BILL ANALYSIS Ó
AB 653
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Date of Hearing: January 23, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 653 (V. Manuel Pérez) - As Amended: August 5, 2013
Policy Committee: Revenue and
Taxation Vote: 9-0
JEDE 9-0
Urgency: Yes State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill establishes the California Innovation and Jobs Act,
which increases the amount of the research and development (R&D)
tax credit and codifies the California Innovation Hub (iHub)
Program. Specifically, this bill:
1)Provides for an increased rate of the R&D tax credit under the
Personal Income Tax (PIT) Law.
2)Provides for an increased rate of the R&D tax credit applied
to qualified research expenses, under the Corporate Tax (CT)
Law.
3)Provides for an increased rate of the R&D credit applied to
basic research payments, under the CT Law,
4)Codifies and expands the iHub Program at the Governor's Office
of Business and Economic Development (GO-Biz) for the purpose
of designating regional iHubs to support collaborations and
coordinate federal, state and local innovation-supporting
resources.
5)Authorizes GO-Biz, with the approval of the Department of
General Services, to use unused or underused state-owned or
leased property for iHubs, nonprofits and businesses to
establish proof-of-concept centers, incubators and
demonstration sites. GO-Biz may authorize businesses or
nonprofits to use state property for demonstration purposes.
FISCAL EFFECT
AB 653
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1)The FTB estimates an annual revenue loss from the increase in
the R&D tax credit of $20 million in fiscal year (FY) 2013-14,
$95 million in FY 2014-15, and $190 million in FY 2015-16.
2)Possible GF costs in the millions to tens of millions for the
use of unused or underused state- owned or leased property.
In 2011-12 DGS sold approximately $42 million of property and
has averaged about $30 million annually over the last 20
years. It is unclear exactly how many of the relatively small
number of parcels sold each year would be used for the
purposes of this program.
3)Minor and absorbable administrative costs to GO-Biz. A
significant amount of the work is already being done by the
office.
COMMENTS
1)Purpose . The author has provided the following statement in
support of this bill:
"The State of California was once regarded as the gold
standard of innovation and a leader of disruptive trends and
technologies that quite literally transformed the world. It
was California that gave rise to the personal computer (Apple
and Hewlett-Packard), the counter culture (Berkeley) and
ground breaking software-based platforms (Google, Facebook,
eBay and Amazon). Today, the state is suffering from an
economic malaise. In numerous surveys, California is
consistently ranked as having a poor business climate. AB 653
proposes a coordinated economic revitalization strategy that
not only leverages the state's entrepreneurial knowhow, but
also incentivizes businesses to risk their capital to develop
and improve the next generation of cutting edge technologies.
It is time to begin the process of developing an economic
strategy that focuses on California's greatest asset: our
ability to innovate."
2)Background. There are two main purposes for the federal and
California R&D credit. First, it is intended to reduce the
after-tax cost of R&D investments, which is expected to lead
to an increase in R&D activity and to encourage taxpayers to
conduct R&D in the U.S. rather than in another country.
Similarly, the California R&D credit is designed to increase
AB 653
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R&D activity and to encourage manufacturing related to R&D to
be undertaken in California rather than elsewhere.
The California's R&D credit provides a powerful incentive for
firms to conduct R&D in this state because of its high credit
percentages that exceed that of other states and because it is
permanent. The California R&D credit is believed to create
additional R&D jobs in the state which, arguably, are more
desirable than jobs in other industries. It also allows other
California businesses to adopt innovations developed locally
more rapidly than innovations developed elsewhere.
3)There is no registered opposition to this bill.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081