Bills

AB 1900: Capital investment incentive programs: repeal date.

Session Year: 2017-2018
House: Assembly
Latest Version Date: 2018-09-14

Version:

Existing law, until January 1, 2019, authorizes a county, city and county, or city to establish a capital investment incentive program, pursuant to which the county, city and county, or city is authorized to pay, upon request, a capital investment incentive amount that does not exceed the amount of property tax derived from that portion of the assessed value of a qualified manufacturing facility, as defined, that exceeds $150,000,000 to a proponent of a qualified manufacturing facility for up to 15 years.

This bill would extend the authorization for capital investment incentive programs, as described above, until January 1, 2024.

(1)Existing law, until January 1, 2019, authorizes a county, city and county, or city to establish a capital investment incentive program, pursuant to which the county, city and county, or city is authorized to pay, upon request, a capital investment incentive amount that does not exceed the amount of property tax derived from that portion of the assessed value of a qualified manufacturing facility that exceeds $150,000,000 to a proponent of a qualified manufacturing facility for up to 15 years. Existing law defines the term qualified manufacturing facility for purposes of these provisions to include proposed manufacturing facilities that meet specified criteria, including that the facility is operated by a business described in specified codes of the 2012 North American Industry Classification System (NAICS) and that the proponent, as defined, is currently engaged in specified activities.

This bill would extend the authorization until January 1, 2024, 2029, and would revise the definition of qualified manufacturing facility to include a facility operated by a mail-order house, administrative management and general management consulting services, by referencing a specified 2012 NAICS code. code, or a business described in other codes related to retail trade, as defined by the 2012 NAICS, and a facility operated by a business engaged, or proposing to engage, in the business of providing goods, products, or services to businesses or into markets for which national or international competition exists, and a proponent that engages in the sale or support of a manufactured product or tangible personal property. The bill, until July 1, 2020, 2024, would reduce the assessed value threshold for calculating the capital investment incentive amount from $150,000,000 to $25,000,000 and would define qualified manufacturing facility to include a proponent that engages in the sale of a manufactured product. $25,000,000.

(2)The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws. Existing law requires any bill authorizing a new tax credit to contain, among other things, specific goals, purposes, and objectives that the tax credit will achieve, detailed performance indicators, and data collection requirements.This bill, for each taxable year beginning on and after January 1, 2018, would allow a credit against the taxes imposed under both laws to a qualified taxpayer, defined as a retail trade entity, as described, in an amount equal to 17.5% of qualified wages paid or incurred during the taxable year to a qualified employee. The bill would limit the credit to the first 5 years after a qualified taxpayer first qualifies to receive the credit. The bill also would include that additional information required for any bill authorizing a new income tax credit.(3)This bill would state the intent of the Legislature to enact legislation to expedite groundbreaking and construction in California of large-scale retail trade entities to create economic opportunity and thousands of jobs in California.(4)

(2)This bill would declare that it is to take effect immediately as an urgency statute.

This bill would extend the authorization until January 1, 2024, and would revise the definition of qualified manufacturing facility to include a facility operated by a mail-order house, by referencing a specified 2012 NAICS code. The bill, until July 1, 2020, would reduce the assessed value threshold for calculating the capital investment incentive amount from $150,000,000 to $25,000,000 and would define qualified manufacturing facility to include a proponent that engages in the sale of a manufactured product.

This bill, for each taxable year beginning on and after January 1, 2018, would allow a credit against the taxes imposed under both laws to a qualified taxpayer, defined as a retail trade entity, as described, in an amount equal to 17.5% of qualified wages paid or incurred during the taxable year to a qualified employee. The bill would limit the credit to the first 5 years after a qualified taxpayer first qualifies to receive the credit. The bill also would include that additional information required for any bill authorizing a new income tax credit.

(3)This bill would state the intent of the Legislature to enact legislation to expedite groundbreaking and construction in California of large-scale retail trade entities to create economic opportunity and thousands of jobs in California.

(4)This bill would declare that it is to take effect immediately as an urgency statute.

Version:

The people of the State of California do enact as follows:SECTION 1.Section 51298.5 of the Government Code is amended to read:51298.5.

(a)This chapter shall remain in effect only until January 1, 2024.

(b)A capital investment incentive program established pursuant to this chapter before January 1, 2024, may remain in effect for the full term of that program, regardless of the repeal of this chapter.

The people of the State of California do enact as follows:SECTION 1.Section 51298.5 of the Government Code is amended to read:51298.5.

(a)This chapter shall remain in effect only until January 1, 2019. 2024.

(b)A capital investment incentive program established pursuant to this chapter before January 1, 2019, 2024, may remain in effect for the full term of that program, regardless of the repeal of this chapter.

