• Sales Tax Exemption for Manufacturing Equipment. AB 80 (Houston), AB 344 (Villines) and AB 1580 (Torrico), exempting manufacturing and telecommunications equipment from sales tax, were held by the committee on the suspense file. An impressive array of taxpayers and taxpayer organizations turned out, to no avail, to support AB 1580. Speaking for the California Manufacturers and Technology Association, Mr. Sutton said economists on both ends of the spectrum say taxing manufacturing equipment is poor tax policy.
  
  A plant owner from Kingsburg said he is considering whether to invest $80 million in new equipment or moving operations out of state. “Do we invest or move?” he asked. Others voicing support included New United Motors, Cal-Tax, Cingular Wireless, SBC, Intel and the California Chamber of Commerce. Lenny Goldberg spoke in opposition, saying the recently expired manufacturers’ investment credit didn’t work

• MIC for Very Tiny Businesses. Legislation providing a sales tax exemption and corporate tax credit for purchase of manufacturing equipment, but excluding almost all businesses, (AB 845, Ridley-Thomas) was held. Only taxpayers with gross assets of $5 million or less used in the manufacturing process could qualify.

• Manufacturers Investment Credit. Placed on suspense was SB 552 (Alquist), providing a full state sales tax exemption on purchases of manufacturing equipment. Senator Alquist said the exemption would not go into effect until the state’s economy improves. She said it was unfair under the existing system to tax a company twice, first on investment and then on production.

  CTRA’s Goldberg said in opposition to the bill that it is much broader than previous MIC measures, and probably would result in a $3 billion annual revenue loss to the state. He suggested that revenue-neutrality discussions commence, offsetting the revenue loss with a split-roll property tax. No one seemed to react to this specific “offer.” However, Senator Mike Machado, the committee chair, said he agreed that business “inputs” should not be taxed and added that it “is somewhat premature” to consider this bill “given the (tax system) structural problems in the state.” He reiterated that he would hope the Legislature would not engage in piecemeal tax policy changes.

• MIC: Bills Would Restore the Tax Credit as reported in Caltaxletter, March 4, 2005.

• MIC Sales Tax Exemption: AB 845 (Ridley-Thomas) beginning on or after January 1, 2006, allows a sales tax exemption for property purchased for “manufacturing, processing, fabricating, or recycling of property,” and revives the 6% tax credit for the amount paid for qualified property. The sales tax exemption and tax credit would cease on the earlier of: January 1, 2012 and January 1, 2011, respectively – or a specified employment determination by the EDD.

• MIC: Meat or Poultry Processing. AB 1028 (Jerome Horton) allows a 6% corporate tax credit for qualified property, as defined. In general, the credit would be for property used for manufacturing and processing meat or poultry, as provided.

• MIC: Telecommunications and Manufacturing Equipment. AB 1580 (Torrico) declares legislative intent to exempt from sales tax manufacturing equipment and telecommunications equipment used in the manufacturing process.

• MIC: Research and Development Activity. SB 552 (Alquist) exempts from sales tax purchases manufacturing equipment, including research and development activities, as specified. The bill provides that for purchases made on or after January 1, 2006, the exemption be implemented through a specified refund procedure, and states that the exemption would apply to local sales or transactions and use taxes, unless the governing body of the taxing county, city, or district votes otherwise.

• Expanded MIC Revived. SB 631 (Dutton) exempts from sales tax purchases of manufacturing equipment, including generation of electricity, and revives the 6 percent income and corporate tax credit for purchase of qualified property, as defined.

• Manufacturers’ Investment Tax Credit. AB 344 (Villines) state legislative intent to restore the manufacturers’ investment tax credit. 

• BOE Approves More MIC Sales Tax Refunds as reported in Caltaxletter, January 28, 2005.

• Manufacturing Equipment Exemption Regulations Repealed. The board repealed Sales Tax Regulation 1525.2 and 1525.3, relating to the manufacturing equipment sales tax exemption on the theory that the exemption expired at the end of 2003. Staff presented the action as a Section 100 change, with no regulatory effect. This procedure exempts the process from notice and public hearing requirements of the Administrative Procedures Act. (Caltaxletter, December 17, 2004)

• Sales Tax Refunds of Unusable MIC Credits Granted. Three sales tax appeals involving refunds of amounts of manufacturers’ investment credit not able to be claimed on corporate tax returns were approved by the board. (Appeal of Lightwave Electronics Corporation, Appeal of Grundfos Holding Corporation and Appeal of Conextant Systems).

