BILL ANALYSIS Ó
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: SB 116 HEARING: 7/13/11
AUTHOR: de León FISCAL: Yes
VERSION: 7/7/11 TAX LEVY: No
CONSULTANT: Miller
MANDATORY SINGLE SALES FACTOR
(1) Makes single sales factor mandatory; (2) Expands the
2009 jobs credit; (3) Adds a manufacturing equipment sales
& use tax exemption; (4) Creates a new education credit;
(5) Changes the cost of performance/market rule for cable
companies; (6) Allows an election of single factor or 3
factor only when the tax is greater under the 3 factor
formula.
Existing Law
I. Apportionment Formula . A multistate firm generates
profits based on its operations in many states, and has a
right under the U.S. Constitution to divide income between
these states for tax purposes, a process known as
"apportionment," to ensure that no state taxes more than
its fair share of that firm's income. The 1957 Uniform
Division of Income for Tax Purposes Act (UDITPA) created
the three-factor double weighted apportionment framework to
capture the factors of production; specifically, property
to represent capital, payroll to represent labor, and sales
to represent market presence.
In 1966, California adopted UDITPA where each of the three
factors had an equal weight of one-third. In 1993,
California adopted a "double-weighted" formula, reducing
the formula's weights on both property and payroll from
33.3% to 25%, but increasing the weight on sales from
33.3% to 50%, thereby reducing that share of a the firm's
income apportioned to states where it employs relatively
more people and produces more goods in the state compared
to its sales. Under the change, a firm with all or most of
its production and payroll in California, but a smaller
share of its sales, benefits from the change, whereas a
firm that either employs few or no people or owns little to
no property here, but sells into California, pays more tax.
SB 116 -- 7/7/11 -- Page 2
Many other states also changed the apportionment weights
in the 1980s and 1990s to induce firms to maintain or
relocate facilities and employees in the state.
Starting in 2011, California's apportionment formula allows
multi-state firms to annually choose either the above
apportionment formula or to use only its sales, commonly
known as the "single sales factor."
Each of the factors in the apportionment formula is a
fraction: the numerator is the value of the item in
California and the denominator is the value of the item
everywhere. The property factor generally includes all
tangible property owned or rented during the taxable year.
The payroll factor includes all forms of compensation paid
to employees. The sales factor includes all gross receipts
from the sale of tangible and intangible property.
Since 1993, the apportionment formula for most taxpayers
has been a three-factor double weighted formula consisting
of payroll, property and double weighted sales as
illustrated below.
---------------------------------------------------------
| Average | + |Average |+ |Californ|) | California |
|Californi| |Californ| (2x| ia | = |Apportionment|
| a | | ia | | Sales | | Formula |
|Property | |Payroll | | | | |
|---------+----+--------+------+--------+---+-------------|
| Average | |Average | | Total | | |
| Total | | Total | | Sales | | |
|Property | |Payroll | | | | |
---------------------------------------------------------
The only exceptions to this rule are four industries:
agriculture, extraction, including oil, savings and loan
and financial services. These four industries must use the
three factor formula without the double weighted sales
factor.
Beginning in 2011, as illustrated below, a qualified
business may elect to use a single sales factor based on
100 percent sales, instead of the three factor formula
described above. The industries listed above still do not
qualify for the single sales factor.
SB 116 -- 7/7/11 -- Page 3
---------------------------
|Californi| = |California |
| a Sales | |Apportionmen|
| | | t Formula |
|---------+----+------------|
| Total | | |
| Sales | | |
---------------------------
II. Intangible Sourcing . As part of the budget agreement
of 2010 (SB 858, Committee on Budget & Fiscal Review,
2010), taxpayers electing the three-factor, double-weighted
sales formula must use the cost of performance method to
source sales of intangible items starting with the 2011
taxable year; taxpayers electing sales factor-only
apportionment of income must source the sales of
intangibles to California using the market rule.
Intangibles are everything that isn't "stuff", and include
all services, such as online stockbrokers and
telecommunications, and licenses to operate software
programs, among others.
Sales of Intangibles - "Costs of Performance ." A company
includes no revenue from its sales of intangibles to
California in the sales factor if the firm incurs a
plurality of the costs associated with developing these
products or services in another state; if the plurality
occurs in California, then the company includes all of its
sales in its California sales factor. For example, a
company that produces streaming video may spend $500,000 in
California and $520,000 in Oregon when developing the
service. The firm does not include any sales of its sales
of streaming video in this state in its California sales
factor, because it incurred most of its costs of
performance outside the state. Had the firm incurred most
of its costs of performance in California, the taxpayer
must include all of its sales of the video service in its
California sales factor.