SECTION 1.Section 51298 of the Government Code is amended to read:51298.It is the intent of the Legislature in enacting this chapter to provide local governments with opportunities to attract large facilities related to manufacturing and retail to invest in their communities and to encourage industries, such as high technology, aerospace, automotive, biotechnology, software, environmental sources, and others, to locate and invest in those facilities in California.(a)Commencing in the 199899 fiscal year, the governing body of a county, city and county, or city, may, by means of an ordinance or resolution approved by a majority of its entire membership, elect to establish a capital investment incentive program. In any county, city and county, or city in which the governing body has so elected, the county, city and county, or city shall, upon the approval by a majority of the entire membership of its governing body of a written request therefor, pay a capital investment incentive amount to the proponent of a qualified manufacturing facility for up to 15 consecutive fiscal years. A request for the payment of capital investment incentive amounts shall be filed by a proponent in writing with the governing body of an electing county, city and county, or city in the time and manner specified in procedures adopted by that governing body. In the case in which the governing body of an electing county, city and county, or city approves a request for the payment of capital investment incentive amounts, both of the following conditions shall apply:(1)The consecutive fiscal years during which a capital investment incentive amount is to be paid shall commence with the first fiscal year commencing after the date upon which the qualified manufacturing facility is certified for occupancy or, if no certification is issued, the first fiscal year commencing after the date upon which the qualified manufacturing facility commences operation.(2)In accordance with paragraph (4) of subdivision (d), the annual payment to a proponent of each capital investment incentive amount shall be contingent upon the proponents payment of a community services fee.(b)For purposes of this section:(1)Qualified manufacturing facility means a proposed manufacturing facility that meets all of the following criteria:(A)The proponents initial investment in that facility, in real and personal property, necessary for the full and normal operation of that facility, made pursuant to the capital investment incentive program, that comprises any portion of that facility or has its situs at that facility, exceeds twenty-five million dollars ($25,000,000). Compliance with this subparagraph shall be certified by the Governors Office of Business and Economic Development upon the directors approval of a proponents application for certification of a qualified manufacturing facility. An application for certification shall be submitted by a proponent to the Governors Office of Business and Economic Development in writing in the time and manner as specified by the director.(B)The facility is to be located within the jurisdiction of the electing county, city and county, or city to which the request is made for payment of capital investment incentive amounts.(C)The facility is operated by any of the following:(i)A business described in Codes 3321 to 3399, inclusive, or Codes 541611, 541711, or 541712 of, or other codes related to retail trade as defined by, the 2012 North American Industry Classification System (NAICS) Manual published by the United States Office of Management and Budget.(ii)A business engaged in the recovery of minerals from geothermal resources, including the proportional amount of a geothermal electric generating plant that is integral to the recovery process by providing electricity for it.(iii)A business engaged in the manufacturing of parts or components related to the production of electricity using solar, wind, biomass, hydropower, or geothermal resources on or after July 1, 2010.(iv)A business firm engaged, or proposing to engage, in the business of providing goods, products, or services to businesses or into markets for which national or international competition exists.(D)The proponent is currently engaged in any of the following:(i)Commercial production.(ii)The perfection of the manufacturing process.(iii)The perfection of a product intended to be manufactured.(iv)The sale or support of a manufactured product or tangible personal property.(2)Proponent means a party or parties that meet all of the following criteria:(A)The party is named in the application to the county, city and county, or city within which the qualified manufacturing facility would be located for a permit to construct a qualified manufacturing facility.(B)The party will be the fee owner of the qualified manufacturing facility upon the completion of that facility. Notwithstanding the previous sentence, the party may enter into a sale-leaseback transaction and nevertheless be considered the proponent.(C)If a proponent that is receiving capital investment incentive amounts subsequently leases the subject qualified manufacturing facility to another party, the lease may provide for the payment to that lessee of any portion of a capital investment incentive amount. Any lessee receiving any portion of a capital investment incentive amount shall also be considered a proponent for the purposes of subdivision (d).(3)Capital investment incentive amount means, with respect to a qualified manufacturing facility for a relevant fiscal year, an amount up to or equal to the amount of ad valorem property tax revenue allocated to the participating local agency, which excludes the revenue transfers required by Sections 97.2 and 97.3 of the Revenue and Taxation Code, from the taxation of that portion of the total assessed value of that real and personal property described in subparagraph (A) of paragraph (1) that is in excess of twenty-five million dollars ($25,000,000).(4)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.(c)A city or special district may, upon the approval by a majority of the entire membership of its governing body, pay to the county, city and county, or city an amount equal to the amount of ad valorem property tax revenue allocated to that city or special district, but not the actual allocation, derived from the taxation of that portion of the total assessed value of that real and personal property described in subparagraph (A) of paragraph (1) of subdivision (b) that is in excess of twenty-five million dollars ($25,000,000).(d)A proponent whose request for the payment of capital investment incentive amounts is approved by an electing county, city and county, or city shall enter into a community services agreement with that county, city and county, or city that includes, but is not limited to, all of the following provisions:(1)A provision requiring that a community services fee be remitted by the proponent to the county, city and county, or city, in each fiscal year, in an amount that is equal to 25 percent of the capital investment incentive amount calculated for that proponent for that fiscal year, except that in no fiscal year shall the amount of the community services fee exceed two million dollars ($2,000,000).(2)A provision specifying the dates in each relevant fiscal year upon which payment of the community services fee is due and delinquent, and the rate of interest to be charged to a proponent for any delinquent portion of the community services fee amount.(3)A provision specifying the procedures and rules for the determination of underpayments or overpayments of a community services fee, for the appeal of determinations of any underpayment, and for the refunding or crediting of any overpayment.(4)A provision specifying that a proponent is ineligible to receive a capital investment incentive amount if that proponent is currently delinquent in the payment of any portion of a community services fee amount, if the qualified manufacturing facility is constructed in a manner materially different from the facility as described in building permit application materials, or if the facility is no longer operated as a qualified manufacturing facility meeting the requirements of paragraph (1) of subdivision (b). If a proponent becomes ineligible to receive a capital investment incentive amount as a result of an agreement provision included pursuant to this subparagraph, the running of the number of consecutive fiscal years specified in an agreement made pursuant to subdivision (a) is not tolled during the period in which the proponent is ineligible.(5)A provision that sets forth a job creation plan with respect to the relevant qualified manufacturing facility. The plan shall specify the number of jobs to be created by that facility, and the types of jobs and compensation ranges to be created thereby. The plan shall also specify that for the entire term of the community services agreement, both of the following shall apply:(A)All of the employees working at the qualified manufacturing facility shall be covered by an employer-sponsored health benefits plan, with the exception of any employee who was offered but declined coverage due to other available group coverage.(B)The average weekly wage, exclusive of overtime, paid to all of the employees working at the qualified manufacturing facility, who are not management or supervisory employees, shall be not less than the state average weekly wage. For the purpose of this subdivision, state average weekly wage means the average weekly wage paid by employers to employees covered by unemployment insurance, as reported to the Employment Development Department for the four calendar quarters ending June 30 of the preceding calendar year.(6)(A)In the case in which the proponent fails to operate the qualified manufacturing facility as required by the community services agreement, a provision that requires the recapture of any portion of any capital investment incentive amounts previously paid to the proponent equal to the lesser of the following:(i)All of the capital investment incentive amounts paid to the proponent, less all of the community services fees received from the proponent, and less any capital investment incentive amounts previously recaptured.(ii)The last capital investment incentive amount paid to the proponent, less the last community services fee received from the proponent, multiplied by 40 percent of the number of years remaining in the community services agreement, but not to exceed 10 years, and less any capital investment incentive amounts previously recaptured.(B)If the proponent fails to operate the qualified manufacturing facility as required by the community services agreement, the county, city and county, or city may, upon a finding that good cause exists, waive any portion of the recapture of any capital investment incentive amount due under this subdivision. For the purpose of this subdivision, good cause includes, but is not limited to, the following:(i)The proponent has sold or leased the property to a person who has entered into an agreement with the county, city and county, or city to assume all of the responsibilities of the proponent under the community services agreement.(ii)The qualified manufacturing facility has been rendered inoperable and beyond repair as a result of an act of God, civil disorder, failure of power, riots, insurrections, war, acts of terrorism, or any other causes, whether the kind herein enumerated or otherwise, not within the control of the qualified manufacturing facility claiming good cause, which restrict or interfere with a qualified manufacturing facilitys ability to timely perform, and which by the exercise of reasonable due diligence, such party is or would have been unable to prevent or overcome.(C)For purposes of this subdivision, failure to operate a qualified manufacturing facility as required by the community services agreement includes, but is not limited to, failure to establish the number of jobs specified in the jobs creation plan created pursuant to paragraph (5).(e)(1)Each county, city and county, or city that elects to establish a capital investment incentive program shall notify the Governors Office of Business and Economic Development of its election to do so no later than June 30th of the fiscal year in which the election was made.(2)In addition to the information required to be reported pursuant to paragraph (1), each county, city and county, or city that has elected to establish a capital investment incentive program shall notify the Governors Office of Business and Economic Development each fiscal year no later than June 30th of the amount of any capital investment incentive payments made and the proponent of the qualified manufacturing facility to whom the payments were made during that fiscal year.(3)The Governors Office of Business and Economic Development shall compile the information submitted by each county, city and county, and city pursuant to paragraphs (1) and (2) and submit a report to the Legislature containing this information no later than October 1, every two years commencing October 1, 2016.(f)This section shall become inoperative on July 1, 2024.(g)A capital investment incentive program established pursuant to this section before the effective date of the act adding this subdivision may remain in effect for the full term of that program.(h)This section is repealed on January 1, 2025.SEC. 2.Section 51298 is added to the Government Code, to read:51298.It is the intent of the Legislature in enacting this chapter to provide local governments with opportunities to attract large facilities related to manufacturing and retail to invest in their communities and to encourage industries, such as high technology, aerospace, automotive, biotechnology, software, environmental sources, and others, to locate and invest in those facilities in California.(a)Commencing in the 199899 fiscal year, the governing body of a county, city and county, or city, may, by means of an ordinance or resolution approved by a majority of its entire membership, elect to establish a capital investment incentive program. In any county, city and county, or city in which the governing body has so elected, the county, city and county, or city shall, upon the approval by a majority of the entire membership of its governing body of a written request therefor, pay a capital investment incentive amount to the proponent of a qualified manufacturing facility for up to 15 consecutive fiscal years. A request for the payment of capital investment incentive amounts shall be filed by a proponent in writing with the governing body of an electing county, city and county, or city in the time and manner specified in procedures adopted by that governing body. In the case in which the governing body of an electing county, city and county, or city approves a request for the payment of capital investment incentive amounts, both of the following conditions shall apply: (1)The consecutive fiscal years during which a capital investment incentive amount is to be paid shall commence with the first fiscal year commencing after the date upon which the qualified manufacturing facility is certified for occupancy or, if no certification is issued, the first fiscal year commencing after the date upon which the qualified manufacturing facility commences operation.(2)In accordance with paragraph (4) of subdivision (d), the annual payment to a proponent of each capital investment incentive amount shall be contingent upon the proponents payment of a community services fee.(b)For purposes of this section:(1)Qualified manufacturing facility means a proposed manufacturing facility that meets all of the following criteria:(A)The proponents initial investment in that facility, in real and personal property, necessary for the full and normal operation of that facility, made pursuant to the capital investment incentive program, that comprises any portion of that facility or has its situs at that facility, exceeds one hundred fifty million dollars ($150,000,000). Compliance with this subparagraph shall be certified by the Governors Office of Business and Economic Development upon the directors approval of a proponents application for certification of a qualified manufacturing facility. An application for certification shall be submitted by a proponent to the Governors Office of Business and Economic Development in writing in the time and manner as specified by the director.(B)The facility is to be located within the jurisdiction of the electing county, city and county, or city to which the request is made for payment of capital investment incentive amounts.(C)The facility is operated by any of the following:(i)A business described in Codes 3321 to 3399, inclusive, or Codes 541611, 541711, or 541712 of, or other codes related to retail trade as defined by, the 2012 North American Industry Classification System (NAICS) Manual published by the United States Office of Management and Budget.(ii)A business engaged in the recovery of minerals from geothermal resources, including the proportional amount of a geothermal electric generating plant that is integral to the recovery process by providing electricity for it.(iii)A business engaged in the manufacturing of parts or components related to the production of electricity using solar, wind, biomass, hydropower, or geothermal resources on or after July 1, 2010.(iv)A business firm engaged, or proposing to engage, in the business of providing goods, products, or services to businesses or into markets for which national or international competition exists.(D)The proponent is currently engaged in any of the following:(i)Commercial production.(ii)The perfection of the manufacturing process.(iii)The perfection of a product intended to be manufactured.(iv)The sale or support of a manufactured product or tangible personal property.(2)Proponent means a party or parties that meet all of the following criteria:(A)The party is named in the application to the county, city and county, or city within which the qualified manufacturing facility would be located for a permit to construct a qualified manufacturing facility.(B)The party will be the fee owner of the qualified manufacturing facility upon the completion of that facility. Notwithstanding the previous sentence, the party may enter into a sale-leaseback transaction and nevertheless be considered the proponent.(C)If a proponent that is receiving capital investment incentive amounts subsequently leases the subject qualified manufacturing facility to another party, the lease may provide for the payment to that lessee of any portion of a capital investment incentive amount. Any lessee receiving any portion of a capital investment incentive amount shall also be considered a proponent for the purposes of subdivision (d).(3)Capital investment incentive amount means, with respect to a qualified manufacturing facility for a relevant fiscal year, an amount up to or equal to the amount of ad valorem property tax revenue allocated to the participating local agency, which excludes the revenue transfers required by Sections 97.2 and 97.3 of the Revenue and Taxation Code, from the taxation of that portion of the total assessed value of that real and personal property described in subparagraph (A) of paragraph (1) that is in excess of one hundred fifty million dollars ($150,000,000).(4)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.(c)A city or special district may, upon the approval by a majority of the entire membership of its governing body, pay to the county, city and county, or city an amount equal to the amount of ad valorem property tax revenue allocated to that city or special district, but not the actual allocation, derived from the taxation of that portion of the total assessed value of that real and personal property described in subparagraph (A) of paragraph (1) of subdivision (b) that is in excess of one hundred fifty million dollars ($150,000,000).(d)A proponent whose request for the payment of capital investment incentive amounts is approved by an electing county, city and county, or city shall enter into a community services agreement with that county, city and county, or city that includes, but is not limited to, all of the following provisions:(1)A provision requiring that a community services fee be remitted by the proponent to the county, city and county, or city, in each fiscal year, in an amount that is equal to 25 percent of the capital investment incentive amount calculated for that proponent for that fiscal year, except that in no fiscal year shall the amount of the community services fee exceed two million dollars ($2,000,000).(2)A provision specifying the dates in each relevant fiscal year upon which payment of the community services fee is due and delinquent, and the rate of interest to be charged to a proponent for any delinquent portion of the community services fee amount.(3)A provision specifying the procedures and rules for the determination of underpayments or overpayments of a community services fee, for the appeal of determinations of any underpayment, and for the refunding or crediting of any overpayment.(4)A provision specifying that a proponent is ineligible to receive a capital investment incentive amount if that proponent is currently delinquent in the payment of any portion of a community services fee amount, if the qualified manufacturing facility is constructed in a manner materially different from the facility as described in building permit application materials, or if the facility is no longer operated as a qualified manufacturing facility meeting the requirements of paragraph (1) of subdivision (b). If a proponent becomes ineligible to receive a capital investment incentive amount as a result of an agreement provision included pursuant to this subparagraph, the running of the number of consecutive fiscal years specified in an agreement made pursuant to subdivision (a) is not tolled during the period in which the proponent is ineligible.(5)A provision that sets forth a job creation plan with respect to the relevant qualified manufacturing facility. The plan shall specify the number of jobs to be created by that facility, and the types of jobs and compensation ranges to be created thereby. The plan shall also specify that for the entire term of the community services agreement, both of the following shall apply:(A)All of the employees working at the qualified manufacturing facility shall be covered by an employer-sponsored health benefits plan, with the exception of any employee who was offered but declined coverage due to other available group coverage. (B)The average weekly wage, exclusive of overtime, paid to all of the employees working at the qualified manufacturing facility, who are not management or supervisory employees, shall be not less than the state average weekly wage. For the purpose of this subdivision, state average weekly wage means the average weekly wage paid by employers to employees covered by unemployment insurance, as reported to the Employment Development Department for the four calendar quarters ending June 30 of the preceding calendar year.(6)(A)In the case in which the proponent fails to operate the qualified manufacturing facility as required by the community services agreement, a provision that requires the recapture of any portion of any capital investment incentive amounts previously paid to the proponent equal to the lesser of the following:(i)All of the capital investment incentive amounts paid to the proponent, less all of the community services fees received from the proponent, and less any capital investment incentive amounts previously recaptured.(ii)The last capital investment incentive amount paid to the proponent, less the last community services fee received from the proponent, multiplied by 40 percent of the number of years remaining in the community services agreement, but not to exceed 10 years, and less any capital investment incentive amounts previously recaptured.(B)If the proponent fails to operate the qualified manufacturing facility as required by the community services agreement, the county, city and county, or city may, upon a finding that good cause exists, waive any portion of the recapture of any capital investment incentive amount due under this subdivision. For the purpose of this subdivision, good cause includes, but is not limited to, the following:(i)The proponent has sold or leased the property to a person who has entered into an agreement with the county, city and county, or city to assume all of the responsibilities of the proponent under the community services agreement.(ii)The qualified manufacturing facility has been rendered inoperable and beyond repair as a result of an act of God, civil disorder, failure of power, riots, insurrections, war, acts of terrorism, or any other causes, whether the kind herein enumerated or otherwise, not within the control of the qualified manufacturing facility claiming good cause, which restrict or interfere with a qualified manufacturing facilitys ability to timely perform, and which by the exercise of reasonable due diligence, such party is or would have been unable to prevent or overcome.(C)For purposes of this subdivision, failure to operate a qualified manufacturing facility as required by the community services agreement includes, but is not limited to, failure to establish the number of jobs specified in the jobs creation plan created pursuant to paragraph (5).(e)(1)Each county, city and county, or city that elects to establish a capital investment incentive program shall notify the Governors Office of Business and Economic Development of its election to do so no later than June 30th of the fiscal year in which the election was made.(2)In addition to the information required to be reported pursuant to paragraph (1), each county, city and county, or city that has elected to establish a capital investment incentive program shall notify the Governors Office of Business and Economic Development each fiscal year no later than June 30th of the amount of any capital investment incentive payments made and the proponent of the qualified manufacturing facility to whom the payments were made during that fiscal year.(3)The Governors Office of Business and Economic Development shall compile the information submitted by each county, city and county, and city pursuant to paragraphs (1) and (2) and submit a report to the Legislature containing this information no later than October 1, every two years commencing October 1, 2016.(f)This section shall become operative on July 1, 2024.SEC. 3.Section 51298.5 of the Government Code, as amended by Section 1 of Chapter 709 of the Statutes of 2017, is amended to read:51298.5.(a)This chapter shall remain in effect only until January 1, 2029.(b)A capital investment incentive program established pursuant to this chapter before January 1, 2029, may remain in effect for the full term of that program, regardless of the repeal of this chapter.SEC. 4.This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect. The facts constituting the necessity are:In order to allow California to readily recruit and retain large business entities, which leads to a huge impact on the states job growth, income tax, infrastructure development, and quality of life, it is necessary that this act take immediate effect.

