The Senate Revenue and Taxation Committee reviewed two sales tax exemptions for manufacturing equipment at its April 28 hearing, but did not approve either one. The committee sent SB 1053 (Runner) to the "suspense file," and killed SBX6 8 (Dutton). Both bills would have exempted manufacturers from paying sales tax on equipment they purchase, creating incentives for expanded business in the state.
Senator Bob Dutton noted that California is one of only three states that taxes purchases made by manufacturers, and the other two states offer tax credits, which California does not.
Cal-Tax Legislative Advocate Suzanne Sutton testified in support of both measures.
California Manufacturing and Technology Association Legislative Director Gregory Hines also testified in support, telling the committee that the legislation would offer businesses incentives to expand in California and start hiring Californians.
Senator Elaine Kontominas Alquist, whose late husband, Senator Al Alquist, authored the manufacturing investment credit in 1993, said she greatly supported the concept and said she has produced more legislation on the subject of exempting manufacturers from paying sales taxes on equipment than anyone else. However, she said the bills meet the criteria for going to the suspense file.
In opposing both bills, committee chair Senator Lois Wolk said she is deeply concerned about the added costs that a sales tax exemption would bring to the state.
The vote on SBX6 8 was 2-2, split along party lines. Senators Alquist and Wolk opposed the bill, Senators Walters and Roy Ashburn voted in support, and Senator Alex Padilla did not vote.
"Today is a setback in our effort to help California's private businesses compete nationally and globally," Senator Dutton said after the vote. "But despite the setback I will continue to fight for private sector jobs because ensuring that these jobs have a chance to grow and prosper is the only way that California's economy is going to turn around."
(Cal-Tax: The committee sends bills to the suspense file if they have significant costs, based on the theory that holding such bills is a good practice, so their relative costs and benefits can be prioritized later. The expressed intent is to avoid passing bills on a piecemeal basis and then later finding out the cumulative cost is too unwieldy for the state. In practice, however, the suspense file often is used simply to kill bills without a vote.)
In other committee action:
Use Tax Filing Deadline Bill Still Pending. Hoping to modify use tax filing deadlines, Gina Rodriquez, a representative from Spidell Publishing, told the committee that while "we all know use tax filing is not new," many tax practitioners and tax software companies were never informed about last year's use tax filing changes. Ms. Rodriquez is sponsoring SB 884 (Ashburn) to change the use tax filing deadline from April 15 to later in the fall so the deadline will correspond with other business tax filings.
The committee did not vote on the bill, but it remains alive and is expected to come back for a vote in May.
Cal-Tax Legislative Advocate Suzanne Sutton and Mr. Goldberg both testified in support of the bill.
State Board of Equalization staff were present during the discussion and said that BOE Chair Betty Yee believes that changing the deadline would create an administrative burden, and that it would be better if late filing penalties could be abated, and that staff hold interested parties meetings to correct the process instead.
Senator Wolk, the committee chair, said she would be more comfortable if the bill had full support of the BOE, and she directed the bill's author to work with the BOE.
Veterans Tax Credit Sent to Suspense. The committee sent SB 1056 (Denham), a bill that would give a tax credit to businesses that hire veterans, to the suspense file. Union lobbyists testified against the measure, claiming that the legislation would apply too broadly. Senator Alquist said she liked the idea, and asked to be added as a co-author.
Committee Approves Tax Credit Allocation Measure. SB 1216 (Cedillo), specifying how the California Tax Credit Allocation Committee (CTCAC) may allocate credits, was approved on a bipartisan 4-0 vote and now goes to the Senate Appropriations Committee.
The bill amends the three sections of state law that provide for low-income housing tax credits to allow CTCAC to swap state credits for federal credits in any year in which it has a surplus, up to 80 percent of a project's basis. CTCAC may not exceed the total credit allowable for a project under federal law.
The Franchise Tax Board estimated that SB 1216 will have no fiscal impact until the 2013-14 fiscal year, at which time it would cause revenue losses of $500,000 in that year and the subsequent two fiscal years.
Cal-TaxReports, May 3, 2010
© 2010 California Taxpayers'
Association.
All Rights Reserved.