Sales of Intangibles - "The Market Rule ." Under the
competitively-neutral market rule, all firms source these
sales based on the state in which the product or service is
ultimately used, so all firms report sales based on how
much they sell in the state, instead of where they invested
when developing the intangible item or service. Each
license for an operating system used on a California
SB 116 -- 7/7/11 -- Page 4
personal computer would be included in the software firm's
California sales factor. In the example above, the firm
would include its sales of the video service to customers
in this state in its California sales factor.
The following chart summarizes California's history of both
apportionment and intangibles.
----------------------------------------------------------
| |1966 - |1993-2010 |2011 |
| |1992 | | |
|-------------+-----------+--------------+-----------------|
|Apportionment|3-factor |3-factor |Elective |
| |formula |formula |(3-factor |
| | |(double-weight|formula with |
| | |ed sales |double weighted |
| | |factor) |sales or single |
| | | |sales factor) |
|-------------+-----------+--------------+-----------------|
|Intangibles |Costs of |Costs of |Cost of |
| |performance|performance |performance if |
| | | |elect 3-factor; |
| | | |formula; market |
| | | |rule if single |
| | | |sales factor |
| | | |elected |
| | | | |
----------------------------------------------------------
III. Jobs Tax Credit . Current state law, SB x 3 15
(Calderon, 2009) allows a credit for taxable years
beginning on or after January 1, 2009, for a qualified
employer in the amount of $3,000 for each qualified
full-time employee hired in the taxable year, determined on
an annual full-time equivalent basis. The calculation of
annual full-time would be the total number of hours worked
for the taxpayer by the employee (not to exceed 2,000 hours
per employee) divided by 2,000. This credit is allocated
by the Franchise Tax Board (FTB) and has a cap of $400
million for all taxable years. The credit remains in
effect until December 1 of the calendar year after the year
in which the cumulative credit limit has been reached and
is repealed after that date. Any credits not used in the
taxable year may be carried forward up to eight taxable
years.
SB 116 -- 7/7/11 -- Page 5
A qualified employer is a taxpayer employing 20 or less
employees.
In addition, both the Personal Income Tax Law (PITL) and
Corporation Tax Law (CTL) provisions regarding this credit
contain certain anti-abuse rules. These rules were
designed to prevent an existing business from being treated
as first commencing business in the state when the business
simply changed structure, i.e. changed from a sole
proprietor to an S-corporation.
IV. Sales & Use Tax . Existing law provides no special tax
treatment to entities engaged in manufacturing or software
production for purchases of equipment and other supplies.
Business entities engaged in manufacturing, research and
development, and software producing activities that make
purchases of equipment and supplies for use in the conduct
of their manufacturing and related activities are required
to pay sales and use tax on their purchases to the same
extent as any other person either engaged in business in
California.
The state sales and use tax rate is 8.25% as detailed
below. Cities and Counties may increase the sales and use
tax rate up to 2% for either specific or general purposes
with a vote of the people.
---------------------------------------
|4.75%| State |Goes to State's General |
| | | Fund |
| | | (Total General Fund is |
| | | 6%) |
|-----+--------+------------------------|
|0.25%| State |Goes to State's General |
| | | Fund |
| | | (Total General Fund is |
| | | 6%) |
|-----+--------+------------------------|
|0.25%| State | Goes Towards State's |
| | | Fiscal Recovery Fund, |
| | | to pay off Economic |
| | | Recovery Bonds (2004) |
|-----+--------+------------------------|
|0.50%| State | Goes to Local Public |
SB 116 -- 7/7/11 -- Page 6
| | | Safety Fund to support |
| | | local criminal justice |
| | | activities (1993) |
|-----+--------+------------------------|
|0.50%| State | Goes to Local Revenue |
| | | Fund to support local |
| | | health and social |
| | |services programs (1991 |
| | | Realignment) |
|-----+--------+------------------------|
|1.00%| Local | 0.25% Goes to county |
| | | transportation funds |
| | | 0.75% Goes to city and |
| | | county operations |
|-----+--------+------------------------|
|Total| | |
| : | | |
|-----+--------+------------------------|
|7.25%|State/Lo| Total Statewide Base |
| | cal |Tax Rate |
| | | |
---------------------------------------
For a ten-year period ending December 31, 2003, California
law provided a partial (General Fund only) sales and use
tax exemption for purchases of equipment and machinery by
new manufacturers, and income and corporation tax credits
for existing manufacturers' investments (MIC) in equipment
(SB 671, Alquist, 1993). The bill provided an exemption to
the state tax portion for sales and purchases of qualifying
property, and the income tax credit was equal to six
percent of the amount paid for qualified property placed in
service in California. Qualified property was depreciable
equipment used primarily for manufacturing, refining,
processing, fabricating or recycling; for research and
development; for maintenance, repair, measurement or
testing of qualified property; and for pollution control
meeting state or federal standards.
