Bill Text: CA SB699 | 2009-2010 | Regular Session | Amended
Bill Title: Sales and use taxes: exemption: sustainable development:
Spectrum: Bipartisan Bill
Status: (Introduced - Dead) 2010-02-01 - Returned to Secretary of Senate pursuant to Joint Rule 56. [SB699 Detail]
Download: California-2009-SB699-Amended.html
BILL NUMBER: SB 699 AMENDED
BILL TEXT
AMENDED IN SENATE MAY 28, 2009
AMENDED IN SENATE APRIL 2, 2009
INTRODUCED BY Senator Alquist
(Principal coauthor: Senator Strickland)
(Principal coauthor: Assembly Member Ruskin)
(Coauthors: Senators Calderon, Harman, Maldonado, and Walters)
(Coauthors: Assembly Members Blakeslee, Buchanan, Coto, Fuentes,
Galgiani, Garrick, Harkey, Jeffries, Lieu, Niello, and Portantino)
FEBRUARY 27, 2009
An act to add Section 6377 to, and to add and repeal
Sections 17053.91 and 23649.1 of, Sections 6377 and
6377.5 to the Revenue and Taxation Code, relating to taxation,
to take effect immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
SB 699, as amended, Alquist. Sales and use tax: personal
and corporate income tax: manufacturers' credit and exemption.
taxes: exemption: sustainable development:
manufacturing.
(1) The
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.
This bill would exempt from a specified portion of those
taxes, for calendar years beginning on and after January 1, 2011, the
gross receipts from the sale of, and the storage, use, or other
consumption in this state of, sustainable development equipment
investments of tangible personal property purchased for use by a
qualified person, as specified, and tangible personal property used
primarily during the research and development process on qualified
research. The bill would also exempt from a
specified portion of those taxes, for calendar years beginning on
or and after January 1, 2013, the gross
receipts from the sale of, and the storage, use, or other
consumption of, sustainable development equipment
investments of tangible personal property purchased for use by a
qualified person to be used in manufacturing or other processes , as
specified, and tangible personal property purchased by a qualified
person and used primarily during the research and development process
for qualified research, as defined tangible personal
property purchased by a qualified person for use primarily in any
stage of the manufacturing, processing, refining, fabricating, or
recycling of property, as specified, and tangible personal property
purchased for use by a contractor purchasing that property for use in
the performance of a construction contract for the qualified person
who will use the property as an integral part of the manufacturing,
processing, refining, fabrica ting, or recycling process,
or as a storage facility for use in connection with the manufacturing
process .
This bill would specify that this exemption does not apply to
local sales and use taxes or transactions and use taxes.
(2) The Personal Income Tax Law and the Corporation Tax Law
authorizes various credits against the taxes imposed by those laws.
This bill would allow a credit in amount equal to a specified
portion of the amount of sales tax reimbursement paid to a retailer
or use tax paid on a purchase of tangible personal property with
respect to taxes paid on transactions occurring between January 1,
2010, and January 1, 2013, that are imposed under the Sales and Use
Tax Law for the sale of, or the storage, use, or other consumption in
this state of, tangible personal property purchased for use by a
qualified person in manufacturing, processing, refining, fabricating,
or recycling of property, tangible personal property purchased for
use by a contractor for a specified purpose, sustainable development
equipment investments of tangible personal property purchased for
specified use, and tangible personal property used, but not consumed,
primarily during the research and development process for qualified
research, as defined. The credit would be applied in equal amounts
over three successive taxable years beginning with the first taxable
year beginning on or after January 1, 2013.
(3) This
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. It is the intent of the Legislature
to enact a competitive tax policy for manufacturers by providing for
partial exemptions from state sales and use taxes for the sale of and
the storage, use, or other consumption of specified manufacturing
equipment and for sustainable manufacturing and research and
development equipment investments used in the manufacturing process.
SECTION 1. It is the intent of the Legislature to
enact legislation that would exempt from specified state sales and
use taxes the sale to, or use by, a manufacturer of tangible personal
property purchased for use in manufacturing or otherwise processing
property, or by a contractor performing a construction contract for
the manufacturer, or by a person purchasing the property to use
during the research and development process on qualified research.