The people of the State of California do enact as follows:SECTION 1.It is the intent of the Legislature to enact legislation, including, but not limited to, financial incentives and changes to regulatory and environmental processes, to expedite groundbreaking and construction in California of large-scale retail trade entities to create economic opportunity and thousands of jobs in California.SEC. 2.SECTION 1.Section 51298 of the Government Code is amended to read:51298.

It is the intent of the Legislature in enacting this chapter to provide local governments with opportunities to attract large manufacturing facilities related to manufacturing and retail to invest in their communities and to encourage industries, such as high technology, aerospace, automotive, biotechnology, software, environmental sources, and others, to locate and invest in those facilities in California.

(a)Commencing in the 199899 fiscal year, the governing body of a county, city and county, or city, may, by means of an ordinance or resolution approved by a majority of its entire membership, elect to establish a capital investment incentive program. In any county, city and county, or city in which the governing body has so elected, the county, city and county, or city shall, upon the approval by a majority of the entire membership of its governing body of a written request therefor, pay a capital investment incentive amount to the proponent of a qualified manufacturing facility for up to 15 consecutive fiscal years. A request for the payment of capital investment incentive amounts shall be filed by a proponent in writing with the governing body of an electing county, city and county, or city in the time and manner specified in procedures adopted by that governing body. In the case in which the governing body of an electing county, city and county, or city approves a request for the payment of capital investment incentive amounts, both of the following conditions shall apply:

(1)The consecutive fiscal years during which a capital investment incentive amount is to be paid shall commence with the first fiscal year commencing after the date upon which the qualified manufacturing facility is certified for occupancy or, if no certification is issued, the first fiscal year commencing after the date upon which the qualified manufacturing facility commences operation.

(2)In accordance with paragraph (4) of subdivision (d), the annual payment to a proponent of each capital investment incentive amount shall be contingent upon the proponents payment of a community services fee.

(b)For purposes of this section:

(1)Qualified manufacturing facility means a proposed manufacturing facility that meets all of the following criteria:

(A)The proponents initial investment in that facility, in real and personal property, necessary for the full and normal operation of that facility, made pursuant to the capital investment incentive program, that comprises any portion of that facility or has its situs at that facility, exceeds twenty-five million dollars ($25,000,000). Compliance with this subparagraph shall be certified by the Governors Office of Business and Economic Development upon the directors approval of a proponents application for certification of a qualified manufacturing facility. An application for certification shall be submitted by a proponent to the Governors Office of Business and Economic Development in writing in the time and manner as specified by the director.

(B)The facility is to be located within the jurisdiction of the electing county, city and county, or city to which the request is made for payment of capital investment incentive amounts.

(C)The facility is operated by any of the following:

(i)A business described in Codes 3321 to 3399, inclusive, or Code 454113, Codes 541611, 541711, or 541712 of of, or other codes related to retail trade as defined by, the 2012 North American Industry Classification System (NAICS) Manual published by the United States Office of Management and Budget.

(ii)A business engaged in the recovery of minerals from geothermal resources, including the proportional amount of a geothermal electric generating plant that is integral to the recovery process by providing electricity for it.

(iii)A business engaged in the manufacturing of parts or components related to the production of electricity using solar, wind, biomass, hydropower, or geothermal resources on or after July 1, 2010.

(iv)A business firm engaged, or proposing to engage, in the business of providing goods, products, or services to businesses or into markets for which national or international competition exists.

(D)The proponent is currently engaged in any of the following:

(i)Commercial production.

(ii)The perfection of the manufacturing process.

(iii)The perfection of a product intended to be manufactured.

(iv)The sale or support of a manufactured product. product or tangible personal property.

(2)Proponent means a party or parties that meet all of the following criteria:

(A)The party is named in the application to the county, city and county, or city within which the qualified manufacturing facility would be located for a permit to construct a qualified manufacturing facility.

(B)The party will be the fee owner of the qualified manufacturing facility upon the completion of that facility. Notwithstanding the previous sentence, the party may enter into a sale-leaseback transaction and nevertheless be considered the proponent.

(C)If a proponent that is receiving capital investment incentive amounts subsequently leases the subject qualified manufacturing facility to another party, the lease may provide for the payment to that lessee of any portion of a capital investment incentive amount. Any lessee receiving any portion of a capital investment incentive amount shall also be considered a proponent for the purposes of subdivision (d).

(3)Capital investment incentive amount means, with respect to a qualified manufacturing facility for a relevant fiscal year, an amount up to or equal to the amount of ad valorem property tax revenue allocated to the participating local agency, which excludes the revenue transfers required by Sections 97.2 and 97.3 of the Revenue and Taxation Code, from the taxation of that portion of the total assessed value of that real and personal property described in subparagraph (A) of paragraph (1) that is in excess of twenty-five million dollars ($25,000,000).

(4)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.

(c)A city or special district may, upon the approval by a majority of the entire membership of its governing body, pay to the county, city and county, or city an amount equal to the amount of ad valorem property tax revenue allocated to that city or special district, but not the actual allocation, derived from the taxation of that portion of the total assessed value of that real and personal property described in subparagraph (A) of paragraph (1) of subdivision (b) that is in excess of twenty-five million dollars ($25,000,000).

(d)A proponent whose request for the payment of capital investment incentive amounts is approved by an electing county, city and county, or city shall enter into a community services agreement with that county, city and county, or city that includes, but is not limited to, all of the following provisions:

(1)A provision requiring that a community services fee be remitted by the proponent to the county, city and county, or city, in each fiscal year, in an amount that is equal to 25 percent of the capital investment incentive amount calculated for that proponent for that fiscal year, except that in no fiscal year shall the amount of the community services fee exceed two million dollars ($2,000,000).

(2)A provision specifying the dates in each relevant fiscal year upon which payment of the community services fee is due and delinquent, and the rate of interest to be charged to a proponent for any delinquent portion of the community services fee amount.

(3)A provision specifying the procedures and rules for the determination of underpayments or overpayments of a community services fee, for the appeal of determinations of any underpayment, and for the refunding or crediting of any overpayment.

(4)A provision specifying that a proponent is ineligible to receive a capital investment incentive amount if that proponent is currently delinquent in the payment of any portion of a community services fee amount, if the qualified manufacturing facility is constructed in a manner materially different from the facility as described in building permit application materials, or if the facility is no longer operated as a qualified manufacturing facility meeting the requirements of paragraph (1) of subdivision (b). If a proponent becomes ineligible to receive a capital investment incentive amount as a result of an agreement provision included pursuant to this subparagraph, the running of the number of consecutive fiscal years specified in an agreement made pursuant to subdivision (a) is not tolled during the period in which the proponent is ineligible.

(5)A provision that sets forth a job creation plan with respect to the relevant qualified manufacturing facility. The plan shall specify the number of jobs to be created by that facility, and the types of jobs and compensation ranges to be created thereby. The plan shall also specify that for the entire term of the community services agreement, both of the following shall apply:

(A)All of the employees working at the qualified manufacturing facility shall be covered by an employer-sponsored health benefits plan, with the exception of any employee who was offered but declined coverage due to other available group coverage.

(B)The average weekly wage, exclusive of overtime, paid to all of the employees working at the qualified manufacturing facility, who are not management or supervisory employees, shall be not less than the state average weekly wage. For the purpose of this subdivision, state average weekly wage means the average weekly wage paid by employers to employees covered by unemployment insurance, as reported to the Employment Development Department for the four calendar quarters ending June 30 of the preceding calendar year.

(6)(A)In the case in which the proponent fails to operate the qualified manufacturing facility as required by the community services agreement, a provision that requires the recapture of any portion of any capital investment incentive amounts previously paid to the proponent equal to the lesser of the following:

(i)All of the capital investment incentive amounts paid to the proponent, less all of the community services fees received from the proponent, and less any capital investment incentive amounts previously recaptured.

(ii)The last capital investment incentive amount paid to the proponent, less the last community services fee received from the proponent, multiplied by 40 percent of the number of years remaining in the community services agreement, but not to exceed 10 years, and less any capital investment incentive amounts previously recaptured.

(B)If the proponent fails to operate the qualified manufacturing facility as required by the community services agreement, the county, city and county, or city may, upon a finding that good cause exists, waive any portion of the recapture of any capital investment incentive amount due under this subdivision. For the purpose of this subdivision, good cause includes, but is not limited to, the following:

(i)The proponent has sold or leased the property to a person who has entered into an agreement with the county, city and county, or city to assume all of the responsibilities of the proponent under the community services agreement.

(ii)The qualified manufacturing facility has been rendered inoperable and beyond repair as a result of an act of God, civil disorder, failure of power, riots, insurrections, war, acts of terrorism, or any other causes, whether the kind herein enumerated or otherwise, not within the control of the qualified manufacturing facility claiming good cause, which restrict or interfere with a qualified manufacturing facilitys ability to timely perform, and which by the exercise of reasonable due diligence, such party is or would have been unable to prevent or overcome.

(C)For purposes of this subdivision, failure to operate a qualified manufacturing facility as required by the community services agreement includes, but is not limited to, failure to establish the number of jobs specified in the jobs creation plan created pursuant to paragraph (5).

(e)(1)Each county, city and county, or city that elects to establish a capital investment incentive program shall notify the Governors Office of Business and Economic Development of its election to do so no later than June 30th of the fiscal year in which the election was made.

(2)In addition to the information required to be reported pursuant to paragraph (1), each county, city and county, or city that has elected to establish a capital investment incentive program shall notify the Governors Office of Business and Economic Development each fiscal year no later than June 30th of the amount of any capital investment incentive payments made and the proponent of the qualified manufacturing facility to whom the payments were made during that fiscal year.

(3)The Governors Office of Business and Economic Development shall compile the information submitted by each county, city and county, and city pursuant to paragraphs (1) and (2) and submit a report to the Legislature containing this information no later than October 1, every two years commencing October 1, 2016.

