20250SB__058796AMD INTRODUCED 2025-02-20 AMENDED_SENATE 2025-03-24 AMENDED_SENATE 2025-05-07 AMENDED_SENATE 2025-05-23 2025 SB AMD Introduced by Senator Grayson LEAD_AUTHOR SENATE Grayson

An act to add and repeal Sections 17053.90 and of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy. taxation, to take effect immediately, tax levy Personal income taxes: credit: manufacturing: sales and use taxes. The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws.

Existing law, 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.

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 imposes or dedicates certain state sales and use tax rates for local funding, including through the Local Revenue Fund 2011.

Existing law provides various exemptions from the taxes imposed by the Sales and Use Tax Law, including, until July 1, 2030, a partial exemption for the sale of, and the storage, use, or other consumption of, qualified tangible personal property, as defined, purchased by a qualified person, as defined, for purchases not exceeding $200,000,000, primarily used for specified purposes, including manufacturing, recycling, and research and development.

Existing sales and use tax law provides that the Bradley-Burns Uniform Local Sales and Use Tax Law, the Transactions and Use Tax Law, and those laws imposing certain sales and use tax rates for local funding do not apply to the above-described exemption, thereby subjecting the sale, or the storage, use, or other consumption in this state, of tangible personal property, otherwise exempt from taxation under these provisions, to local sales and use taxes, transactions and use taxes, and state sales and use taxes imposed for local funding.

This bill would, for taxable years beginning on or after January 1, 2026, and before January 1, 2031, allow a credit against the taxes imposed by the Personal Income Tax Law and the Corporation Tax Law to a taxpayer in an amount equal to the amount of sales tax reimbursement paid by the taxpayer to a retailer for the purchase of tangible personal property sold at retail in this state, or the amount of use tax paid by the taxpayer on the storage, use, or other consumption in this state of tangible personal property purchased from a retailer, that would have been exempt from taxation pursuant to the above-described exemption, but for the application of local sales and use taxes and transactions and use taxes, or the imposition of certain sales and use tax rates for local funding, as specified.

The bill would authorize the California Department of Tax and Fee Administration to provide specified information to the Franchise Tax Board to assist in the administration of the credit, and would apply existing restrictions to the sharing of that information, the violation of which is a crime. By expanding the scope of a crime, this bill would impose a state-mandated local program.

This bill would require, on or before May 14, 2026, and annually thereafter, the Department of Finance to provide to the legislative budget committees an estimate of the amount of revenue that would not be realized if the credits described above were allowed for that taxable year and would provide that those credits are allowed only for taxable years for which the Legislature appropriates money in the Budget Act for the administration of those credits.

Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals that the tax expenditure will achieve, detailed performance indicators, and data collection requirements. This bill also would include additional information required for any bill authorizing a new tax expenditure. The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason. This bill would take effect immediately as a tax levy. MAJORITY NO YES YES YES NO YES NO NO NO NO The people of the State of California do enact as follows:

SECTION

Section 17053.90 is added to the Revenue and Taxation Code , to read: 17053.90. (

a) For taxable years beginning on or after January 1, 2026, and before January 1, 2031, there shall be allowed a credit against the “net tax,” as defined in

Section 17039, to a taxpayer in an amount equal to qualified tax payments made during the taxable year. (

b) For purposes of this section, the following

definitions shall apply: (1) “Tax payment” means either of the following: (

A) A sales tax reimbursement paid by the taxpayer to a retailer, as reimbursement for a tax imposed by

Chapter 2 (commencing with

Section 6051) of

Part 1, or pursuant to a local ordinance authorized by

Part 1.5 (commencing with

Section 7200) or

Part 1.6 (commencing with

Section 7251). (

B) Use taxes paid by the taxpayer pursuant to

Chapter 3 (commencing with

Section 6201) of

Part 1, or pursuant to a local ordinance authorized by

Part 1.5 (commencing with

Section 7200) or

Part 1.6 (commencing with

Section 7251). (2) “Qualified tax payment” means a tax payment made to the extent that the purchase, or the storage, use, or other consumption in this state, of tangible personal property would have been exempt from tax pursuant to

Section 6377.1 if not for the application of subdivision (

d) of that section. (

c) Any deduction otherwise allowed under this part for any amount paid or incurred by the taxpayer upon which the credit is based shall be reduced by the amount of the credit allowed under this section. (

d) If a credit allowed by this

section exceeds the “net tax,” the excess may be carried over to reduce the “net tax” in the following taxable year, and succeeding eight years, if necessary, until the credit is exhausted. (

e) The credit allowed by this

section may be claimed only on a timely filed original return of a taxpayer. (f)

(1) A credit, or the carryover of a credit pursuant to subdivision (d), shall not be allowed with respect to tangible personal property described in subparagraph (

B) of paragraph (1) of subdivision (

e) of

Section 6377.1.

(2) In the case where a taxpayer claims a credit under this section, and the tangible personal property that is subject to the tax giving rise to the credit provided under this

section is subsequently moved out of state or is otherwise described in subparagraph (

B) of paragraph (1) of subdivision (

e) of

Section 6377.1 within one year from the date of purchase, the taxpayer shall file an amended return for the taxable year in which the credit was claimed. (g)

(1) The Franchise Tax Board may request any information necessary for the administration of this

section from the California Department of Tax and Fee Administration.

(2) Notwithstanding

Section 7056, the California Department of Tax and Fee Administration may provide information to the Franchise Tax Board, in a form and manner agreed upon between the department and the Franchise Tax Board, necessary for the administration of this section. Any taxpayer information provided by the department to the Franchise Tax Board shall be subject to the provisions of

Section 7056.5. (h)

(1) The Franchise Tax Board may prescribe rules, guidelines, procedures, or other guidance to carry out the purposes of this section.

