(April 6, 2011) The California Chamber of Commerce is urging the author to amend legislation requiring all future-enacted investment credits to sunset after seven years.

The automatic seven-year sunset requirement in SB 508 (Wolk; D-Davis) will discourage investment in the state because it creates uncertainty for California employers making long-term investment decisions, the CalChamber argues.

The bill is scheduled to be considered April 11 by the Senate Appropriations Committee.

When businesses choose to locate in a state, factors such as the availability of a skilled workforce, infrastructure, regulatory environment, and tax structure all play a significant role, the CalChamber contends. Businesses evaluate whether they can rely on these factors to remain relatively stable and consistent in the long term.

For capital-intensive industries like manufacturing and research and development, investment decisions are made many years into the future. The ability for corporate decision-makers in these industries to plan anticipated costs over a span of many years is an important factor when determining locations for these investments.

Establishing an arbitrary seven-year sunset puts the long-term viability of any credit in jeopardy and, in many cases, could ultimately render the credit’s value useless in a company’s final siting determination, the CalChamber has pointed out.

The CalChamber and other business groups have urged the author to amend the arbitratory seven-year sunset requirement and allow individual tax credits introduced in the future to be evaluated on their merit and have a reasonable sunset applied, if appropriate.

Key Vote

SB 508 passed the Senate Governance and Finance Committee on March 30 without changes on a party-line vote.

Ayes: Wolk (D-Davis), DeSaulnier (D-Concord), Hancock (D-Berkeley), Hernandez (D-West Covina), Kehoe (D-San Diego), Liu (D-La Cañada Flintridge).

Noes: Huff (R-Diamond Bar), LaMalfa (R-Richvale).

No vote recorded: Fuller (R-Bakersfield).

Action Needed

The CalChamber is asking businesses to contact their senator and members of Senate Appropriations to urge them to oppose SB 508 unless it is amended.

Staff Contact: Mira Guertin