(f)This section shall become inoperative on July 1, 2020, and, as of January 1, 2021, is repealed.

(f)This section shall become inoperative on July 1, 2024.

(g)A capital investment incentive program established pursuant to this section before the effective date of the act adding this subdivision may remain in effect for the full term of that program.

(h)This section is repealed on January 1, 2025.

SEC. 3.SEC. 2.Section 51298 is added to the Government Code, to read:51298.

(b)For purposes of this section:

(1)Qualified manufacturing facility means a proposed manufacturing facility that meets all of the following criteria:

(A)The proponents initial investment in that facility, in real and personal property, necessary for the full and normal operation of that facility, made pursuant to the capital investment incentive program, that comprises any portion of that facility or has its situs at that facility, exceeds one hundred fifty million dollars ($150,000,000). Compliance with this subparagraph shall be certified by the Governors Office of Business and Economic Development upon the directors approval of a proponents application for certification of a qualified manufacturing facility. An application for certification shall be submitted by a proponent to the Governors Office of Business and Economic Development in writing in the time and manner as specified by the director.

(B)The facility is to be located within the jurisdiction of the electing county, city and county, or city to which the request is made for payment of capital investment incentive amounts.

(C)The facility is operated by any of the following:

(i)A business described in Codes 3321 to 3399, inclusive, or Codes 454113, 541611, 541711, or 541712 of of, or other codes related to retail trade as defined by, the 2012 North American Industry Classification System (NAICS) Manual published by the United States Office of Management and Budget.

(iii)A business engaged in the manufacturing of parts or components related to the production of electricity using solar, wind, biomass, hydropower, or geothermal resources on or after July 1, 2010.

(iv)A business firm engaged, or proposing to engage, in the business of providing goods, products, or services to businesses or into markets for which national or international competition exists.

(D)The proponent is currently engaged in any of the following:

(i)Commercial production.

(ii)The perfection of the manufacturing process.

(iii)The perfection of a product intended to be manufactured.

(iv)The sale or support of a manufactured product or tangible personal property.

(2)Proponent means a party or parties that meet all of the following criteria:

(f)This section shall become operative on July 1, 2020. 2024.

SEC. 4.SEC. 3.Section 51298.5 of the Government Code, as amended by Section 1 of Chapter 709 of the Statutes of 2017, is amended to read:51298.5.

(a)This chapter shall remain in effect only until January 1, 2024. 2029.

(b)A capital investment incentive program established pursuant to this chapter before January 1, 2024, 2029, may remain in effect for the full term of that program, regardless of the repeal of this chapter.

SEC. 5.Section 17053.49 is added to the Revenue and Taxation Code, to read:17053.49.(a)For each taxable year beginning on or after January 1, 2018, there shall be allowed as a credit against the net tax, as defined in Section 17039, to a qualified taxpayer, an amount equal to 17.5 percent of qualified wages paid or incurred during the taxable year with respect to a qualified employee.(b)For purposes of this section:(1)Qualified employee means a full-time employee.(2)(A)Qualified taxpayer means a person that is engaged in a trade or business and meets both of the following conditions:(i)Is either not engaged in business in this state before January 1, 2018, or is engaged in business in this state before January 1, 2018, and has a net increase in full-time qualified employees on or after January 1, 2018.(ii)Is a retail trade entity that occupies any of the following:(I)An existing building of at least 500,000 square feet.(II)A developed or renovated greenfield site of at least 100 acres.(III)A combination of infill, existing buildings, and a renovated or redeveloped greenfield site that is at least 500,000 square feet.(B)A qualified taxpayer shall not include a person that is located within a 25-mile radius of any other person engaged in a business or trade of like kind.(3)Qualified wages means wages subject to withholding under Division 6 (commencing with Section 13000) of the Unemployment Insurance Code.(c)This credit shall only be allowed to a qualified taxpayer for five consecutive taxable years, beginning on the date that the qualified taxpayer that meets either condition of clause (i) of subparagraph (A) of paragraph (2) of subdivision (b) is either first engaged in a trade or business in this state or first has a net increase in full-time employees.(d)In the case where the credit allowed by this section exceeds the net tax, the credit may be carried over to reduce the net tax in the following taxable year, and the succeeding five years if necessary, until the credit is exhausted.(e)A deduction otherwise allowed under this part for any amount paid or incurred by the qualified taxpayer upon which the credit is based shall be reduced by the amount of the credit allowed by this section.(f)The credit under this section may be claimed only on a timely filed original return.(g)(1)The Franchise Tax Board may adopt regulations as necessary or appropriate to carry out the purposes of this section.(2)Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code does not apply to any standard, criterion, procedure, determination, rule, notice, or guideline established or issued by the Franchise Tax Board pursuant to this section.SEC. 6.Section 23649 is added to the Revenue and Taxation Code, to read:23649.(a)For each taxable year beginning on or after January 1, 2018, there shall be allowed as a credit against the tax, as defined in Section 23036, to a qualified taxpayer, an amount equal to 17.5 percent of qualified wages paid or incurred during the taxable year with respect to a qualified employee.(b)For purposes of this section:(1)Qualified employee means a full-time employee.(2)(A)Qualified taxpayer means a person that is engaged in a trade or business and meets both of the following conditions:(i)Is either not engaged in business in this state before January 1, 2018, or is engaged in business in this state before January 1, 2018, and has a net increase in full-time qualified employees on or after January 1, 2018.(ii)Is a retail trade entity that occupies any of the following:(I)An existing building of at least 500,000 square feet.(II)A developed or renovated greenfield site of at least 100 acres.(III)A combination of infill, existing buildings, and a renovated or redeveloped greenfield site that is at least 500,000 square feet.(B)A qualified taxpayer shall not include a person that is located within a 25-mile radius of any other person engaged in a business or trade of like kind.(3)Qualified wages means wages subject to withholding under Division 6 (commencing with Section 13000) of the Unemployment Insurance Code.(c)This credit shall only be allowed to a qualified taxpayer for five consecutive taxable years, beginning on the date that the qualified taxpayer that meets either condition of clause (i) of subparagraph (A) of paragraph (2) of subdivision (b) is either first engaged in a trade or business in this state or first has a net increase in full-time employees.(d)In the case where the credit allowed by this section exceeds the tax, the credit may be carried over to reduce the tax in the following taxable year, and the succeeding five years if necessary, until the credit is exhausted.(e)A deduction otherwise allowed under this part for any amount paid or incurred by the qualified taxpayer upon which the credit is based shall be reduced by the amount of the credit allowed by this section.(f)The credit under this section may be claimed only on a timely filed original return.(g)(1)The Franchise Tax Board may adopt regulations as necessary or appropriate to carry out the purposes of this section.(2)Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code does not apply to any standard, criterion, procedure, determination, rule, notice, or guideline established or issued by the Franchise Tax Board pursuant to this section.SEC. 7.For the purposes of complying with Section 41 of the Revenue and Taxation Code, with respect to Sections 17053.49 and 23649 of the Revenue and Taxation Code as added by this act, the Legislature finds and declares as follows:(a)Specific goals, purposes, and objectives:(1)Increase the number of businesses located in California.(2)Increase state revenue.(3)Increase the number of jobs available for Californians.(4)Decrease statewide unemployment.(b)Performance indicators:(1)The number of businesses that locate to California and receive the credit.(2)A decrease in the unemployment rate.(3)The number of jobs created by businesses that receive the credit.(c)Data collection requirements and baseline measurements:(1)The baseline measures include:(A)State level of unemployment at the time the credits become available.(B)The average number of businesses that located to California in the five years prior to the credit being available.(2)Data to collect includes:(A)The number of businesses that qualify for the credit.(B)How many jobs qualified taxpayers create.(C)The total amount of salaries paid that qualify for the credit.(D)How long a qualified taxpayer remains in California.(E)The total amount of qualified wages paid and the income generated to the state from those wages.SEC. 8.SEC. 4.

This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect. The facts constituting the necessity are:

In order to allow California to readily recruit and retain large business entities, which leads to a huge impact on the states job growth, income tax, infrastructure development, and quality of life, it is necessary that this act take immediate effect.

The people of the State of California do enact as follows:SECTION 1.

It is the intent of the Legislature to enact legislation, including, but not limited to, financial incentives and changes to regulatory and environmental processes, to expedite groundbreaking and construction in California of large-scale retail trade entities to create economic opportunity and thousands of jobs in California.

SEC. 2.Section 51298 of the Government Code is amended to read:51298.

It is the intent of the Legislature in enacting this chapter to provide local governments with opportunities to attract large manufacturing facilities to invest in their communities and to encourage industries, such as high technology, aerospace, automotive, biotechnology, software, environmental sources, and others, to locate and invest in those facilities in California.

(b)For purposes of this section:

(1)Qualified manufacturing facility means a proposed manufacturing facility that meets all of the following criteria:

(A)The proponents initial investment in that facility, in real and personal property, necessary for the full and normal operation of that facility, made pursuant to the capital investment incentive program, that comprises any portion of that facility or has its situs at that facility, exceeds one hundred fifty twenty-five million dollars ($150,000,000). ($25,000,000). Compliance with this subparagraph shall be certified by the Governors Office of Business and Economic Development upon the directors approval of a proponents application for certification of a qualified manufacturing facility. An application for certification shall be submitted by a proponent to the Governors Office of Business and Economic Development in writing in the time and manner as specified by the director.

(B)The facility is to be located within the jurisdiction of the electing county, city and county, or city to which the request is made for payment of capital investment incentive amounts.

(C)The facility is operated by any of the following:

(i)A business described in Codes 3321 to 3399, inclusive, or Codes 541711 Code 454113, 541711, or 541712 of the 2012 North American Industry Classification System (NAICS) Manual published by the United States Office of Management and Budget.

(iii)A business engaged in the manufacturing of parts or components related to the production of electricity using solar, wind, biomass, hydropower, or geothermal resources on or after July 1, 2010.

(D)The proponent is currently engaged in any of the following:

(i)Commercial production.

(ii)The perfection of the manufacturing process.

(iii)The perfection of a product intended to be manufactured.

(iv)The sale of a manufactured product.

(2)Proponent means a party or parties that meet all of the following criteria:

(f)This section shall become operative on July 1, 2015.

(f)This section shall become inoperative on July 1, 2020, and, as of January 1, 2021, is repealed.

SEC. 3.Section 51298 is added to the Government Code, to read:51298.

(b)For purposes of this section:

(1)Qualified manufacturing facility means a proposed manufacturing facility that meets all of the following criteria:

(A)The proponents initial investment in that facility, in real and personal property, necessary for the full and normal operation of that facility, made pursuant to the capital investment incentive program, that comprises any portion of that facility or has its situs at that facility, exceeds one hundred fifty million dollars ($150,000,000). Compliance with this subparagraph shall be certified by the Governors Office of Business and Economic Development upon the directors approval of a proponents application for certification of a qualified manufacturing facility. An application for certification shall be submitted by a proponent to the Governors Office of Business and Economic Development in writing in the time and manner as specified by the director.

(B)The facility is to be located within the jurisdiction of the electing county, city and county, or city to which the request is made for payment of capital investment incentive amounts.

(C)The facility is operated by any of the following:

(i)A business described in Codes 3321 to 3399, inclusive, or Codes 454113, 541711, or 541712 of the 2012 North American Industry Classification System (NAICS) Manual published by the United States Office of Management and Budget.