SEC. 2. Section 6377 is added to the
Revenue and Taxation Code , to read:
6377. (a) On and after January 1, 2010, 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, all of
the following:
(1) Sustainable development equipment investments of tangible
personal property purchased by a qualified person for use primarily
in any stage of the manufacturing, processing, refining, fabricating,
or recycling 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, processing,
refining, fabricating, or recycling has altered tangible personal
property to its completed form, including packaging, if required.
(2) Tangible personal property used primarily during the research
and development process on qualified research.
(b) For purposes of this section:
(1) "Fabricating" means to make, build, create, produce, or
assemble components or property to work in a new or different manner.
(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, processing, refining, fabricating, or
recycling activity of the qualified taxpayer and ending at the point
at which the manufacturing, processing, refining, fabricating, or
recycling 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, processing,
refining, or recycling activity is conducted. Raw materials that are
stored on premises other than where the qualified person's
manufacturing, processing, refining, fabricating, or recycling
activity is conducted, shall not be considered to have been
introduced into the manufacturing, processing, refining, fabricating,
or recycling process.
(5) "Processing" means the physical application of the materials
and labor necessary to modify or change the characteristics of
property.
(6) "Qualified person" means either of the following:
(A) A person who is engaged in those lines of business described
in Codes 3111 to 3399, inclusive, or 5112 of the North American
Industrial Classification System (NAICS) published by the United
States Office of Management and Budget (OMB), 2002 edition.
(B) An affiliate of a person described in subparagraph (A)
provided that the affiliate is a member of the qualified person's
unitary group for which a combined report is required to be filed
under Article 1 (commencing with Section 25101) of Chapter 17 of Part
11.
(7) "Qualified research" means research that meets the
requirements of Section 174 of the Internal Revenue Code.
(8) "Refining" means the process of converting a natural resource
to an intermediate or finished product.
(9) "Sustainable development equipment" means qualified
manufacturing or research and development equipment that meets any of
the following criteria:
(A) It is consistent with meeting the goals and objectives of
compliance with greenhouse gas emissions standards as set forth in
Division 25.5 (commencing with Section 38500) of the Health and
Safety Code.
(B) It promotes the reduction of wasteful, inefficient,
unnecessary, or uneconomic uses of energy.
(C) It encourages the utilization of cost-effective water use
efficiency practices to curtail the waste of water and to ensure that
water use does not exceed reasonable needs.
(D) It promotes the utilization of recycled or reusable materials
in the manufacturing process.
(E) It retains or expands California-based jobs for which
associated production relocation has occurred in whole or in part to
other states or regions in North America since 2001.
(10) "Tangible personal property" includes, but is not limited to,
all of the following:
(A) Machinery and equipment, including component parts and
contrivances such as belts, shafts, moving parts, and operating
structures.
(B) Equipment or devices used or required to operate, control,
regulate, or maintain the machinery and equipment, 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 qualified person or
another party.
(C) Property used in pollution control that meets standards
established by this state or any local or regional governmental
agency within this state.
(D) Special purpose buildings and foundations used as an integral
part of the manufacturing, processing, refining, or fabricating
process, or that constitute a research or storage facility used
during the manufacturing process.
(E) Fuels used or consumed in the manufacturing process.
(11) "Tangible personal property" does not include any of the
following:
(A) Consumables with a normal useful life of less than one year,
except as provided in subparagraph (E) of paragraph (10).
(B) Furniture, inventory, and equipment used in the extraction
process, or equipment used to store finished products that have
completed the manufacturing process.
(C) Buildings or components of buildings used solely for
warehousing purposes after completion of the manufacturing process.
(D) Tangible personal property used primarily in administration,
general management, or marketing.
(c) Notwithstanding subdivision (a), the exemption provided by
this section shall not apply to any sale or use of property that,
within one year from the date of purchase, is either 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. 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 (A) removes that
property outside California, (B) converts that property for use in a
manner not qualifying for the exemption, or (C) 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.
(d) (1) Notwithstanding any provision of the Bradley-Burns Uniform
Local Sales and Use Tax Law (Part 1.5 (commencing with Section
7200)) or the Transactions and Use Tax Law (Part 1.6 (commencing with
Section 7251)), the exemption established by this section shall not
apply with respect to any tax levied by a county, city, or district
pursuant to, or in accordance with, either of those laws.
(2) Notwithstanding subdivision (a), the exemption provided by
this section shall not apply with respect to any tax levied pursuant
to Section 6051.2, 6051.5, 6201.2, or 6201.5 or pursuant to Section
35 of Article XIII of the California Constitution.