The MIC had a conditional sunset date which required that
the provisions sunset in any year following a year when
manufacturing employment (as determined by the Employment
Development Department) did not manufacturing employment by
more than 100,000. On January 1, 2003, manufacturing
employment, less aerospace, did not exceed the 1994
SB 116 -- 7/7/11 -- Page 7
employment number by more than 100,000 (it was less than
the 1994 number by over 10,000), and therefore the MIC and
partial sales tax exemption sunset at the end of 2003.
Proposed Law
I. Apportionment Formula . As amended, this bill amends the
apportionment formula in two ways:
1. Single Sales Factor : This bill makes the single
sales factor apportionment formula mandatory for all
taxpayers except those in a qualified business
activity (extractive, agricultural, savings and loans,
and banks and financial services) for taxable years
beginning on or after January 1, 2011.
2. Elective Single Sales Factor & 50% assignment of
intangibles to this state . As introduced, SB 116
required all taxpayers to use the mandatory single
sales factor. As amended, this bill allows taxpayers
to choose the 3-factor formula only when it results in
a greater amount of tax owed.
II. Intangible Sourcing. 50/50 market costs of
performance . SB 858 (Committee on Budget, 2010) requires
that companies that elect single sales factor choose the
"market" rule and source all intangible property to this
state and taxpayers that elect to pay taxes under the
3-factor formula source intangible property to where the
goods originate. SB 116 as amended, allows cable companies
to choose either that have a "minimum investment" in this
state of $250 million or more, to assign 50% of their
intangible property to "this state" under the market rule
and 50% shall "not be assigned to this state."
III. Jobs Tax Credit . SB 116 expands the eligibility for
the jobs credit to employers with 50 or fewer employees,
and also increases the amount of the credit from $3,000 to
$4,000 for each new hire.
IV. Manufacturing Equipment Sales Tax Exemption . Current
law provides that all tangible personal property in this
SB 116 -- 7/7/11 -- Page 8
state is subject to the sales and use tax.
SB 116 creates a new manufacturing sales & use tax
exemption. The bill provides that starting in 2012-13,
companies would be given a 1% exemption from the General
Fund Sales and Use Tax (SUT) for equipment, and start-up
companies would be eligible for a 5% exemption.
V. K-12 Education Investment and Higher Education
Investment Tax Credit Programs . Existing law provides for
a deduction against net tax for any charitable
contribution. The law also provides for various credits
with the intent of changing behavior or encouraging
investment.
SB 116 creates a new credit against net tax. The bill sets
up a special fund within the general fund to which
taxpayers may contribute. The bill provides a 75% credit
for contributions to the special fund. This credit may not
be combined with any other deduction or charitable
contribution.