(iii)A business engaged in the manufacturing of parts or components related to the production of electricity using solar, wind, biomass, hydropower, or geothermal resources on or after July 1, 2010.

(D)The proponent is currently engaged in any of the following:

(i)Commercial production.

(ii)The perfection of the manufacturing process.

(iii)The perfection of a product intended to be manufactured.

(2)Proponent means a party or parties that meet all of the following criteria:

(f)This section shall become operative on July 1, 2020.

SEC. 4.Section 51298.5 of the Government Code, as amended by Section 1 of Chapter 709 of the Statutes of 2017, is amended to read:51298.5.

(a)This chapter shall remain in effect only until January 1, 2019. 2024.

SEC. 5.Section 17053.49 is added to the Revenue and Taxation Code, to read:17053.49.

(a)For each taxable year beginning on or after January 1, 2018, there shall be allowed as a credit against the net tax, as defined in Section 17039, to a qualified taxpayer, an amount equal to 17.5 percent of qualified wages paid or incurred during the taxable year with respect to a qualified employee.

(b)For purposes of this section:

(1)Qualified employee means a full-time employee.

(2)(A)Qualified taxpayer means a person that is engaged in a trade or business and meets both of the following conditions:

(i)Is either not engaged in business in this state before January 1, 2018, or is engaged in business in this state before January 1, 2018, and has a net increase in full-time qualified employees on or after January 1, 2018.

(ii)Is a retail trade entity that occupies any of the following:

(I)An existing building of at least 500,000 square feet.

(II)A developed or renovated greenfield site of at least 100 acres.

(III)A combination of infill, existing buildings, and a renovated or redeveloped greenfield site that is at least 500,000 square feet.

(B)A qualified taxpayer shall not include a person that is located within a 25-mile radius of any other person engaged in a business or trade of like kind.

(3)Qualified wages means wages subject to withholding under Division 6 (commencing with Section 13000) of the Unemployment Insurance Code.

(c)This credit shall only be allowed to a qualified taxpayer for five consecutive taxable years, beginning on the date that the qualified taxpayer that meets either condition of clause (i) of subparagraph (A) of paragraph (2) of subdivision (b) is either first engaged in a trade or business in this state or first has a net increase in full-time employees.

(d)In the case where the credit allowed by this section exceeds the net tax, the credit may be carried over to reduce the net tax in the following taxable year, and the succeeding five years if necessary, until the credit is exhausted.

(e)A deduction otherwise allowed under this part for any amount paid or incurred by the qualified taxpayer upon which the credit is based shall be reduced by the amount of the credit allowed by this section.

(f)The credit under this section may be claimed only on a timely filed original return.

(g)(1)The Franchise Tax Board may adopt regulations as necessary or appropriate to carry out the purposes of this section.

(2)Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code does not apply to any standard, criterion, procedure, determination, rule, notice, or guideline established or issued by the Franchise Tax Board pursuant to this section.

SEC. 6.Section 23649 is added to the Revenue and Taxation Code, to read:23649.

(a)For each taxable year beginning on or after January 1, 2018, there shall be allowed as a credit against the tax, as defined in Section 23036, to a qualified taxpayer, an amount equal to 17.5 percent of qualified wages paid or incurred during the taxable year with respect to a qualified employee.

(b)For purposes of this section:

(1)Qualified employee means a full-time employee.

(2)(A)Qualified taxpayer means a person that is engaged in a trade or business and meets both of the following conditions:

(ii)Is a retail trade entity that occupies any of the following:

(I)An existing building of at least 500,000 square feet.

(II)A developed or renovated greenfield site of at least 100 acres.

(III)A combination of infill, existing buildings, and a renovated or redeveloped greenfield site that is at least 500,000 square feet.

(B)A qualified taxpayer shall not include a person that is located within a 25-mile radius of any other person engaged in a business or trade of like kind.

(3)Qualified wages means wages subject to withholding under Division 6 (commencing with Section 13000) of the Unemployment Insurance Code.

(d)In the case where the credit allowed by this section exceeds the tax, the credit may be carried over to reduce the tax in the following taxable year, and the succeeding five years if necessary, until the credit is exhausted.

(f)The credit under this section may be claimed only on a timely filed original return.

(g)(1)The Franchise Tax Board may adopt regulations as necessary or appropriate to carry out the purposes of this section.

SEC. 7.

For the purposes of complying with Section 41 of the Revenue and Taxation Code, with respect to Sections 17053.49 and 23649 of the Revenue and Taxation Code as added by this act, the Legislature finds and declares as follows:

(a)Specific goals, purposes, and objectives:

(1)Increase the number of businesses located in California.

(2)Increase state revenue.

(3)Increase the number of jobs available for Californians.

(4)Decrease statewide unemployment.

(b)Performance indicators:

(1)The number of businesses that locate to California and receive the credit.

(2)A decrease in the unemployment rate.

(3)The number of jobs created by businesses that receive the credit.

(c)Data collection requirements and baseline measurements:

(1)The baseline measures include:

(A)State level of unemployment at the time the credits become available.

(B)The average number of businesses that located to California in the five years prior to the credit being available.

(2)Data to collect includes:

(A)The number of businesses that qualify for the credit.

(B)How many jobs qualified taxpayers create.

(C)The total amount of salaries paid that qualify for the credit.

(D)How long a qualified taxpayer remains in California.

(E)The total amount of qualified wages paid and the income generated to the state from those wages.

SEC. 8.

Date	Status
Sep 14, 2018	Chaptered by Secretary of State - Chapter 382, Statutes of 2018.
Sep 14, 2018	Approved by the Governor.
Aug 20, 2018	Enrolled and presented to the Governor at 3 p.m.
Aug 14, 2018	In Assembly. Ordered to Engrossing and Enrolling.
Aug 13, 2018	Read third time. Passed. Ordered to the Assembly.
Aug 1, 2018	Ordered to special consent calendar.
Jun 14, 2018	Read second time. Ordered to third reading.
Jun 13, 2018	From committee: Do pass. (Ayes 7. Noes 0.) (June 13).
May 30, 2018	Referred to Com. on GOV. & F.
May 22, 2018	In Senate. Read first time. To Com. on RLS. for assignment.
May 21, 2018	Read third time. Passed. Ordered to the Senate.
May 15, 2018	Read second time. Ordered to third reading.
May 14, 2018	Read second time and amended. Ordered returned to second reading.
May 10, 2018	From committee: Amend, and do pass as amended. (Ayes 9. Noes 0.) (May 9).
May 7, 2018	In committee: Hearing postponed by committee.
May 3, 2018	Re-referred to Com. on L. GOV. pursuant to Assembly Rule 96.
May 1, 2018	Re-referred to Com. on REV. & TAX.
Apr 30, 2018	From committee chair, with author's amendments: Amend, and re-refer to Com. on REV. & TAX. Read second time and amended.
Apr 9, 2018	In committee: Set, second hearing. Hearing canceled at the request of author.
Mar 12, 2018	In committee: Set, first hearing. Hearing canceled at the request of author.
Feb 5, 2018	Referred to Coms. on REV. & TAX. and L. GOV.
Jan 23, 2018	From printer. May be heard in committee February 22.
Jan 22, 2018	Read first time. To print.

Date	Description	Location	Votes
Aug 13, 2018	Special Consent AB1900	Senate Floor	36 0 3 Passed
Jun 13, 2018	Do pass	Senate Standing Committee on Governance and Finance	7 0 0 Passed
May 21, 2018	AB 1900 BROUGH Assembly Third Reading	Assembly Floor	73 1 4 Passed
May 9, 2018	Do pass as amended.	Assembly Standing Committee on Local Government	9 0 0 Passed

Key

Pro

Against

Did Not Vote

This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.

Positions by individuals are not included.

* Testimony in a hearing

** Position recorded in bill analysis

*** Position recorded in written testimony

Organization	Position	Date
California Labor Federation	* Indeterminate	May 9, 2018
California Manufacturers And Technology Association	** Support	Jun 15, 2018
Unknown.	** Against	Jun 8, 2018

* Testimony in a hearing

** Position recorded in bill analysis

*** Position recorded in written testimony

SENATE RULES COMMITTEE

Office of Senate Floor Analyses

(916) 651-1520 Fax: (916) 327-4478

THIRD READING

Bill No: AB 1900

Author:

Vote:

SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 6/13/18

AYES: McGuire, Nguyen, Beall, Hernandez, Hertzberg, Lara, Moorlach

ASSEMBLY FLOOR: 73-1, 5/21/18 - See last page for vote

SUBJECT:

SOURCE: Author

DIGEST:

This bill extends the Capital Investment Incentive Program from January 1, 2019, to January 1, 2024.

ANALYSIS:

Existing law:

Provides that all property is taxable at the same percentage of fair market value unless explicitly exempted by the Constitution or federal law (California Constitution, Article XIII)
Establishes a formula for the allocation of property taxes, using the historical share as a base and apportioning revenues from the change in assessed valuation among each local agency serving a particular property. Each local agency's share of property tax reflects the tax rate of each jurisdiction relative to the rates of other taxing agencies in the jurisdiction.
Enacts the Capital Investment Incentive Program (program), which allows cities and counties to pay a “capital investment incentive amount” for 15 years to a proponent of a qualified manufacturing facility making an initial investment that exceeds $150 million.
1. Requires proponents to apply to the city or county by filing a request, which must be approved by majority vote of the city or county’s governing body for payments to commence.
2. Provides that the payment a proponent receives a payment is equal to the amount of property taxes paid and received by that city or county that exceeds $150 million of the facility’s value.
3. Requires the proponent to pay a community service fee equal to 25% of the capital incentive amount, up to $2 million a year, sign a community services agreement that requires employer-sponsored health care and payment of an average wage not less than the state average spells out the fee, a job creation plan, and provisions to recapture the incentive payments if the proponent fails to run the facility as agreed.
4. Allows a city or special district to pay the county or city an amount equal to the amount of property tax revenue that the local government receives from the facility’s property taxes paid on the facility’s value over $150 million.
Requires, to qualify for the program, the qualified manufacturing facility to:
1. Have an initial investment in real and personal property over $150 million, certified by the Governor’s Office of Business and Economic Development (GO-Biz).
2. Be within the county or city offering the capital incentive program.
3. Be operated by a business within specified North American Industrial Classification System (NAICS), a firm that recovers minerals from geothermal resources, or manufacturer of components and parts used in specified forms of renewable energy generation.
Sunsets the program on January 1, 2019.

This bill extends the program to January 1, 2024.

Background

The Legislature originally passed the tax rebate program to help Placer County officials attract an Intel plant, but they never used the law (SB 566, Thompson, Chapter 616, Statutes of 1997). Legislators expanded the definition of a qualified manufacturing facility to include CalEnergy Company’s plan to extract minerals from geothermal brine, which did not launch (SB 133, Kelley, Chapter 24, Statutes of 1999.) The Legislature expanded the program to include manufacturers that produce of electricity using solar, wind, biomass, hydropower, or geothermal resources, shifted the responsibility to certify the investment to the Business, Transportation and Housing Agency, and sunset the program (AB 904, V.M Perez, Chapter 486, Statutes of 2009).