SEC. 2. Section 6377 is added to the Revenue
and Taxation Code, to read:
6377. On or
SEC. 3. Section 6377.5 is added to the Revenue and
Taxation Code, to read:
6377.5. (a) On and
after January 1, 2013, 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, all of the following:
(1) Tangible personal property purchased by a qualified person for
use primarily in any stage of the manufacturing, processing,
refining, fabricating, or recycling 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, processing, refining, fabricating, or recycling has
altered property to its completed form, including packaging, if
required.
(2) Tangible personal property purchased for use by a contractor
purchasing that property for use in the performance of a construction
contract for the qualified person who will use the property as an
integral part of the manufacturing, processing, refining,
fabricating, or recycling process, or as a storage facility for use
in connection with the manufacturing process.
(3) Sustainable development equipment investments of tangible
personal property purchased by a qualified person for use primarily
in any stage of the manufacturing, processing, refining, fabricating,
or recycling 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, processing,
refining, fabricating, or recycling has altered property to its
completed form, including packaging, if required.
(4) Tangible personal property used primarily during the research
and development process on qualified research.
(b) For purposes of this section:
(1) "Fabricating" means to make, build, create, produce, or
assemble components or property to work in a new or different manner.
(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, processing, refining, fabricating, or
recycling activity of the qualified taxpayer and ending at the point
at which the manufacturing, processing, refining, fabricating, or
recycling 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, processing,
refining, or recycling activity is conducted. Raw materials that are
stored on premises other than where the qualified person's
manufacturing, processing, refining, fabricating, or recycling
activity is conducted , shall not be considered to
have been introduced into the manufacturing, processing, refining,
fabricating, or recycling process.
(5) "Processing" means the physical application of the materials
and labor necessary to modify or change the characteristics of
property.
(6) "Qualified person" means either of the following:
(A) A person who is engaged in those lines of business described
in Codes 3111 to 3399, inclusive, or 5112 of the North American
Industrial Classification System (NAICS) published by the United
States Office of Management and Budget (OMB), 2002 edition.
(B) An affiliate of a person described in subparagraph (A)
provided that the affiliate is a member of the qualified person's
unitary group for which a combined report is required to be filed
under Article 1 (commencing with Section 25101) of Chapter 17 of Part
11.
(7) "Qualified research" means research that meets the
requirements of Section 174 of the Internal Revenue Code.
(8)
(7) "Refining" means the process of converting a
natural resource to an intermediate or finished product.
(9) "Sustainable development equipment" means qualified
manufacturing or research and development equipment that meets any of
the following:
(A) Is consistent with meeting the goals and objectives of
compliance with greenhouse gas emissions standards as set forth in
Division 25.5 (commencing with Section 38500) of the Health and
Safety Code.
(B) Promotes the reduction of wasteful, inefficient, unnecessary,
or uneconomic uses of energy.
(C) Encourages the utilization of cost-effective water use
efficiency practices to curtail the waste of water and to ensure that
water use does not exceed reasonable needs.
(D) Promotes the utilization of recycled or reusable materials in
the manufacturing process.
(10)
(8) "Tangible personal property" includes, but is not
limited to, all of the following:
(A) Machinery and equipment, including component parts and
contrivances such as belts, shafts, moving parts, and operating
structures.
(B) Equipment or devices used or required to operate, control,
regulate, or maintain the machinery and equipment, 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 qualified person or
another party.
(C) Property used in pollution control that meets standards
established by this state or any local or regional governmental
agency within this state.
(D) Special purpose buildings and foundations used as an integral
part of the manufacturing, processing, refining, or fabricating
process, or that constitute a research or storage facility used
during the manufacturing process.
(E) Fuels used or consumed in the manufacturing process.
(11)
(9) "Tangible personal property" does not include any
of the following:
(A) Consumables with a normal useful life of less than one year,
except as provided in subparagraph (E) of paragraph (10)
(8) .
(B) Furniture, inventory, and equipment used in the extraction
process, or equipment used to store finished products that have
completed the manufacturing process.
(C) Buildings or components of buildings used solely for
warehousing purposes after completion of the manufacturing process.
(D) Tangible personal property used primarily in administration,
general management, or marketing.
(c) No exemption shall 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.
