sale.
(4) Section 41(c)(5) of the Internal Revenue Code, relating to
election of alternative simplified credit, shall not apply.
(h) Section 41(h) of the Internal Revenue Code, relating to
termination, shall not apply.
(i) Section 41(g) of the Internal Revenue Code, relating to
special rule for passthrough of credit, is modified by each of the
following:
(1) The last sentence shall not apply.
(2) If the amount determined under Section 41(a) of the Internal
Revenue Code for any taxable year exceeds the limitation of Section
41(g) of the Internal Revenue Code, that amount may be carried over
to other taxable years under the rules of subdivision (e); except
that the limitation of Section 41(g) of the Internal Revenue Code
shall be taken into account in each subsequent taxable year.
(j) Section 41(a)(3) of the Internal Revenue Code shall not apply.
(k) Section 41(b)(3)(D) of the Internal Revenue Code, relating to
amounts paid to eligible small businesses, universities, and federal
laboratories, shall not apply.
(l) Section 41(f)(6), relating to energy research consortium,
shall not apply.
(m) For taxable years commencing on and after January 1, 2013, a
taxpayer utilizing a credit pursuant to this section shall report to
the Franchise Tax Board, in a separate line item, the following
information:
(1) Total research and development expenditures made in the tax
year subject to the credit and the total research and development
expenditures not subject to the credit.
(2) For the total research and development expenditures subject to
the credit, a breakdown of the total amount of the credit
attributable to each of the following:
(A) Gross wages.
(B) Capital expenditures.
(C) Outside consultants and services.
SEC. 7. SEC. 8. Section 17053.87 is
added to the Revenue and Taxation Code, to read:
17053.87. (a) For each taxable year beginning on or after January
1, 2013, there shall be allowed to a qualified taxpayer as a credit
against the "net tax," as defined in Section 17039, an amount equal
to 40 percent of the amount of a qualified contract price
that is paid to the
contribution that is made by a qualified
taxpayer in that taxable year.
(b) For purposes of this section, the following terms have the
following meanings:
(1) "Qualified contract" contribution
" means a contract between
monetary contribution by a business entity and
to a postsecondary educational institution for
the business entity to provide curriculum or
research leading to job opportunities in the private sector, or
consultation services associated with the establishment of curriculum
or research leading to job opportunities in the private sector,
where the business entity and the postsecondary educational
institution agree that there is a substantial potential for the
future employment of students as a result of the contract
contribution .
(2) "Qualified taxpayer" means a business entity that
enters into a contract or memorandum of understanding with
makes a qualified contribution to a postsecondary
educational institution to provide curriculum or research
leading to job opportunities in the private sector, or consultation
services associated with the establishment of curriculum or research
leading to job opportunities in the private sector .
(c) In the case where the credit allowed by this section exceeds
the "net tax," the excess may be carried over to reduce the "net tax"
in the following taxable year, and succeeding taxable years if
necessary, until the credit is exhausted.
(d) (1) The Franchise Tax Board may prescribe rules, guidelines,
or procedures necessary or appropriate to carry out the purposes of
this section.
(2) Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code does not apply to any
standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the Franchise Tax Board pursuant
to this section.
SEC. 8. SEC. 9. Section 23609 of the
Revenue and Taxation Code is amended to read:
23609. For each taxable year beginning on or after January 1,
1987, there shall be allowed as a credit against the "tax" (as
defined by Section 23036) an amount determined in accordance with
Section 41 of the Internal Revenue Code, except as follows:
(a) For each taxable year beginning before January 1, 1997, both
of the following modifications shall apply:
(1) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code is modified to read "8 percent."
(2) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "12 percent."
(b) (1) For each taxable year beginning on or after January 1,
1997, and before January 1, 1999, both of the following modifications
shall apply:
(A) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code is modified to read "11 percent."
(B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "24 percent."
(2) For each taxable year beginning on or after January 1, 1999,
and before January 1, 2000, both of the following shall apply:
(A) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code is modified to read "12 percent."
(B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "24 percent."
(3) For each taxable year beginning on or after January 1, 2000,
both of the following shall apply:
(A) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code is modified to read "15 percent."
(B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "24 percent."
(4) For each taxable year beginning on or after January 1, 2013,
and before January 1, 2014, both of the following shall apply:
(A) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code shall not be modified.
(B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "29 percent."
