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AB-904 Income taxes: credits: manufacturers’ machinery and equipment.(2021-2022)

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Date Published: 03/18/2021 09:00 PM
AB904:v98#DOCUMENT

Amended  IN  Assembly  March 18, 2021

CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Assembly Bill
No. 904


Introduced by Assembly Member Grayson

February 17, 2021


An act to amend Section 51298 of the Government Sections 17039.3 and 23036.3 of, and to add Sections 17053.50 and 23650 to, the Revenue and Taxation Code, relating to local government. taxation, to take effect immediately, tax levy.


LEGISLATIVE COUNSEL'S DIGEST


AB 904, as amended, Grayson. Capital investment incentive program. Income taxes: credits: manufacturers’ machinery and equipment.
The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws. Existing law provides that, except as specified, the total credits allowable under those laws may not reduce the taxes imposed by those laws by more than $5,000,000, as provided, for taxable years beginning on or after January 1, 2020, and before January 1, 2023. Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives the tax expenditure will achieve, detailed performance indicators, and data collection requirements.
This bill would establish credits against the taxes imposed by those laws for taxable years beginning on or after January 1, 2021, and before January 1, 2032, in an amount equal to a specified percentage of the amount paid or incurred during the taxable year by a qualified taxpayer, as defined, for qualified personal tangible property, defined, in part, to include machinery and equipment, up to $1,000,000. The bill would exclude these credits from the $5,000,000 tax reduction cap described above. The bill would also include additional information required for any bill authorizing a new tax expenditure.
This bill would take effect immediately as a tax levy.

Existing law, until January 1, 2024, authorizes a county, city and county, or city to establish a capital investment incentive program to attract large manufacturing facilities to invest in their communities and to encourage certain industries to locate and invest in those facilities, as specified.

This bill would make a nonsubstantive change to that authorization.

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NOYES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Section 17039.3 of the Revenue and Taxation Code is amended to read:

17039.3.
 (a) Notwithstanding any provision of this part or Part 10.2 (commencing with Section 18401) to the contrary, for taxpayers not required to be included in a combined report under Section 25101 or 25110, or taxpayers not authorized to be included in a combined report under Section 25101.15, for each taxable year beginning on or after January 1, 2020, and before January 1, 2023, the total of all qualified business credits otherwise allowable under any provision of Chapter 2 (commencing with Section 17041), including the carryover of any business credit under a former provision of that chapter, for the taxable year shall not reduce the “net tax,” as defined in Section 17039, by more than five million dollars ($5,000,000).
(b) Notwithstanding any provision of this part or Part 10.2 (commencing with Section 18401) to the contrary, for taxpayers required to be included in a combined report under Section 25101 or 25110, or taxpayers authorized to be included in a combined report under Section 25101.15, for each taxable year beginning on or after January 1, 2020, and before January 1, 2023, the total of all qualified business credits otherwise allowable under any provision of Chapter 2 (commencing with Section 17041), including the carryover of any business credit under a former provision of that chapter, by all members of the combined report shall not reduce the aggregate amount of “tax,” as defined in Section 23036, of all members of the combined report by more than five million dollars ($5,000,000).
(c) For purposes of this section, “business “qualified business credit” means a credit allowable under any provision of Chapter 2 (commencing with Section 17041) other than the following credits:
(1) The credit allowed by Section 17052 (relating to credit for earned income).
(2) The credit allowed by Section 17052.1 (relating to credit for young child).
(3) The credit allowed by Section 17052.6 (relating to credit for household and dependent care).
(4) The credit allowed by Section 17052.25 (relating to credit for adoption costs).
(5) The credit allowed by Section 17053.5 (relating to renter’s tax credit).
(6) The credit allowed by Section 17053.50 (relating to credit for manufacturers’ machinery and equipment).

(6)

(7) The credit allowed by Section 17054 (relating to credit for personal exemption).

(7)

(8) The credit allowed by Section 17054.5 (relating to credit for qualified joint custody head of household and a qualified taxpayer with a dependent parent).

(8)

(9) The credit allowed by Section 17054.7 (relating to credit for qualified senior head of household).

(9)

(10) The credit allowed by Section 17058 (relating to credit for low-income housing).

