Bill Text: CA AB1565 | 2009-2010 | Regular Session | Amended
Bill Title: Research and development tax credit areas.
Spectrum: Slight Partisan Bill (Democrat 11-6)
Status: (Engrossed - Dead) 2010-06-23 - In committee: Placed on REV. & TAX. suspense file. [AB1565 Detail]
Download: California-2009-AB1565-Amended.html
BILL NUMBER: AB 1565 AMENDED
BILL TEXT
AMENDED IN SENATE JUNE 16, 2010
AMENDED IN SENATE JUNE 9, 2010
AMENDED IN SENATE MAY 28, 2009
AMENDED IN ASSEMBLY APRIL 13, 2009
INTRODUCED BY Assembly Member Buchanan
( Coauthors: Assembly Members
Blakeslee, Coto, Harkey, Huber,
V. Manuel Perez, Silva, and Solorio
)
( Coauthor: Senator Harman
)
MARCH 12, 2009
An act to add and repeal Chapter 12.9 (commencing with Section
7092) of Division 7 of Title 1 of the Government Code, and to add and
repeal Sections 17052.66 and 23609.66 of the Revenue and Taxation
Code, relating to taxation, to take effect immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
AB 1565, as amended, Buchanan. Research and development tax credit
areas.
Existing law establishes the Department of Housing and Community
Development with duties that include overseeing various programs to
promote economic and community development throughout the state.
This bill would authorize, until January 1, 2016, the department
to designate, based on specific factors, a Research and Development
Tax Credit Area located within an Innovation Hub or a city, as
respectively defined.
The Personal Income Tax Law and the Corporation Tax Law, by
reference to a specified federal statute, allow a credit against
taxes imposed by those laws for increasing research activities. The
amount of the credit under both laws is equal to 15% of the excess of
the qualified research expenses, as defined, for the taxable year
over the base amount, as defined, and, in addition, under the
Corporation Tax Law, 24% of the basic research payments, as defined.
This bill would, under both laws, in lieu of that credit,
for each taxable year beginning on or after January 1, 2011,
and before January 1, 2016, provide to a qualified taxpayer, as
defined, a tax credit for research and development, as defined, for
expenses equal to 20% of the research and development expenses
relating to the development of alternative energy sources and
advanced transportation technologies, as those terms are defined,
conducted in California in a research and development tax area, as
described. The bill would further require the Legislative Analyst's
Office to report to the Legislature on the effectiveness of the tax
credit program established by this act.
This bill would take effect immediately as a tax levy.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Chapter 12.9 (commencing with Section 7092) is added to
Division 7 of Title 1 of the Government Code, to read:
CHAPTER 12.9. RESEARCH AND DEVELOPMENT TAX CREDIT AREA
7092. Unless context requires otherwise, the following
definitions shall apply to this chapter:
(a) "City" means a city incorporated on or after July 1, 2000.
(b) "Department" means the Department of Housing and Community
Development.
(c) "iHub" means an Innovation Hub designated by the Business,
Transportation and Housing Agency.
(d) "Research and Development Tax Credit Area" or "area" means a
geographical region designated by the department pursuant to this
chapter.
7092.5. A Research and Development Tax Credit Area shall be
located entirely within the jurisdiction of a city or iHub and shall
be smaller in size than the city or iHub.
7092.10. (a) A city or iHub is authorized to make a proposal to
the department to have a Research and Development Tax Credit Area
located within its jurisdiction.
(b) A proposal to have the department designate an area shall
include, but not be limited to, both of the following:
(1) The geographical boundaries of the proposed area.
(2) The targeted number of new, permanent jobs anticipated to be
created by the proposed area.
7092.15. (a) The department is authorized to designate a Research
and Development Tax Credit Area after evaluating a proposal by a
city or iHub.
(b) The department shall evaluate a proposal to designate an area
based upon all of the following criteria:
(1) The extent to which the anticipated benefit to the state from
projects or products produced within the proposed area equals or
exceeds the anticipated benefit to entities claiming the tax credits
pursuant to Sections 17052.66 and 23609.66 of the Revenue and
Taxation Code.
(2) The extent to which the proposed area will create new,
permanent jobs in this state.
(3) The extent to which projects or products produced within the
proposed area result in a reduction of greenhouse gases, a reduction
in air or water pollution, an increase in energy efficiency, or a
reduction in energy consumption, beyond what is required by any
federal or state law or regulation.
(4) Any other factors the department deems appropriate in
accordance with this chapter.
7092.20. This chapter shall remain in effect only until January
1, 2016, and as of that date is repealed.