VI. Urgency Clause . SB 116 adds urgency clause
State Revenue Impact
----------------------------------------------------------------
| Estimated Revenue Impact of SB 116 as Amended on 7/7/2011 |
|----------------------------------------------------------------|
| For Tax Years Beginning On Or After January 1, 2011 |
|----------------------------------------------------------------|
| Enactment Assumed After June 30, 2011 |
|----------------------------------------------------------------|
| |
----------------------------------------------------------------
|-------------+-----------+------------+------------+------------|
| | 2011-12 | 2012-13 | 2013-14 | 2014-15 |
|-------------+-----------+------------+------------+------------|
| Job Tax | -45,000,| 22,000,00| 45,000,00| 55,000,00|
| Credit | 000 | 0 | 0 | 0 |
|-------------+-----------+------------+------------+------------|
| Education | -420,000| -900,000,| -950,000,| -950,000,|
| credit | ,000 | 000 | 000 | 000 |
----------------------------------------------------------------
SB 116 -- 7/7/11 -- Page 9
| Mandatory | 1,300,00| $1,100,00| $1,100,00| $1,000,00|
| SSF | 0,000 | 0,000 | 0,000 | 0,000 |
----------------------------------------------------------------
| Special | -38,000,| -38,000,0| -37,000,0| -39,000,0|
| sales | 000 | 00 | 00 | 00 |
| rule-cab| | | | |
| le | | | | |
| corps | | | | |
----------------------------------------------------------------
| Sales and | -261,000| -275,000,| -291,000,| -301,000,|
| Use Tax | ,000 | 000 | 000 | 000 |
| | | | | |
|-------------+-----------+------------+------------+------------|
| Net | 536,000,| -91,000,0| -133,000,| -235,000,|
| Fiscal Impact| 000 | 00 | 000 |000 |
| | | | | |
----------------------------------------------------------------
Comments
1. Purpose of the bill . SB 116 seeks to stop rewarding
companies that move jobs out of state, incentivize job
creation here at home, and save California taxpayers over
$1 Billion annually through the implementation of a
mandatory single sales factor in the calculation of
corporate taxes owed to the state. The trend around the
country is states moving towards the "single sales factor"
method for the calculation of taxes. However, in
California's adoption of this method in 2009, instead of
adopting a mandatory single sales factor like the vast
majority of other states-including Texas, New York,
Michigan, Illinois, Oregon, Washington, and just last
April, New Jersey-our tax law has an annual elective single
sales factor. Allowing corporations to choose the
three-factor, double weighted formula, which lowers their
tax liability the smaller their California presence,
unfairly benefits companies that move jobs or base the bulk
of their operations out-of-state-at the expense of $1
Billion/year to California's taxpayers. In order to
eliminate this competitive disadvantage and level the
playing field for California-based companies, we need to
make the single sales factor mandatory. SB 116 is about
putting California first-we should be encouraging job
creation and greater investment here in our home state,
instead of rewarding out-of-state corporations and
California companies that move jobs out of state.
SB 116 -- 7/7/11 -- Page 10
According to the recent Legislative Analyst's Office (LAO)
report, Reconsidering the Optional Single Sales Factor
(2010), adoption of a mandatory single sales factor would
result in a net gain of tens of thousands of jobs in
California. Other components of SB 116 also seek to
facilitate job creation and assist in California's economic
recovery by expanding eligibility for the existing Jobs
Credit, and providing a sales tax exemption on the purchase
of manufacturing equipment. In addition, two new tax
credit programs-the K-12 Education Investment Tax Credit
and the Higher Education Investment Tax Credit-would
provide taxpayers with access to $1 Billion in tax credits,
and direct funds generated towards our under-funded public
education systems. State budget solutions over the last
several fiscal years have included deep cuts and payment
deferrals to K-12 Education and the University of
California, California State University, and California
Community College systems. These tax credit programs will
help in the repayment of money owed to schools under
Proposition 98, and help rebuild the state's investment in
education.
2. Shot through the heart . In an opposition letter, the
California Chamber of Commerce, the California
Manufacturers & Technology Association and CalTax state
that the elective single sales factor was a "remarkable,
although rare, bright spot in California's notoriously bad
business climate." The three groups state that the state
was correct in making the single sales factor elective in
2009 and that the attempt to make it mandatory negates the
importance of business contributions to the state's overall
economic health. Furthermore, the opposition states that
not all business models fit easily into a single sales
calculation, but these companies have significant
investments of property and payroll in California. The
size of their sales in one of the largest markets in the
world renders those investments moot by comparison.
Finally, they state that SB 116 will "cut the heart out of
an already weakened California economy."
3. Of Fractions of Loaves . As introduced, SB 116
implemented Governor Brown's proposal in his January Budget
to remove the ability for firms to choose which
apportionment formula leads to paying the lowest tax, and
require all firms to source sales of intangible goods
SB 116 -- 7/7/11 -- Page 11
according to the market rule instead of the former "costs
of performance" method. The Legislature did not enact the
change in income apportionment as part of the Budget, which
are contained in AB 103 (Committee on Budget) and SB 79
(Committee on Budget and Fiscal Review). As amended, the
measure is less aggressive: allowing firms to still choose
the three-factor, double weighted method if they'd rather
apply accrued tax credits (only if they would owe more
tax), partially carving cable companies out of the impact
of the change to the market rule, adding a tax credit for
donations to public education, and providing a limited
sales and use tax exemption. These sweeteners come on top
of considerable tax breaks the Legislature has enacted in
recent years, such as house purchase tax credits (SBx2 15,
Ashburn, 2009), motion picture production tax credits (ABx3
15, Krekorian, SBx3 15, Calderon, 2009), sales and use tax
exemptions for solar manufacturing (SB 71, Padilla, 2010),
tax credit sharing and net operating loss carrybacks (AB
1452, Committee on Budget 2008), as well as a safe harbor
from the large corporate understatement penalty, and
waiving NOL suspensions for single taxpayers (SB 858,
Committee on Budget, 2010). As introduced, the measure
raised more than $1 billion, now it raises only negative
$235 million when fully implemented in 2014-15, no
accounting for the contributions to the General Fund
through the education credit. The Committee may wish to
consider whether abandoning the Governor's Proposal in
favor of a measure that implements its changes in a less
ambitious way in exchange for new tax breaks for specified
taxpayers is merited in these times of continued fiscal
stress and the recent history of adding more and more
taxpayer-specific benefits to the tax code.
