Bill Text: CA AB2227 | 2021-2022 | Regular Session | Introduced
Bill Title: Income taxes: credits: intermodal equipment manufacturing.
Sponsorship: Partisan Bill (Democrat 1)
Status: (Introduced - Dead) 2022-03-22 - In committee: Hearing for testimony only. [AB2227 Detail]
Download: California-2021-AB2227-Introduced.html
CALIFORNIA LEGISLATURE—
2021–2022 REGULAR SESSION
Assembly Bill
No. 2227
| Introduced by Assembly Member O’Donnell |
February 15, 2022 |
An act to amend Sections 17039.3 and 23036.3 of, and to add Sections 17053.20 and 23620 to, the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
AB 2227, as introduced, O’Donnell.
Income taxes: credits: intermodal equipment manufacturing.
The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws. Existing law provides that, except as specified, the total credits allowable under those laws may not reduce the taxes imposed by those laws by more than $5,000,000, as provided, for taxable years beginning on or after January 1, 2020, and before January 1, 2023. Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives the tax expenditure will achieve, detailed performance indicators, and data collection requirements.
This bill would establish credits against the taxes imposed by those laws for taxable years beginning on or after January 1, 2022, and before January 1, 2032, in an amount equal to 6% of the amount paid or incurred during the taxable
year by a qualified taxpayer, as defined, for qualified personal tangible property, defined, in part, to include machinery and equipment of qualified businesses engaged in the manufacturing of intermodal equipment, up to $5,000,000. The bill would exclude these credits from the $5,000,000 tax reduction cap described above. The bill would also include additional information required for any bill authorizing a new tax expenditure.
This bill would take effect immediately as a tax levy.
Digest Key
Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: NOBill Text
The people of the State of California do enact as follows:
SECTION 1.
Section 17039.3 of the Revenue and Taxation Code is amended to read:17039.3.
(a) Notwithstanding any provision of this part or Part 10.2 (commencing with Section 18401) to the contrary, for taxpayers not required to be included in a combined report under Section 25101 or 25110, or taxpayers not authorized to be included in a combined report under Section 25101.15, for each taxable year beginning on or after January 1, 2020, and before January 1, 2023, the total of all qualified business credits otherwise allowable under any provision of Chapter 2 (commencing with Section 17041), including the carryover of any business credit under a former provision of that chapter, for the taxable year shall not reduce the “net tax,” as defined in Section 17039, by more than five million dollars ($5,000,000).(b) Notwithstanding any provision of this part or Part 10.2 (commencing with Section 18401) to the contrary, for taxpayers required to be included in a combined report under Section 25101 or 25110, or taxpayers authorized to be included in a combined report under Section 25101.15, for each taxable year beginning on or after January 1, 2020, and before January 1, 2023, the total of all qualified business credits otherwise allowable under any provision of Chapter 2 (commencing with Section 17041), including the carryover of any business credit under a former provision of that chapter, by all members of the combined report shall not reduce the aggregate amount of “tax,” as defined in Section 23036, of all members of the combined report by more than five million dollars ($5,000,000).
(c) For purposes of this section, “business
“qualified business credit” means a credit allowable under any provision of Chapter 2 (commencing with Section 17041) other than the following credits:
(1) The credit allowed by Section 17052 (relating to credit for earned income).
(2) The credit allowed by Section 17052.1 (relating to credit for young child).
(3) The credit allowed by Section 17052.6 (relating to credit for household and dependent care).
(4) The credit allowed by Section 17052.25 (relating to credit for adoption costs).
(5) The credit allowed by Section 17053.5 (relating to renter’s tax credit).
(6) The credit allowed by Section 17053.20 (relating to credit for intermodal equipment manufacturers’ machinery and equipment).
(6)
(7) The credit allowed by Section 17054 (relating to credit for personal exemption).
(7)
(8) The credit allowed by Section
17054.5 (relating to credit for qualified joint custody head of household and a qualified taxpayer with a dependent parent).
(8)
(9) The credit allowed by Section 17054.7 (relating to credit for qualified senior head of household).
(9)
(10) The credit allowed by Section 17058 (relating to credit for low-income housing).
(10)
(11) The credit allowed by Section 17061 (relating to refunds pursuant to the Unemployment Insurance Code).