SEC. 2. Section 17052.66 is added to the Revenue and Taxation
Code, to read:
17052.66. (a) For each taxable year beginning on or after January
1, 2011, and before January 1, 2016, there shall be allowed as a
credit against the "net tax" (as defined by Section 17039) for the
taxable year an amount determined in accordance with Section 41 of
the Internal Revenue Code, except as otherwise provided in this
section.
(b) For purposes of this section:
(1) "Qualified taxpayer" means a taxpayer that conducts research
and development in a research and development tax area relating to
either of the following fields:
(A) Alternative energy sources, as defined in paragraph (2) of
subdivision (b) and subdivision (c) of Section 26003 of the Public
Resources Code; the application of cogeneration technology, as
defined in Section 25134 of the Public Resources Code; the
conservation of energy through the use of solar, biomass, wind,
geothermal, hydroelectricity under 30 megawatts, or any other source
of energy, the efficient use of which will reduce the use of fossil
and nuclear fuels. Alternative energy sources also include advanced
electric distributive generation technology, as defined in
subdivision (a) of Section 379.8 of the Public Utilities Code, or
energy storage technologies and their component materials.
(A) "Alternative sources" means alternative sources as defined in
paragraph (1) of subdivision (c) of Section 26003 of the Public
Resources Code. Alternative sources also include advanced electrical
distribution generation technology, as defined in subdivision (a) of
Section 379.8 of the Public Utilities Code.
(B) Advanced transportation technologies, as defined in
subdivision (d) of Section 26003 of the Public Resources Code.
Advanced transportation technologies include emerging
commercially competitive transportation-related technologies
identified by a transportation authority as capable of creating
long-term, high value-added jobs for Californians while enhancing the
state's commitment to energy conservation, pollution reduction, and
transportation efficiency. Those technologies may include, but are
not limited to, intelligent vehicle highway systems, advanced
telecommunications for transportation, command, control, and
communications for public transit vehicles and systems, electric
vehicles and ultralow-emission vehicles, high-speed rail and magnetic
levitation passenger systems, and fuel cells.
(2) "Research and development" means those activities that are
described in Section 174 of the Internal Revenue Code or in any
regulation thereunder.
(3) "Research and development tax area" means a research and
development tax area in the state established pursuant to Chapter
12.9 (commencing with Section 7092) of Division 7 of Title 1 of the
Government Code, but excludes any area designated as an enterprise
zone pursuant to Chapter 12.8 (commencing with Section 7070) of
Division 7 of Title 1 of the Government Code , a
targeted tax area pursuant to Chapter 12.93 (commencing with Section
7097) of Division 7 of Title 1 of the Government Code, a
manufacturing enhancement area pursuant to Chapter 12.8 (commencing
with Section 7070) of Division 7 of Title 1 of the Government Code,
or a local agency military base recovery area pursuant to Chapter
12.97 (commencing with Section 7105) of Division 7 of Title 1 of the
Government Code .
(c) In the case where the credit allowed under this section
exceeds the "net tax," the excess may be carried over to reduce the
"net tax" in the following year, and succeeding years if necessary,
until the credit has been exhausted, but only to the extent that the
qualified taxpayer continues to conduct research and development in
the research and development tax area during the time for which the
reduction in "net tax" is claimed.
(d) For each taxable year beginning on or after January 1, 2011,
the reference to "Section 501(a)" in Section 41(b)(3)(C) of the
Internal Revenue Code, relating to contract research expenses, is
modified to read "this part or Part 11 (commencing with Section
23001)."
(e) Section 41(h) of the Internal Revenue Code, relating to
termination, shall not apply.
(f) Section 41(g) of the Internal Revenue Code, relating to
special rule for passthrough of credit, is modified by each of the
following:
(1) The last sentence shall not apply.
(2) If the amount determined under Section 41(a) of the Internal
Revenue Code for any taxable year exceeds the limitation of Section
41(g) of the Internal Revenue Code, that amount may be carried over
to other taxable years under the rules of subdivision (e); except
that the limitation of Section 41(g) of the Internal Revenue Code
shall be taken into account in each subsequent taxable year.
(g) Section 41(a)(3) of the Internal Revenue Code shall not apply.
(h) Section 41(b)(3)(D) of the Internal Revenue Code, relating to
amounts paid to eligible small businesses, universities, and federal
laboratories, shall not apply.
(i) Section 41(f)(6), relating to energy research consortium,
shall not apply.
(j) The credit allowed by this section shall be in addition to any
other credit allowed by this part for the expenses on which the
credit under this section is based.
(j) Section 41(c)(5) of the Internal Revenue Code, relating to
election of alternative simplified credit, shall not apply.
