Senate Revenue & Taxation Committee Rule Change Thwarts Green Tech and Alternative Energy Industries

Wednesday, May 12, 2010

The Senate Revenue & Taxation Committee (Rev & Tax) voted to amend its rules for placing legislation referred to the committee on the suspense file today - a procedural motion that allows a bill to die without receiving a roll-call vote. This action is unusual because it is happening in the middle of the legislative session and appears to target only Republican bills that would create jobs and get Californians back to work.

Nine Republican bills were sent to the suspense file under the committee's newly adopted rules, allowing Democrats to avoid casting a vote to oppose measures that could put more Californians back to work.

On May 5th, the Rev & Tax Committee sent to the suspense file a bill, Senate Bill X6 9 authored by Senator Bob Dutton, which would set California's tax credit for new research activities in the state to the same level offered by the federal government and several other states.

Ironically, two of the Republican bills sent to the suspense file today (SB 1073 and SB 1074) authored by Sen. Roy Ashburn (R-Bakersfield), would provide incentives for businesses to create green jobs or expand the use of alternative energy in California and reduce the state's unprecedented levels of unemployment.

Democrats have lauded their support of "green tech" industries in California, setting up numerous government grant or loan programs. Legislative Democrats have also boasted that green jobs will offset the expected loss of existing, critically needed jobs in industries that will be forced to shut down or drastically reduce or retool their operations in order to comply with California's extreme Greenhouse Gas Reduction law (AB 32) and the subsequent taxes that will result from it.

SB 1073 would further green tech and green energy goals immediately by increasing the state's research and development income tax credit from 15% to 20% for green technology and renewable energy research and development costs. This change generally puts California law in conformity with federal law and requires the green technology and energy research to occur within the state. SB 1073 would allow the credit to be claimed only in fiscal year 2014 or later. The bill was recently amended to address implementation concerns outlined by the Franchise Tax Board and to delay any impact the tax credits would have on the General Fund.

"My goal is to encourage the emerging green tech industry to locate in California without having an immediate impact on the state's revenues," said Sen. Roy Ashburn. "Green tech and alternative energy companies are making decisions now about where they should locate based on the resources and financial incentives being offered to them. If we do not act now to attract these businesses, we will be too late."

Another bill sent to the suspense file is SB 1074 (Ashburn), which would reinstate the Manufacturing Investment Credit (MIC) for green technology and alternative energy development companies.

California had a more general manufacturing investment credit law that expired in 2004. SB 1074 would reinstate the MIC for green technology and alternative energy companies engaged in specified activities within the state. The credit will help California to compete with incentives offered by other states—the Internal Revenue Service currently lists 43 states that offer green technology or renewable energy investment tax credits.

"From my perspective it's a win-win-win for green tech, the state, and working Californians that should not be tabled and certainly not tabled without asking members of the committee to go on record opposing these benefits," Senator Ashburn said.

The other Republican bills sent to suspense were:

S.B.X.6. No. 5 - Hollingsworth. Sales and use taxes: exclusion: trade-in motor vehicle.

S.B.X.6. No. 6 - Hollingsworth. Tax amnesty: penalty.

S.B.X.6. No. 7 - Denham. Income taxes: hiring credit: veterans.

S.B.X.6. No. 9 - Dutton. Income and corporation tax credits: research and development.

S.B.X.6. No. 10 - Dutton. Income and corporation taxes: net capital gains: exclusion.

S.B.X.6. No. 13 - Dutton. Income tax: health savings accounts

S.B. No. 1416 - Walters. Capital gains: sale of principal residence: seniors

S.B. No. 1430 - Walters. Taxation: homeowners' property tax exemption

S.B. No. 1239 - Wyland. Income and corporation taxes: sales and use taxes.

"These bills are important to making California a less hostile place for businesses. They would allow entrepreneurs and business owners to invest more into their companies and create more jobs," said Senate Republican Leader Dennis Hollingsworth.

"If our economy is ever going to recover, we need to encourage job creation and give businesses in other states a reason to relocate here while giving our home-state companies incentives to expand and hire more people," further commented Hollingsworth.

"I was disappointed by the actions taken today by Democrats on the Revenue and Taxation Committee," Senator Dutton said. "The only way that California is going to begin to pull out of this economic downturn is through private sector job creation. These bills would have helped send a message to job creators that we are serious about helping them survive and grow new jobs. Instead, Democrats took a business as usual approach and buried these pro-jobs measures."

"California's top priorities must be job creation, developing incentives for businesses to stay in our state and protecting taxpayers from skyrocketing tax increases," said Senator Wyland. "I'm disappointed to see that today, liberals did not take advantage of an opportunity to reduce unemployment and the personal costs of joblessness. Instead, the approach adopted by liberals favors more taxes—an approach proven to only send jobs out of California and worsen both our economic and budgetary crisis."