Bill Text: CA SB686 | 2011-2012 | Regular Session | Amended
Bill Title: Sales and use taxes: exemption: advanced manufacturing.
Spectrum: Slight Partisan Bill (Republican 3-1)
Status: (Introduced - Dead) 2012-01-31 - Returned to Secretary of Senate pursuant to Joint Rule 56. [SB686 Detail]
Download: California-2011-SB686-Amended.html
BILL NUMBER: SB 686 AMENDED
BILL TEXT
AMENDED IN SENATE JANUARY 4, 2012
AMENDED IN SENATE MAY 17, 2011
INTRODUCED BY Senator Padilla
(Principal coauthor: Senator Strickland)
(Coauthor: Senator La Malfa)
(Coauthor: Assembly Member Fletcher)
FEBRUARY 18, 2011
An act to add and repeal Section 6377.1 of the Revenue
and Taxation amend Section 26011.8 of the Public
Resources Code, relating to taxation, to take effect
immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
SB 686, as amended, Padilla. Sales and use taxes: exemption:
biotechnology advanced manufacturing.
The Sales and Use Tax Law imposes a tax on retailers measured by
the gross receipts from the sale of tangible personal property sold
at retail in this state, or on the storage, use, or other consumption
in this state of tangible personal property purchased from a
retailer for storage, use, or other consumption in this state, and
provides various exemptions from the taxes imposed by that law.
Existing law authorizes, until January 1, 2012, the California
Alternative Energy and Advanced Transportation Financing Authority to
evaluate project applications and to approve projects, as defined by
the California Alternative Energy and Advanced T
ransportation Financing Authority Act, for financial assistance in
the form of an exclusion from a "sale" or "purchase" subject to Sales
and Use Tax Law.
This bill would exempt from those taxes, on and after
January 1, 2012, and before January 1, 2020, the gross receipts from
the sale of, and the storage, use, or other consumption of, tangible
personal property purchased by a qualified person for use primarily
in the biotechnology manufacturing process. The bill additionally
would require the Legislative Analyst's Office to report to the Joint
Legislative Budget Committee on the effectiveness of this tax
exemption additionally include advanced manufacturing,
as defined, as a project eligible for the above exclusion from the
Sales and Use Tax Law .
The Bradley-Burns Uniform Local Sales and Use Tax Law authorizes
counties and cities to impose local sales and use taxes in conformity
with the Sales and Use Tax Law, and existing law authorizes
districts, as specified, to impose transactions and use taxes in
accordance with the Transactions and Use Tax Law, which conforms to
the Sales and Use Tax Law. Exemptions from state sales and use taxes
are incorporated into these laws.
Section 2230 of the Revenue and Taxation Code provides that the
state will reimburse counties and cities for revenue losses caused by
the enactment of sales and use tax exemptions.
This bill would provide that, notwithstanding Section 2230 of the
Revenue and Taxation Code, no appropriation is made and the state
shall not reimburse local agencies for sales and use tax revenues
lost by them pursuant to this bill.
This bill would take effect immediately as a tax levy.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 26011.8 of the
Public Resources Code is amended to read:
26011.8. (a) The purpose of this section is to promote the
creation of California-based manufacturing, California-based jobs,
the rapid transfer of new technologies to the manufacturing
industry, the reduction of greenhouse gases, or reductions in
air and water pollution or energy consumption. In furtherance of this
purpose, the authority may approve a project for financial
assistance in the form of the sales and use tax exclusion established
in Section 6010.8 of the Revenue and Taxation Code.
(b) (1) For purposes of this section, "project" means a project as
defined in paragraph (2) of subdivision (g) of Section 26003.
(2) For purposes of this section, "alternative sources" also
includes advanced electric distributive generation technology as
defined in Section 379.8 of the Public Utilities Code or energy
storage technologies and their component materials.
(3) For the purposes of this section, "advanced manufacturing"
means any of the following:
(A) The implementation of process improvements, increasing quality
controls, and installing advanced technologies, as defined by the
authority, and other intelligent production systems, as defined by
the authority.
(B) The use of a highly skilled and highly compensated workforce.
(C) The rapid transfer and adoption of newly researched and
developed manufacturing technologies into the manufacturing process.
(c) The authority shall publish notice of the availability of
project applications and deadlines for submission of project
applications to the authority.
