Bill Text: CA SB998 | 2013-2014 | Regular Session | Amended
NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Taxes: exemption and credits: new aerospace projects.
Spectrum: Partisan Bill (Republican 3-0)
Status: (Introduced - Dead) 2014-08-14 - Held in committee and under submission. [SB998 Detail]
Download: California-2013-SB998-Amended.html
Bill Title: Taxes: exemption and credits: new aerospace projects.
Spectrum: Partisan Bill (Republican 3-0)
Status: (Introduced - Dead) 2014-08-14 - Held in committee and under submission. [SB998 Detail]
Download: California-2013-SB998-Amended.html
BILL NUMBER: SB 998 AMENDED
BILL TEXT
AMENDED IN SENATE APRIL 9, 2014
INTRODUCED BY Senator Knight
FEBRUARY 13, 2014
An act to add Article 8 (commencing with Section 12099.8) to
Chapter 1.6 of Part 2 of Division 3 of Title 2 of the Government
Code, to amend Section 510 of, and to add Section 511.5 to, the Labor
Code, to add Sections 21080.38 and 21168.6.8 to the Public Resources
Code, to amend Sections 17059.2 and 23689 of, and to add Sections
17053.35, 17053.36, 23635, and 23636 to, the Revenue and Ta
xation Code, and to add Section 10215.2 to the Unemployment
Insurance Code, relating to aerospace.
LEGISLATIVE COUNSEL'S DIGEST
SB 998, as amended, Knight. California Aerospace Innovation Hub
Act of 2014.
Existing
(1) Existing law provides various
incentives for industries such as the aerospace industry to locate
and invest in this state, such as a program that allows local
governments to establish a capital investment incentive program to
pay a capital investment incentive amount to the proponents of a
qualified manufacturing facility in the aerospace business, and a
sales and use tax exemption for the gross receipts from the sale of,
and the storage, use, or other consumption of, qualified tangible
personal property purchased by a person engaged in aerospace products
and parts manufacturing for use primarily in manufacturing,
processing, refining, fabricating, or recycling of property.
Existing law also creates the California Innovation Hub Program
within the Governor's Office of Business and Economic Development and
requires the office to designate innovation hubs and to oversee,
coordinate, and provide assistance to each innovation hub.
The bill would require the Governor's Office of Business and
Economic Development to design and implement Aerospace Innovation
Hubs, as specified, based on existing geographically based clusters
of facilities of aerospace manufacturers and related businesses.
(2) The Personal Income Tax Law and the Corporation Tax Law allow
various credits against the taxes imposed by those laws.
The bill, for taxable years beginning on or after January 1, 2015,
and before January 1, 2025, would allow a credit against these taxes
to an aerospace manufacturer or related business operating within an
Aerospace Innovation Hub equal 10% of the qualified cost, as
defined, of qualified property, as defined, placed in service during
the taxable year, as provided. This credit would be in lieu of a
specified sales and use tax exemption.
The bill, for the same taxable years, would allow a credit against
these taxes for each taxable year equal to 25% of the charges for
electricity paid or incurred by an aerospace manufacturer or related
business operating within an Aerospace Innovation Hub during the
taxable year.
The Personal Income Tax Law and the Corporation Tax Law, for
taxable years beginning before January 1, 2025, allow a credit
against the taxes imposed by those laws for each taxable year in an
amount as determined by the Governor's Office of Business and
Economic Development, pursuant to a contractual agreement with the
taxpayer, agreed upon by the California Competes Tax Credit
Committee, and based on specified factors.
The bill would include among those factors whether the taxpayer is
an aerospace manufacturer or related business operating within an
Aerospace Innovation Hub.
(3) Existing law, with certain exceptions, establishes 8 hours as
a day's work and a 40-hour workweek, and requires payment of
prescribed overtime compensation for additional hours worked.
Existing law authorizes the adoption by 2/3 of employees in a work
unit of alternative workweek schedules providing for workdays no
longer than 10 hours within a 40-hour workweek. Under existing law,
any person who violates the provisions regulating work hours is
guilty of a misdemeanor.
The bill would allow an individual nonexempt employee of an
aerospace manufacturer or related business operating within an
Aerospace Innovation Hub to request an employee-selected flexible
work schedule providing for workdays up to 10 hours per day within a
40-hour workweek, and would allow the employer to implement this
schedule without the obligation to pay overtime compensation for
those additional hours in a workday, except as specified. The bill
would require the Division of Labor Standards Enforcement in the
Department of Industrial Relations to enforce this provision and
adopt regulations.
(4) Existing law specifies that moneys in the Employment Training
Fund are to be expended only for particular purposes relating to
employment training and related administrative costs. Existing law
authorizes the Employment Training Panel to allocate money in the
fund for particular purposes related to employment training.
The bill would allow the Employment Training Panel to expend
moneys in the Employment Training Fund to reimburse an aerospace
manufacturer or related business operating within an Aerospace
Innovation Hub for its reasonable costs of workforce training upon
appropriation by the Legislature.
(5) The California Environmental Quality Act (CEQA) requires a
lead agency, as defined, to prepare, or cause to be prepared, and
certify the completion of, an environmental impact report (EIR) on a
project that it proposes to carry out or approve that may have a
significant effect on the environment or to adopt a negative
declaration if it finds that the project will not have that effect.
CEQA also requires a lead agency to prepare a mitigated negative
declaration for a project that may have a significant effect on the
environment if revisions in the project would avoid or mitigate that
effect and there is no substantial evidence that the project, as
revised, would have a significant effect on the environment.
CEQA establishes a procedure by which a person may seek judicial
review of the decision of the lead agency made pursuant to CEQA.
The bill would require the lead agency to undertake specified
steps in the preparation of the EIR for certain aerospace projects,
which would be designated by the Governor. The bill would require a
public agency, in certifying the EIR and in granting approvals for
those designated aerospace projects, to concurrently prepare the
record of proceeding and to certify the record of proceeding within 5
days of the filing of a specified notice. The bill would require the
Judicial Council, on or before July 1, 2015, to adopt a rule of
court to establish procedures applicable to actions or proceedings
seeking judicial review of a public agency's action in certifying the
EIR and in granting approval of those designated aerospace
manufacturing projects that requires the actions or proceedings,
including any appeals therefrom, be resolved, to the extent feasible,
within 270 days of the certification of the record of proceeding.
The bill would, for the calendar years from 2015 to 2020, inclusive,
require the Governor to designate 4 aerospace projects each year
meeting specified requirements for which the above provisions would
apply.
The bill would exempt from the requirements of CEQA a project or
an activity related to the retooling or alteration for manufacturing
purposes of an existing aerospace manufacturing facility or
aerospace-related facility in an Aerospace Innovation Hub within the
facility's existing footprint.
Because this bill would impose additional duties on local
agencies, it would impose a state-mandated local program.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
The bill would provide that no reimbursement is required by this
act for a specified reason.
This bill would state the intent of the Legislature to enact
legislation to create the California Aerospace Innovation Hub Act of
2014. This bill would state the intent of the Legislature to enact
legislation that would create geographically based aerospace hubs
around existing aerospace manufacturing clusters, and that within the
aerospace hubs aerospace manufacturers and related businesses would
benefit from special tax preferences, streamlined regulations, and
work schedule flexibility.
Vote: majority. Appropriation: no. Fiscal committee: no
yes . State-mandated local program: no
yes .
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Article 8 (commencing with Section
12099.8) is added to Chapter 1.6 of Part 2 of Division 3 of Title 2
of the Government Code , to read:
Article 8. Aerospace Innovation Hubs
12099.8. For the purposes of this article, the following terms
have the following meanings:
(a) "Aerospace Innovation Hub" means a geographic area that, based
on a determination by the Governor's Office of Business and Economic
Development, contains a cluster of aerospace manufacturing
facilities or related business facilities.
(b) "Aerospace manufacturer" means a person that is primarily
engaged in those lines of business described in Code 3364 of the
North American Industry Classification System (NAICS) published by
the United States Office of Management and Budget (OMB), 2012
edition.
