Bill Text: CA AB1997 | 2013-2014 | Regular Session | Amended
Bill Title: Sales and use taxes: exemptions: unmanned aerial vehicle manufacturing: income taxes: credits: hiring.
Sponsorship: Partisan Bill (Republican 1)
Status: (Introduced - Dead) 2014-04-02 - Re-referred to Com. on REV. & TAX. [AB1997 Detail]
Download: California-2013-AB1997-Amended.html
BILL NUMBER: AB 1997 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 1, 2014
INTRODUCED BY Assembly Member Gorell
FEBRUARY 20, 2014
An act relating to unmanned aircraft systems.
An act to amend Section 6377.1 of, and to add and repeal
Sections 17053.83 and 23623.3 of the Revenue and Taxation Code,
relating to taxation, to take effect immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
AB 1997, as amended, Gorell. Unmanned aircraft systems.
Sales and use taxes: exemptions: unmanned aerial
vehicle manufacturing: income taxes: credits: hiring.
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, and
provides various exemptions from the taxes imposed by that law.
Existing law includes an exemption from those taxes, on and after
July 1, 2014, and before January 1, 2022, for the gross receipts from
the sale of, and the storage, use, or other consumption of,
qualified tangible personal property purchased by a qualified person,
including persons engaged in aircraft manufacturing, for use
primarily in manufacturing, processing, refining, fabricating, or
recycling of property, or research and development, and qualified
tangible personal property purchased for use by a contractor for
specified purposes, as provided. Existing law specifies that this
exemption does not apply to local sales and use taxes, transactions
and use taxes, and specified state taxes from which revenues are
deposited into the Local Public Safety Fund, the Education Protection
Account, the Local Revenue Fund, the Fiscal Recovery Fund, or the
Local Revenue Fund 2011.
This bill, on and after January 1, 2015, would instead provide
that the exemption also applies to local sales and use taxes and
those specified state taxes with respect to qualified tangible
personal property purchased by a qualified person that is engaged in
aircraft manufacturing of unmanned aerial vehicles.
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. Amendments to 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 any local agencies for sales and use tax revenues
lost by them pursuant to this bill.
The Personal Income Tax Law and the Corporation Tax Law allow
various credits against the taxes imposed by those laws.
This bill would allow, under both laws, for taxable years
beginning on or after January 1, 2015, and before January 1, 2025, a
credit in an amount equal to a specified percentage of the qualified
wages, as defined, paid or incurred by a qualified taxpayer that
manufactures unmanned aerial vehicles with respect to qualified
employees, as defined, during the taxable year, not to exceed $20,000
per year, per qualified employee.
This bill would take effect immediately as a tax levy.
Existing federal law, the Federal Aviation Administration
Modernization and Reform Act of 2012, provides for the integration of
civil unmanned aircraft systems, commonly known as drones, into the
national airspace system by September 30, 2015. Existing federal law
requires the Administrator of the Federal Aviation Administration to
develop and implement operational and certification requirements for
the operation of public unmanned aircraft systems in the national
airspace system by December 31, 2015.
This bill would state the intent of the Legislature to enact
legislation that would provide incentives to unmanned aircraft system
manufacturers that manufacture those systems in this state, in order
to capture and develop the incredible future growth of the unmanned
aircraft system manufacturing industry within California. The bill
would also define "unmanned aircraft system" for those purposes.
Vote: majority. Appropriation: no. Fiscal committee: no
yes . State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 6377.1 of the
Revenue and Taxation Code is amended to read:
6377.1. (a) Except as provided in subdivision (e), on or after
July 1, 2014, and before July 1, 2022, 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, any of the
following:
(1) Qualified 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 tangible personal
property to its completed form, including packaging, if required.
(2) Qualified tangible personal property purchased for use by a
qualified person to be used primarily in research and development.
(3) Qualified tangible personal property purchased for use by a
qualified person to be used primarily to maintain, repair, measure,
or test any qualified tangible personal property described in
paragraph (1) or (2).