(d) Any amounts included in an election pursuant to Section 6902.5, relating to an irrevocable election to apply credit amounts under Section 17053.85, 17053.95, 17053.98, 23685, 23695, or 23698 against qualified sales and use tax, as defined in Section 6902.5, are not included in the five-million-dollar ($5,000,000) limitation set forth in subdivision (a) or (b).
(e) The amount of any credit otherwise allowable for the taxable year under Section 17039 that is not allowed due to application of this section shall remain a credit carryover amount under this part.
(f) The carryover period for any credit that is not allowed due to the application of this section shall be increased by the number of taxable years the credit or any portion thereof was not allowed.
(g) Notwithstanding anything to the contrary in this part or Part 10.2 (commencing with Section 18401), the credits listed in subdivision (c) shall be applied after any business credits, as limited by subdivision (a) or (b), are applied.
(h) 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. 2.
Section 17053.20 is added to the Revenue and Taxation Code, to read:17053.20.
(a) For each taxable year beginning on or after January 1, 2022, and before January 1, 2032, there shall be allowed as a credit against the “net tax,” defined by Section 17039, to a qualified taxpayer for 6 percent of the amount paid or incurred during the taxable year for qualified personal tangible property up to five million dollars ($5,000,000).(b) For purposes of this section, the following definitions shall apply:
(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) “Qualified business” means a business that is or does all of the following:
(A) Described in
Sector Codes 31 to 33, inclusive, of the North American Industry Classification System (NAICS) published by the United States Office of Management and Budget (OMB), 2017 edition.
(B) Engaged in the manufacturing of intermodal equipment or fabrication of the components of intermodal equipment.
(C) Completes all activities related to the manufacturing of intermodal equipment or fabrication of the components of intermodal equipment within the State of California.
(7) (A) “Qualified personal tangible 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) “Qualified taxpayer” means a taxpayer that, on and after January 1, 2022, is primarily
engaged in a qualified business located in the state.
(9) “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. For the purposes of this paragraph, tangible personal property that is deducted under Section 17201, 17255, or 24356 shall be deemed to have a useful life of one or more years.
(c) In the case where the credit allowed by subdivision (a) exceeds the “net tax,” the excess may be carried over to reduce the “net tax” in the following taxable year, and
succeeding years if necessary, until the credit is exhausted.
SEC. 3.
Section 23036.3 of the Revenue and Taxation Code is amended to read:23036.3.
(a) Notwithstanding any provision of this part or Part 10.2 (commencing with Section 18401) to the contrary, except as provided in subdivision (d), for taxpayers not required to be included in a combined report under Section 25101 or 25110, or taxpayers not authorized to be included in a combined report under Section 25101.15, for each taxable year beginning on or after January 1, 2020, and before January 1, 2023, the total of all qualified business credits otherwise allowable under any provision of Chapter 3.5 (commencing with Section 23604) including the carryover of any credit under a former provision of that chapter, for the taxable year shall not reduce the “tax,” as defined in Section 23036, by more than five million dollars ($5,000,000).(b) Notwithstanding any provision of this part or Part 10.2 (commencing with Section 18401) to the contrary, except as provided in subdivision (d), for taxpayers required to be included in a combined report under Section 25101 or 25110, or taxpayers authorized to be included in a combined report under Section 25101.15, for each taxable year beginning on or after January 1, 2020, and before January 1, 2023, the total of all qualified business credits otherwise allowable under any provision of Chapter 3.5 (commencing with Section 23604), including the carryover of any credit under a former provision of that chapter, by all members of the combined report shall not reduce the aggregate amount of “tax,” as defined in Section 23036, of all members of the combined report by more than five-million-dollars
five million dollars
($5,000,000).
(c) For purposes of this section, “qualified business credit” means a credit allowable under any provision of Chapter 3.5 (commencing with Section 23604) other than the credit allowed by Section 23620 (relating to a credit for intermodal equipment manufacturers’ machinery and equipment).
(c)
(d) Any amounts included in an election pursuant to Section 6902.5, relating to an irrevocable election to apply credit amounts under Section 17053.85, 17053.95, 17053.98, 23685, 23695, or
23698 against qualified sales and use tax, as defined in Section 6902.5, are not included in the five million dollar five-million-dollar ($5,000,000) limitation set forth in subdivision (a) or (b).
(d)
(e) The limitation under subdivision (a) or (b) shall not apply to the credit allowed by Section 23610.5 (relating to credit for low-income housing).
