Amended  IN  Assembly  March 18, 2019

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill No. 784
Introduced by Assembly Member Mullin

February 19, 2019

An act to amend Section 23609 of the Revenue and Taxation Code, relating to taxation. An act to add and repeal Section 6377 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.


LEGISLATIVE COUNSEL'S DIGEST

AB 784, as amended, Mullin. Corporation taxes. Sales and use taxes: exemption: California Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project.
Existing state sales and use tax laws impose a tax on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state of, 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. The Sales and Use Tax Law provides various exemptions from those taxes.
This bill would, until January 1, 2024, provide an exemption from those taxes with respect to the sale of specified zero-emission technology medium- and heavy-duty transit bus vehicles. The bill would provide that this exemption does not apply to specified state sales and use taxes from which the proceeds are deposited into the Local Revenue Fund, the Local Revenue Fund 2011, or the Local Public Safety Fund.
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 laws authorize districts, as specified, to impose transactions and use taxes in accordance with the Transactions and Use Tax Law, which generally conforms to the Sales and Use Tax Law. Amendments to the Sales and Use Tax Law are automatically incorporated into the local tax laws.
Existing law requires the state to reimburse counties and cities for revenue losses caused by the enactment of sales and use tax exemptions.
This bill would provide that, notwithstanding Section 2230 of the Revenue and Taxation Code, no appropriation is made and the state shall not reimburse any local agencies for sales and use tax revenues lost by them pursuant to this bill.
This bill would take effect immediately as a tax levy.

The Corporation Tax Law imposes taxes upon a corporation doing business in this state, according to, or measured by, net income, as specified. The Corporation Tax Law, in modified conformity to a credit allowed under federal law, allows a credit against taxes imposed by that law for increasing research activities, as described.

This bill would make nonsubstantive changes to the provisions allowing that credit.

Digest Key Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NOYES   Local Program: NO  
Bill Text
The people of the State of California do enact as follows:
SECTION 1. Section 6377 is added to the Revenue and Taxation Code, to read:

6377. (a) There are exempted from the taxes imposed by this part the greater of either of the following:
(1) (A) The gross receipts from the sale of, and the storage and use of, or other consumption in this state of, any zero-emission technology medium- and heavy-duty transit bus vehicles that are eligible for the California Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project funded under the Air Quality Improvement Program at the State Air Resources Board.
(B) Notwithstanding any provision of the Bradley-Burns Uniform Local Sales and Use Tax Law (Part 1.5 (commencing with Section 7200)) or the Transactions and Use Tax Law (Part 1.6 (commencing with Section 7251)), the exemption established by this paragraph does not apply with respect to any tax levied by a county, city, or district pursuant to, or in accordance with, either of those laws.
(2) The gross receipts measured by the value of a motor vehicle that is traded in for zero-emission technology medium- and heavy-duty transit bus vehicles that are eligible for the California Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project funded under the Air Quality Improvement Program at the State Air Resources Board, if the value of the trade-in motor vehicle is separately stated on the new motor vehicle invoice or bill of sale or similar document provided to the purchaser.
(b) Notwithstanding subdivision (a), the exemption established by this section shall not apply with respect to any tax levied pursuant to Section 6051.2 or 6201.2, pursuant to Section 35 of Article XIII of the California Constitution, or any tax levied pursuant to Section 6051 or 6201 that is deposited in the State Treasury to the credit of the Local Revenue Fund 2011 pursuant to Section 6051.15 or 6201.15.
(c) This section shall become inoperative on January 1, 2024, and as of that date is repealed.
SEC. 2. Notwithstanding Section 2230 of the Revenue and Taxation Code, no appropriation is made by this act and the state shall not reimburse any local agency for any sales and use tax revenues lost by it under this act.
SEC. 3. This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.
SECTION 1.Section 23609 of the Revenue and Taxation Code is amended to read:23609.

For each taxable year beginning on or after January 1, 1987, there shall be allowed as a credit against the “tax,” as defined by Section 23036, an amount determined in accordance with Section 41 of the Internal Revenue Code, relating to credit for increasing research activities, except as follows:

(a)For each taxable year beginning before January 1, 1997, both of the following modifications shall apply:

(1)The reference to “20 percent” in Section 41(a)(1) of the Internal Revenue Code is modified to read “8 percent.”

(2)The reference to “20 percent” in Section 41(a)(2) of the Internal Revenue Code is modified to read “12 percent.”

(b)(1)For each taxable year beginning on or after January 1, 1997, and before January 1, 1999, both of the following modifications shall apply:

(A)The reference to “20 percent” in Section 41(a)(1) of the Internal Revenue Code is modified to read “11 percent.”

(B)The reference to “20 percent” in Section 41(a)(2) of the Internal Revenue Code is modified to read “24 percent.”

(2)For each taxable year beginning on or after January 1, 1999, and before January 1, 2000, both of the following shall apply:

(A)The reference to “20 percent” in Section 41(a)(1) of the Internal Revenue Code is modified to read “12 percent.”

(B)The reference to “20 percent” in Section 41(a)(2) of the Internal Revenue Code is modified to read “24 percent.”

(3)For each taxable year beginning on or after January 1, 2000, both of the following shall apply:

(A)The reference to “20 percent” in Section 41(a)(1) of the Internal Revenue Code is modified to read “15 percent.”

(B)The reference to “20 percent” in Section 41(a)(2) of the Internal Revenue Code is modified to read “24 percent.”