(4) Qualified tangible personal property purchased for use by a
contractor purchasing that property for use in the performance of a
construction contract for the qualified person, that will use that
property as an integral part of the manufacturing, processing,
refining, fabricating, or recycling process, or as a research or
storage facility for use in connection with those processes.
(b) For purposes of this section:
(1) "Fabricating" means to make, build, create, produce, or
assemble components or tangible personal 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 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 property.
(3) "Primarily" means 50 percent or more of the time.
(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) (A) "Qualified person" means a person that is primarily
engaged in those lines of business described in Codes 3111 to 3399,
inclusive, 541711, or 541712 of the North American Industry
Classification System (NAICS) published by the United States Office
of Management and Budget (OMB), 2012 edition.
(B) Notwithstanding subparagraph (A), "qualified person" shall not
include either of the following:
(i) An apportioning trade or business that is required to
apportion its business income pursuant to subdivision (b) of Section
25128.
(ii) A trade or business conducted wholly within this state that
would be required to apportion its business income pursuant to
subdivision (b) of Section 25128 if it were subject to apportionment
pursuant to Section 25101.
(7) (A) "Qualified tangible personal property" includes, but is
not limited to, all of the following:
(i) Machinery and equipment, including component parts and
contrivances such as belts, shafts, moving parts, and operating
structures.
(ii) Equipment or devices used or required to operate, control,
regulate, or maintain the machinery, including, but not limited to,
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
party.
(iii) Tangible personal property used in pollution control that
meets standards established by this state or any local or regional
governmental agency within this state.
(iv) Special purpose buildings and foundations used as an integral
part of the manufacturing, processing, refining, fabricating, or
recycling process, or that constitute a research or storage facility
used during those processes. Buildings used solely for warehousing
purposes after completion of those processes are not included.
(B) "Qualified tangible personal property" shall not include any
of the following:
(i) Consumables with a useful life of less than one year.
(ii) Furniture, inventory, and equipment used in the extraction
process, or equipment used to store finished products that have
completed the manufacturing, processing, refining, fabricating, or
recycling process.
(iii) Tangible personal property used primarily in administration,
general management, or marketing.
(8) "Refining" means the process of converting a natural resource
to an intermediate or finished product.
(9) "Research and development" means those activities that are
described in Section 174 of the Internal Revenue Code or in any
regulations thereunder.
(10) "Useful life" for tangible personal property that is treated
as having a useful life of one or more years for state income or
franchise tax purposes shall be deemed to have a useful life of one
or more years for purposes of this section. "Useful life" for
tangible personal property that is treated as having a useful life of
less than one year for state income or franchise tax purposes shall
be deemed to have a useful life of less than one year for purposes of
this section.
(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 and furnishes it to the board upon
request.
(d) (1) (A) Notwithstanding the
Bradley-Burns Uniform Local Sales and Use Tax Law (Part 1.5
(commencing with Section 7200)) and the Transactions and Use Tax Law
(Part 1.6 (commencing with Section 7251)), the exemption established
by this section shall not apply with respect to any tax levied by a
county, city, or district pursuant to, or in accordance with, either
of those laws.
(2)
(B) Notwithstanding subdivision (a), the exemption
established by this section shall not apply with respect to any tax
levied pursuant to Section 6051.2, 6051.5, 6201.2, or 6201.5,
pursuant to Section 35 of Article XIII of the California
Constitution, or any tax levied pursuant to Section 6051 or 6201 that
is deposited in the State Treasury to the credit of the Local
Revenue Fund 2011 pursuant to Section 6051.15 or 6201.15.
(2) On and after January 1, 2015, paragraph (1) shall not apply to
qualified tangible personal property purchased for use by a
qualified person primarily engaged in the line of business described
in Industry Group 336411 of the North American Industry
Classification System (NAICS) published by the United States Office
of Management and Budget (OMB), 2012 edition, that manufactures
unmanned aerial vehicles.