(c) "Related business" means a person that is primarily engaged in
those lines of business described in Codes 222512, 325211, 332710,
332812, 333299, 333514, 333517, 333611, 333612, 333613, 333618,
334419, 334511, 334513, 334515, 334519, 335311, 335314, 335991, and
335999 of the North American Industry Classification System (NAICS)
published by the United States Office of Management and Budget (OMB),
2012 edition.
12099.81. The Governor's Office of Business and Economic
Development shall designate and implement Aerospace Innovation Hubs
based on existing geographically based clusters of facilities of
aerospace manufacturers and related businesses. The Governor's Office
of Business and Economic Development shall consider several factors
when designating an area as an Aerospace Innovation Hub, including
the location of facilities, the proximity of facilities to each
other, the size of facilities, and the number of employees working in
those facilities.
SEC. 2. Section 510 of the Labor Code
is amended to read:
510. (a) Eight hours of labor constitutes a day's work. Any work
in excess of eight hours in one workday and any work in excess of 40
hours in any one workweek and the first eight hours worked on the
seventh day of work in any one workweek shall be compensated at the
rate of no less than one and one-half times the regular rate of pay
for an employee. Any work in excess of 12 hours in one day shall be
compensated at the rate of no less than twice the regular rate of pay
for an employee. In addition, any work in excess of eight hours on
any seventh day of a workweek shall be compensated at the rate of no
less than twice the regular rate of pay of an employee. Nothing in
this section requires an employer to combine more than one rate of
overtime compensation in order to calculate the amount to be paid to
an employee for any hour of overtime work. The requirements of this
section do not apply to the payment of overtime compensation to an
employee working pursuant to any of the following:
(1) An alternative workweek schedule adopted pursuant to Section
511.
(2) An employee-selected flexible work schedule adopted pursuant
to Section 511.5.
(2)
(3) An alternative workweek schedule adopted pursuant
to a collective bargaining agreement pursuant to Section 514.
(3)
(4) An alternative workweek schedule to which this
chapter is inapplicable pursuant to Section 554.
(b) Time spent commuting to and from the first place at which an
employee's presence is required by the employer shall not be
considered to be a part of a day's work, when the employee commutes
in a vehicle that is owned, leased, or subsidized by the employer and
is used for the purpose of ridesharing, as defined in Section 522 of
the Vehicle Code.
(c) This section does not affect, change, or limit an employer's
liability under the workers' compensation law.
SEC. 3. Section 511.5 is added to the
Labor Code , to read:
511.5. (a) Notwithstanding Section 511 or any other law or order
of the Industrial Welfare Commission, an individual nonexempt
employee of a qualified employer may work up to 10 hours per workday
without any obligation on the part of the employer to pay an overtime
rate of compensation, except as provided in subdivision (b), if the
employee requests this schedule in writing and the employer approves
the request. This shall be referred to as an overtime exemption for
an employee-selected flexible work schedule.
(b) If an employee-selected flexible work schedule is adopted
pursuant to subdivision (a), the employer shall pay overtime at one
and one-half times the employee's regular rate of pay for all hours
worked over 40 hours in a workweek or over 10 hours in a workday,
whichever is the greater number of hours. All work performed in
excess of 12 hours per workday and in excess of eight hours on a
fifth, sixth, or seventh day in the workweek shall be paid at double
the employee's regular rate of pay.
(c) The employer may inform its employees that it is willing to
consider an employee request to work an employee-selected flexible
work schedule, but shall not induce a request by promising an
employment benefit or threatening an employment detriment.
(d) The employee or employer may discontinue the employee-selected
flexible work schedule at any time by giving written notice to the
other party. The request will be effective the first day of the next
pay period or the fifth day after notice is given if there are fewer
than five days before the start of the next pay period, unless
otherwise agreed to by the employer and the employee.
(e) This section does not apply to any employee covered by a valid
collective bargaining agreement or employed by the state, a city,
county, city and county, district, municipality, or other public,
quasi-public, or municipal corporation, or any political subdivision
of this state.
(f) This section shall be liberally construed to accomplish its
purposes.
(g) (1) The Division of Labor Standards Enforcement shall enforce
this section and shall adopt or revise regulations in a manner
necessary to conform and implement this section.
(2) This section shall prevail over any inconsistent provisions in
any wage order of the Industrial Welfare Commission.
(h) (1) For the purposes of this section, "qualified employer"
means any employer that is an aerospace manufacturer or related
business operating within an Aerospace Innovation Hub.
(2) For purposes of this subdivision, "Aerospace Innovation Hub,"
"aerospace manufacturer," and "related business" have the same
meanings as defined in subdivisions (a), (b), and (c), respectively,
of Section 12099.8 of the Government Code.
SEC. 4. Section 21080.38 is added to the
Public Resources Code , to read:
21080.38. (a) This division does not apply to a project or an
activity related to the retooling or alteration for manufacturing
purposes of an existing facility of an aerospace manufacturer or a
related business in an Aerospace Innovation Hub within the facility's
existing footprint.
(b) For purposes of this division, "Aerospace Innovation Hub,"
"aerospace manufacturer," and "related business" have the same
meanings as defined in subdivisions (a), (b), and (c), respectively,
of Section 12099.8 of the Government Code.
SEC. 5. Section 21168.6.8 is added to the
Public Resources Code , to read:
21168.6.8. (a) For the purposes of this section, the following
terms have the following meanings:
(1) "Aerospace project" means either of the following:
(A) A project related to the construction of a new facility of an
aerospace manufacturer or a related business.
(B) A project related to the expansion of an existing facility of
an aerospace manufacturer or a related business outside of the
facility's existing footprint.
(2) "Designated aerospace project" means an aerospace project
designated pursuant to subdivision (b).
(b) For each calendar year from 2015 to 2020, inclusive, the
Governor shall designate four aerospace projects within Aerospace
Innovation Hubs designated pursuant to Section 12099.81 of the
Government Code. Each designated project shall have a capital
investment of at least 75 million dollars ($75,000,000).
(c) (1) On or before July 1, 2015, the Judicial Council shall
adopt a rule of court to establish procedures applicable to actions
or proceedings brought to attack, review, set aside, void, or annul
the certification of the environmental impact report for a designated
aerospace project or the granting of any project approvals that
require the actions or proceedings, including any potential appeals
therefrom, be resolved, to the extent feasible, within 270 days of
certification of the record of proceedings pursuant to subdivision
(e).
(2) Notwithstanding any other law, the procedures established
pursuant to paragraph (1) shall apply to an action or proceeding
brought to attack, review, set aside, void, or annul the
certification of the environmental impact report for a designated
aerospace project or the granting of any project approvals.
(d) (1) The draft and final environmental impact report for a
designated aerospace project shall include a notice in not less than
12-point type stating the following:
THIS EIR IS SUBJECT TO SECTION 21168.6.8 OF THE PUBLIC RESOURCES
CODE, WHICH PROVIDES, AMONG OTHER THINGS, THAT THE LEAD AGENCY NEED
NOT CONSIDER CERTAIN COMMENTS FILED AFTER THE CLOSE OF THE PUBLIC
COMMENT PERIOD FOR THE DRAFT EIR. ANY JUDICIAL ACTION CHALLENGING THE
CERTIFICATION OF THE EIR OR THE APPROVAL OF THE PROJECT DESCRIBED IN
THE EIR IS SUBJECT TO THE PROCEDURES SET FORTH IN SECTION 21168.6.8
OF THE PUBLIC RESOURCES CODE. A COPY OF SECTION 21168.6.8 OF THE
PUBLIC RESOURCES CODE IS INCLUDED IN THE APPENDIX TO THIS EIR.
(2) The draft environmental impact report and final environmental
impact report shall contain, as an appendix, the full text of this
section.
(3) Within 10 days after the release of the draft environmental
impact report, the lead agency shall conduct an informational
workshop to inform the public of the key analyses and conclusions of
that report.
(4) Within 10 days before the close of the public comment period,
the lead agency shall hold a public hearing to receive testimony on
the draft environmental impact report. A transcript of the hearing
shall be included as an appendix to the final environmental impact
report.