(k) For each taxable year beginning on or after January 1, 2011:
(1) The reference to "3 percent" in Section 41(c)(4)(A)(i) of the
Internal Revenue Code is modified to read "one and forty-nine
hundredths of one percent."
(2) The reference to "4 percent" in Section 41(c)(4)(A)(ii) of the
Internal Revenue Code is modified to read "one and ninety-eight
hundredths of one percent."
(3) The reference to "5 percent" in Section 41(c)(4)(A)(iii) of
the Internal Revenue Code is modified to read "two and forty-eight
hundredths of one percent."
(l) The credit allowed by this section shall be in lieu of the
credit under Section 17052.12.
(m) (1) The amount of the credit otherwise allowed under this
section, including any credit carryovers from prior years, that may
reduce the "net tax" for the taxable year shall not exceed the amount
of tax that would be imposed on the taxpayer's business income
attributed to a research and development tax area determined as if
that attributable income represented all the income of the taxpayer
subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the research
and development tax area. For that purpose, the taxpayer's business
income that is attributable to sources in this state shall first be
determined in accordance with Chapter 17 (commencing with Section
25101) of Part 11. That business income shall be further apportioned
to the research and development tax area in accordance with Article 2
(commencing with Section 25120) of Chapter 17 of Part 11, modified
for purposes of this section in accordance with paragraph (3).
(3) Income shall be apportioned to a research and development tax
area by multiplying the total California business income of the
taxpayer by a fraction, the numerator of which is the property
factor, plus the payroll factor, and the denominator of which is two.
For purposes of this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the research and development tax
area during the taxable year, and the denominator of which is the
average value of all the taxpayer's real and tangible personal
property owned or rented and used in this state during the taxable
year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the research and development
tax area during the taxable year for compensation, and the
denominator of which is the total compensation paid by the taxpayer
in this state during the taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "net tax" for the
taxable year, as provided in subdivision (c).
(k)
(n) This section shall remain in effect only until
December 1, 2016, and as of that date is repealed.
SEC. 3. Section 23609.66 is added to the Revenue and Taxation
Code, to read:
23609.66. (a) For each taxable year beginning on or after January
1, 2011, and before January 1, 2016, there shall be allowed as a
credit against the "tax" (as defined by Section 23036) an amount
determined in accordance with Section 41 of the Internal Revenue
Code, except as otherwise provided in this section.
(b) For purposes of this section:
(1) "Qualified taxpayer" means a taxpayer that conducts research
and development in a research and development tax area relating to
either of the following fields:
(A) Alternative energy sources, as defined in paragraph (2) of
subdivision (b) and subdivision (c) of Section 26003 of the Public
Resources Code; the application of cogeneration technology, as
defined in Section 25134 of the Public Resources Code; the
conservation of energy through the use of solar, biomass, wind,
geothermal, hydroelectricity under 30 megawatts, or any other source
of energy, the efficient use of which will reduce the use of fossil
and nuclear fuels. Alternative energy sources also include advanced
electric distributive generation technology, as defined in
subdivision (a) of Section 379.8 of the Public Utilities Code, or
energy storage technologies and their component materials.
(A) "Alternative sources" means alternative sources as defined in
paragraph (1) of subdivision (c) of Section 26003 of the Public
Resources Code. Alternative sources also include advanced electrical
distribution generation technology, as defined in subdivision (a) of
Section 379.8 of the Public Utilities Code.
(B) Advanced transportation technologies, as defined in
subdivision (d) of Section 26003 of the Public Resources Code.
Advanced transportation technologies include emerging
commercially competitive transportation-related technologies
identified by a transportation authority as capable of creating
long-term, high value-added jobs for Californians while enhancing the
state's commitment to energy conservation, pollution reduction, and
transportation efficiency. Those technologies may include, but are
not limited to, intelligent vehicle highway systems, advanced
telecommunications for transportation, command, control, and
communications for public transit vehicles and systems, electric
vehicles and ultralow-emission vehicles, high-speed rail and magnetic
levitation passenger systems, and fuel cells.
(2) "Research and development" means those activities that are
described in Section 174 of the Internal Revenue Code or in any
regulations thereunder.
(3) "Research and development tax area" means a research and
development tax area in the state established pursuant to Chapter
12.9 (commencing with Section 7092) of Division 7 of Title 1 of the
Government Code, but excludes any area designated as an enterprise
zone pursuant to Chapter 12.8 (commencing with Section 7070) of
Division 7 of Title 1 of the Government Code , a targeted tax
area pursuant to Chapter 12.93 (commencing with Section
7097) of Division 7 of Title 1 of the Government Code, a
manufacturing enhancement area pursuant to Chapter 12.8 (commencing
with Section 7070) of Division 7 of Title 1 of the Government Code,
or a local agency military base recovery area pursuant to Chapter
12.97 (commencing with Section 7105) of Division 7 of Title 1 of the
Government Code .