(e) (1) The exemption provided by this section shall not apply to
either of the following:
(A) Any tangible personal property purchased during any calendar
year that exceeds two hundred million dollars ($200,000,000) of
purchases of qualified tangible personal property for which an
exemption is claimed by a qualified person under this section. For
purposes of this subparagraph, in the case of a qualified person that
is required to be included in a combined report under Section 25101
or authorized to be included in a combined report under Section
25101.15, the aggregate of all purchases of qualified personal
property for which an exemption is claimed pursuant to this section
by all persons that are required or authorized to be included in a
combined report shall not exceed two hundred million dollars
($200,000,000) in any calendar year.
(B) The sale or storage, use, or other consumption of property
that, within one year from the date of purchase, is removed from
California, converted from an exempt use under subdivision (a) to
some other use not qualifying for exemption, or used in a manner not
qualifying for exemption.
(2) 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, and the purchase exceeds
the two-hundred-million-dollar ($200,000,000) limitation described
in subparagraph (A) of paragraph (1), or within one year from the
date of purchase, the purchaser removes that property from
California, converts that property for use in a manner not qualifying
for the exemption, or uses that 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 purchased, removed, converted,
or used, and the cost of the tangible personal property to the
purchaser shall be deemed the gross receipts from that retail sale.
(f) This section shall apply to leases of qualified tangible
personal property classified as "continuing sales" and "continuing
purchases" in accordance with Sections 6006.1 and 6010.1. The
exemption established by this section shall apply to the rentals
payable pursuant to the lease, provided the lessee is a qualified
person and the tangible personal property is used in an activity
described in subdivision (a).
(g) (1) Upon the effective date of this section, the Department of
Finance shall estimate the total dollar amount of exemptions that
will be taken for each calendar year, or any portion thereof, for
which this section provides an exemption.
(2) No later than each March 1 next following a calendar year for
which this section provides an exemption, the board shall provide to
the Joint Legislative Budget Committee a report of the total dollar
amount of exemptions taken under this section for the immediately
preceding calendar year. The report shall compare the total dollar
amount of exemptions taken under this section for that calendar year
with the department's estimate for that same calendar year. If that
total dollar amount taken is less than the estimate for that calendar
year, the report shall identify options for increasing exemptions
taken so as to meet estimated amounts.
(h) This section is repealed on January 1, 2023.
SEC. 2. Section 17053.83 is added to the
Revenue and Taxation Code , to read:
17053.83. (a) For each taxable year beginning on or after January
1, 2015, and before January 1, 2025, there shall be allowed as a
credit against the "net tax," as defined in Section 17039, to a
qualified taxpayer who employs a qualified employee during the
taxable year in an amount equal to the following:
(1) Fifty percent of qualified wages paid or incurred during any
taxable year beginning on or after January 1, 2015, and before
January 1, 2017.
(2) Forty percent of qualified wages paid or incurred during any
taxable year beginning on or after January 1, 2017, and before
January 1, 2019.
(3) Thirty percent of qualified wages paid or incurred during any
taxable year beginning on or after January 1, 2019, and before
January 1, 2021.
(4) Twenty percent of qualified wages paid or incurred during any
taxable year beginning on or after January 1, 2021, and before
January 1, 2023.
(5) Ten percent of qualified wages paid or incurred during any
taxable year beginning on or after January 1, 2023, and before
January 1, 2025.
(b) For purposes of this section:
(1) "Qualified taxpayer" means any taxpayer that is primarily
engaged in the line of business described in Industry Group 336411 of
the North American Industry Classification System (NAICS) published
by the United States Office of Management and Budget (OMB), 2012
edition, that manufactures unmanned aerial vehicles.
(2) "Qualified employee" means an individual who is hired by the
qualified taxpayer during the taxable year, whose services for the
qualified taxpayer are performed in this state and are at least 90
percent directly related to the qualified taxpayer's line of business
described in Industry Group 336411 of the North American Industry
Classification System (NAICS) published by the United States Office
of Management and Budget (OMB), 2012 edition, manufacturing unmanned
aerial vehicles.
(3) "Qualified wages" means that portion of wages paid or incurred
by the qualified taxpayer during the taxable year with respect to
qualified employees that are direct costs, as defined in Section 263A
of the Internal Revenue Code, allocable to property manufactured in
this state by the qualified taxpayer.