4. There's a first time for everything . SB 116 creates a
new credit for education expenses in this state through
contributions to the general fund. For example, a taxpayer
would give $100 to a special fund within the general fund
specifically for education but he or she would not be able
to designate a school or program for the funds. In return,
the taxpayer receives a $75 credit for the funds while the
state keeps a full $25 of the original $100. Generally,
credits are given to influence or change behavior, this
credit is to fund state programs. The Committee may wish
to consider the utilization of such a credit and what
information is necessary to encourage taxpayers to
contribute.
SB 116 -- 7/7/11 -- Page 12
5. Which way ? Currently, taxpayers can take the
charitable deduction for "public purpose" donations to the
general fund. Taxpayers can reduce their income by an
average of 30% for state and federal purposes, subject to
limitations and the Alternative Minimum Tax. This bill
allows taxpayers to take a 75% credit plus the federal
deduction. Does a credit allow a greater benefit that we
will see more contributions than we would have under a
charitable donation? Why identify public education
donations as special when health and human services have
suffered far deeper budget cuts, lack the Constitutional
funding protection of Proposition 98, and voters appear far
less willing to enact special taxes for health and human
services than for education? The Committee may wish to
consider whether this credit is necessary; additionally, it
may also wish to consider the efficacy of limiting it to
one public service.
6. Let them pay more . This bill allows only one group of
taxpayers to choose between the single sales factor and the
3-factor formula: those businesses that would pay more
under the 3-factor formula. The author argues that some
companies need this option in order to fully utilize their
available credits. The Committee may wish to consider if
there is a possibility that taxpayers would still pay less
under less under the 3-factor formula because of the
availability of credits which the calculation in this bill
does not consider.
7. If you build it, they will come . AB 116 includes a
partial sales and use tax exemption for manufacturing
similar to the one the Governor proposed in his May
revision. Starting in 2012-13, companies would be given a
1% exemption from the General Fund Sales and Use Tax for
equipment, and start-up companies would be eligible for a
5% exemption. Since purchases of tangible property used in
manufacturing is subject to the sales and use tax, and the
output of manufacturing is also subject to sales and use
tax when products are sold, there is a "double-taxation"
that is levied on corporations. The proposed sales tax
exemption seeks to alleviate this cost and provide an
incentive for buying capital and locating manufacturing
equipment here in California. The Governor's May Revision,
however, required that the exemption be conditioned on the
sales and use tax 1% extension which expired on July 1st of
SB 116 -- 7/7/11 -- Page 13
this year. The Committee may wish to consider whether a
sales and use tax exemption, absent the tax extensions
makes sense.
8. What a way to make a living. The jobs credit SB 116
seeks to amend has been in effect since 2009 and there is
little evidence that it has affected unemployment in this
state. California experienced steep employment declines
during the recent recession and the state's unemployment
rate is persistently higher than the national average.
Academic literature suggests that no state tax policy can
affect high unemployment in this state. A recent study by
David Neumark at the Public Policy Institute of California
(PPIC) suggests two direct job creation policies: hiring
credits and worker subsidies such as the federal Earned
Income Tax Credit. At the February 16th hearing of this
committee, Mr. Neumark presented his findings. He argues
that hiring credits act to increase the demand for labor
and are the best policy response to spur a recovery from
the recession. He suggests that hiring credits should
focus broadly on the recently unemployed and establish
incentives for new hires rather than increases in the work
hours of existing employees. In order to be effective, the
credits would need to be between $9,100 to $75,000 per
employee so state funding would contribute only modestly at
best to the credit. The author argues that this bill makes
the credit more efficient and only spends the money
allocated for the purpose. The Committee may wish to
consider whether there are better ways to create a jobs
credit or even if it makes sense to supplant existing
credits, such as enterprise zones, with this credit.
