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CAEATFA

California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA)

Senate Bill 71, The Advanced Transportation and Alternative Source Manufacturing Sales and Use Tax Exclusion Program promotes  California-based manufacturing, California-based jobs, and the reduction of greenhouse gases, air and water pollution, and/or energy consumption by providing a partial sales tax exemption.  This exemption requires application, approval and unique guidelines to implement.

So far, the Program has approved sales tax exemptions  in the following fields:

• Electric Vehicle Manufacturing;
• Solar Photovoltaic Manufacturing;
• Landfill Gas Capture and Production;
• Biogas Capture and Production (Dairies and Waste Water Treatment Plants);
• Demonstration Hydrogen Fuel Production;
• Electric Vehicle Battery Manufacturing;
• Biomass Processing and Fuel Production; and
• Others

Who is Company Eligible?

In order to be eligible – Applicants must show that the property to be purchased will used for the design, manufacture, production or assembly of advanced transportation technologies or alternative source – including energy efficiency – products, components, or systems.

How Do I Apply?

Applications are accepted on an on-going basis, and there is no limitation to the amount that can be provided through the SB 71 Program. The application process is complex, so a good consultant will help steer your company through the Application process and will work with CAEATFA staff to help you obtain a sales and use tax exclusion (STE) provided by the State.

There are no STE minimum or maximum limits for individual projects under the SB 71 Program. Applicants will be required to make at least twenty five (25) percent of the purchases identified in their application within one year of application approval. All purchases must be made within three years following the approval of the application, unless CAEATFA grants a longer time period.

Is There a Fee?

The State Application Fee is equal to .0005 of the total purchase prices of the qualified property identified in each application. The minimum application fee is $250 with a maximum of $10,000. Payment for this fee is required at the time the application is submitted. An Administrative Fee will also be required by the Authority and is equal to .004 of the total purchase price of the qualified property approved of in the application.

EZ Reform Equals New Manufacturing Sales Tax Credit

California’s controversial economic development program the Enterprise Zone (EZ) officially has become relegated to the history books. Assembly Bill 93, passed on June 25th, 2013 by the Senate and June 27th, 2013 by the State Assembly substantially reforms the program.

Manufacturer’s Sales Tax Credit begins in 2014

In addition to making major improvements in how the EZ hiring credits are targeted and awarded, AB 93 creates a manufacturing equipment sales tax exemption. This sales and use tax exemption eliminates the California portion of sales tax for basic manufacturing and biotech equipment purchases, and will be offered statewide — rather than within certain geographic areas. Currently, California was among only a very few states that did not offer this type of exemption.  AB 93 also would establish the California Competes Tax Credit Committee, administered by the Governor’s Office, with the purpose of negotiating business tax credits in exchange for investments and employment expansion in California.  AB 93’s strong provisions in two key areas of the program — transparency and performance evaluation should enable program administrators, policymakers, and the public to track these credits’ impact and their return on investment.

Much Needed Reforms to the EZ Credit

The California budget project released their report detailing the escalating costs and serious shortcomings of the EZ Program.  AB 93 moves California in a new direction on enterprise zones and economic development by improving the tax credit in ways that eliminates the most severe program inefficiencies.

Specifically, AB 93 restructures the hiring tax credit in five crucial ways:

  • Discontinuing retroactive hiring credits, whereby credits are awarded for hires made in past years.
  • Requiring businesses to create new jobs — not just make new hires — as a condition of claiming hiring credits.
  • Eliminating residency in a Targeted Employment Area as a qualifying criterion for the tax credit and specifically targeting the tax credit for three categories of individuals: those that have been previously unemployed for six months, recipients of the Earned Income Tax Credit, and veterans.
  • Changing the credit formula to remain the same over a five-year period, instead of decreasing over time — thereby removing the incentive and reward for employers that “churn” their workforces.
  • Ensuring that companies that take the credit pay employees a living wage by increasing the amount of qualified wages from up to $12 per hour to between $12 and $28 per hour for employees.

AB 93 also addresses the EZ Program’s current inability to target areas of the state that are most in need of job growth, new businesses, and assistance with economic development.  While the current EZ designations remain intact, the new hiring tax credit also includes a census tracts throughout the state that rank in the bottom 25 percent in both unemployment and poverty rate. Further, census tracts with low unemployment are removed from the eligible areas, ensuring that the hiring tax credit truly targets to businesses located in the state’s most economically distressed areas.

 

The reforms contained in AB 93 represent major improvements to California’s EZ Program and are designed to address the worst abuses and inefficiencies within the program. These reforms are a significant step forward for the state in fostering positive economic development and long-term fiscal health.  The program will begin to be phased out by the end of 2013 and fully revamped by 2014.

Congress Takes on Internet Sales Tax

On Monday May 6th 2013, Congress took a step toward ending tax-free internet retail sales, as the Senate passed a bill empowering states to collect sales tax for purchases made online.

The measure got 69 yes votes and 27 no votes in the Senate.  Next the House of Representatives will address the issue.  It is anticipated that anti-tax sentiment among many Republicans may make it more difficult to pass.

Supporters of the legislation, say it is about tax fairness and that it isn’t a tax increase. Tennessee Republican Sen. Lamar Alexander. Stated “This is a tax that everybody owes but only some people pay.”

 

Opponents claim this bill builds a base for a national Internet sales tax and imposes burdensome compliance costs on small businesses.  “I fear that what we’re going to do is crush a lot of these start-ups,” said Sen. Ron Wyden, an Oregon Democrat.

The Senate bill would exempt businesses with less than $1 million in online sales, but eBay wants to raise that small-business exemption to firms with less than $10 million in sales.  States can currently only require retailers to collect sales taxes if they have some “nexus” or physical presence in the state.

Rep. Bob Goodlatte of Virginia, who chairs the Judiciary Committee which the bill would go through, has raised concerns about the complexity of complying with the bill.

 

 

 

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