(c) The credit allowed by this section shall not exceed twenty
thousand dollars ($20,000) per year, per qualified employee. For
employees who are qualified employees for part of a taxable year, the
credit shall not exceed twenty thousand dollars ($20,000) multiplied
by a fraction, the numerator of which is the number of months of the
taxable year that the employee is a qualified employee and the
denominator of which is 12.
(d) 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 year, and seven succeeding years if necessary,
until the credit is exhausted.
(e) The credit allowed by this section shall be in lieu of any
other credit or deduction that the qualified taxpayer may otherwise
be allowed pursuant to this part.
(f) The Franchise Tax Board may prescribe rules, guidelines, or
procedures necessary or appropriate to carry out the purposes of this
section.
(g) This section shall remain in effect only until December 1,
2025, and as of that date is repealed.
SEC. 3. Section 23623.3 is added to the
Revenue and Taxation Code , to read:
23623.3. (a) For each taxable year beginning on or after January
1, 2015, and before January 1, 2025, there shall be allowed as a
credit against "tax," as defined in Section 23036, to a qualified
taxpayer who employs a qualified employee during the taxable year in
an amount equal to the following:
(1) Fifty percent of qualified wages paid or incurred during any
taxable year beginning on or after January 1, 2015, and before
January 1, 2017.
(2) Forty percent of qualified wages paid or incurred during any
taxable year beginning on or after January 1, 2017, and before
January 1, 2019.
(3) Thirty percent of qualified wages paid or incurred during any
taxable year beginning on or after January 1, 2019, and before
January 1, 2021.
(4) Twenty percent of qualified wages paid or incurred during any
taxable year beginning on or after January 1, 2021, and before
January 1, 2023.
(5) Ten percent of qualified wages paid or incurred during any
taxable year beginning on or after January 1, 2023, and before
January 1, 2025.
(b) For purposes of this section:
(1) "Qualified taxpayer" means any taxpayer that is primarily
engaged in the line of business described in Industry Group 336411 of
the North American Industry Classification System (NAICS) published
by the United States Office of Management and Budget (OMB), 2012
edition, that manufactures unmanned aerial vehicles.
(2) "Qualified employee" means an individual who is hired by the
qualified taxpayer during the taxable year, whose services for the
qualified taxpayer are performed in this state and are at least 90
percent directly related to the qualified taxpayer's line of business
described in Industry Group 336411 of the North American Industry
Classification System (NAICS) published by the United States Office
of Management and Budget (OMB), 2012 edition, manufacturing unmanned
aerial vehicles.
(3) "Qualified wages" means that portion of wages paid or incurred
by the qualified taxpayer during the taxable year with respect to
qualified employees that are direct costs, as defined in Section 263A
of the Internal Revenue Code, allocable to property manufactured in
this state by the qualified taxpayer.
(c) The credit allowed by this section shall not exceed twenty
thousand dollars ($20,000) per year, per qualified employee. For
employees who are qualified employees for part of a taxable year, the
credit shall not exceed twenty thousand dollars ($20,000) multiplied
by a fraction, the numerator of which is the number of months of the
taxable year that the employee is a qualified employee and the
denominator of which is 12.
(d) 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 seven succeeding years if necessary, until the
credit is exhausted.
(e) The credit allowed by this section shall be in lieu of any
other credit or deduction that the qualified taxpayer may otherwise
be allowed pursuant to this part.
(f) The Franchise Tax Board may prescribe rules, guidelines, or
procedures necessary or appropriate to carry out the purposes of this
section.
(g) This section shall remain in effect only until December 1,
2025, and as of that date is repealed.
SEC. 4. 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.
SEC. 5. This act provides for a tax levy within
the meaning of Article IV of the Constitution and shall go into
immediate effect.
SECTION 1. It is the intent of the Legislature
to enact legislation that would provide incentives to unmanned
aircraft system manufacturers that manufacture those systems in this
state, in order to capture and develop the incredible future growth
of the unmanned aircraft system manufacturing industry within
California. "Unmanned aircraft system" means an unmanned aircraft and
associated elements, including communication links and the
components that control the unmanned aircraft, that are required for
the pilot in command to operate safely and efficiently in the
national airspace system.