9. Dr. Frankenstein's Creation . As Edward Kleibard,
former chief of staff to the Joint Committee on Taxation,
recently wrote: "The tax system is a window into the soul
of our society, because we use tax law as our principal
tool of industrial policy, wage support and income
redistribution. Our tax structure tells more about what we
as a society believe to be fundamentally fair than does any
other aspect of government." Applying this quote to
California's tax law leads to the conclusion that
California is one of the most taxpayer-friendly states in
the nation, and one that provides unique benefits to
out-of-state firms, in stark contrast to its history of
treating all multistate corporations equally. When
SB 116 -- 7/7/11 -- Page 14
California adopted the elective single sales factor in
2008, it departed from every other state save Missouri by
allowing taxpayers to choose to use the old formula if it
resulted in a lower tax in any given year. Allowing firms
with more property and payroll to benefit from the old
formula negates the incentive for them to move more
property and payroll to California, thereby reducing the
share of its income it has to apportion to other three
factor states. Additionally, an out-of-state firm that
mostly or exclusively sells intangibles that apportions
under the three-factor, double weighted formula and
allocates intangibles under the cost of performance rule,
yielding a sales factor close to or equal to zero, enjoys a
competitive advantage over a California firm electing
single sales factor and allocates intangibles under the
market rule because it cannot reduce its sales factor below
the percentage of its sales in California.
SB 116 proposes two major changes to the rules. First, all
firms must apportion income to California under the single
sales factor, except firms can still choose the
three-factor, double weighted formula only when they would
pay more tax. Supporters state that this change is
preferable because firms can then use more of their accrued
tax credits, such as Research and Development Credit, which
can't currently be used because they lack the tax liability
to apply the credit under single-sales factor, and using
those credits allows them to reduce the amount of deferred
tax assets on its financial statements. Never before have
apportionment formulas taken credit application into
account. The Committee may wish to consider the merits of
structuring California's apportionment formula, the
foundation of its corporate tax system, to please some
firms and its investors.
Second, the measure applies the market rule to all
taxpayers, except for cable companies which would have to
allocate half of its sales based on that percentage of its
sales in California compared to its total sales if it met
qualified investment targets. Generally, tax systems treat
should apply the same rules to all taxpayers. Also, cable
companies primarily invest in California to serve customer
demand, and have consistently avoided California with its
discretionary investments, resulting in its opposition to
the market rule and support for the cost of performance
method. The Committee may wish to consider why a separate
SB 116 -- 7/7/11 -- Page 15
set of rules should apply to cable companies.
10. Amendments. The bill is unclear on several items; the
author may wish to clarify the following:
The cut-off dates for the education credits are
unclear. The language does not specify that the
cut-off date would be the quarter that the
$1,000,000,000 in credits would be reached.
There would be costs incurred to modify systems to
track and store the credit information and publish
that information. The costs have not been determined
at this time.
The bill language does not specify what agency
would be responsible for the administration of the
special funds.
The language in Section 25136.1 excludes those
taxpayers electing to use the four-factor formula; if
their "tax" before credits using the four-factor
formula is greater than if they use the single sales
factor formula for apportioning business income. This
is not an implementation concern for the FTB, but
wanted to point out that it may be confusing to some
taxpayers.
The jobs tax credit portion of the bill cuts off
claims if (1) the $400 million cap is reached or (2)
12/31/2012. In specifying the cutoff date, however,
the bill requires the submission of a timely filed
original tax return prior to this date. Since
12/31/2012 is the last day of the tax year for most
taxpayers, they will be unable to claim the jobs tax
credit for tax year 2012.
SB 116 -- 7/7/11 -- Page 16
11. Been there . This bill recalls three four bills this
committee has already seen:
The Committee approved SB 156 (Emmerson) earlier
this year which makes an identical change to the
Governor's May Revision proposal.
The Committee approved SB 640 (Runner) which enacts
a credit equal to $500 for each formerly unemployed
person a taxpayer employs.
The Committee approved SB (Dutton) which created a
sales and use tax exemption for manufacturing
products.
The Committee approved AB 1195 (Allen) which makes
the identical changes to the jobs credit that this
bill does as well.
Support and Opposition (7/11/11)
Support : Unknown.
Opposition : California Taxpayers'
Association.