SB 1239

Bill Subjects

Abstract

The Sales and Use Tax Law imposes a tax on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state, or on the storage, use, or other consumption in this state of tangible personal property purchased from a retailer for storage, use, or other consumption in this state. That law provides various exemptions from those taxes. The bill would exempt from those taxes, on or after January 1, 2011, the gross receipts from the sale of, and the storage, use, or other consumption of, tangible personal property purchased by a qualified person for use in the manufacturing process, as specified, or to be used primarily in qualified research, as specified. This bill would also exempt the gross receipts from the sale of, and the storage, use, or other consumption of, tangible personal property purchased for use by a contractor for specified purposes. The Personal Income Tax Law and the Corporation Tax Law authorize various credits against the taxes imposed by those laws. Both laws, in specified conformity to federal income tax laws, allow a credit for increasing research expenses, as defined. In general, the amount of the credit under both laws is equal to 15% of the excess of the qualified research expenses, as defined, for the taxable year over the base amount, as defined, and, in addition, for purposes of the Corporation Tax Law, 24% of the basic research payments, as defined. The term "base amount" means the product of the average annual gross receipts of the taxpayer for each of the specified years preceding the taxable year and the fixed-base percentage, as defined, but in no event less than 50% of the qualified research expenses for the taxable year. A taxpayer may elect an alternative incremental credit for increasing research expenses in modified conformity to federal income tax laws. This bill would increase the credit for increasing research expenses to 20% of the excess of the qualified research expenses over the base amount. This bill would also provide complete conformity to the alternative incremental credit provided under those federal income tax laws. The Personal Income Tax Law and the Corporation Tax Law authorize a credit for taxable years beginning on or after January 1, 2009, and before January 1, 2011, in an amount equal to $3,000, prorated as provided, for each full-time employee hired during the taxable year by an employer that employed a specified number of employees. Those laws contain a specified cut-off date for the credits and require those sections to be repealed as of a specified date. This bill would delete the requirement related to the number of employees employed by the employer and the specified cut-off date and repeal date. This bill would, for taxable years beginning on or after January 1, 2010, also allow a credit under both laws in an amount equal to specified percentages of wages paid by a taxpayer to a qualified employee. The Personal Income Tax Law and the Corporation Tax Law authorize a taxpayer to depreciate property, determined by an applicable depreciation method, an applicable recovery period, and an applicable convention. This bill would reduce the recovery period for depreciating property to one-half of the period authorized by existing law. The Personal Income Tax Law and the Corporation Tax Law provide that a net operating loss attributable to a taxable year beginning on or after January 1, 2008, shall be a net operating loss carryback to each of the 2 taxable years preceding the taxable year of loss. Those laws allow a net operating loss carryback in an amount that shall not exceed specified percentages of the net operating loss. This bill would, commencing in 2015, extend the net operating loss carryback to each of the 5 taxable years preceding the taxable year of the loss and would increase the percentage of net operating loss carryback to 100% of the net operating loss for taxable years beginning on or after January 1, 2012. The Personal Income Tax Law and the Corporation Tax Law provide that gain or loss upon the disposition of a capital asset is determined by reference to the specified adjusted basis of that asset. This bill would provide under both laws that the gross income of a taxpayer does not include any gain from the sale or exchange of any capital asset. This bill would take effect immediately as a tax levy.