(c) In the case where the credit allowed by this section exceeds
the "tax," the excess may be carried over to reduce the "tax" in the
following year, and succeeding years if necessary, until the credit
has been exhausted, but only to the extent that the qualified
taxpayer continues to conduct research and development in the
research and development tax area during the time for which the
reduction in "tax" is claimed.
(d) For each taxable year beginning on or after January 1, 2011,
the reference to "Section 501(a)" in Section 41(b)(3)(C) of the
Internal Revenue Code, relating to contract research expenses, is
modified to read "this part or Part 10 (commencing with Section
17001)."
(e) Section 41(h) of the Internal Revenue Code, relating to
termination, shall not apply.
(f) Section 41(g) of the Internal Revenue Code, relating to
special rule for passthrough of credit, is modified by each of the
following:
(1) The last sentence shall not apply.
(2) If the amount determined under Section 41(a) of the Internal
Revenue Code for any taxable year exceeds the limitation of Section
41(g) of the Internal Revenue Code, that amount may be carried over
to other taxable years under the rules of subdivision (f), except
that the limitation of Section 41(g) of the Internal Revenue Code
shall be taken into account in each subsequent taxable year.
(g) Section 41(a)(3) of the Internal Revenue Code shall not apply.
(h) Section 41(b)(3)(D) of the Internal Revenue Code, relating to
amounts paid to eligible small businesses, universities, and federal
laboratories, shall not apply.
(i) Section 41(f)(6) of the Internal Revenue Code, relating to
energy research consortium, shall not apply.
(j) The credit allowed by this section shall be in addition to any
other credit allowed by this part for the expenses on which the
credit under this section is based.
(j) Section 41(c)(5) of the Internal Revenue Code, relating to
election of alternative simplified credit, shall not apply.
(k) For each taxable year beginning on or after January 1, 2011:
(1) The reference to "3 percent" in Section 41(c)(4)(A)(i) of the
Internal Revenue Code is modified to read "one and forty-nine
hundredths of one percent."
(2) The reference to "4 percent" in Section 41(c)(4)(A)(ii) of the
Internal Revenue Code is modified to read "one and ninety-eight
hundredths of one percent."
(3) The reference to "5 percent" in Section 41(c)(4)(A)(iii) of
the Internal Revenue Code is modified to read "two and forty-eight
hundredths of one percent."
(l) The credit allowed by this section shall be in lieu of the
credit under Section 23609.
(m) Section 23663 shall not apply to the credit allowed by this
section.
(n) (1) The amount of the credit otherwise allowed under this
section, including any credit carryovers from prior years, that may
reduce the "tax" for the taxable year shall not exceed the amount of
tax that would be imposed on the taxpayer's business income
attributed to a research and development tax area determined as if
that attributable income represented all the income of the taxpayer
subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the research
and development tax area. For that purpose, the taxpayer's business
income that is attributable to sources in this state shall first be
determined in accordance with Chapter 17 (commencing with Section
25101). That business income shall be further apportioned to the
research and development tax area in accordance with Article 2
(commencing with Section 25120) of Chapter 17, modified for purposes
of this section in accordance with paragraph (3).
(3) Income shall be apportioned to a research and development tax
area by multiplying the total California business income of the
taxpayer by a fraction, the numerator of which is the property
factor, plus the payroll factor, and the denominator of which is two.
For purposes of this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the research and development tax
area during the taxable year, and the denominator of which is the
average value of all the taxpayer's real and tangible personal
property owned or rented and used in this state during the taxable
year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the research and development
tax area during the taxable year for compensation, and the
denominator of which is the total compensation paid by the taxpayer
in this state during the taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "tax" for the taxable
year, as provided in subdivision (c).
(k)
(o) This section shall remain in effect only until
December 1, 2016, and as of that date is repealed.
SEC. 4. Between January 1, 2016, and December 31, 2016, the
Legislative Analyst's Office shall report to the Legislature on the
effectiveness of the Research and Development Tax Credit Area program
established pursuant to Chapter 12.9 (commencing with Section 7092)
of Division 7 of Title 1 of the Government Code, by evaluating
factors, including, but not limited to, all of the following:
(a) The number of jobs created by the program in this state.
(b) The number of businesses that have remained in this state or
relocated to this state as a result of the program.
(c) The amount of state and local revenue and economic activity
generated by the program.
(d) The amount of reduction in greenhouse gases, air pollution,
water pollution, or energy consumption as a result of the program.
SEC. 5. This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.