(d) Notwithstanding any provision of the Bradley-Burns Uniform
Local Sales and Use Tax Law (Part 1.5 (commencing with Section 7200))
or the Transactions and Use Tax Law (Part 1.6 (commencing with
Section 7251)), the exemption established by this section shall not
apply with respect to any tax levied by a county, city, or district
pursuant to, or in accordance with, either of those laws.
(e) (1)
(c) Notwithstanding subdivision (a), the
exemption provided by this section shall not apply to any sale or use
of property that, within one year from the date of purchase, is
either 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. 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 (A) removes that property outside California,
(B) converts that property for use in a manner not qualifying for
the exemption, or (C) 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.
(d) (1) Notwithstanding any provision of the Bradley-Burns Uniform
Local Sales and Use Tax Law (Part 1.5 (commencing with Section
7200)) or the Transactions and Use Tax Law (Part 1.6 (commencing with
Section 7251)), the exemption established by this section shall not
apply with respect to any tax levied by a county, city, or district
pursuant to, or in accordance with, either of those laws.
(2) Notwithstanding subdivision (a), the exemption
established by paragraphs (1) and (2) of subdivision (a)
provided by this section shall not apply with respect to
any tax levied pursuant to Sections 6051.2, 6051.5, 6051.7, 6201.2,
6201.5, or 6201.7 or pursuant to Section 35 of Article XIII of the
California Constitution.
(3) Notwithstanding subdivision (a), the exemption established by
paragraphs (3) and (4) of subdivision (a) shall not apply with
respect to any tax levied pursuant to Section 6051.2, 6051.5, 6201.2,
or 6201.5 or pursuant to Section 35 of Article XIII of the
California Constitution.
(f) 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 (1) removes that property outside
California, (2) converts that property for use in a manner not
qualifying for the exemption, or (3) 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.
SEC. 3. Section 17053.91 is added to the
Revenue and Taxation Code, to read:
17053.91. (a) (1) There shall be allowed to a qualified person as
a credit against the "net tax" as defined in Section 17039, an
amount equal to that portion of sales tax reimbursement paid to a
retailer or use tax paid on a purchase of tangible personal property
that is placed in service in this state, equal to 5 percent of the
gross receipts or sales price on transactions described in
subparagraphs (A) and (B), occurring between January 1, 2010, and
January 1, 2013, that are subject to tax under Part 1 (commencing
with Section 6351) of Division 2.
(A) Tangible personal property is purchased by a qualified person
for use primarily in any stage of the manufacturing, processing,
refining, fabricating, or recycling 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, processing, refining, fabricating, or recycling has
altered property to its completed form, including packaging, if
required.
(B) Tangible personal property is purchased for use by a
contractor purchasing that property for use in the performance of a
construction contract for the qualified person who will use the
property as an integral part of the manufacturing, processing,
refining, fabricating, or recycling process, or as a storage facility
for use in connection with the manufacturing process.
(2) There shall be allowed to a qualified person as a credit
against the "net tax" as defined in Section 17039 an amount equal to
that portion of sales tax reimbursement paid to a retailer or use tax
paid on a purchase of tangible personal property that is placed in
service in this state, equal to 6 percent of the gross receipts or
sales price on transactions described in subparagraphs (A) and (B),
occurring between January 1, 2010, and January 1, 2013, that are
subject to tax under Part 1 (commencing with Section 6351) of
Division 2.
(A) Sustainable development equipment investments of tangible
personal property is purchased by a qualified person for use
primarily in any stage of the manufacturing, processing, refining,
fabricating, or recycling 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,
processing, refining, fabricating, or recycling has altered property
to its completed form, including packaging, if required.
(B) Tangible personal property is purchased by a qualified person
and used primarily during the research and development process on
qualified research.
(b) The amount of any credit allowed under subdivision (a) shall
be applied in equal amounts over three successive taxable years
beginning with the first taxable year beginning on or after January
1, 2013.
(c) For purposes of this section:
(1) "Fabricating" means to make, build, create, produce, or
assemble components or property to work in a new or different manner.
(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 person and introduced
into the manufacturing, processing, refining, fabricating, or
recycling activity of the qualified person and ending at the point at
which the manufacturing, processing, refining, fabricating, or
recycling 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, processing,
refining, or recycling activity is conducted. Raw
materials that are stored on premises other
than where the qualified person's manufacturing, processing,
refining, fabricating, or recycling activity is conducted, shall not
be considered to have been introduced into the manufacturing,
processing, refining, fabricating, or recycling process.
