Green manufacturers get a tax break -- with a catch

California Senate Bill 71 recently got signed into law by California governor Arnold Schwarzenegger. This legislation exempts green manufacturers from paying sales and use taxes on manufacturing equipment to encourage investment in manufacturing, job creation and economic growth in California.

Ah, but there's a catch. SB 71 requires projects that receive tax exemptions to have a net tax benefit to the state at least equal to the tax benefit of the manufacturer benefiting from the exemption. Apparently the burden of proving this lies with the manufacturer, and it is not entirely clear how manufacturers would go about figuring whether the two tax benefits are equal.

SB 71 also requires that these projects target areas with high unemployment. Today, of course, the entire state might qualify as an area with high unemployment. But particulars of what happens if employment rates change in certain areas of the state are not initially clear.

Additionally, SB 71 requires the Legislative Analyst’s Office to report to the Legislature on the effectiveness of the program.

"California is one of only three states in the nation that does not provide a sales tax exemption or tax credit for the purchase of green manufacturing equipment. This places California at a competitive disadvantage when firms are considering whether to locate or expand in the state,” said Senator Padilla, Chair of the Senate Energy, Utilities and Communications Committee.

A release on SB 71 can be found at Senator Padilla's Web site:{5EACFA15-EA6B-41D8-9711-C030F9FAD5EE}&DE={BF219C84-03FE-42A3-9291-32F3F15DA3C7}

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