(5) (A) Within five days following the close of the public comment
period, a commenter on the draft environmental impact report may
submit to the lead agency a written request for nonbinding mediation.
The lead agency and the designated aerospace project applicant shall
participate in nonbinding mediation with all commenters who
submitted timely comments on the draft environmental impact report
and who requested the mediation. Mediation conducted pursuant to this
paragraph shall end no later than 35 days after the close of the
public comment period.
(B) A request for mediation shall identify all areas of dispute
raised in the comment submitted by the commenter that are to be
mediated.
(C) The lead agency shall select one or more mediators who shall
be retired judges or recognized experts with at least five years
experience in land use and environmental law or science, or
mediation. The applicant shall bear the costs of mediation.
(D) A mediation session shall be conducted on each area of dispute
with the parties requesting mediation on that area of dispute.
(E) The lead agency shall adopt, as a condition of approval, any
measures agreed upon by the lead agency, the applicant, and any other
commenter who requested mediation. A commenter who agrees to a
measure pursuant to this subparagraph shall not raise the issue
addressed by that measure as a basis for an action or proceeding
challenging the lead agency's decision to certify the environmental
impact report or to grant one or more initial project approvals.
(6) The lead agency need not consider written comments submitted
after the close of the public comment period, unless those comments
address any of the following:
(A) New issues raised in the response to comments by the lead
agency.
(B) New information released by the public agency subsequent to
the release of the draft environmental impact report, such as new
information set forth or embodied in a staff report, proposed permit,
proposed resolution, ordinance, or similar documents.
(C) Changes made to the project after the close of the public
comment period.
(D) Proposed conditions for approval, mitigation measures, or
proposed findings required by Section 21081 or a proposed reporting
and monitoring program required by paragraph (1) of subdivision (a)
of Section 21081.6, where the lead agency releases those documents
subsequent to the release of the draft environmental impact report.
(E) New information that was not reasonably known and could not
have been reasonably known during the public comment period.
(7) The lead agency shall file the notice required by subdivision
(a) of Section 21152 within five days after the last initial project
approval.
(e) (1) The lead agency shall prepare and certify the record of
the proceedings in accordance with this subdivision and in accordance
with Rule 3.1365 of the California Rules of Court. The applicant
shall pay the lead agency for all costs of preparing and certifying
the record of proceedings.
(2) No later than three business days following the date of the
release of the draft environmental impact report, the lead agency
shall make available to the public in a readily accessible electronic
format the draft environmental impact report and all other documents
submitted to or relied on by the lead agency in the preparation of
the draft environmental impact report. A document prepared by the
lead agency or submitted by the applicant after the date of the
release of the draft environmental impact report that is a part of
the record of the proceedings shall be made available to the public
in a readily accessible electronic format within five business days
after the document is prepared or received by the lead agency.
(3) Notwithstanding paragraph (2), documents submitted to or
relied on by the lead agency that were not prepared specifically for
the project and are copyright protected are not required to be made
readily accessible in an electronic format. For those copyright
protected documents, the lead agency shall make an index of these
documents available in an electronic format no later than the date of
the release of the draft environmental impact report, or within five
business days if the document is received or relied on by the lead
agency after the release of the draft environmental impact report.
The index must specify the libraries or lead agency offices in which
hardcopies of the copyrighted materials are available for public
review.
(4) The lead agency shall encourage written comments on the
project to be submitted in a readily accessible electronic format,
and shall make any such comment available to the public in a readily
accessible electronic format within five days of its receipt.
(5) Within seven business days after the receipt of any comment
that is not in an electronic format, the lead agency shall convert
that comment into a readily accessible electronic format and make it
available to the public in that format.
(6) The lead agency shall indicate in the record of the
proceedings comments received that were not considered by the lead
agency pursuant to paragraph (6) of subdivision (d) and need not
include the content of the comments as a part of the record.
(7) Within five days after the filing of the notice required by
subdivision (a) of Section 21152, the lead agency shall certify the
record of the proceedings for the approval or determination and shall
provide an electronic copy of the record to a party that has
submitted a written request for a copy. The lead agency may charge
and collect a reasonable fee from a party requesting a copy of the
record for the electronic copy, which shall not exceed the reasonable
cost of reproducing that copy.
(8) Within 10 days after being served with a complaint or a
petition for a writ of mandate, the lead agency shall lodge a copy of
the certified record of proceedings with the superior court.
(9) Any dispute over the content of the record of the proceedings
shall be resolved by the superior court. Unless the superior court
directs otherwise, a party disputing the content of the record shall
file a motion to augment the record at the time it files its initial
brief.
(10) The contents of the record of proceedings shall be as set
forth in subdivision (e) of Section 21167.6.
SEC. 6. Section 17053.35 is added to the
Revenue and Taxation Code , to read:
17053.35. (a) For taxable years beginning on or after January 1,
2015, and before January 1, 2025, a qualified taxpayer shall be
allowed a credit against the "net tax," as defined in Section 17039,
an amount equal to 10 percent of the qualified cost of qualified
property that is placed in service in this state during the taxable
year.
(b) For purposes of this section, "qualified cost" means any cost
that satisfies each of the following conditions:
(1) Is a cost paid or incurred by the qualified taxpayer for the
construction, reconstruction, or acquisition of qualified property
during the taxable year.
(2) Except as provided in paragraph (2) of subdivision (d) and
subparagraph (B) of paragraph (3) of subdivision (d), is an amount
upon which the qualified taxpayer has paid, directly or indirectly,
as a separately stated contract amount or as determined from the
records of the qualified taxpayer, sales tax reimbursement or use tax
under Part 1 (commencing with Section 6001).
(3) Is an amount properly chargeable to the capital account of the
qualified taxpayer.
(c) (1) (A) For purposes of this section, "qualified taxpayer"
means any taxpayer that is an aerospace manufacturer or related
business operating within an Aerospace Innovation Hub.
(B) For the purposes of this subdivision, "Aerospace Innovation
Hub," "aerospace manufacturer," and "related business" have the same
meanings as defined in subdivisions (a), (b), and (c), respectively,
of Section 12099.8 of the Government Code.
(2) "Qualified taxpayer" does not include a taxpayer whose
acquisition of tangible personal property is subject to the exemption
provided by Section 6377.1.
(3) In the case of any pass thru entity, the determination of
whether a taxpayer is a qualified taxpayer under this section shall
be made at the entity level and any credit under this section or
Section 23649 shall be allowed to the pass thru entity and passed
through to the partners or shareholders in accordance with applicable
provisions of Part 10 (commencing with Section 17001) or Part 11
(commencing with Section 23001). For purposes of this paragraph, the
term "pass thru entity" means any partnership or "S" corporation.
(4) The Franchise Tax Board may prescribe regulations to carry out
the purposes of this section, including any regulations necessary to
prevent the avoidance of the effect of this section through
splitups, shell corporations, partnerships, tiered ownership
structures, sale-leaseback transactions, or otherwise.
(d) For purposes of this section, "qualified property" means
property that is described as any of the following:
(1) Tangible personal property that is defined in Section 1245(a)
of the Internal Revenue Code that is primarily used for any of the
following:
(A) For the manufacturing, processing, refining, fabricating, or
recycling of property, beginning at the point at which any raw
materials are received by the qualified taxpayer 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.
(B) In research and development.
(C) To maintain, repair, measure, or test any property described
in this paragraph.
(D) For pollution control that meets or exceeds standards
established by the state or by any local or regional governmental
agency within the state.
(E) For recycling.
(2) The value of any capitalized labor costs that are directly
allocable to the construction or modification of property described
in paragraph (1).
(3) (A) Special purpose buildings and foundations that are
constructed or modified for use by the qualified taxpayer primarily
in a manufacturing, processing, refining, fabricating, or recycling
process, or as a research or storage facility primarily used in
connection with those processes.
(B) The value of any capitalized labor costs that are directly
allocable to the construction or modification of special purpose
buildings and foundations that are used primarily in the
manufacturing, processing, refining, fabricating, or recycling
process, or as a research or storage facility primarily used in
connection with those processes.