(5) "Processing" means the physical application of the materials
and labor necessary to modify or change the characteristics of
property.
(6) "Qualified person" means either of the following:
(A) A person who is engaged in those lines of business described
in Codes 3111 to 3399, inclusive, or 5112 of the North American
Industrial Classification System (NAICS) published by the United
States Office of Management and Budget (OMB), 2002 edition.
(B) An affiliate of a person described in subparagraph (A)
provided that the affiliate is a member of the qualified person's
unitary group for which a combined report is required to be filed
under Article 1 (commencing with Section 25101) of Chapter 17 of Part
11.
(7) "Qualified research" means research that meets the
requirements of Section 174 of the Internal Revenue Code.
(8) "Refining" means the process of converting a natural resource
to an intermediate or finished product.
(9) "Sustainable development equipment" means qualified
manufacturing or research and development equipment that meets any of
the following:
(A) Is consistent with meeting the goals and objectives of
compliance with greenhouse gas emissions standards as set forth in
Division 25.5 (commencing with Section 38500) of the Health and
Safety Code.
(B) Promotes the reduction of wasteful, inefficient, unnecessary,
or uneconomic uses of energy.
(C) Encourages the utilization of cost-effective water use
efficiency practices to curtail the waste of water and to ensure that
water use does not exceed reasonable needs.
(D) Promotes the utilization of recycled or reusable materials in
the manufacturing process.
(10) "Tangible personal property" includes, but is not limited to,
all of the following:
(A) Machinery and equipment, including component parts and
contrivances such as belts, shafts, moving parts, and operating
structures.
(B) Equipment or devices used or required to operate, control,
regulate, or maintain the machinery and equipment, 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 qualified person or
another party.
(C) Property used in pollution control that meets standards
established by this state or any local or regional governmental
agency within this state.
(D) Special purpose buildings and foundations used as an integral
part of the manufacturing, processing, refining, or fabricating
process, or that constitute a research or storage facility used
during the manufacturing process.
(E) Fuels used or consumed in the manufacturing process.
(11) "Tangible personal property" does not include any of the
following:
(A) Consumables with a normal useful life of less than one year,
except as provided in subparagraph (E) of paragraph (10).
(B) Furniture, inventory, and equipment used in the extraction
process, or equipment used to store finished products that have
completed the manufacturing process.
(C) Buildings or components of buildings used solely for
warehousing purposes after completion of the manufacturing process.
(D) Property that is used primarily in administration, general
management, or marketing.
(E) Property that, within one year from the date of purchase, is
either removed from California, converted from a use described in
subdivision (a) to some other use not described in subdivision (a),
or used in a manner not described in subdivision (a).
(d) In the case where the credit otherwise allowed under this
section exceeds the "net tax" for the taxable year, that portion of
the credit that exceeds the "net tax" may be carried over to reduce
the net tax in the following taxable year, and the succeeding four
taxable years if necessary, until the credit is exhausted.
(e) This section shall remain in effect only until December 1,
2016, and as of that date is repealed.
SEC. 4. Section 23649.1 is added to the Revenue
and Taxation Code, to read:
23649.1. (a) (1) There shall be allowed to a qualified person as
a credit against the "tax" as defined in Section 23036, an amount
equal to that portion of sales tax reimbursement paid to a retailer
or use tax paid on a purchase of tangible personal property that is
placed in service in this state equal to 6 percent of the gross
receipts or sales price on transactions described in subparagraphs
(A) and (B) occurring between January 1, 2010, and January 1, 2013,
that are subject to tax under Part 1 (commencing with Section 6351)
of Division 2.
(A) Tangible personal property is purchased by a qualified person
for use primarily in any stage of the manufacturing, processing,
refining, fabricating, or recycling 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, processing, refining, fabricating, or recycling has
altered property to its completed form, including packaging, if
required.
(B) Tangible personal property is purchased for use by a
contractor purchasing that property for use in the performance of a
construction contract for the qualified person who will use the
property as an integral part of the manufacturing, processing,
refining, fabricating, or recycling process, or as a storage facility
for use in connection with the manufacturing process.
(2) There shall be allowed to a qualified person as a credit
against the "tax" as defined in Section 23036, and amount equal to
that portion of sales tax reimbursement paid to a retailer or use tax
on a purchase of tangible personal property that is placed in
service in this state, equal to 5 percent of the gross receipts or
sales price on transactions occurring between January 1, 2010, and
January 1, 2013, that are subject to tax under Part 1 (commencing
with Section 6351) of Division 2.