(d) The authority shall evaluate project applications based upon
all of the following criteria:
(1) The extent to which the project develops manufacturing
facilities, or purchases equipment for manufacturing facilities,
located in California.
(2) The extent to which the anticipated benefit to the state from
the project equals or exceeds the projected benefit to the
participating party from the sales and use tax exclusion.
(3) The extent to which the project will create new, permanent
jobs in California.
(4) The extent to which the project utilizes advanced
manufacturing.
(4)
(5) To the extent feasible, the extent to which the
project, or the product produced by the project, results 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.
(5)
(6) The extent of unemployment in the area in which the
project is proposed to be located.
(6)
(7) Any other factors the authority deems appropriate
in accordance with this section.
(e) At a duly noticed public hearing, the authority shall approve,
by resolution, project applications for financial assistance.
(f) Notwithstanding subdivision (j), and without regard to the
actual date of any transaction between a participating party and the
authority, any project as defined in subdivision (g) of Section 26003
approved by the authority by resolution for the sales and use tax
exclusion pursuant to Section 6010.8 of the Revenue and Taxation Code
prior to the effective date of this section, shall not be subject to
this section.
(g) The Legislative Analyst's Office shall report to the Joint
Legislative Budget Committee on the effectiveness of this program, on
or before January 1, 2019, by evaluating factors, including, but not
limited to, the following:
(1) The number of jobs created by the program in California.
(2) The number of businesses that have remained in California or
relocated to California as a result of this program.
(3) The amount of state and local revenue and economic activity
generated by the program.
(4) The types of advanced manufacturing utilized.
(4)
(5) The amount of reduction in greenhouse gases, air
pollution, water pollution, or energy consumption.
(h) Once the exclusions granted pursuant to Section 6010.8 of the
Revenue and Taxation Code for projects approved by the authority
pursuant to this section exceed one hundred million dollars
($100,000,000) annually, the authority shall provide a 20-day notice
to the Legislature prior to making additional approvals pursuant to
this section.
(i) The authority shall make every effort to expedite the
operation of this section, and shall adopt regulations for purposes
of implementing the section as emergency regulations in accordance
with Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code. For purposes of that
Chapter 3.5, including Section 11349.6 of the Government Code, the
adoption of the regulations shall be considered by the Office of
Administrative Law to be necessary for the immediate preservation of
the public peace, health and safety, and general welfare.
(j) This section shall remain in effect only until January 1,
2021, and as of that date is repealed. The sale or purchase of
tangible personal property of a project approved prior to January 1,
2021, shall continue to be excluded from sales and use taxes pursuant
to Section 6010.8 of the Revenue and Taxation Code for the period of
time set forth in the authority's resolution approving the project
pursuant to this section.
SECTION 1. Section 6377.1 is added to the
Revenue and Taxation Code, to read:
6377.1. (a) On and after January 1, 2012, there are exempted from
the taxes imposed by this part the gross receipts from the sale of,
and the storage, use, or other consumption in this state of, any of
tangible personal property purchased for use in biotechnology
manufacturing by a qualified person to be used primarily in any stage
of manufacturing of property, beginning at the point any raw
materials are received by the qualified person and introduced into
the process and ending at the point at which the manufacturing, has
altered property to its completed form, including packaging, if
required.
(b) For purposes of this section:
(1) "Biotechnology manufacturing" means manufacturing in the lines
of business described in Codes 325411, 325412, 325413, 325414,
334510, 33911, and 541711 of the North American Industry
Classification System (NAICS) published by the United States Office
of Management and Budget (OMB), 2007 edition, including medicinal and
botanical manufacturing, pharmaceutical preparation manufacturing,
in-vitro diagnostic substance manufacturing, biological product
manufacturing, and marketing research.
(2) "Manufacturing" means the activity of converting or
conditioning property by changing the form, composition, quality, or
character of the property for ultimate sale at retail or use in the
manufacturing of a product to be ultimately sold at retail.
Manufacturing includes any improvements to tangible personal property
that result in a greater service life or greater functionality than
that of the original property.
(3) "Primarily" means tangible personal property used 50 percent
or more of the time in an activity described in subdivision (a).