• Manufacturing Personal Property Purchase Tax Credit. AB 2484 (Ridley-Thomas) was amended May 18, 2004 to delete prior contents and add provisions establishing a 6 percent tax credit for purchase or lease by a small manufacturing business of specified property. The bill also provides for a sales tax exemption for such property.

  Property eligible for the credit includes property used for manufacturing, processing, fabricating, testing pollution control or recycling. Computer software is also included.

  It is unclear whether “capital labor” is included. One provision requires a sales tax to be paid on the property, except for computer software. Another provision says “qualified property” means “the value of any capitalized labor costs that are directly allocable to the construction of the property described (above).”

  In order to be a “qualified taxpayer” eligible for the credit, the taxpayer must:

  • Have as its principal business activity in businesses described in Codes 331 to 339999 of NAICS (North American Industrial Code System).

  • Have “gross aggregate gross assets” in the manufacturing activity that do not exceed $5 million.

  • Maintain or increase the average number of manufacturing jobs reported in 2003.

  • Agree to provide the Franchise Tax Board with additional information and permit the FTB to disclose the information with the Legislative Analyst.

• Assembly Rev & Tax: From "MIC" to "MTJIC" as reported in Caltaxletter, May 14, 2004.

• MIC for Bio-Tech Companies Approved. The committee, by a 4-0 vote, approved SB 1572 (Alpert), creating a manufacturing incentive tax credit for bio-tech companies. The credit would equal 15 percent of the increase in California investments if it exceeds $50 million. Further, to be eligible, the taxpayer must create 50 new jobs. The credit would increase if there is greater investment and more new jobs created.
  
  Senator Alpert said the incentive is needed as bio-tech investment will double in the next decade and companies are deciding now where to invest. Jim Gross, representing Genentech, said California doesn’t have a mechanism to encourage business to come to or stay in California.
  
  The bill was opposed by Lenny Goldberg, who said the investment would happen anyway.

• MIC for New Companies. The committee heard but did not act on SB 1554 (Karnette), reinstating the manufacturers investment tax credit (equal to the state’s 6 percent share of the sales tax). It would be available only to newly formed companies in California or those moving here from elsewhere, and for only the first three years of operation. The measure’s sponsors include the California Chamber of Commerce, the Silicon Valley Manufacturing Group, the California Manufacturers and Technology Association and the American Electronics Association. Opposing the bill was the CTRA. The bill was held on the panel’s suspense file. (Caltaxletter, April 16, 2004.)

• Expanded MIC Revived. AB 1998 (Dutton) exempts from sales tax purchases of manufacturing equipment, including generation of electricity, and revives the 6 percent income and corporate tax credit for purchase of qualified property, as defined. (Caltaxletter, February 20, 2004.)

• MIC Extension. AB 2070 (Houston) extends indefinitely the manufacturing property sales tax exemption for new businesses and the 6 percent tax credit for purchases of manufacturing equipment. (Caltaxletter, February 20, 2004.)

• MIC for Electricity-Generating Property. AB 2076 (Dutton) establishes a 6 percent tax credit for the amount paid for qualified property for generation of electricity. (Caltaxletter, February 20, 2004.)

• MIC Credit: Increase & Extension. SB 1295 (Morrow) extends the MIC sales tax exemption for new business indefinitely and increases to 8 percent for an indefinite period the tax credit for the amount paid for specified new manufacturing equipment. (Caltaxletter, February 20, 2004.)

• MIC Extension Proposal Killed by Senate Tax Panel as reported in Caltaxletter, January 16, 2004.

• Manufacturer Income Tax Credit: Extension and Increase. AB 1270 (Dutton) was amended January 5 to extend the credit indefinitely and increase the credit from 6 percent to 8 percent. (Caltaxletter, January 9, 2004.)

• FTB: MIC Expires Next Year as reported in Caltaxletter, December 19, 2003.