(C) (i) For purposes of this paragraph, "special purpose building
and foundation" means only a building and the foundation immediately
underlying the building that is specifically designed and constructed
or reconstructed for the installation, operation, and use of
specific machinery and equipment with a special purpose, which
machinery and equipment, after installation, will become affixed to
or a fixture of the real property, and the construction or
reconstruction of which is specifically designed and used exclusively
for the specified purposes as set forth in subparagraph (A).
(ii) A building is specifically designed and constructed or
modified for a qualified purpose if it is not economical to design
and construct the building for the intended purpose and then use the
structure for a different purpose.
(iii) For purposes of clause (i) and clause (vi), a building is
used exclusively for a qualified purpose only if its use does not
include a use for which it was not specifically designed and
constructed or modified. Incidental use of a building for
nonqualified purposes does not preclude the building from being a
special purpose building. "Incidental use" means a use that is both
related and subordinate to the qualified purpose. It will be
conclusively presumed that a use is not subordinate if more than
one-third of the total usable volume of the building is devoted to a
use that is not a qualified purpose.
(iv) In the event an entire building does not qualify as a special
purpose building, a taxpayer may establish that a portion of a
building, and the foundation immediately underlying the portion,
qualifies for treatment as a special purpose building and foundation
if the portion satisfies all of the definitional provisions in this
subparagraph.
(v) To the extent that a building is not a special purpose
building as defined above, but a portion of the building qualifies
for treatment as a special purpose building, then all equipment that
exclusively supports the qualified purpose occurring within that
portion and that would qualify as Internal Revenue Code Section 1245
property if it were not a fixture or affixed to the building shall be
treated as a cost of the portion of the building that qualifies for
treatment as a special purpose building.
(vi) Buildings and foundations that do not meet the definition of
a special purpose building and foundation set forth above
include, but are not limited to:
buildings designed and constructed or reconstructed principally to
function as a general purpose manufacturing, industrial, or
commercial building; research facilities that are used primarily
prior to or after, or prior to and after, the manufacturing process;
or storage facilities that are used primarily prior to or after, or
prior to and after, completion of the manufacturing process.
(4) Subject to the provisions in paragraph (2) of subdivision (b),
qualified property also includes computer software that is primarily
used for those purposes set forth in paragraph (1) of this
subdivision.
(5) Qualified property does not include any of the following:
(A) Furniture.
(B) Facilities used for warehousing purposes after completion of
the manufacturing process.
(C) Inventory.
(D) Equipment used in the extraction process.
(E) Equipment used to store finished products that have completed
the manufacturing process.
(F) Any tangible personal property that is used in administration,
general management, or marketing.
(e) 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 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 more than 50 percent.
(4) "Process" means the period beginning at the point at which any
raw materials are received by the qualified taxpayer and introduced
into that activity of the qualified taxpayer and ending at the point
at which the manufacturing, processing, refining, fabricating, or
recycling activity of the qualified taxpayer has altered tangible
personal property to its completed form, including packaging, if
required. Raw materials are considered to have been introduced into
the process when the raw materials are stored on the same premises
where the qualified taxpayer's manufacturing, processing, refining,
fabricating, or recycling activity is conducted. Raw materials that
are stored on premises other than where the qualified taxpayer's
manufacturing, processing, refining, fabricating, or recycling
activity is conducted, are not 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
property.
(6) "Refining" means the process of converting a natural resource
to an intermediate or finished product.
(7) "Research and development" means those activities that are
described in Section 174 of the Internal Revenue Code or in any
regulations thereunder.
(f) The credit allowed under subdivision (a) shall apply to
qualified property that is acquired by or subject to lease by a
qualified taxpayer, subject to the following special rules:
(1) A lessor of qualified property, irrespective of whether the
lessor is a qualified taxpayer, is not allowed the credit provided
under subdivision (a) with respect to any qualified property leased
to another qualified taxpayer.
(2) (A) For purposes of determining the qualified cost paid or
incurred by a lessee in any leasing transaction that is not treated
as a sale under Part 1 (commencing with Section 6001), the following
rules apply:
(i) Except as provided by subparagraph (C) of this paragraph,
paragraphs (1) and (3) of subdivision (b) do not apply.
(ii) Except as provided in subparagraph (B) and clause (iii), the
"qualified cost" upon which the lessee shall compute the credit
provided under this section shall be equal to the original cost to
the lessor (within the meaning of Section 18031) of the qualified
property that is the subject of the lease.
(iii) The requirement of paragraph (2) of subdivision (b) shall be
treated as satisfied only if the lessor has made a timely election
under either Section 6094.1 or subdivision (d) of Section 6244 and
has paid sales tax reimbursement or use tax measured by the purchase
price of the qualified property (within the meaning of paragraph (5)
of subdivision (g) of Section 6006). For purposes of this
subdivision, the amount of original cost to the lessor that may be
taken into account under clause (ii) may not exceed the purchase
price upon which sales tax reimbursement or use tax has been paid
under the preceding sentence.
(B) For purposes of applying subparagraph (A) only, the following
special rules shall apply:
(i) The original cost to the lessor of the qualified property
shall be reduced by the amount of any original cost of that property
that was taken into account by any predecessor lessee in computing
the credit allowable under this section.
(ii) Clause (i) does not apply in any case where the predecessor
lessee was required to recapture the credit provided under this
section pursuant to subdivision (g).
(iii) For purposes of this section only, in any case where a
successor lessor has acquired qualified property from a predecessor
lessor in a transaction not treated as a sale under Part 1
(commencing with Section 6001), the original cost to the successor
lessor of the qualified property shall be reduced by the amount of
the original cost of the qualified property that was taken into
account by any lessee of the predecessor lessor in computing the
credit allowable under this section.
(C) In determining the original cost of any qualified property
under this paragraph, only amounts paid or incurred by the lessor on
or after January 1, 2015, shall be taken into account.
(D) Notwithstanding subparagraph (A), in the case of any leasing
transaction for which the lessee is allowed the credit under this
section and thereafter the lessee (or any party related to the lessee
within the meaning of Section 267 or 318 of the Internal Revenue
Code) acquires the qualified property from the lessor (or any
successor lessor) within one year from the date the qualified
property is first used by the lessee under the terms of the lease,
the lessee's (or related party's) acquisition of the qualified
property from the lessor (or successor lessor) shall be treated as a
disposition by the lessee of the qualified property that was subject
to the lease under subdivision (g).
(3) For purposes of determining the qualified cost paid or
incurred by a lessee in any leasing transaction that is treated as a
sale under Part 1 (commencing with Section 6001), the following rules
apply:
(A) Paragraph (1) of subdivision (b) is applied by substituting
the term "purchase" for the term "construction, reconstruction, or
acquisition."
(B) Paragraph (3) of subdivision (b) applies.
(C) The requirement of paragraph (2) of subdivision (b) are
treated as satisfied at the time that either the lessor or the
qualified taxpayer pays sales tax reimbursement or use tax under Part
1 (commencing with Section 6001).
(4) (A) In the case of any leasing transaction described in
paragraph (2), the lessor shall provide a statement to the lessee
specifying the amount of the lessor's original cost of the qualified
property and the amount of that cost upon which a sales or use tax
was paid within 45 days after the close of the lessee's taxable year
in which the credit is allowable to the lessee under this section.
(B) The statement required under subparagraph (A) shall be made
available to the Franchise Tax Board upon request.
(g) A credit is not allowed if the qualified property is removed
from the state, is disposed of to an unrelated party, or is used for
any purpose not qualifying for the credit provided in this section in
the same taxable year in which the qualified property is first
placed in service in this state. If any qualified property for which
a credit is allowed pursuant to this section is thereafter removed
from this state, disposed of to an unrelated party, or used for any
purpose not qualifying for the credit provided in this section within
one year from the date the qualified property is first placed in
service in this state, the amount of the credit allowed by this
section for that qualified property shall be recaptured by adding
that credit amount to the net tax of the qualified taxpayer for the
taxable year in which the qualified property is disposed of, removed,
or put to an ineligible use.
(h) 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 the seven succeeding years if necessary,
until the credit is exhausted.