(4) "Process" means the period beginning at the point at which any
raw materials are received by the qualified taxpayer and introduced
into the manufacturing activity of the qualified person and ending at
the point at which the manufacturing activity of the qualified
person has altered tangible personal property to its completed form,
including packaging, if required. Raw materials shall be considered
to have been introduced into the process when the raw materials are
stored on the same premises where the qualified person's
manufacturing activity is conducted. Raw materials that are stored on
premises other than where the qualified person's manufacturing
activity is conducted, shall not be considered to have been
introduced into the manufacturing process.
(5) "Qualified person" means a person who is engaged in
biotechnology manufacturing.
(6) (A) "Tangible personal property," as used in this section,
includes, but is not limited to, all of the following:
(i) Machinery and equipment, including component parts and
contrivances such as belts, shafts, moving parts, and operating
structures.
(ii) All equipment or devices used or required to operate,
control, regulate, or maintain the machinery, including, without
limitation, computers, data processing equipment, and computer
software, together with all repair and replacement parts with a
useful life of one or more years, whether purchased separately or in
conjunction with a complete machine and regardless of whether the
machine or component parts are assembled by the taxpayer or another
party.
(iii) Property used in pollution control that meets standards
established by this state or any local or regional governmental
agency within this state.
(iv) Fuels used or consumed in the manufacturing process.
(B) "Tangible personal property" shall not include any of the
following:
(i) Consumables with a normal useful life of less than one year,
except as provided in clause (iv) of subparagraph (A).
(ii) Furniture, inventory, and equipment used in the extraction
process, or equipment used to store finished products that have
completed the manufacturing process.
(iii) Tangible personal property used primarily in administration,
general management, or marketing.
(c) An exemption shall not be allowed under this section unless
the purchaser furnishes the retailer with an exemption certificate,
completed in accordance with any instructions or regulations as the
board may prescribe, and the retailer subsequently furnishes the
board with a copy of the exemption certificate. The exemption
certificate shall contain the sales price of the machinery or
equipment, the sale of, or the storage, use, or other consumption of
which is exempt pursuant to subdivision (a).
(d) Notwithstanding subdivision (a), the exemption provided by
this section shall not apply to any sale or use of property which,
within one year from the date of purchase, is removed from
California, converted from an exempt use under subdivision (a) to
some other use not qualifying for the exemption, or used in a manner
not qualifying for the exemption.
(e) If a purchaser certifies in writing to the seller that the
property purchased without payment of the tax will be used in a
manner entitling the seller to regard the gross receipts from the
sale as exempt from the sales tax, and within one year from the date
of purchase, the purchaser removes that property outside California,
converts that property for use in a manner not qualifying for the
exemption, or uses that property in a manner not qualifying for the
exemption, the purchaser shall be liable for payment of sales tax,
with applicable interest, as if the purchaser were a retailer making
a retail sale of the property at the time the property is so removed,
converted, or used, and the sales price of the property to the
purchaser shall be deemed the gross receipts from that retail sale.
(f) This section shall remain in effect only through and including
December 31, 2019, and is repealed on January 1, 2020.
SEC. 2. (a) On or before January 1, 2020, the
Legislative Analyst's Office shall report to the Joint Legislative
Budget Committee on the effectiveness of the tax exemption
established in Section 6377.1 of the Revenue and Taxation Code by
evaluating various factors, including, but not limited to, all of the
following:
(1) The amount of tax revenue lost to the state as a result of the
tax exemption.
(2) The number of employers claiming the tax exemption and the
nature of the claims, such as the size of the employer, the location
of the employer, and the primary biotechnology emphasis of the
employer.
(3) The activities and products for which the tax exemption was
claimed.
(4) The number of jobs created in California as a result of the
tax exemption.
(5) The number of businesses that have remained in California or
relocated to California as a result of the tax exemption.
(6) The amount of state and local revenue and economic activity
generated by the tax exemption.
(b) The Legislative Analyst's Office shall evaluate the tax
exemption, as described in subdivision (a), with a focus on outcomes
and the fiscal and employment impacts of this exemption for the State
of California.
SEC. 3. SEC. 2. Notwithstanding
Section 2230 of the Revenue and Taxation Code, no appropriation is
made by this act and the state shall not reimburse any county or city
for any sales and use tax revenues lost by it under this act.
SEC. 4. SEC. 3. This act provides
for a tax levy within the meaning of Article IV of the Constitution
and shall go into immediate effect.