• MIC: R.I.P. The manufacturers’ investment tax credit (MIC) is history for 2004 as last-minute efforts to extend the existing tax credit found no support among Democrats. According to Capitol sources, the only way Governor Davis and key Democrats would consider a MIC extension would be in combination with a $350 million to $400 million tax increase on business taxpayers. Efforts to reinstate the credit will be made next year. (Caltaxletter, September 12, 2003.)

• MIC Extension Proclaimed Dead. The Burton-Brulte budget compromise does not include an extension of the manufacturers’ investment tax credit beyond its imminent sunset date in December. Senator Brulte has been trying to save the credit, but Democrats say a deal is impossible. “The MIC is dead,” said Senator Dan Perata. Jack Stewart, president of the California Manufacturers and Technology Association, said failure to renew the credit will send a signal to business that “Sacramento just doesn’t give a damn about business.”

• Caltaxletter article: July 11, 2003. Rehearing Denied on Columbia Steel MIC Decision

• Caltaxletter article: June 13, 2003. Business Urges MIC Extension

• Joint letter to Governor Gray Davis on extending the Manufacturer's Investment  Tax Credit.

• Caltaxletter article: June 6, 2003. BOE Finalizes Baxter Decision; Will Reconsider Deadlocked Case

• Caltaxletter article: May 16, 2003. Migden: Unable to Zap the MIC, She Vows to Police It

• Caltaxletter article: May 9, 2003. Assembly Tax Panel's Suspense File Gets Fatter

• Caltaxletter article: May 2, 2003. Senate MIC Hearing: No Action Taken

• Caltaxletter article: April 25, 2003. Dueling MIC Bills are Debated Before Assembly Tax Panel

• Caltaxletter article: April 25, 2003. MIC Under Attack by California Budget Project

• Does California Mean Business Anymore? By Jack Stewart.

• Caltaxletter article: February 7, 2003. Business Turns Out to Support MIC Extension

• Caltaxletter article: February 7, 2003. BOE: Taxpayer Wins Another MIC Appeal

• Caltaxletter article: December 6, 2002. Speculation Swirls About the MIC Beyond 2003

Legislation:

• MIC Credit Extension. AB 122 (Calderon) extends the MIC and the new business investment partial sales tax exemption to 2006 or to the earliest date thereafter that manufacturing job growth dips below a threshold of 100,000 higher than 1994 levels.

• MIC Repeal. AB 651 (Corbett) was amended on April 24 to phase out the manufacturers’ investment tax credit over five years and phase-in a new 2 percent (growing to 7 percent) tax credit for taxpayers participating in a Career Technical Education Campaign.

  (As Introduced) MIC: New Qualification Proposed. AB 651 (Corbett) disallows the manufacturers investment sales tax exemption and tax credit unless the business is certified as a participant in the Career Technical Education Campaign.

• MIC Tax Credit: Electric Power Plants. AB 1270 (Dutton) expands the manufacturers’ income tax credit and new manufacturers’ sales tax exemption to cover electricity generating facilities.

• MIC Sales Tax Exemption Reform. AB 1665 (Runner) reforms the manufacturing investment partial sales tax exemption. The bill includes telecommunications property as eligible for the exemption, allows existing business to qualify for the exemption, allows the sales tax exemption to be claimed in addition to the MIC and makes the exemption permanent.

• MIC Sales Tax Exemption Reform. AB 1674 (Dutra) is the same as AB 1665 above.

• MIC Credit Extension. SB 47 (Ackerman) repeals the sunset provisions of the manufacturers’ investment credit and the partial sales tax exemption for purchase of manufacturing equipment by new businesses.

• MIC Credit Increase and Extension. SB 137 (Morrow) increases the manufacturers investment credit to 8 percent and extends it and the partial sales tax exemption indefinitely.

• MIC Credit. SB 454 (Vasconcellos) extends the manufacturing investment sales tax exemption and tax credit to an unspecified date if unspecified job criteria are met.

• MIC Credit Extension. SB 2X (Poochigian) repeals the sunset provisions in the manufacturers’ investment credit and partial sales tax exemption for purchase of manufacturing equipment by new businesses.