(i) This credit shall be in lieu of any other credit or deduction
that the qualified taxpayer may otherwise be allowed pursuant to this
part.
SEC. 7. Section 17053.36 is added to the
Revenue and Taxation Code , to read:
17053.36. (a) For taxable years beginning January 1, 2015, and
before January 1, 2025, there shall be allowed as a credit against
the "net tax," as defined in Section 17039, an amount equal to 25
percent of the charges for electricity paid or incurred by a
qualified taxpayer during the taxable year.
(b) (1) For purposes of this section, "qualified taxpayer" means
any taxpayer that is an aerospace manufacturer or related business
operating within an Aerospace Innovation Hub.
(2) For the purposes of this subdivision, "Aerospace Innovation
Hub," "aerospace manufacturer," and "related business" have the same
meanings as defined in subdivisions (a), (b), and (c), respectively,
of Section 12099.8 of the Government Code.
(c) If 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 the succeeding seven years if necessary, until
the credit is exhausted.
(d) This credit shall be in lieu of any other credit or deduction
that the qualified taxpayer may otherwise be allowed pursuant to this
part.
SEC. 8. Section 17059.2 of the Revenue
and Taxation Code is amended to read:
17059.2. (a) (1) For each taxable year beginning on and after
January 1, 2014, and before January 1, 2025, there shall be allowed
as a credit against the "net tax," as defined in Section 17039, an
amount as determined by the committee pursuant to paragraph (2) and
approved pursuant to Section 18410.2.
(2) The credit under this section shall be allocated by GO-Biz
with respect to the 2013-14 fiscal year through and including the
2017-18 fiscal year. The amount of credit allocated to a taxpayer
with respect to a fiscal year pursuant to this section shall be as
set forth in a written agreement between GO-Biz and the taxpayer and
shall be based on the following factors:
(A) The number of jobs the taxpayer will create or retain in this
state.
(B) The compensation paid or proposed to be paid by the taxpayer
to its employees, including wages and fringe benefits.
(C) The amount of investment in this state by the taxpayer.
(D) The extent of unemployment or poverty in the area according to
the United States Census in which the taxpayer's project or business
is proposed or located.
(E) The incentives available to the taxpayer in this state,
including incentives from the state, local government, and other
entities.
(F) The incentives available to the taxpayer in other states.
(G) The duration of the proposed project and the duration the
taxpayer commits to remain in this state.
(H) The overall economic impact in this state of the taxpayer's
project or business.
(I) The strategic importance of the taxpayer's project or business
to the state, region, or locality.
(J) The opportunity for future growth and expansion in this state
by the taxpayer's business.
(K) The extent to which the anticipated benefit to the state
exceeds the projected benefit to the taxpayer from the tax credit.
(L) (i) Whether the taxpayer is an aerospace manufacturer or
related business operating within an Aerospace Innovation Hub.
(ii) For the purposes of this subparagraph, "Aerospace Innovation
Hub," "aerospace manufacturer," and "related business" have the same
meanings as defined in subdivisions (a), (b), and (c), respectively,
of Section 12099.8 of the Government Code.
(3) The written agreement entered into pursuant to paragraph (2)
shall include:
(A) Terms and conditions that include the taxable year or years
for which the credit allocated shall be allowed, a minimum
compensation level, and a minimum job retention period.
(B) Provisions indicating whether the credit is to be allocated in
full upon approval or in increments based on mutually agreed upon
milestones when satisfactorily met by the taxpayer.
(C) Provisions that allow the committee to recapture the credit,
in whole or in part, if the taxpayer fails to fulfill the terms and
conditions of the written agreement.
(b) For purposes of this section:
(1) "Committee" means the California Competes Tax Credit Committee
established pursuant to Section 18410.2.
(2) "GO-Biz" means the Governor's Office of Business and Economic
Development.
(c) For purposes of this section, GO-Biz shall do the following:
(1) Give priority to a taxpayer whose project or business is
located or proposed to be located in an area of high unemployment or
poverty.
(2) Negotiate with a taxpayer the terms and conditions of proposed
written agreements that provide the credit allowed pursuant to this
section to a taxpayer.
(3) Provide the negotiated written agreement to the committee for
its approval pursuant to Section 18410.2.
(4) Inform the Franchise Tax Board of the terms and conditions of
the written agreement upon approval of the written agreement by the
committee.
(5) Inform the Franchise Tax Board of any recapture, in whole or
in part, of a previously allocated credit upon approval of the
recapture by the committee.
(6) Post on its Internet Web site all of the following:
(A) The name of each taxpayer allocated a credit pursuant to this
section.
(B) The estimated amount of the investment by each taxpayer.
(C) The estimated number of jobs created or retained.
(D) The amount of the credit allocated to the taxpayer.
(E) The amount of the credit recaptured from the taxpayer, if
applicable.
(d) For purposes of this section, the Franchise Tax Board shall do
all of the following:
(1) (A) Except as provided in subparagraph (B), review the books
and records of all taxpayers allocated a credit pursuant to this
section to ensure compliance with the terms and conditions of the
written agreement between the taxpayer and GO-Biz.
(B) In the case of a taxpayer that is a "small business," as
defined in Section 17053.73, review the books and records of the
taxpayer allocated a credit pursuant to this section to ensure
compliance with the terms and conditions of the written agreement
between the taxpayer and GO-Biz when, in the sole discretion of the
Franchise Tax Board, a review of those books and records is
appropriate or necessary in the best interests of the state.
(2) Notwithstanding Section 19542:
(A) Notify GO-Biz of a possible breach of the written agreement by
a taxpayer and provide detailed information regarding the basis for
that determination.
(B) Provide information to GO-Biz with respect to whether a
taxpayer is a "small business," as defined in Section 17053.73.
(e) In the case where the credit allowed under this section
exceeds the "net tax," as defined in Section 17039, for a taxable
year, the excess credit may be carried over to reduce the "net tax"
in the following taxable year, and succeeding five taxable years, if
necessary, until the credit has been exhausted.
(f) Any recapture, in whole or in part, of a credit approved by
the committee pursuant to Section 18410.2 shall be treated as a
mathematical error appearing on the return. Any amount of tax
resulting from that recapture shall be assessed by the Franchise Tax
Board in the same manner as provided by Section 19051. The amount of
tax resulting from the recapture shall be added to the tax otherwise
due by the taxpayer for the taxable year in which the committee's
recapture determination occurred.
(g) (1) The aggregate amount of credit that may be allocated in
any fiscal year pursuant to this section and Section 23689 shall be
an amount equal to the sum of subparagraphs (A), (B), and (C), less
the amount specified in subparagraph (D):
(A) Thirty million dollars ($30,000,000) for the 2013-14 fiscal
year, one hundred fifty million dollars ($150,000,000) for the
2014-15 fiscal year, and two hundred million dollars ($200,000,000)
for each fiscal year from 2015-16 to 2017-18, inclusive.
(B) The unallocated credit amount, if any, from the preceding
fiscal year.
(C) The amount of any previously allocated credits that have been
recaptured.
(D) The amount estimated by the Director of Finance, in
consultation with the Franchise Tax Board and the State Board of
Equalization, to be necessary to limit the aggregation of the
estimated amount of exemptions claimed pursuant to Section 6377.1 and
of the amounts estimated to be claimed pursuant to this section and
Sections 17053.73, 23626, and 23689 to no more than seven hundred
fifty million dollars ($750,000,000) for either the current fiscal
year or the next fiscal year.
(i) The Director of Finance shall notify the Chairperson of the
Joint Legislative Budget Committee of the estimated annual allocation
authorized by this paragraph. Any allocation pursuant to these
provisions shall be made no sooner than 30 days after written
notification has been provided to the Chairperson of the Joint
Legislative Budget Committee and the chairpersons of the committees
of each house of the Legislature that consider appropriation, or not
sooner than whatever lesser time the Chairperson of the Joint
Legislative Budget Committee, or his or her designee, may determine.
(ii) In no event shall the amount estimated in this subparagraph
be less than zero dollars ($0).