(e)
(f) The amount of any credit otherwise allowable for the taxable year under Section 23036 that is not allowed due to the application of this section shall remain a credit carryover amount under this part.
(f)
(g) The carryover period for any credit that is not allowed due to the application of this section shall be increased by the number of taxable years the credit or any portion thereof was not allowed.
(g)
(h) 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. 4.
Section 23620 is added to the Revenue and Taxation Code, to read:23620.
(a) For each taxable year beginning on or after January 1, 2022, and before January 1, 2032, there shall be allowed as a credit against the “tax,” as defined by Section 23036, to a qualified taxpayer for a 6 percent of the amount paid or incurred during the taxable year for qualified personal tangible property up to five million dollars ($5,000,000).(b) For purposes of this section, the following definitions shall apply:
(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) “Qualified business” means a business that is or does all of the following:
(A) Described in Sector
Codes 31 to 33, inclusive, of the North American Industry Classification System (NAICS) published by the United States Office of Management and Budget (OMB), 2017 edition.
(B) Engaged in the manufacturing of intermodal equipment or fabrication of the components of intermodal equipment.
(C) Completes all activities related to the manufacturing of intermodal equipment or fabrication of the components of intermodal equipment within the State of California.
(7) (A) “Qualified personal tangible 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) “Qualified taxpayer” means a taxpayer that, on and after January 1, 2022, is primarily
engaged in a qualified business located in the state.
(9) “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. For the purposes of this paragraph, tangible personal property that is deducted under Section 17201, 17255, or 24356 shall be deemed to have a useful life of one or more years.
(c) In the case where the credit allowed by subdivision (a) exceeds the “tax,” the excess may be carried over to reduce the “tax” in the following taxable year, and succeeding
years if necessary, until the credit is exhausted.
SEC. 5.
(a) For purposes of Section 41 of the Revenue and Taxation Code, with respect to the tax expenditure created by the amendments to Sections 17053.20 and 23620 of the Revenue and Taxation Code made by this act, the Legislature finds and declares the following:(1) The specific goals, purposes, and objectives of this bill are as follows:
(A) To incentivize manufacturers to make capital investments and encourage increased production of intermodal equipment and intermodal equipment components in California.
(B) To provide additional economic incentives to both attract and retain manufacturing of
intermodal equipment and intermodal equipment components in the state while mitigating other costs, impacts, and pressures of operating in California.
(C) To mitigate the effects of an unprecedented global supply chain crisis in which disruptions to the movement of goods are caused and exacerbated by the pandemic of the coronavirus disease 2019 (COVID-19) and surges in demand outstrip intermodal equipment supply and availability.
(D) To provide a domestic supply of intermodal equipment in order to reduce the impacts of the global supply chain crisis on costs and access of California importers and exporters to equipment, vessels, and foreign markets, which threatens the sustainable economic growth of the state.
(E) To assist California importer and exporter shippers in the wake of the pandemic and assist shippers in
weathering increased costs of access to domestic and foreign markets.
(F) To continue to grow access by California’s exporters to the international supply chain and the resulting trade that these exporters facilitate, directly and indirectly employing millions of Californians, contributing billions of dollars in economic activity, and generating significant local and state tax revenues as a result of this activity.
(G) To insulate California from the additional future effects on the global supply chain that may be caused by excessive demand driven by the current global COVID-19 pandemic, a continuation of the pandemic caused by a future variant of the coronavirus, or other future pandemics or natural disasters, and to provide a domestic supply of intermodal equipment to limit those extenuating factors beyond the control of Californians.
(2) To measure whether the credit achieves its intended purpose, the Franchise Tax Board shall prepare a written report on all of the following:
(A) The number of taxpayers claiming the credit.
(B) The average credit amount on tax returns claiming the credit.
(C) The number of taxpayers claiming the credit in a taxable year that have not claimed the credit for a previous taxable year.
(b) Notwithstanding Section 19542 of the Revenue and Taxation Code, the Franchise Tax Board shall provide the written report prepared pursuant to paragraph (2) of subdivision (a) to the Senate Committee on Budget and Fiscal Review, the Assembly Committee on Budget, the Senate and Assembly Committees on
Appropriations, the Senate Committee on Governance and Finance, and the Assembly Committee on Revenue and Taxation.