In 2012, the Legislature expanded the program to (SB 1006, Committee on Budget and Fiscal Review, Chapter 32, Statutes of 2012):

Include research and development facilities,
Raise the threshold investment amount from $150 to $250 million,
Lower from $150 million to $25 million the assessed valuation threshold that trigger capital investment incentive payments equivalent to property taxes paid,
Revise eligibility criteria, and
Shift the duty to certify investments to GO-Biz.

SB 1006 sought to entice Samsung Semiconductor to expand its manufacturing facility in San Jose; however, the facility was constructed without the incentive agreement being executed, with the company instead applying for and receiving California Competes tax credits. The bill repealed all of its changes on June 30, 2013. In 2014, the Legislature again reauthorized the program, expanded the NAICS codes to include aerospace manufacturers, and lower the threshold to trigger incentive payments from $150 million in value to $25 million, as part of a package of incentives to attract production of the United States Air Force’s new long-range bomber to California (AB 2389, Fox, Chapter 116, and SB 718, Roth, Chapter 189, Statutes of 2014). The specific programmatic changes sunset on January 1, 2016, thereby defaulting to the threshold investment amounts and minimum value thresholds to those originally set by the Legislature in 1997; however, both bills sunset the program entirely on January 1, 2018. Last year, the Legislature extended the capital investment incentive program for one year from January 1, 2018, to January 1, 2019 (AB 758, E. Garcia, Chapter 709, Statutes of 2017).

In November, 2017, GO-Biz submitted a report covering plan activity under the program through June 30, 2017. The report indicated that the following cities had approved a resolution establishing a program:

The City of Palmdale entered into a 15-year agreement with the Lockheed Martin Corporation, which agreed to invest $385 million in new facilities if it secured the Department of Defense (DOD) contract to manufacture the new strategic aircraft program. The agreement would have paid Lockheed Martin $740,000 annually, with a Community Service Fee of an unspecified amount.
The County of Los Angeles entered into a 15-year agreement with the Lockheed Martin Corporation if it secured the same contract. The agreement would have paid Lockheed Martin $3.08 million annually, with a community services fee of $1.02 million.

However, DOD awarded the contract to another bidder, so no payments were made. The County of Los Angeles and the City of Long Beach entered into an agreement with Weber Metals, Inc., where the county entered into a 15-year agreement to make a payment of $1.04 million and the city makes one of $709,000, in exchange for annual community service fees of $348,607 and $265,000, respectively. GO-Biz indicated that the facility is currently under construction, so no payments have yet been made. If GO-Biz certifies the investment, it would become the first time the program has been used in its 20-year life. Recently, the City of Riverside and City of El Centro have both adopted CIIP resolutions, and the City of Huntington Beach is considering adopting one, according to GO-Biz. However, no specific project has yet been identified for these jurisdictions.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 6/15/18)

California Manufacturers and Technology Association

OPPOSITION: (Verified 6/15/18)

None received

ARGUMENTS IN SUPPORT: According to the author, “California must always remember that in today’s global economy, location is not permanent, but by choice. Companies, especially those that would avail themselves of the benefits offered in this bill, have many opportunities to locate outside of California. We have to be ready as a state to make that choice easier for them to locate their business, suppliers, contract, and product investment here. AB 1900 is a focused economic incentive that will have a positive economic impact on our state. By extending the sunset date of the California Investment Incentive Program, it offers a chance to build local community support for creating or retaining a business where the taxable property value alone represents great public revenue – including the additional corporate and personal tax collections. This locally driven program allows cities or counties the opportunity to partner with manufacturing facilities to invest long term in their communities by offering property tax rebates for up to 15 years. Extending this program would be particularly rewarding for California, which has suffered an exodus of manufacturers. The intent of AB 1900 is to reverse the trend where California sees company after company leave this state. AB 1900 is one way to help increase California's ability to attract and retain these capital-intensive industry and high-wage jobs.”

ASSEMBLY FLOOR: 73-1, 5/21/18

AYES: Acosta, Aguiar-Curry, Travis Allen, Arambula, Baker, Berman, Bigelow, Bloom, Bonta, Brough, Burke, Caballero, Calderon, Carrillo, Cervantes, Chau, Chávez, Chen, Chiu, Choi, Chu, Cooley, Cooper, Cunningham, Dahle, Daly, Flora, Fong, Frazier, Friedman, Gallagher, Gipson, Gloria, Gonzalez Fletcher, Grayson, Harper, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Obernolte, O'Donnell, Patterson, Quirk, Quirk-Silva, Reyes, Rodriguez, Rubio, Salas, Steinorth, Mark Stone, Thurmond, Ting, Voepel, Waldron, Weber, Wood, Rendon

NOES: Santiago

NO VOTE RECORDED: Eggman, Cristina Garcia, Eduardo Garcia, Gray

Prepared by:

6/15/18 12:48:32

**** END ****

SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Mike McGuire, Chair

2017 - 2018 Regular

Bill No:	AB 1900	Hearing Date:	6/13/18
Author:	Brough	Tax Levy:	No
Version:	5/14/18	Fiscal:	No
Consultant:	Grinnell

Capital investment incentive programs: repeal date

Extends the Capital Investment Incentive Program from January 1, 2019, to January 1, 2024.

Background

Article XIII of the California Constitution provides that all property is taxable at the same percentage of fair market value unless explicitly exempted by the Constitution or federal law. The Constitution limits the maximum amount of any ad valorem tax on real property at 1% of full cash value, and directs assessors to only reappraise property when newly constructed, or ownership changes (Proposition 13, 1978). Proposition 13 additionally limited any inflationary growth of the full cash value base to 2% per year.

Under the Capital Investment Incentive Program, counties and cities can pay a capital investment incentive amount for 15 years to a proponent of a qualified manufacturing facility making an initial investment that exceeds $150 million. The proponent must apply to the city or county by filing a request, which must be approved by majority vote of the city or county’s governing body for payments to commence. If approved, a proponent receives a payment equal to the amount of property taxes paid and received by that city or county that exceeds $150 million of the facility’s value - other agencies’ shares of tax revenues from that property are not affected. In return for this property tax rebate, the proponent must then pay a community service fee equal to 25% of the capital incentive amount, up to $2 million a year. The proponent must also sign a community services agreement that spells out the fee, payment conditions, a job creation plan that requires employer-sponsored health care and payment of an average wage not less than the state average, and provisions to recapture the incentive payments if the proponent fails to run the facility as agreed. Additionally, a city or special district may pay the county or city an amount equal to the amount of property tax revenue that the local government receives from the facility’s property taxes paid on the facility’s value over $150 million.

To qualify for this tax rebate program, a qualified manufacturing facility must be engaged in commercial production, the perfection of the manufacturing process, or the perfection of a product intended to be manufactured. The proponent of the facility must also:

Have an initial investment in real and personal property over $150 million, certified by the Governor’s Office of Business and Economic Development (GO-Biz),
Be located within the county or city offering the capital incentive program, and
Be operated by a business within specified North American Industrial Classification System (NAICS) codes, that includes firms engaged in:
Forging and Stamping;
Cutlery and Handtool Manufacturing;
Architectural and Structural Metals Manufacturing;
Boiler, Tank, and Shipping Container Manufacturing;
Hardware Manufacturing;
Spring and Wire Product Manufacturing;
Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing;
Coating, Engraving, Heat Treating, and Allied Activities;
Other Fabricated Metal Product Manufacturing;
Agriculture, Construction, and Mining Machinery Manufacturing;
Commercial and Service Industry Machinery Manufacturing;
Ventilation, Heating, Air-Conditioning, and Commercial Refrigeration Equipment Manufacturing;
Metalworking Machinery Manufacturing;
Engine, Turbine, and Power Transmission Equipment Manufacturing;
Other General Purpose Machinery Manufacturing
Computer and Peripheral Equipment Manufacturing;
Communications Equipment Manufacturing;
Audio and Video Equipment Manufacturing;
Semiconductor and Other Electronic Component Manufacturing;
Navigational, Measuring, Electromedical, and Control Instruments Manufacturing;
Manufacturing and Reproducing Magnetic and Optical Media;
Electrical Lighting Equipment Manufacturing;
Household Appliance Manufacturing;
Electrical Equipment Manufacturing;
Other Electrical Equipment and Component Manufacturing;
Motor Vehicle Manufacturing;
Motor Vehicle Body and Trailer Manufacturing;
Motor Vehicle Parts Manufacturing;
Aerospace Product and Parts Manufacturing;
Railroad Rolling Stock Manufacturing;
Ship and Boat Building;
Other Transportation Equipment Manufacturing;
Furniture and Related Product Manufacturing;
Household and Institutional Furniture and Kitchen Cabinet Manufacturing;
Office Furniture (including Fixtures) Manufacturing;
Other Furniture Related Product Manufacturing;
Medical Equipment and Supplies Manufacturing;
Other Miscellaneous Manufacturing;
Research and development in biotechnology;
Research and development in the physical, engineering, and life sciences;
The recovery of minerals from geothermal resources, including the proportional amount of a geothermal electric generating plant that is integral to the recovery process by providing electricity for it, and;
The manufacturing of parts or components related to the production of electricity using solar, wind, biomass, hydropower, or geothermal resources.

The Legislature originally approved the program to help Placer County officials attract an Intel plant, but they never used the law (SB 566, Thompson, 1997). Legislators expanded the definition of a qualified manufacturing facility to include CalEnergy Company’s plan to extract minerals from geothermal brine, which did not launch (SB 133, Kelley, 1999.) In 2009, the Legislature further expanded the program to include other manufacturers that produce of electricity using solar, wind, biomass, hydropower, or geothermal resources; shifted the responsibility to certify the investment to the Business, Transportation and Housing Agency; and sunset the program on January 1, 2017 (AB 904, V.M Perez).

In 2012, the Legislature expanded the program to (SB 1006, Committee on Budget and Fiscal Review):

Include research and development facilities,
Raise the threshold investment amount from $150 to $250 million,
Lower from $150 million to $25 million the assessed valuation threshold that trigger capital investment incentive payments equivalent to property taxes paid,
Revise eligibility criteria, and
Shift the duty to certify investments to GO-Biz.

In 2014, the Legislature again reauthorized the program, expanded the NAICS codes to include additional manufacturers, and lower the threshold to trigger incentive payments from $150 million in value to $25 million, as part of a package of incentives to attract production of the United States Air Force’s new long-range bomber to California (AB 2389, Fox, and SB 718, Roth, 2014). The specific programmatic changes sunset on January 1, 2016, thereby defaulting to the threshold investment amounts and minimum value thresholds to those originally set by the Legislature in 1997. Both bills set the program to sunset entirely on January 1, 2018. However, last year, the Legislature extended the program from January 1, 2018, to January 1, 2019, at the request of Imperial County and ES Minerals, a firm seeking to extract lithium from a location near the Salton Sea (AB 755, E. Garcia).

Seeking additional incentives for the state to lure and maintain manufacturing, the author wants to extend the program for an additional five years.

Proposed Law

Assembly Bill 1900 extends the Capital Investment Incentive Program from January 1, 2019, to January 1, 2024.

State Revenue Impact

No estimate.

