Manufacturing flagship bill is here!

By CMTA Staff

Capitol Update, March 5, 2021

CMTA's flagship legislation has arrived. Our ultimate Manufacturing "Maker" bill, AB 904 by Assemblymember Tim Grayson, seeks a more competitive environment by requiring a manufacturing exempiton from California's existing $5 million equipment and R&D tax credit cap.

For decades the driving engine of California's economy has been manufacturing. Fueled by the state's research, technological and intellectual resources, California has grown to employ more manufacturers than any other state.  But that growth is stagnant and we are losing manufacturing investments for mass scale production to other states. With a 1.8 percent decline in manufacturing jobs since the recession in California compared to the rest of the nation's 8.0 percent increase, we have work to do. Which is why we are focusing on this bill and others to provide an incentive for new and existing manufacturers to scale up facilities here in the Golden State. The production sector is a primary pathway to the middle class for many working families.  This point will be emphasized as CMTA works to get the bill passed.

"California manufacturers consistently innovate, and research and develop products here, but we must find a way to provide those companies operational cost relief so they can compete and invest more in longterm production here in the State," said bill author Assemblymember Tim Grayson. "With CMTA’s great partnership and lots of early support on this legislation I think we have a real chance at helping manufacturers create high quality opportunities for California‘s working families."

 

Details on what the AB 904 adjusts in the tax code:

Section 1 and Section 3 – Exemption from Tax Credit Cap

Revenue & Tax Code Sections 17039.3 (PIT - amended) and 23036.3 (CIT – added)

adds the term “qualified business credit” to exempt the manufacturing machinery and equipment tax exemption from the $5 million cap.

Section 2 and Section 4 – Manufacturing Tax Credit Revenue & Taxation Code Sections 17053.50 (PIT – added) and 23650 (CIT – added)

- Tax credit on “qualified personal tangible property,” as defined, to a “qualified taxpayer” for up to $1M

- Definitions to describe the processes

- Definition of “qualified business” is limited to Manufacturing NAICS codes

-“Qualified personal tangible property” defined as:

  • Machinery and equipment
  • Equipment/devices to control, maintain, operate the machinery
  • Used in pollution control
  • Special purpose buildings/foundations used as integral part of manufacturing

Does not include:

  • Consumables with useful life less than one year
  • Furniture, inventory
  • Equipment used in extraction process
  • Equipment used to store finish product
  • Primarily used in administration, general mgmt. and marketing

- “Qualified taxpayer” defined as MFG on or after 1/1/20

- Defines “useful life” as one or more years

- Tax credit percentage

  • 6% for MFG with 99 or fewer employees
  • 5% for MFG with 100+ employees

- Carryover until credit exhausted and not beyond 1/1/35 for smaller MFG or 1/1/34 for larger MFG.

 

Section 5 – Legislative declarations re goal, purpose and objectives of the bill

- To incentivize, attract/retain and support recovering small/medium-sized companies.

- Measurements – FTB prepare written report re utilization to be shared with relevant legislative fiscal committees.

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