(May 1, 2007) The California Chamber of Commerce is supporting two bills that will help stimulate growth and investments in California manufacturing and research and development.

• AB 1152 (Niello; R-Fair Oaks) encourages manufacturers to retain and expand precious manufacturing operations and jobs in California by allowing for a partial sales tax exemption on purchases of new manufacturing equipment, which is currently offered by many other states.
• AB 1206 (Smyth; R-Santa Clarita) encourages investment in California-based research and development (R&D) activities and jobs by creating a partial sales tax exemption for purchases of equipment used in R&D.

Send legislators a letter of support.

Manufacturing
California manufacturing jobs make up approximately 10 percent of California’s jobs, about 1.5 million employees, and about 14 percent of its gross state product.

As companies make long-term investment decisions, they look at a variety of factors, including a state’s manufacturing investment incentives. States that compete for business with California often offer a sales tax credit or exemption on purchases of manufacturing equipment. Unfortunately, in 2002, California’s manufacturer’s investment credit (MIC) was allowed to lapse. Signed into law in 1993, the MIC was credited with helping restore California’s economic vitality after the recession of the early 1990s.

The CalChamber believes the time is right for California to prioritize and take aggressive action to retain and grow its manufacturing jobs. Adoption of the sales tax exemption provided by AB 1152 is an investment with returns this state needs — more investments and jobs, a better economy, and more income and corporate tax revenues.

Research and Development
California currently ranks first in the nation in research and development (R&D) performance, accounting for more than one-fifth of total U.S. R&D. The state’s universities rank number five in U.S. R&D among universities.

AB 1206 seeks to end the double taxation currently imposed upon R&D activities — taxation of the equipment used in R&D and then taxation of the product of the R&D when it is sold. California's existing 15 percent R&D tax credit applies only to labor costs and not equipment.

California needs to proactively maintain and expand its leading edge in R&D innovation and talent, as it competes for R&D investments, jobs and knowledge capital, not only with other states but other countries like India and China, which are aggressively working to expand their innovation output. The 2006 Pollina Corporate Real Estate, Inc. study reports that growing numbers of Silicon Valley professionals are heading to India to start new businesses with U.S. funding or to expand R&D labs for Silicon Valley companies. Meanwhile, the Chinese government has tripled its spending on R&D since 1998.

Strengthening California’s R&D incentives will bolster R&D activity in both the industry sector and the state's universities, stimulating the state's economy with additional investments and jobs and helping California to maintain its R&D leadership.

Action Needed
AB 1152 and AB 1206 are scheduled to be heard May 7 by the Assembly Revenue and Taxation Committee.

Contact your Assembly member and members of the Assembly Revenue and Taxation Committee and ask them to support AB 1152 and AB 1206.

For an easy-to-use sample letter, visit www.calchambervotes.com

Staff Contact: Kyla Christoffersen