Comments

1. Purpose of the bill. According to the author, “California must always remember that in today’s global economy, location is not permanent, but by choice. Companies, especially those that would avail themselves of the benefits offered in this bill, have many opportunities to locate outside of California. We have to be ready as a state to make that choice easier for them to locate their business, suppliers, contract, and product investment here. AB 1900 is a focused economic incentive that will have a positive economic impact on our state. By extending the sunset date of the California Investment Incentive Program, it offers a chance to build local community support for creating or retaining a business where the taxable property value alone represents great public revenue – including the additional corporate and personal tax collections. This locally driven program allows cities or counties the opportunity to partner with manufacturing facilities to invest long term in their communities by offering property tax rebates for up to 15 years. Extending this program would be particularly rewarding for California, which has suffered an exodus of manufacturers. The intent of AB 1900 is to reverse the trend where California sees company after company leave this state. AB 1900 is one way to help increase California's ability to attract and retain these capital-intensive industry and high-wage jobs.”

2. Right way? AB 1900 extends the capital investment incentive program, which allows cities and counties to refund property taxes received solely by that jurisdiction to specified firms, under the assumption that the net economic benefits to that city or county exceed the amounts refunded. However, the program would sunset on January 1, 2019, but for legislative action, thereby eliminating the authority for local agencies to use property tax rebates for economic development purposes. While the state foregoes almost $60 billion annually in tax expenditures, some for economic development purposes, is it good public policy for local agencies to do too? The Committee may wish to consider the general effectiveness of property tax rebates toward creating economic development.

3. How does this work? If a city council or county board of supervisors approves the proponent’s request, he or she pays their property tax as they would normally under current law. The local agency approving the request then sends a payment equal to the amount of the share of the property tax they received on the value of the facility that exceeds $150 million, less the community service fee. For example, a firm that constructs a facility valued at $200 million, pays $2 million in tax at a 1% rate. If the local agency approving the request receives a 15% share of the allocated property tax for that property in that specific tax rate area, the payment is $750,000 ($200 million - $150 million = $50 million x 1% rate x the 15% share), less the $187,500 (25%) community service fee, for a net payment of $562,000.

4. This just in. In November, 2017, GO-Biz submitted a report covering plan activity under the program through June 30, 2017. The report indicated that the following cities had approved a resolution establishing a CIIP:

The City of Palmdale entered into a 15-year agreement with the Lockheed Martin Corporation, which agreed to invest $385 million in new facilities if it secured the Department of Defense (DOD) contract to manufacture the new strategic aircraft program. The agreement would have paid Lockheed Martin $740,000 annually, with a Community Service Fee of an unspecified amount.
The County of Los Angeles entered into a 15-year agreement with the Lockheed Martin Corporation if it secured the same contract. The agreement would have paid Lockheed Martin $3.08 million annually, with a community services fee of $1.02 million.

5. Subsidies and schools. In addition to counties and cities, special districts can also make incentive payments to manufacturers under the program. However, the underlying law is unclear regarding whether special districts also include school districts. Should the measure allow school districts to do so, why should school districts shift funds from education purposes to pay for economic development incentives? While current law prohibits special districts from paying the actual allocation, likely nullifying any state Proposition 98 backfill for a school district from the state General Fund, the Committee may wish to consider amending the measure or enacting subsequent legislation to preclude school districts from making incentive payments.

Assembly Actions

Assembly Local Government Committee: 9-0
Assembly Floor: 73-1

Support and Opposition

(6/8/18)

Support: California Manufacturers and Technology Association

Opposition: Unknown.

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:

Author:(Brough)

As Amended Ver:May 14, 2018

2/3 vote. Urgency

Committee	Votes	Ayes	Noes
Local Government	9-0	Aguiar-Curry, Waldron, Bloom, Caballero, Cooley, Grayson, Lackey, Voepel, Mullin

SUMMARY: Extends the authorization for cities and counties to establish a capital investment incentive program (CIIP) until January 1 2024.

EXISTING LAW:

Specifies that all property is subject to property tax, unless explicitly exempted by the California Constitution or federal law.
Authorizes counties or cities to establish a CIIP and requires those that choose to do so to pay a "capital investment incentive amount" (incentive amount) to the proponent of a qualified manufacturing facility for up to 15 consecutive years, as specified.
Defines the criteria that a "qualified manufacturing facility" must meet, including (among other specifications) that the proponent's initial investment in the facility exceeds $150 million, the facility is located within the jurisdiction of the county or city that will pay the incentive amount, the facility will be operated by specified types of businesses, and the proponent will be engaged in specified activities.
Limits the incentive amount paid to the proponent for a relevant fiscal year to an amount up to or equal to the amount of ad valorem property tax revenue allocated to the participating county or city from the total assessed value of the facility's real or personal property in excess of $150 million.
Requires a proponent whose request for payment of the incentive amount is approved to enter into a "community services agreement" (agreement) with the county or city.
Requires the agreement to contain specified provisions, including a specified "community services fee," (fee) a job creation plan, and protections for the local government if the proponent fails to meet its obligations under the agreement.
Provides the incentive amount paid to the proponent, as specified above, is contingent upon the proponent's payment of fee, as specified.
Calculates the proponent's fee as an amount equal to 25% of the proponent's incentive amount for each fiscal year, and caps the fee to a maximum of $2 million in any fiscal year.
Requires each county or city that elects to create a CIIP to notify the Governor's Office of Business and Economic Development (GO-Biz) each fiscal year, as specified.
Requires GO-Biz to compile the information submitted by counties and cities and submit a report to the Legislature no later than October 1 every two years, as specified.
Repeals the authority of counties and cities to create a CIIP on January 1, 2019, but specifies that a CIIP established before this date may remain in effect for the full term of that program.

FISCAL EFFECT: None

COMMENTS:

Background. SB 566 (Thompson), Chapter 616, Statutes of 1997, enacted the CIIP, and SB 133 (Kelley), Chapter 24, Statutes of 1999, expanded the program to provide local governments with an opportunity to attract large manufacturing facilities to invest in their communities and to encourage industries, such as high technology, energy, environmental, and others to locate and invest in California. CIIP authorizes a local government to offer partial property tax abatement for qualified manufacturing facilities for assessed property taxes in excess of $150 million. The program allows a local government to rebate a 'capital investment incentive amount' to a manufacturer proponent that is equal to the taxes owed on the manufacturing property in excess of the first $150 million assessment for up to 15 years.

The incentive may only be offered after the proponent and the local government agrees to a "Community Services Agreement" that requires the proponent to meet certain criteria, such as job creation numbers, wages paid at least to the state average weekly wage, and local fees. If a proponent fails to meet these requirements, the local government is entitled to repayment of any amounts paid.

In 1999, Imperial County and CalEnergy Operating Corporation attempted to utilize the program for zinc extraction from the Salton Sea, but a collapse in the zinc market caused the project, and thus the program, to cease. The abated property taxes were returned to the County, as provided under the Community Service Agreement between CalEnergy and the County. Imperial County and EnergySource Minerals, LLC (ES Minerals) are currently attempting to utilize the program, but may not finalize it before the program sunsets this year.

Bill Summary. This bill extends the CIIP for five years until January 1, 2024. This bill is sponsored by the author.
Author's Statement. According to the author, "California must always remember that in today's global economy, location is not permanent, but by choice. Companies, especially those that would avail themselves of the benefits offered in this bill, have many opportunities to locate outside of California. We have to be ready as a state to make that choice easier for them to locate their business, suppliers, contract, and product investment here.

"AB 1900 is a focused economic incentive that will have a positive economic impact on our state. By extending the sunset date of the California Investment Incentive Program, it offers a chance to build local community support for creating or retaining a business where the taxable property value alone represents great public revenue – including the additional corporate and personal tax collections. This locally driven program allows cities or counties the opportunity to partner with manufacturing facilities to invest long term in their communities by offering property tax rebates for up to 15 years.

"Extending this program would be particularly rewarding for California which has suffered an exodus of manufacturers. The intent of AB 1900 is to reverse the trend where California sees company after company leave this state. AB 1900 is one way to help increase California's ability to attract and retain these capital-intensive industry and high-wage jobs."

Prior and Related Legislation. The CIIP has been expanded on multiple occasions to include new types of facilities. AB 904 (Perez), Chapter 486, Statutes of 2009, included businesses engaged in manufacturing alternative electricity production parts and components. SB 1006 (Committee on Budget and Fiscal Review), Chapter 32, Statutes of 2012, briefly expanded the program to include "qualified research and development facilities" until June 30, 2013. AB 2389 (Fox), Chapter 116, Statutes of 2014, added businesses engaged in research and development in biotechnology, physical engineering, and life sciences and lowered the threshold of annual property tax revenues the taxpayer must pay to be eligible from $150 million to $25 million until July 1, 2015.

Several times the Legislature has declined to expand the program to other participants, including certain alternative energy electricity plants with AB 2129 (Kelley) of 2002 and AB 1966 (B. Garcia) of 2006. Additionally, the Legislature has declined to repeal the program due to lack of use via SB 360 (Negrete McLeod) of 2007.

Most recently, AB 755 (Garcia), Chapter 709, Statutes of 2017, was signed into law which extended the capital investment incentive program from January 1, 2018, to January 1, 2019.

Arguments in Support. Supporters argue that preserving programs like CIIP is crucial to providing manufacturers a solid foundation to continue to reshore their facilities back to America, and to choose California when they do. Reshoring is beginning to outpace offshoring – manufacturing jobs are returning to the United States, although many are choosing to locate their manufacturing facilities in states other than California.

State tax credits and incentives, such as property tax abatements, offset the costs of moving or building a facility in a new city, hiring California workers, and other investments. The CIIP allows our state to compete with others that are offering hefty economic development incentives.

Arguments in Opposition. None on file.

Analysis Prepared by: Jimmy MacDonald / L. GOV. / (916) 319-3958 FN: 0002883

Date of Hearing: May 9, 2018

ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT

Cecilia Aguiar-Curry, Chair

ABPCA Bill Id:AB 1900 (

Author:Brough) – As Amended Ver:April 30, 2018

SUBJECT: Capital investment incentive programs: qualified manufacturing facility: capital investment incentive amount.

SUMMARY: Modifies and extends the authorization for cities and counties to establish a capital investment incentive program (CIIP). Specifically, this bill:

Extends the sunset of the CIIP from January 1, 2019, to January 1, 2029.
Modifies the CIIP, which authorizes cities and counties to establish a CIIP, whereby
the city or county pays a "capital investment incentive amount" (i.e., property tax rebate)
to the proponent of a "qualified manufacturing facility" for up to 15 consecutive fiscal years,
as follows:
1. Expands the definition of a "qualified manufacturing facility" to include a facility operated by any of these businesses:
  1. A business described in unspecified codes of the 2012 North American Industry Classification System (NAICS) Manual that relate to retail trade; and,
  2. A business firm engaged, or proposing to engage, in the business of providing goods, products, or services to businesses or into markets for which national or international competition exists.
2. Expands the type of qualifying activities the proponent is currently engaged in to include the sale or support of a manufactured product or tangible personal property;
3. Reduces the proponent's required initial investment in that facility from an amount that exceeds $150 million to $25 million as measured by the assessed value of the real and personal property necessary for full and normal operation of that facility; and,
4. Increases the amount that a participating city, county, or city and county may pay to a proponent as a "capital investment incentive amount" on the basis of the ad valorem property tax revenues derived from the facility by lowering the threshold to $25 million of assessed value from $150 million.
Provides that the amendments outlined in 2) become inoperative on July 1, 2024, and repeals the statutory provision on January 1, 2025.
Enacts a new section that would remove the amendments proposed in 2) on July 1, 2024, except the new statute continues the expanded definition of a "qualified manufacturing facility" to include a facility operated by any of the specified businesses and the corresponding expanded type of "qualifying activities".
Expands the CIIP's intent to also include attracting large facilities related to retail.
Provides that any pre-established CIIP may remain in effect for its full term.
Takes immediate effect as an urgency measure to allow California to readily recruit and retain large business entities, leading to growth in jobs, income tax, infrastructure development, and quality of life.