(5) For each taxable year beginning on or after January 1, 2014,
and before January 1, 2015, both of the following shall apply:
(A) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code is modified to read "25 percent."
(B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "34 percent."
(6) For each taxable year beginning on or after January 1, 2015,
and before January 1, 2016, both of the following shall apply:
(A) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code is modified to read "30 percent."
(B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "39 percent."
(7) For each taxable year beginning on or after January 1, 2016,
and before January 1, 2017, both of the following shall apply:
(A) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code is modified to read "35 percent."
(B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "44
"40 percent."
(8) For each taxable year beginning on or after January 1, 2017,
both of the following shall apply:
(A) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code is modified to read "40 percent."
(B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "49
"40 percent."
(c) (1) With respect to any expense paid or incurred after the
operative date of Section 6378, Section 41(b)(1) of the Internal
Revenue Code is modified to exclude from the definition of "qualified
research expense" any amount paid or incurred for tangible personal
property that is eligible for the exemption from sales or use tax
provided by Section 6378.
(2) "Qualified research" and "basic research" shall include only
research conducted in California.
(d) The provisions of Section 41(e)(7)(A) of the Internal Revenue
Code , shall be modified so that "basic research,"
for purposes of this section, includes any basic or applied research
including scientific inquiry or original investigation for the
advancement of scientific or engineering knowledge or the improved
effectiveness of commercial products, except that the term does not
include any of the following:
(1) Basic research conducted outside California.
(2) Basic research in the social sciences, arts, or humanities.
(3) Basic research for the purpose of improving a commercial
product if the improvements relate to style, taste, cosmetic, or
seasonal design factors.
(4) Any expenditure paid or incurred for the purpose of
ascertaining the existence, location, extent, or quality of any
deposit of ore or other mineral (including oil and gas).
(e) (1) In the case of a taxpayer engaged in any biopharmaceutical
research activities that are described in codes 2833 to 2836,
inclusive, or any research activities that are described in codes
3826, 3829, or 3841 to 3845, inclusive, of the Standard Industrial
Classification (SIC) Manual published by the United States Office of
Management and Budget, 1987 edition, or any other biotechnology
research and development activities, the provisions of Section 41(e)
(6) of the Internal Revenue Code shall be modified to include both of
the following:
(A) A qualified organization as described in Section 170(b)(1)(A)
(iii) of the Internal Revenue Code and owned by an institution of
higher education as described in Section 3304(f) of the Internal
Revenue Code.
(B) A charitable research hospital owned by an organization that
is described in Section 501(c)(3) of the Internal Revenue Code, is
exempt from taxation under Section 501(a) of the Internal Revenue
Code, is not a private foundation, is designated a "specialized
laboratory cancer center," and has received Clinical Cancer Research
Center status from the National Cancer Institute.
(2) For purposes of this subdivision:
(A) "Biopharmaceutical research activities" means those activities
that use organisms or materials derived from organisms, and their
cellular, subcellular, or molecular components, in order to provide
pharmaceutical products for human or animal therapeutics and
diagnostics. Biopharmaceutical activities make use of living
organisms to make commercial products, as opposed to pharmaceutical
activities that make use of chemical compounds to produce commercial
products.
(B) "Other biotechnology research and development activities"
means research and development activities consisting of the
application of recombinant DNA technology to produce commercial
products, as well as research and development activities regarding
pharmaceutical delivery systems designed to provide a measure of
control over the rate, duration, and site of pharmaceutical delivery.
(f) In the case where the credit allowed by this section exceeds
the "tax," the excess may be carried over to reduce the "tax" in the
following year, and succeeding years if necessary, until the credit
has been exhausted.
(g) For each taxable year beginning on or after January 1, 1998,
the reference to "Section 501(a)" in Section 41(b)(3)(C) of the
Internal Revenue Code, relating to contract research expenses, is
modified to read "this part or Part 10 (commencing with Section
17001)."
(h) (1) For each taxable year beginning on or after January 1,
2000:
(A) The reference to "3 percent" in Section 41(c)(4)(A)(i) of the
Internal Revenue Code is modified to read "one and forty-nine
hundredths of one percent."
(B) The reference to "4 percent" in Section 41(c)(4)(A)(ii) of the
Internal Revenue Code is modified to read "one and ninety-eight
hundredths of one percent."