Chapter 3.5 (commencing with

Section 11340) of Part of Division of Title of the Government Code shall not apply to any rule, guideline, or procedure prescribed by the Franchise Tax Board pursuant to this section.

(2) The Franchise Tax Board may prescribe any regulations necessary or appropriate to carry out the purposes of this section, including any regulations to prevent improper claims from being filed. (i)

(1) On or before May 14, 2026, and annually thereafter, the Department of Finance shall provide to the legislative budget committees an estimate of the amount of revenue that would not be realized if the credits established under this

section were allowed for that taxable year.

(2) The credits established by this

section shall be allowed only for taxable years for which the Legislature appropriates money in the Budget Act for the administration of the credits established by this section. (i)</xhtml:p>"?> (j)

(1) For the purpose of complying with

Section 41, as it pertains to the credit allowed by this

section and

Section 23623, the Legislature finds and declares the following: (

A) The specific goal that the credits will achieve is to encourage new and continued investment in California in the areas of manufacturing and research and development. (

B) Detailed performance indicators for the Legislature to use in determining whether the credits meet that goal are as follows: (

i) The total dollar amount of tax credits allowed pursuant to this

section and

Section 23623. (ii) The number of taxpayers that were allowed a tax credit pursuant to this section. (2) (

A) On or before April 1, 2033, the Franchise Tax Board shall submit a report to the Legislature, in compliance with

Section of the Revenue and Taxation Code, detailing the total dollar amount of tax credits allowed pursuant to this

section and

Section 23623, and the number of taxpayers allowed a credit. (

B) The disclosure requirements of this paragraph shall be treated as an exception to

Section 19542. (j)</xhtml:p>"?> (

k) Except for the reporting requirements of subdivision (j), this

section shall remain operative only until December 1, 2031, and is repealed as of January 1, 2034.

SEC. 2.

Section is added to the Revenue and Taxation Code , to read: 23623. (

a) For taxable years beginning on or after January 1, 2026, and before January 1, 2031, there shall be allowed a credit against the “tax,” as defined in

Section 23036, to a taxpayer in an amount equal to qualified tax payments made during the taxable year. (

b) For purposes of this section, the following

definitions shall apply: (1) “Tax payment” means either of the following: (

A) A sales tax reimbursement paid by the taxpayer to a retailer, as reimbursement for a tax imposed by

Chapter 2 (commencing with

Section 6051) of

Part 1, or pursuant to a local ordinance authorized by

Part 1.5 (commencing with

Section 7200) or

Part 1.6 (commencing with

Section 7251). (

B) Use taxes paid by the taxpayer pursuant to

Chapter 3 (commencing with

Section 6201) of

Part 1, or pursuant to a local ordinance authorized by

Part 1.5 (commencing with

Section 7200) or

Part 1.6 (commencing with

Section 7251). (2) “Qualified tax payment” means a tax payment made to the extent that the purchase, or the storage, use, or other consumption in this state, of tangible personal property would have been exempt from tax pursuant to

Section 6377.1 if not for the application of subdivision (

d) of that section. (

c) Any deduction otherwise allowed under this part for any amount paid or incurred by the taxpayer upon which the credit is based shall be reduced by the amount of the credit allowed under this section. (

d) If a credit allowed by this

section exceeds the “tax,” the excess may be carried over to reduce the “tax” in the following taxable year, and succeeding eight years, if necessary, until the credit is exhausted. (

e) The credit allowed by this

section may be claimed only on a timely filed original return of a taxpayer. (f)

(1) A credit, or the carryover of a credit pursuant to subdivision (d), shall not be allowed with respect to tangible personal property described in subparagraph (

B) of paragraph (1) of subdivision (

e) of

Section 6377.1.

(2) In the case where a taxpayer claims a credit under this section, and the tangible personal property that is subject to the tax giving rise to the credit provided under this

section is subsequently moved out of state or is otherwise described in subparagraph (

B) of paragraph (1) of subdivision (

e) of

Section 6377.1 within one year from the date of purchase, the taxpayer shall file an amended return for the taxable year in which the credit was claimed. (g)

(1) The Franchise Tax Board may request any information necessary for the administration of this

section from the California Department of Tax and Fee Administration.

(2) Notwithstanding

Section 7056, the California Department of Tax and Fee Administration may provide information to the Franchise Tax Board, in a form and manner agreed upon between the department and the Franchise Tax Board, necessary for the administration of this section. Any taxpayer information provided by the department to the Franchise Tax Board shall be subject to the provisions of

Section 7056.5. (h)

(1) The Franchise Tax Board may prescribe rules, guidelines, procedures, or other guidance to carry out the purposes of this section.

Chapter 3.5 (commencing with

Section 11340) of Part of Division of Title of the Government Code shall not apply to any rule, guideline, or procedure prescribed by the Franchise Tax Board pursuant to this section.

(2) The Franchise Tax Board may prescribe any regulations necessary or appropriate to carry out the purposes of this section, including any regulations to prevent improper claims from being filed. (i)

(1) On or before May 14, 2026, and annually thereafter, the Department of Finance shall provide to the legislative budget committees an estimate of the amount of revenue that would not be realized if the credits established under this

section were allowed for that taxable year.

(2) The credits established by this

section shall be allowed only for taxable years for which the Legislature appropriates money in the Budget Act for the administration of the credits established by this section. (i)</xhtml:p>"?> (

j) This

section shall remain operative only until December 1, 2031, and as of that date is repealed.

SEC. 3. No reimbursement is required by this act pursuant to

Section of

Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of

Section of the Government Code, or changes the definition of a crime within the meaning of

Section of

Article XIII B of the California Constitution.

SEC. 4. This act provides for a tax levy within the meaning of

Article IV of the California Constitution and shall go into immediate effect.