EXISTING LAW:

Specifies that all property is subject to property tax, unless explicitly exempted by the California Constitution or federal law.
Authorizes counties or cities to establish a CIIP and requires those that choose to do so to pay a "capital investment incentive amount" (incentive amount) to the proponent of a qualified manufacturing facility for up to 15 consecutive years, as specified.
Defines the criteria that a "qualified manufacturing facility" must meet, including (among other specifications) that the proponent's initial investment in the facility exceeds $150 million, the facility is located within the jurisdiction of the county or city that will pay the incentive amount, the facility will be operated by specified types of businesses, and the proponent will be engaged in specified activities.
Limits the incentive amount paid to the proponent for a relevant fiscal year to an amount up to or equal to the amount of ad valorem property tax revenue allocated to the participating county or city from the total assessed value of the facility's real or personal property in excess of $150 million.
Requires a proponent whose request for payment of the incentive amount is approved to enter into a "community services agreement" (agreement) with the county or city.
Requires the agreement to contain specified provisions, including a specified "community services fee," (fee) a job creation plan, and protections for the local government if the proponent fails to meet its obligations under the agreement.
Provides the incentive amount paid to the proponent, as specified above, is contingent upon the proponent's payment of fee, as specified.
Calculates the proponent's fee as an amount equal to 25% of the proponent's incentive amount for each fiscal year, and caps the fee to a maximum of $2 million in any fiscal year.
Requires each county or city that elects to create a CIIP to notify the Governor's Office
of Business and Economic Development (GO-Biz) each fiscal year, as specified.
Requires GO-Biz to compile the information submitted by counties and cities and submit
a report to the Legislature no later than October 1 every two years, as specified.
Repeals the authority of counties and cities to create a CIIP on January 1, 2019, but specifies that a CIIP established before this date may remain in effect for the full term of that program.

FISCAL EFFECT: None

COMMENTS:

Background. SB 566 (Thompson), Chapter 616, Statutes of 1997, enacted the CIIP, and
SB 133 (Kelley), Chapter 24, Statutes of 1999, expanded the program to provide local governments with an opportunity to attract large manufacturing facilities to invest in their communities and to encourage industries, such as high technology, energy, environmental, and others to locate and invest in California. CIIP authorizes a local government to offer partial property tax abatement for qualified manufacturing facilities for assessed property taxes in excess of $150 million. The program allows a local government to rebate a ‘capital investment incentive amount’ to a manufacturer proponent that is equal to the taxes owed on the manufacturing property in excess of the first $150 million assessment for up to 15 years.

The incentive may only be offered after the proponent and the local government agrees to a “Community Services Agreement” that requires the proponent to meet certain criteria, such as job creation numbers, wages paid at least to the state average weekly wage, and local fees. If a proponent fails to meet these requirements, the local government is entitled to repayment of any amounts paid.

Bill Summary. This bill modifies the CIIP in several ways. First, it extends the program
for 10 years. Second, it expands the program to include large-scale retail-trade related facilities. Third, it temporarily lowers the required initial investment amount from $150 million to $25 million. Finally, it temporarily increases the property taxes cities and counties can rebate to that facility over $25 million of assessed value by lowering the threshold from $150 million. This bill is sponsored by the author.
Author’s Statement. According to the author, “California must always remember that in today’s global economy, location is not permanent, but by choice. Companies, especially those that would avail themselves of the benefits offered in this bill, have many opportunities to locate outside of California. We have to be ready as a state to make that choice easier for them to locate their business, suppliers, contract, and product investment here.

“Approximately 9,000 California companies moved their headquarters or diverted projects
to out-of-state locations in the last seven years for states that offer greater economic opportunities for entrepreneurs and workers alike. The projections for California GDP
are to be much slower than previous years, a concern for future year’s revenue projections

“The intent of AB 1900 is to reverse this trend. California has an unmatched workforce, world-class universities and transportation hubs that allow for access to destinations throughout the world; making it the perfect location for companies large and small if given the right tools and resources to aggressively bid and attract employers to locate here.”

Policy Considerations. The Committee may wish to consider the following:
1. Program’s Original Intent. By expanding the program to also include retail facilities, AB 1900 represents a vast departure from the original intent of the program. When
  SB 566 was adopted in 1997, the intent of the program was made clear by saying, “It is the intent of the Legislature in enacting this chapter to provide local governments with opportunities to attract large manufacturing facilities to invest in their communities and to encourage industries, such as high technology, aerospace, automotive, biotechnology, software, environmental sources, and others, to locate and invest in those facilities in California.” By including retail facilities, this bill could potentially lead to sporting goods stores, online retailer warehouse distribution centers, and many others receiving property tax relief with little public oversight and transparency as to the benefit each community will receive. AB 1900 ultimately moves away from the premise of attracting manufacturing plants and instead subsidizes retail companies. The Committee may wish to consider whether this year's bill shifts the character of the program from a property tax subsidy to lure manufacturing, to a program that subsidizes large retail companies that would likely locate in California irrespective of the property tax relief.
2. Correct Threshold? The initial $150 million threshold was set at a time when a comparable Oregon statute had a $100 million threshold, with proponents noting that a higher threshold would be appropriate for California. On the theory that only a substantial investment would generate the kind of economic activity necessary to "pay" for the property tax rebates granted, a high dollar threshold was probably reasonable, and California was courting "mega" businesses.|

However, 20 years later, few CIIP property tax rebates appear to have been issued. Imperial County issued some property tax rebates to CalEnergy, but the company repaid the funds after its mineral extraction plant did not become operational. The Los Angeles County and the City of Palmdale entered into an agreement with Lockheed Martin, if it was awarded a Department of Defense contract to manufacture the Advanced Strategic Aircraft Program. However, the contract was awarded to another bidder. Most recently, the County of Los Angeles and the City of Long Beach entered into an agreement with Weber Metals, Inc. to forge and manufacture aircraft parts, and the facility is still under construction.

While a reduction may be warranted, is the proposed $25 million assessed value reduction too steep? A local government subsidy's primary purpose is to encourage manufacturing and other activities in a particular location. This bill's financial incentives will only increase economic activity to the extent one assumes the activity would not otherwise occur in that particular local government's location or another location within this state. The Committee may wish to consider the appropriate threshold level.

1. Mixed Messages. Recent efforts by the Legislature have been to place more scrutiny
  on the decision-making process that a local government undertakes when providing subsidies to attract business investment. AB 562 (Williams), Chapter 740, Statutes of 2013, established requirements for local agencies to meet before approving any subsidy and during the term of such subsidies. In arguing for the bill, the author noted, "Each year, local governments give out billions of dollars in tax incentives to corporations in hopes of increasing economic growth and drawing jobs for their residents…State requirements for local budgets, annual financial reports, and regular audits allow constituents to review most of the direct fiscal decisions made by local governments. However, local economic subsidies do not receive the same public scrutiny as budgets and regulatory decisions. Additionally, local governments rarely track how many jobs are created and it’s impossible to know whether the jobs would have been created without the aid. AB 562 seeks to remedy this shortcoming."

In addition to the requirements established by AB 562 for all subsidies exceeding $100,000, AB 2853 (Medina) from this year establishes additional requirements that local agencies must meet before and during the term of any subsidy exceeding $100,000 for warehouse distribution centers. While the requirements in both AB 562 and AB 2853 would likely apply to any property tax relief granted under the CIIP, AB 1900 proposes to significantly expand the type of facilities that can be granted such a subsidy and considerably increase the amount of property tax that can be rebated. The Committee may wish to consider if it is prudent to both increase the types of facilities and the amount of subsidies that can be granted, in light of the Legislature’s recent efforts to place more scrutiny on such local government subsidies.

Committee Amendments. To address several of the issues raised, the Committee may wish to consider amendments that would do the following:
1. Remove the reduction of the $150 million threshold;
2. Remove the expansion of the program to retail facilities; and,
3. Change the program’s sunset date to January 1, 2024.
Prior and Related Legislation. The CIIP has been expanded on multiple occasions to include new types of facilities. AB 904 (Perez), Chapter 486, Statutes of 2009, included businesses engaged in manufacturing alternative electricity production parts and components. SB 1006 (Committee on Budget and Fiscal Review), Chapter 32, Statutes of 2012, briefly expanded the program to include "qualified research and development facilities" until
June 30, 2013. AB 2389 (Fox), Chapter 116, Statutes of 2014, added businesses engaged
in research and development in biotechnology, physical engineering, and life sciences and lowered the threshold of annual property tax revenues the taxpayer must pay to be eligible from $150 million to $25 million until July 1, 2015.

Several times the Legislature has declined to expand the program to other participants, including certain alternative energy electricity plants with AB 2129 (Kelley) in 2002 and
AB 1966 (B. Garcia) in 2006. Additionally, the Legislature has declined to repeal the program due to lack of use via SB 360 (Negrete McLeod) in 2007.

Most recently, AB 755 (Garcia), Chapter 709, Statutes of 2017, was signed into law which extended the capital investment incentive program from January 1, 2018, to January 1, 2019.

Arguments in Support. Supporters argue that preserving programs like CIIP is crucial
to providing manufacturers a solid foundation to continue to reshore their facilities back
to America, and to choose California when they do. Reshoring is beginning to outpace offshoring – manufacturing jobs are returning to the United States, although many are choosing to locate their manufacturing facilities in states other than California.

Arguments in Opposition. Opponents argue that the goal of the CIIP is to provide local governments with opportunities to attract large manufacturing facilities to locate and invest in their region. There are compelling policy reasons to attract manufacturing, which is an engine of economic growth. Manufacturing jobs have the highest multiplier effect of any job classification in any industry – for every manufacturing job created an additional 2.5 jobs are created in the broader economy. Jobs in manufacturing are also good for working families. The average wage for a manufacturing job in California is $25,000 higher than that of a service sector employee and $35,000 higher than retail trade wages.

AB 1900 goes against the intent of the CIIP to attract manufacturing by allowing a broad range of businesses to access the incentive. The bill opens up the credit to companies in retail trade, administrative and general management consulting, and to any company involved in the “support” of a manufactured product, which could include Amazon, Wal-Mart, McDonald’s or literally any company that buys or sells a product. Allowing retail trade and other industries to access this limited incentive dilutes its effectiveness and creates a tax giveaway to major corporations that already have access to other tax credit programs.

REGISTERED SUPPORT / OPPOSITION:

Support

California Manufacturers and Technology Association

Opposition

California Labor Federation

Analysis Prepared by: Jimmy MacDonald / L. GOV. / (916) 319-3958

Discussed in Hearing

6MIN

Authors shown for version:
Chaptered (9/14/2018)

AB 1900: Capital investment incentive programs: repeal date.

THIRD READING

Bill No: AB 1900

DIGEST:

SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Background

Proposed Law

State Revenue Impact

Comments

Assembly Actions

Support and Opposition

ASSEMBLY THIRD READING

ATR Bill Id:

ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT

ABPCA Bill Id:AB 1900 (

Senate Standing Committee on Governance and Finance

Assembly Floor

Assembly Standing Committee on Local Government