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Enterprise Zone Clean-up Legislation Heads to Senate for Concurrence

Assembly Passes SB 90 Earlier Today with Bipartisan Support

July 3, 2013
Gov. Jerry Brown’s goal of eliminating the state’s Enterprise Zone (EZ) program and replacing it with a new statewide program came to fruition today.
With bipartisan support the Assembly passed SB 90 (Galgiani) this morning and immediately transferred it back to the Senate for amendment concurrence. It is anticipated that the bill will also receive bipartisan support in the Senate and be sent to the Governor’s desk. SB 90 is the clean-up legislation to AB 93 (Committee on Budget), the bill that eliminated EZs. Since taking office, the Governor has worked to abolish this important program despite its economic benefits.

Although AB 93 includes several replacement economic development programs, they are temporary in nature. The following summarizes current and pending EZ related legislation.
AB 93 Summary
The Legislature on June 27 passed AB 93, the bill that eliminated the state EZ program. It is now at the Governor’s desk awaiting his signature.  The legislation allows currently operating EZs to expire as of Jan. 1, 2014 and replaces it with the following:
  • State sales tax exemptions on the purchase of specified manufacturing equipment;
  • Narrowly-targeted hiring tax credits to be applied only within the boundaries of former EZs and the poorest 25 percent of the state’s census tracts; and
  • Funding for the Governor’s Office of Business and Economic Development (GO-Biz) to offer income tax credits on a negotiated basis to employers/businesses. 
The League has prepared a detailed overview of AB 93 available online
SB 90 Summary   
  1. Provides that the state sales tax exemption for purchases of manufacturing equipment will apply for eight years, from July 1, 2014 to July 1, 2022.
  2. Makes the following changes affecting the new hiring tax credits offered after July 1, 2014:
    1. Creates a new definition of “economic development area” to include both EZs and local agency military base recovery areas. These areas will qualify for the new credits, in addition to the census tracts identified by the Department of Finance.
    2. Clarifies the term “qualified full-time employee” to include individuals previously convicted of a felony, veterans out of service up to one year and CalWORKs recipients.
    3. Bans sexually-oriented businesses from receiving credits.
    4. Authorizes Go Biz to designate up to five pilot areas where a $10 per hour wage can be used (as opposed to the $12 minimum threshold established for all other areas).  Go Biz decisions on the pilot areas are prohibited from administrative appeal or judicial review.
  3. Changes affecting Go Biz Incentives:
    1. Clarifies criteria for GO-Biz negotiations/agreements with businesses. Considerations include:
      1. The number of jobs to be created/retained;
      2. The amount of business investment;
      3. Employee wages;
      4. The extent of unemployment/poverty in given area;
      5. Potential future growth/expansion within state;
      6. The duration of proposal; and
      7. The amount of incentives available to business in comparison to other states.
    2. Requires GO-Biz to post online:
      1. The name of business claiming credits;
      2. The amount of credits allocated;
      3. The estimated investment amount; and
      4. The estimated number of jobs created.
  4. Changes regarding the carryover period of tax credits
    1. Allows businesses to use tax credits previously accrued currently estimated to be approximately $3 billion under the eliminated EZ program with the caveat that they use them within 10 years. 

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