Multistate Tax Alert: California Legislative Developments
On July 11, 2013, California Governor Edmund G. Brown Jr. signed Assembly Bill (“AB”) 93, which phases out and replaces California Enterprise Zone (“EZ”) tax credits with a new economic development program comprised of a hiring tax credit, a statewide partial sales and use tax manufacturing exemption, and incentive fund.1 AB 93 takes effect immediately. California’s current EZ program offers income tax credits to taxpayers located within specific geographic areas called EZ’s. Under AB 93, the EZ incentives will be repealed as of January 1, 2014, and replaced by three new incentives.2 This Tax Alert provides a summary of AB 93 and the new incentives, information on the treatment of EZ credits, both currently generated and carry-forward tax credits, and addresses other possible taxpayer considerations.
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1 AB 93 (enrolled July 3, 2013) 2013-14 Leg., (Cal. 2013). Governor Brown also signed Senate Bill (“SB”) 90 on July 11, 2013. 2013-14 Leg., (Cal. 2013). SB 90 modifies some provisions of AB 93. This Tax Alert incorporates the changes made by SB 90 into the discussion of AB 93.
2 AB 93 also phases out and ends on December 31, 2013, the current “new jobs credit” in California, as well as California credits associated with Local Area Military Base Relocation Areas (“LAMBRA”), Manufacturing Enhancement Areas (“MEA”) and Targeted Tax Areas (“TTA”).