(April 21, 2006) California Chamber-supported bills to provide businesses with investment incentives that will help California compete for quality jobs are set for hearings next week.
Scheduled to be heard on April 24 in the Assembly Revenue and Taxation Committee is AB 2032 (Lieu; D-Torrance), which boosts the state’s competitiveness by increasing the research and development tax credit for businesses from 15 percent to 20 percent to bring it into full conformity with federal law.
On the April 26 hearing agenda for the Senate Revenue and Taxation Committee are SB 1291 (Alquist; D-Santa Clara) and SB 1643 (Runner; R-Lancaster). Both bills encourage investment in California and help revitalize the manufacturing industry by reinstating a limited sales and use tax exemption. SB 1291 establishes the tax exemption for the sale of manufacturing materials. SB 1643 sets up the tax exemption for manufacturing equipment for start-up companies.
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“California must once again provide businesses with investment incentives as well as reward those that do,” said Kyla Christoffersen, Chamber legislative advocate. “To complement these efforts, the state also should work to remove bureaucratic and regulatory barriers to job creation.”
Research and Development
The state’s research and development tax credit has remained at 15 percent since the last increase in the 2000-2001 state budget and should be updated to more appropriately reflect inflation and increases in costs associated with research and development, as well as to bring California’s credit into full conformity with the 20 percent credit provided under federal law.
Besides encouraging growth in research and development, the increase in the research and development tax credit will help California compete with other states for production and manufacturing jobs in aerospace, biotechnology, computer and other high-technology industries.
Boost for Manufacturing
California’s economic recovery cannot succeed without business investment and job creation. During the recession of the 1990s, the manufacturer’s investment tax credit was a critical component to the state’s recovery. After the 1990s, California ceased offering tax incentives for investment in manufacturing equipment, becoming one of the only states that taxes manufacturing equipment with no exemption or credit.
By establishing the sales and use tax exemption on the purchase of manufacturing materials (SB 1291) and reinstating the exemption for the purchase of manufacturing equipment (SB 1643), California will send an important message to the business community that the state values and wants to encourage investment.
Action Needed
The Chamber is urging employers to contact their legislators and members of the Assembly and Senate Revenue and Taxation committees to voice support for AB 2032, SB 1291 and SB 1643.
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Staff Contact: Kyla Christoffersen