(A) Sustainable development equipment investments of tangible
personal property purchased by a qualified person for use primarily
in any stage of the manufacturing, processing, refining, fabricating,
or recycling 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, processing,
refining, fabricating, or recycling has altered property to its
completed form, including packaging, if required.
(B) Tangible personal property is purchased by a qualified person
and used primarily during the research and development process on
qualified research.
(b) The amount of any credit allowed under subdivision (a) shall
be applied in equal amounts over three successive taxable years
beginning with the first taxable year beginning on or after January
1, 2013.
(c) For purposes of this section:
(1) "Fabricating" means to make, build, create, produce, or
assemble components or property to work in a new or different manner.
(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 person and introduced
into the manufacturing, processing, refining, fabricating, or
recycling activity of the qualified person and ending at the point at
which the manufacturing, processing, refining, fabricating, or
recycling 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, processing,
refining, or recycling activity is conducted. Raw materials that are
stored on premises other than where the qualified person's
manufacturing, processing, refining, fabricating, or recycling
activity is conducted, shall not be considered to have been
introduced into the manufacturing, processing, refining, fabricating,
or recycling process.
(5) "Processing" means the physical application of the materials
and labor necessary to modify or change the characteristics of
property.
(6) "Qualified person" means either of the following:
(A) A person who is engaged in those lines of business described
in Codes 3111 to 3399, inclusive, or 5112 of the North American
Industrial Classification System (NAICS) published by the United
States Office of Management and Budget (OMB), 2002 edition.
(B) An affiliate of a person described in subparagraph (A)
provided that the affiliate is a member of the qualified person's
unitary group for which a combined report is required to be filed
under Article 1 (commencing with Section 25101) of Chapter 17 of Part
11.
(7) "Qualified research" means research that meets the
requirements of Section 174 of the Internal Revenue Code.
(8) "Refining" means the process of converting a natural resource
to an intermediate or finished product.
(9) "Sustainable development equipment" means qualified
manufacturing or research and development equipment that meets any of
the following:
(A) Is consistent with meeting the goals and objectives of
compliance with greenhouse gas emissions standards as set forth in
Division 25.5 (commencing with Section 38500) of the Health and
Safety Code.
(B) Promotes the reduction of wasteful, inefficient, unnecessary,
or uneconomic uses of energy.
(C) Encourages the utilization of cost-effective water use
efficiency practices to curtail the waste of water and to ensure that
water use does not exceed reasonable needs.
(D) Promotes the utilization of recycled or reusable materials in
the manufacturing process.
(10) "Tangible personal property" includes, but is not limited to,
all of the following:
(A) Machinery and equipment, including component parts and
contrivances such as belts, shafts, moving parts, and operating
structures.
(B) Equipment or devices used or required to operate, control,
regulate, or maintain the machinery and equipment, 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 qualified person or
another party.
(C) Property used in pollution control that meets standards
established by this state or any local or regional governmental
agency within this state.
(D) Special purpose buildings and foundations used as an integral
part of the manufacturing, processing, refining, or fabricating
process, or that constitute a research or storage facility used
during the manufacturing process.
(E) Fuels used or consumed in the manufacturing process.
(11) "Tangible personal property" does not include any of the
following:
(A) Consumables with a normal useful life of less than one year,
except as provided in subparagraph (E) of paragraph (10).
(B) Furniture, inventory, and equipment used in the extraction
process, or equipment used to store finished products that have
completed the manufacturing process.
(C) Buildings or components of buildings used solely for
warehousing purposes after completion of the manufacturing process.
(D) Personal property that is used primarily in administration,
general management, or marketing.
(E) Property that, within one year from the date of purchase, is
either removed from California, converted from a use described in
subdivision (a), to some other use not described in subdivision (a),
or used in a manner not described in subdivision (a) or (b).
(d) In the case where the credit otherwise allowed under this
section exceeds the "tax" for the taxable year, that portion of the
credit that exceeds the "tax" may be carried over to reduce the tax
in the following taxable year, and the succeeding four taxable years
if necessary, until the credit is exhausted.
(e) This section shall remain in effect only until December 1,
2016, and as of that date is repealed.
SEC. 5. SEC. 4. This act provides
for a tax levy within the meaning of Article IV of the Constitution
and shall go into immediate effect.
