Economic development: taxation: credits, deductions, exemptions, and net operating losses.

(1) Existing law provides for the designation and oversight by the Department of Housing and Community Development of various economic development areas in the state, including enterprise zones, manufacturing enhancement areas, targeted tax areas, and local agency military base recovery areas, or LAMBRAs. Existing law allows various incentives to businesses operating in these areas. This bill would repeal the provisions authorizing those designations on January 1, 2014. (2) The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws, including hiring credits and sales and use tax credits for taxpayers within the specified economic development areas, and a hiring credit for taxpayers, other than those allowed a credit with respect to operating in the specified economic development areas. Those laws, for taxpayers engaged in business within specified economic development areas, authorize specified net operating loss carryovers and expense deductions in computing income subject to taxes. Those laws also authorize an interest deduction for interest received in payment of indebtedness of a person engaged in business in an enterprise zone. This bill generally would make these provisions inoperative for taxable years beginning on or after January 1, 2014, and repeal these provisions on either December 1, 2014, or December 1, 2019, as provided. This bill would limit the application of sales and use tax credits to sales and use tax paid for purchases before January 1, 2014, and limit the carryover of those credits to the 10 succeeding years, limit the application of the hiring credits to employees hired within a specified period before January 1, 2014, and limit the carryovers for those credits to the 10 succeeding years. The bill would limit the interest deduction to interest received before January 1, 2014. This bill would also allow a credit against tax under both laws for each taxable year beginning on or after January 1, 2014, and before January 1, 2025, in an amount as provided in a written agreement between the Governor's Office of Business and Economic Development and the taxpayer, agreed upon by the California Competes Tax Credit Committee as established by this bill, and based on specified factors, including the number of jobs the taxpayer will create or retain in the state and the amount of investment in the state by the taxpayer. The bill would limit the aggregate amount of credits allowed to taxpayers to a specified sum per fiscal year. This bill would, under both laws for taxable years beginning on or after January 1, 2014, and before January 1, 2021, allow a credit against tax for portions of the wages paid by a taxpayer engaged in a trade or business within a designated census tract, as defined, or a former enterprise zone to certain full-time employees who provide services for that taxpayer in connection with that trade or business. The bill would require the Population Research Unit in the Department of Finance to identify designated census tracts in accordance with certain criteria. (3) Existing sales and use tax laws impose taxes on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state, or on the storage, use, or other consumption in this state of tangible personal property purchased from a retailer for storage, use, or other consumption in this state, and provides various exemptions from those taxes. The bill would exempt from those taxes, on and after July 1, 2014, and before January 1, 2019, or before July 1, 2021, the gross receipts from the sale of, and the storage, use, or other consumption of, qualified tangible personal property purchased by a qualified person for use primarily in manufacturing, processing, refining, fabricating, or recycling of property, as specified; qualified tangible personal property purchased for use by a contractor for specified purposes, as provided; and qualified tangible personal property purchased for use by a qualified person to be used primarily in research and development, as provided. The bill would require the purchaser to furnish the retailer with an exemption certificate, as specified. The Bradley-Burns Uniform Local Sales and Use Tax Law authorizes counties and cities to impose local sales and use taxes in conformity with the Sales and Use Tax Law, and existing law authorizes districts, as specified, to impose transactions and use taxes in conformity with the Transactions and Use Tax Law, which conforms to the Sales and Use Tax Law. Exemptions from state sales and use taxes are incorporated into these laws. This bill would specify that this exemption does not apply to local sales and use taxes, transactions and use taxes, and specified state taxes from which revenues are deposited into the Local Public Safety Fund, the Education Protection Account, the Local Revenue Fund, the Fiscal Recovery Fund, or the Local Revenue Fund 2011. (4) This bill would appropriate up to $600,000 for allocation to a committee and departments, as specified, by the Director of Finance in furtherance of the objectives of this bill, as provided. (5) This bill would declare that it is to take effect immediately as an urgency statute.