(2) Each fiscal year, 25 percent of the aggregate amount of the
credit that may be allocated pursuant to this section and Section
23689 shall be reserved for small business, as defined in Section
17053.73 or 23626.
(3) Each fiscal year, no more than 20 percent of the aggregate
amount of the credit that may be allocated pursuant to this section
shall be allocated to any one taxpayer.
(h) GO-Biz may prescribe rules and regulations as necessary to
carry out the purposes of this section. Any rule or regulation
prescribed pursuant to this section may be by adoption of an
emergency regulation in accordance with Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code.
(i) A written agreement between GO-Biz and a taxpayer with respect
to the credit authorized by this section shall comply with existing
law on the date the agreement is executed.
(j) (1) Upon the effective date of this section, the Department of
Finance shall estimate the total dollar amount of credits that will
be claimed under this section with respect to each fiscal year from
the 2013-14 fiscal year to the 2024-25 fiscal year, inclusive.
(2) The Franchise Tax Board shall annually provide to the Joint
Legislative Budget Committee, by no later than March 1, a report of
the total dollar amount of the credits claimed under this section
with respect to the relevant fiscal year. The report shall compare
the total dollar amount of credits claimed under this section with
respect to that fiscal year with the department's estimate with
respect to that same fiscal year. If the total dollar amount of
credits claimed for the fiscal year is less than the estimate for
that fiscal year, the report shall identify options for increasing
annual claims of the credit so as to meet estimated amounts.
(k) This section is repealed on December 1, 2025.
SEC. 9. Section 23635 is added to the
Revenue and Taxation Code , to read:
23635. (a) For taxable years beginning on or after January 1,
2015, and before January 1, 2025, a qualified taxpayer shall be
allowed a credit against the "tax," as defined in Section 23036, an
amount equal to 10 percent of the qualified cost of qualified
property that is placed in service in this state during the taxable
year.
(b) For purposes of this section, "qualified cost" means any cost
that satisfies each of the following conditions:
(1) Is a cost paid or incurred by the qualified taxpayer for the
construction, reconstruction, or acquisition of qualified property
during the taxable year.
(2) Except as provided in paragraph (2) of subdivision (d) and
subparagraph (B) of paragraph (3) of subdivision (d), is an amount
upon which the qualified taxpayer has paid, directly or indirectly,
as a separately stated contract amount or as determined from the
records of the qualified taxpayer, sales tax reimbursement or use tax
under Part 1 (commencing with Section 6001).
(3) Is an amount properly chargeable to the capital account of the
qualified taxpayer.
(c) (1) (A) For purposes of this section, "qualified taxpayer"
means any taxpayer that is an aerospace manufacturer or related
business operating within an Aerospace Innovation Hub.
(B) For the purposes of this subdivision, "Aerospace Innovation
Hub," "aerospace manufacturer," and "related business" have the same
meanings as defined in subdivisions (a), (b), and (c), respectively,
of Section 12099.8 of the Government Code.
(2) "Qualified taxpayer" does not include a taxpayer whose
acquisition of tangible personal property is subject to the exemption
provided by Section 6377.1.
(3) In the case of any pass thru entity, the determination of
whether a taxpayer is a qualified taxpayer under this section shall
be made at the entity level and any credit under this section or
Section 23649 shall be allowed to the pass thru entity and passed
through to the partners or shareholders in accordance with applicable
provisions of Part 10 (commencing with Section 17001) or Part 11
(commencing with Section 23001). For purposes of this paragraph, the
term "pass thru entity" means any partnership or "S" corporation.
(4) The Franchise Tax Board may prescribe regulations to carry out
the purposes of this section, including any regulations necessary to
prevent the avoidance of the effect of this section through
splitups, shell corporations, partnerships, tiered ownership
structures, sale-leaseback transactions, or otherwise.
(d) For purposes of this section, "qualified property" means
property that is described as any of the following:
(1) Tangible personal property that is defined in Section 1245(a)
of the Internal Revenue Code that is primarily used for any of the
following:
(A) For the manufacturing, processing, refining, fabricating, or
recycling of property, beginning at the point at which any raw
materials are received by the qualified taxpayer 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.
(B) In research and development.
(C) To maintain, repair, measure, or test any property described
in this paragraph.
(D) For pollution control that meets or exceeds standards
established by the state or by any local or regional governmental
agency within the state.
(E) For recycling.
(2) The value of any capitalized labor costs that are directly
allocable to the construction or modification of property described
in paragraph (1).
(3) (A) Special purpose buildings and foundations that are
constructed or modified for use by the qualified taxpayer primarily
in a manufacturing, processing, refining, fabricating, or recycling
process, or as a research or storage facility primarily used in
connection with those processes.
(B) The value of any capitalized labor costs that are directly
allocable to the construction or modification of special purpose
buildings and foundations that are used primarily in the
manufacturing, processing,
refining, fabricating, or recycling process, or as a research or
storage facility primarily used in connection with those processes.
(C) (i) For purposes of this paragraph, "special purpose building
and foundation" means only a building and the foundation immediately
underlying the building that is specifically designed and constructed
or reconstructed for the installation, operation, and use of
specific machinery and equipment with a special purpose, which
machinery and equipment, after installation, will become affixed to
or a fixture of the real property, and the construction or
reconstruction of which is specifically designed and used exclusively
for the specified purposes as set forth in subparagraph (A).
(ii) A building is specifically designed and constructed or
modified for a qualified purpose if it is not economical to design
and construct the building for the intended purpose and then use the
structure for a different purpose.
(iii) For purposes of clause (i) and clause (vi), a building is
used exclusively for a qualified purpose only if its use does not
include a use for which it was not specifically designed and
constructed or modified. Incidental use of a building for
nonqualified purposes does not preclude the building from being a
special purpose building. "Incidental use" means a use that is both
related and subordinate to the qualified purpose. It will be
conclusively presumed that a use is not subordinate if more than
one-third of the total usable volume of the building is devoted to a
use that is not a qualified purpose.
(iv) In the event an entire building does not qualify as a special
purpose building, a taxpayer may establish that a portion of a
building, and the foundation immediately underlying the portion,
qualifies for treatment as a special purpose building and foundation
if the portion satisfies all of the definitional provisions in this
subparagraph.
(v) To the extent that a building is not a special purpose
building as defined above, but a portion of the building qualifies
for treatment as a special purpose building, then all equipment that
exclusively supports the qualified purpose occurring within that
portion and that would qualify as Internal Revenue Code Section 1245
property if it were not a fixture or affixed to the building shall be
treated as a cost of the portion of the building that qualifies for
treatment as a special purpose building.
(vi) Buildings and foundations that do not meet the definition of
a special purpose building and foundation set forth above include,
but are not limited to: buildings designed and constructed or
reconstructed principally to function as a general purpose
manufacturing, industrial, or commercial building; research
facilities that are used primarily prior to or after, or prior to and
after, the manufacturing process; or storage facilities that are
used primarily prior to or after, or prior to and after, completion
of the manufacturing process.
(4) Subject to the provisions in paragraph (2) of subdivision (b),
qualified property also includes computer software that is primarily
used for those purposes set forth in paragraph (1) of this
subdivision.
(5) Qualified property does not include any of the following:
(A) Furniture.
(B) Facilities used for warehousing purposes after completion of
the manufacturing process.
(C) Inventory.
(D) Equipment used in the extraction process.
(E) Equipment used to store finished products that have completed
the manufacturing process.
(F) Any tangible personal property that is used in administration,
general management, or marketing.
(e) 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 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 more than 50 percent.
(4) "Process" means the period beginning at the point at which any
raw materials are received by the qualified taxpayer and introduced
into that activity of the qualified taxpayer and ending at the point
at which the manufacturing, processing, refining, fabricating, or
recycling activity of the qualified taxpayer has altered tangible
personal property to its completed form, including packaging, if
required. Raw materials are considered to have been introduced into
the process when the raw materials are stored on the same premises
where the qualified taxpayer's manufacturing, processing, refining,
fabricating, or recycling activity is conducted. Raw materials that
are stored on premises other than where the qualified taxpayer's
manufacturing, processing, refining, fabricating, or recycling
activity is conducted, are not 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
property.