(C) The reference to "5 percent" in Section 41(c)(4)(A)(iii) of
the Internal Revenue Code is modified to read "two and forty-eight
hundredths of one percent."
(2) Section 41(c)(4)(B) shall not apply and in lieu thereof an
election under Section 41(c)(4)(A) of the Internal Revenue Code may
be made for any taxable year of the taxpayer beginning on or after
January 1, 1998. That election shall apply to the taxable year for
which made and all succeeding taxable years unless revoked with the
consent of the Franchise Tax Board.
(3) Section 41(c)(7) of the Internal Revenue Code, relating to
gross receipts, is modified to take into account only those gross
receipts from the sale of property held primarily for sale to
customers in the ordinary course of the taxpayer's trade or business
that is delivered or shipped to a purchaser within this state,
regardless of f.o.b. point or any other condition of the sale.
(4) Section 41(c)(5) of the Internal Revenue Code, relating to
election of the alternative simplified credit, shall not apply.
(i) Section 41(h) of the Internal Revenue Code, relating to
termination, shall not apply.
(j) Section 41(g) of the Internal Revenue Code, relating to
special rule for passthrough of credit, is modified by each of the
following:
(1) The last sentence shall not apply.
(2) If the amount determined under Section 41(a) of the Internal
Revenue Code for any taxable year exceeds the limitation of Section
41(g) of the Internal Revenue Code, that amount may be carried over
to other taxable years under the rules of subdivision (f), except
that the limitation of Section 41(g) of the Internal Revenue Code
shall be taken into account in each subsequent taxable year.
(k) Section 41(a)(3) of the Internal Revenue Code shall not apply.
(l) Section 41(b)(3)(D) of the Internal Revenue Code, relating to
amounts paid to eligible small businesses, universities, and federal
laboratories, shall not apply.
(m) Section 41(f)(6) of the Internal Revenue Code, relating to
energy research consortium, shall not apply.
(n) For taxable years commencing on and after January 1, 2013, a
taxpayer utilizing a credit pursuant to this section shall report to
the Franchise Tax Board, in a separate line item, the following
information:
(1) Total research and development expenditures made in the tax
year subject to the credit and the total research and development
expenditures not subject to the credit.
(2) For the total research and development expenditures subject to
the credit, a breakdown of the total amount of the credit
attributable to each of the following:
(A) Gross wages.
(B) Capital expenditures.
(C) Outside consultants and services.
SEC. 9. SEC. 10. Section 23687 is
added to the Revenue and Taxation Code, to read:
23687. (a) For each taxable year beginning on or after January 1,
2013, there shall be allowed to a qualified taxpayer as a credit
against the "tax," as defined in Section 23036, an amount equal to 40
percent of the amount of a qualified contract price
contribution that is paid to the
made by a qualified taxpayer in that taxable
year.
(b) For purposes of this section, the following terms have the
following meanings:
(1) "Qualified contract" contribution
" means a contract between
monetary contribution by a business entity and
to a postsecondary educational institution for
the business entity to provide curriculum or
research leading to job opportunities in the private sector, or
consultation services associated with the establishment of curriculum
or research leading to job opportunities in the private sector,
where the business entity and the postsecondary educational
institution agree that there is a substantial potential for the
future employment of students as a result of the contract
contribution .
(2) "Qualified taxpayer" means a business entity that
enters into a contract or memorandum of understanding with
makes a qualified contribution to a postsecondary
educational institution to provide curriculum or research
leading to job opportunities in the private sector, or consultation
services associated with the establishment of curriculum or research
leading to job opportunities in the private sector .
(c) In the case where the credit allowed by this section exceeds
the "tax," the excess may be carried over to reduce the "tax" in the
following taxable year, and succeeding taxable years if necessary,
until the credit is exhausted.
(d) (1) The Franchise Tax Board may prescribe rules, guidelines,
or procedures necessary or appropriate to carry out the purposes of
this section.
(2) Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code does not apply to any
standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the Franchise Tax Board pursuant
to this section.
SEC. 10. SEC. 11. The provisions of
this act are severable. If any provision of this act or its
application is held invalid, that invalidity shall not affect other
provisions or applications that can be given effect without the
invalid provision or application.
SEC. 11. SEC. 12. Notwithstanding
Section 2230 of the Revenue and Taxation Code, no appropriation is
made by this act and the state shall not reimburse any local agency
for any sales and use tax revenues lost by it under this act.