(c)(1)With respect to any expense paid or incurred after the operative date of Section 6378, Section 41(b)(1) of the Internal Revenue Code, relating to qualified research expenses, is modified to exclude from the definition of “qualified research expense” any amount paid or incurred for tangible personal property that is eligible for the exemption from sales or use tax provided by Section 6378.

(2)“Qualified research” and “basic research” shall include only research conducted in California.

(d)The provisions of Section 41(e)(7)(A) of the Internal Revenue Code, relating to basic research, shall be modified so that “basic research,” for purposes of this section, includes any basic or applied research including scientific inquiry or original investigation for the advancement of scientific or engineering knowledge or the improved effectiveness of commercial products, except that the term does not include any of the following:

(1)Basic research conducted outside California.

(2)Basic research in the social sciences, arts, or humanities.

(3)Basic research for the purpose of improving a commercial product if the improvements relate to style, taste, cosmetic, or seasonal design factors.

(4)Any expenditure paid or incurred for the purpose of ascertaining the existence, location, extent, or quality of any deposit of ore or other mineral (including oil and gas).

(e)(1)In the case of a taxpayer engaged in any biopharmaceutical research activities that are described in codes 2833 to 2836, inclusive, or any research activities that are described in codes 3826, 3829, or 3841 to 3845, inclusive, of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition, or any other biotechnology research and development activities, the provisions of Section 41(e)(6) of the Internal Revenue Code, relating to qualified organization, shall be modified to include both of the following:

(A)A qualified organization as described in Section 170(b)(1)(A)(iii) of the Internal Revenue Code and owned by an institution of higher education as described in Section 3304(f) of the Internal Revenue Code, relating to definition of institution of higher education.

(B)A charitable research hospital owned by an organization that is described in Section 501(c)(3) of the Internal Revenue Code, is exempt from taxation under Section 501(a) of the Internal Revenue Code, relating to exemption from taxation, is not a private foundation, is designated a “specialized laboratory cancer center,” and has received Clinical Cancer Research Center status from the National Cancer Institute.

(2)For purposes of this subdivision:

(A)“Biopharmaceutical research activities” means those activities that use organisms or materials derived from organisms, and their cellular, subcellular, or molecular components, in order to provide pharmaceutical products for human or animal therapeutics and diagnostics. Biopharmaceutical activities make use of living organisms to make commercial products, as opposed to pharmaceutical activities that make use of chemical compounds to produce commercial products.

(B)“Other biotechnology research and development activities” means research and development activities consisting of the application of recombinant DNA technology to produce commercial products, as well as research and development activities regarding pharmaceutical delivery systems designed to provide a measure of control over the rate, duration, and site of pharmaceutical delivery.

(f)In the case where the credit allowed by this section exceeds the “tax,” the excess may be carried over to reduce the “tax” in the following year, and succeeding years if necessary, until the credit has been exhausted.

(g)For each taxable year beginning on or after January 1, 1998, the reference to “Section 501(a)” in Section 41(b)(3)(C) of the Internal Revenue Code, relating to amounts paid to certain research consortia, is modified to read “this part or Part 10 (commencing with Section 17001).”

(h)(1)For each taxable year beginning on or after January 1, 2000:

(A)The reference to “3 percent” in Section 41(c)(4)(A)(i) of the Internal Revenue Code is modified to read “one and forty-nine hundredths of one percent.”

(B)The reference to “4 percent” in Section 41(c)(4)(A)(ii) of the Internal Revenue Code is modified to read “one and ninety-eight hundredths of one percent.”

(C)The reference to “5 percent” in Section 41(c)(4)(A)(iii) of the Internal Revenue Code is modified to read “two and forty-eight hundredths of one percent.”

(2)Section 41(c)(4)(B) of the Internal Revenue Code, relating to election, shall not apply and in lieu thereof an election under Section 41(c)(4)(A) of the Internal Revenue Code, relating to in general, may be made for any taxable year of the taxpayer beginning on or after January 1, 1998. That election shall apply to the taxable year for which made and all succeeding taxable years unless revoked with the consent of the Franchise Tax Board.

(3)Section 41(c)(7) of the Internal Revenue Code, relating to gross receipts, is modified to take into account only those gross receipts from the sale of property held primarily for sale to customers in the ordinary course of the taxpayer’s trade or business that is delivered or shipped to a purchaser within this state, regardless of f.o.b. point or any other condition of the sale.

(4)Section 41(c)(5) of the Internal Revenue Code, relating to election of alternative simplified credit, shall not apply.

(i)Section 41(h) of the Internal Revenue Code, relating to termination, shall not apply.

(j)Section 41(g) of the Internal Revenue Code, relating to special rule for pass-thru of credit, is modified by each of the following:

(1)The last sentence shall not apply.

(2)If the amount determined under Section 41(a) of the Internal Revenue Code, relating to general rule, for any taxable year exceeds the limitation of Section 41(g) of the Internal Revenue Code, that amount may be carried over to other taxable years under the rules of subdivision (f), except that the limitation of Section 41(g) of the Internal Revenue Code, relating to special rule for pass-thru of credit, shall be taken into account in each subsequent taxable year.

(k)Section 41(a)(3) of the Internal Revenue Code shall not apply.

(l)Section 41(b)(3)(D) of the Internal Revenue Code, relating to amounts paid to eligible small businesses, universities, and Federal laboratories, shall not apply.

(m)Section 41(f)(6) of the Internal Revenue Code, relating to energy research consortium, shall not apply.