(6) "Refining" means the process of converting a natural resource
to an intermediate or finished product.
(7) "Research and development" means those activities that are
described in Section 174 of the Internal Revenue Code or in any
regulations thereunder.
(f) The credit allowed under subdivision (a) shall apply to
qualified property that is acquired by or subject to lease by a
qualified taxpayer, subject to the following special rules:
(1) A lessor of qualified property, irrespective of whether the
lessor is a qualified taxpayer, is not allowed the credit provided
under subdivision (a) with respect to any qualified property leased
to another qualified taxpayer.
(2) (A) For purposes of determining the qualified cost paid or
incurred by a lessee in any leasing transaction that is not treated
as a sale under Part 1 (commencing with Section 6001), the following
rules apply:
(i) Except as provided by subparagraph (C) of this paragraph,
paragraphs (1) and (3) of subdivision (b) do not apply.
(ii) Except as provided in subparagraph (B) and clause (iii), the
"qualified cost" upon which the lessee shall compute the credit
provided under this section shall be equal to the original cost to
the lessor (within the meaning of Section 18031) of the qualified
property that is the subject of the lease.
(iii) The requirement of paragraph (2) of subdivision (b) shall be
treated as satisfied only if the lessor has made a timely election
under either Section 6094.1 or subdivision (d) of Section 6244 and
has paid sales tax reimbursement or use tax measured by the purchase
price of the qualified property (within the meaning of paragraph (5)
of subdivision (g) of Section 6006). For purposes of this
subdivision, the amount of original cost to the lessor that may be
taken into account under clause (ii) may not exceed the purchase
price upon which sales tax reimbursement or use tax has been paid
under the preceding sentence.
(B) For purposes of applying subparagraph (A) only, the following
special rules shall apply:
(i) The original cost to the lessor of the qualified property
shall be reduced by the amount of any original cost of that property
that was taken into account by any predecessor lessee in computing
the credit allowable under this section.
(ii) Clause (i) does not apply in any case where the predecessor
lessee was required to recapture the credit provided under this
section pursuant to subdivision (g).
(iii) For purposes of this section only, in any case where a
successor lessor has acquired qualified property from a predecessor
lessor in a transaction not treated as a sale under Part 1
(commencing with Section 6001), the original cost to the successor
lessor of the qualified property shall be reduced by the amount of
the original cost of the qualified property that was taken into
account by any lessee of the predecessor lessor in computing the
credit allowable under this section.
(C) In determining the original cost of any qualified property
under this paragraph, only amounts paid or incurred by the lessor on
or after January 1, 2015, shall be taken into account.
(D) Notwithstanding subparagraph (A), in the case of any leasing
transaction for which the lessee is allowed the credit under this
section and thereafter the lessee (or any party related to the lessee
within the meaning of Section 267 or 318 of the Internal Revenue
Code) acquires the qualified property from the lessor (or any
successor lessor) within one year from the date the qualified
property is first used by the lessee under the terms of the lease,
the lessee's (or related party's) acquisition of the qualified
property from the lessor (or successor lessor) shall be treated as a
disposition by the lessee of the qualified property that was subject
to the lease under subdivision (g).
(3) For purposes of determining the qualified cost paid or
incurred by a lessee in any leasing transaction that is treated as a
sale under Part 1 (commencing with Section 6001), the following rules
apply:
(A) Paragraph (1) of subdivision (b) is applied by substituting
the term "purchase" for the term "construction, reconstruction, or
acquisition."
(B) Paragraph (3) of subdivision (b) applies.
(C) The requirement of paragraph (2) of subdivision (b) are
treated as satisfied at the time that either the lessor or the
qualified taxpayer pays sales tax reimbursement or use tax under Part
1 (commencing with Section 6001).
(4) (A) In the case of any leasing transaction described in
paragraph (2), the lessor shall provide a statement to the lessee
specifying the amount of the lessor's original cost of the qualified
property and the amount of that cost upon which a sales or use tax
was paid within 45 days after the close of the lessee's taxable year
in which the credit is allowable to the lessee under this section.
(B) The statement required under subparagraph (A) shall be made
available to the Franchise Tax Board upon request.
(g) A credit is not allowed if the qualified property is removed
from the state, is disposed of to an unrelated party, or is used for
any purpose not qualifying for the credit provided in this section in
the same taxable year in which the qualified property is first
placed in service in this state. If any qualified property for which
a credit is allowed pursuant to this section is thereafter removed
from this state, disposed of to an unrelated party, or used for any
purpose not qualifying for the credit provided in this section within
one year from the date the qualified property is first placed in
service in this state, the amount of the credit allowed by this
section for that qualified property shall be recaptured by adding
that credit amount to the net tax of the qualified taxpayer for the
taxable year in which the qualified property is disposed of, removed,
or put to an ineligible use.
(h) 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 the seven succeeding years if necessary, until
the credit is exhausted.
(i) This credit shall be in lieu of any other credit or deduction
that the qualified taxpayer may otherwise be allowed pursuant to this
part.
SEC. 10. Section 23636 is added to the
Revenue and Taxation Code , to read:
23636. (a) For taxable years beginning January 1, 2015, and
before January 1, 2025, there shall be allowed as a credit against
the "tax," as defined in Section 23036, an amount equal to 25 percent
of the charges for electricity paid or incurred by a qualified
taxpayer during the taxable year.
(b) (1) For purposes of this section, "qualified taxpayer" means
any taxpayer that is an aerospace manufacturer or related business
operating within an Aerospace Innovation Hub.
(2) For the purposes of this subdivision, "Aerospace Innovation
Hub," "aerospace manufacturer," and "related business" have the same
meanings as defined in subdivisions (a), (b), and (c), respectively,
of Section 12099.8 of the Government Code.
(c) If the credit allowed by this section exceeds the "tax," the
excess may be carried over to reduce the "tax" in the following year,
and the succeeding seven years if necessary, until the credit is
exhausted.
(d) This credit shall be in lieu of any other credit or deduction
that the qualified taxpayer may otherwise be allowed pursuant to this
part.
SEC. 11. Section 23689 of the Revenue
and Taxation Code is amended to read:
23689. (a) (1) For each taxable year beginning on and after
January 1, 2014, and before January 1, 2025, there shall be allowed
as a credit against the "tax," as defined in Section 23036, an amount
as determined by the committee pursuant to paragraph (2) and
approved pursuant to Section 18410.2.
(2) The credit under this section shall be allocated by GO-Biz
with respect to the 2013-14 fiscal year through and including the
2017-18 fiscal year. The amount of credit allocated to a taxpayer
with respect to a fiscal year pursuant to this section shall be as
set forth in a written agreement between GO-Biz and the taxpayer and
shall be based on the following factors:
(A) The number of jobs the taxpayer will create or retain in this
state.
(B) The compensation paid or proposed to be paid by the taxpayer
to its employees, including wages and fringe benefits.
(C) The amount of investment in this state by the taxpayer.
(D) The extent of unemployment or poverty in the area according to
the United States Census in which the taxpayer's project or business
is proposed or located.
(E) The incentives available to the taxpayer in the state,
including incentives from the state, local government and other
entities.
(F) The incentives available to the taxpayer in other states.
(G) The duration of the proposed project and the duration the
taxpayer commits to remain in this state.
(H) The overall economic impact in this state of the taxpayer's
project or business.
(I) The strategic importance of the taxpayer's project or business
to the state, region, or locality.
(J) The opportunity for future growth and expansion in this state
by the taxpayer's business.
(K) The extent to which the anticipated benefit to the state
exceeds the projected benefit to the taxpayer from the tax credit.
(L) (i) Whether the taxpayer is an aerospace manufacturer or
related business operating within an Aerospace Innovation Hub.
(ii) For the purposes of this subparagraph, "Aerospace Innovation
Hub," "aerospace manufacturer," and "related business" have the same
meanings as defined in subdivisions (a), (b), and (c), respectively,
of Section 12099.8 of the Government Code.
(3) The written agreement entered into pursuant to paragraph (2)
shall include:
(A) Terms and conditions that include the taxable year or years
for which the credit allocated shall be allowed, a minimum
compensation level, and a minimum job retention period.
(B) Provisions indicating whether the credit is to be allocated in
full upon approval or in increments based on mutually agreed upon
milestones when satisfactorily met by the taxpayer.
(C) Provisions that allow the committee to recapture the credit,
in whole or in part, if the taxpayer fails to fulfill the terms and
conditions of the written agreement.
(b) For purposes of this section:
(1) "Committee" means the California Competes Tax Credit Committee
established pursuant to Section 18410.2.
(2) "GO-Biz" means the Governor's Office of Business and Economic
Development.
(c) For purposes of this section, GO-Biz shall do the following:
(1) Give priority to a taxpayer whose project or business is
located or proposed to be located in an area of high unemployment or
poverty.
(2) Negotiate with a taxpayer the terms and conditions of proposed
written agreements that provide the credit allowed pursuant to this
section to a taxpayer.
(3) Provide the negotiated written agreement to the committee for
its approval pursuant to Section 18410.2.
(4) Inform the Franchise Tax Board of the terms and conditions of
the written agreement upon approval of the written agreement by the
committee.
(5) Inform the Franchise Tax Board of any recapture, in whole or
in part, of a previously allocated credit upon approval of the
recapture by the committee.
(6) Post on its Internet Web site all of the following:
(A) The name of each taxpayer allocated a credit pursuant to this
section.
(B) The estimated amount of the investment by each taxpayer.
(C) The estimated number of jobs created or retained.
(D) The amount of the credit allocated to the taxpayer.
(E) The amount of the credit recaptured from the taxpayer, if
applicable.
(d) For purposes of this section, the Franchise Tax Board shall do
all of the following:
(1) (A) Except as provided in subparagraph (B), review the books
and records of all taxpayers allocated a credit pursuant to this
section to ensure compliance with the terms and conditions of the
written agreement between the taxpayer and GO-Biz.
(B) In the case of a taxpayer that is a "small business," as
defined in Section 23626, review the books and records of the
taxpayer allocated a credit pursuant to this section to ensure
compliance with the terms and conditions of the written agreement
between the taxpayers and GO-Biz when, in the sole discretion of the
Franchise Tax Board, a review of those books and records is
appropriate or necessary in the best interests of the state.
(2) Notwithstanding Section 19542:
(A) Notify GO-Biz of a possible breach of the written agreement by
a taxpayer and provide detailed information regarding the basis for
that determination.
(B) Provide information to GO-Biz with respect to whether a
taxpayer is a "small business," as defined in Section 23626.
(e) In the case where the credit allowed under this section
exceeds the "tax," as defined in Section 23036, for a taxable year,
the excess credit may be carried over to reduce the "tax" in the
following taxable year, and succeeding five taxable years, if
necessary, until the credit has been exhausted.
(f) Any recapture, in whole or in part, of a credit approved by
the committee pursuant to Section 18410.2 shall be treated as a
mathematical error appearing on the return. Any amount of tax
resulting from that recapture shall be assessed by the Franchise Tax
Board in the same manner as provided by Section 19051. The amount of
tax resulting from the recapture shall be added to the tax otherwise
due by the taxpayer for the taxable year in which the committee's
recapture determination occurred.
(g) (1) The aggregate amount of credit that may be allocated in
any fiscal year pursuant to this section and Section 17059.2 shall be
an amount equal to the sum of subparagraphs (A), (B), and (C), less
the amount specified in subparagraph (D):
(A) Thirty million dollars ($30,000,000) for the 2013-14 fiscal
year, one hundred fifty million dollars ($150,000,000) for the
2014-15 fiscal year, and two hundred million dollars ($200,000,000)
for each fiscal year from 2015-16 to 2017-18, inclusive.
(B) The unallocated credit amount, if any, from the preceding
fiscal year.
(C) The amount of any previously allocated credits that have been
recaptured.
(D) The amount estimated by the Director of Finance, in
consultation with the Franchise Tax Board and the State Board of
Equalization, to be necessary to limit the aggregation of the
estimated amount of exemptions claimed pursuant to Section 6377.1 and
of the amounts estimated to be claimed pursuant to this section and
Sections 17053.73, 17059.2, and 23626 to no more than seven hundred
fifty million dollars ($750,000,000) for either the current fiscal
year or the next fiscal year.
(i) The Director of Finance shall notify the Chairperson of the
Joint Legislative Budget Committee of the estimated annual allocation
authorized by this paragraph. Any allocation pursuant to these
provisions shall be made no sooner than 30 days after written
notification has been provided to the Chairperson of the Joint
Legislative Budget Committee and the chairpersons of the committees
of each house of the Legislature that consider appropriation, or not
sooner than whatever lesser time the Chairperson of the Joint
Legislative Budget Committee, or his or her designee, may determine.
(ii) In no event shall the amount estimated in this subparagraph
be less than zero dollars ($0).
(2) Each fiscal year, 25 percent of the aggregate amount of the
credit that may be allocated pursuant to this section and Section
17059.2 shall be reserved for "small business," as defined in Section
17053.73 or 23626.
(3) Each fiscal year, no more than 20 percent of the aggregate
amount of the credit that shall be allocated pursuant to this section
may be allocated to any one taxpayer.
(h) GO-Biz may prescribe rules and regulations as necessary to
carry out the purposes of this section. Any rule or regulation
prescribed pursuant to this section may be by adoption of an
emergency regulation in accordance with Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code.
(i) (1) A written agreement between GO-Biz and a taxpayer with
respect to the credit authorized by this section shall not restrict,
broaden, or otherwise alter the ability of the taxpayer to assign
that credit or any portion thereof in accordance with Section 23663.
(2) A written agreement between GO-Biz and a taxpayer with respect
to the credit authorized by this section must comply with existing
law on the date the agreement is executed.
(j) (1) Upon the effective date of this section, the Department of
Finance shall estimate the total dollar amount of credits that will
be claimed under this section with respect to each fiscal year from
the 2013-14 fiscal year to the 2024-25 fiscal year, inclusive.
(2) The Franchise Tax Board shall annually provide to the Joint
Legislative Budget Committee, by no later than March 1, a report of
the total dollar amount of the credits claimed under this section
with respect to the relevant fiscal year. The report shall compare
the total dollar amount of credits claimed under this section with
respect to that fiscal year with the department's estimate with
respect to that same fiscal year. If the total dollar amount of
credits claimed for the fiscal year is less than the estimate for
that fiscal year, the report shall identify options for increasing
annual claims of the credit so as to meet estimated amounts.
(k) This section is repealed on December 1, 2025.
SEC. 12. Section 10215.2 is added to the
Unemployment Insurance Code , to read:
10215.2. (a) Upon appropriation by the Legislature, the panel
shall reimburse an employer that is an aerospace manufacturer or
related business operating within an Aerospace Innovation Hub for its
reasonable costs of workforce training.
(b) The aerospace manufacturer or related business shall apply for
reimbursement in such form and providing such information as may be
required by the panel.
(c) For the purposes of this section, "Aerospace Innovation Hub,"
"aerospace manufacturer," and "related business" have the same
meanings as defined in subdivisions (a), (b), and (c), respectively,
of Section 12099.8 of the Government Code.
SEC. 13. No reimbursement is required by this act
pursuant to Section 6 of Article XIII B of the California
Constitution because a local agency or school district has the
authority to levy service charges, fees, or assessments sufficient to
pay for the program or level of service mandated by this act, within
the meaning of Section 17556 of the Government Code.
SECTION 1. It is the intent of the Legislature
to enact legislation to create the California Aerospace Innovation
Hub Act of 2014 to improve the ability of the state to retain and
attract aerospace businesses and the high-wage, middle-class jobs
that these businesses provide. It is the intent of the Legislature to
enact legislation that would create
geographically based aerospace hubs around
existing aerospace manufacturing clusters, and that within the
aerospace hubs aerospace manufacturers and related businesses would
benefit from special tax preferences, streamlined regulations, and
work schedule flexibility.