(10)

(11) The credit allowed by Section 17061 (relating to refunds pursuant to the Unemployment Insurance Code).
(d) Any amounts included in an election pursuant to Section 6902.5, relating to an irrevocable election to apply credit amounts under Section 17053.85, 17053.95, 17053.98, 23685, 23695, or 23698 against qualified sales and use tax, as defined in Section 6902.5, are not included in the five-million-dollar ($5,000,000) limitation set forth in subdivision (a) or (b).
(e) The amount of any credit otherwise allowable for the taxable year under Section 17039 that is not allowed due to application of this section shall remain a credit carryover amount under this part.
(f) The carryover period for any credit that is not allowed due to the application of this section shall be increased by the number of taxable years the credit or any portion thereof was not allowed.
(g) Notwithstanding anything to the contrary in this part or Part 10.2 (commencing with Section 18401), the credits listed in subdivision (c) shall be applied after any business credits, as limited by subdivision (a) or (b), are applied.
(h) Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code does not apply to any standard, criterion, procedure, determination, rule, notice, or guideline established or issued by the Franchise Tax Board pursuant to this section.

SEC. 2.

 Section 17053.50 is added to the Revenue and Taxation Code, to read:

17053.50.
 (a) For each taxable year beginning on or after January 1, 2021, and before January 1, 2032, there shall be allowed as a credit against the “net tax,” defined by Section 17039, to a qualified taxpayer for a percentage determined by subdivision (c) of the amount paid or incurred during the taxable year for qualified personal tangible property up to one million dollars ($1,000,000).
(b) For purposes of this section, the following definitions shall apply:
(1) “Fabricating” means to make, build, create, produce, or assemble components or tangible personal property to work in a new or different manner.
(2) “Manufacturing” means the activity of converting or conditioning tangible personal property by changing the form, composition, quality, or character of the property for ultimate sale at retail or use in the manufacturing of a product to be ultimately sold at retail. Manufacturing includes any improvements to tangible personal property that result in a greater service life or greater functionality than that of the original property.
(3) “Primarily” means 50 percent or more of the time.
(4) “Process” means the period beginning at the point at which any raw materials are received by the qualified person and introduced into the manufacturing, processing, refining, fabricating, or recycling activity of the qualified person and ending at the point at which the manufacturing, processing, refining, fabricating, or recycling activity of the qualified person has altered tangible personal property to its completed form, including packaging, if required. Raw materials shall be considered to have been introduced into the process when the raw materials are stored on the same premises where the qualified person’s manufacturing, processing, refining, fabricating, or recycling activity is conducted. Raw materials that are stored on premises other than where the qualified person’s manufacturing, processing, refining, fabricating, or recycling activity is conducted shall not be considered to have been introduced into the manufacturing, processing, refining, fabricating, or recycling process.
(5) “Processing” means the physical application of the materials and labor necessary to modify or change the characteristics of tangible personal property.
(6) “Qualified business” means a business described in Sector Codes 31 to 33, inclusive, of the North American Industry Classification System (NAICS) published by the United States Office of Management and Budget (OMB), 2017 edition.
(7) (A) “Qualified personal tangible property” includes, but is not limited to, all of the following:
(i) Machinery and equipment, including component parts and contrivances such as belts, shafts, moving parts, and operating structures.
(ii) Equipment or devices used or required to operate, control, regulate, or maintain the machinery, including, but not limited to, computers, data processing equipment, and computer software, together with all repair and replacement parts with a useful life of one or more years therefor, whether purchased separately or in conjunction with a complete machine and regardless of whether the machine or component parts are assembled by the qualified person or another party.
(iii) Tangible personal property used in pollution control that meets standards established by this state or any local or regional governmental agency within this state.
(iv) Special purpose buildings and foundations used as an integral part of the manufacturing, processing, refining, fabricating, or recycling process, or that constitute a research or storage facility used during those processes. Buildings used solely for warehousing purposes after completion of those processes are not included.
(B) “Qualified tangible personal property” shall not include any of the following:
(i) Consumables with a useful life of less than one year.
(ii) Furniture, inventory, and equipment used in the extraction process, or equipment used to store finished products that have completed the manufacturing, processing, refining, fabricating, or recycling process.
(iii) Tangible personal property used primarily in administration, general management, or marketing.
(8) “Qualified taxpayer” means a taxpayer that, on and after January 1, 2020, is primarily engaged in a qualified business.
(9) “Refining” means the process of converting a natural resource to an intermediate or finished product.
(10) “Useful life” for tangible personal property that is treated as having a useful life of one or more years for state income or franchise tax purposes shall be deemed to have a useful life of one or more years for purposes of this section. “Useful life” for tangible personal property that is treated as having a useful life of less than one year for state income or franchise tax purposes shall be deemed to have a useful life of less than one year for purposes of this section. For the purposes of this paragraph, tangible personal property that is deducted under Section 17201, 17255, or 24356 shall be deemed to have a useful life of one or more years.
(c) The percentage of the credit for the amount paid or incurred during the taxable year for qualified personal tangible property provided by subdivision (a) shall be determined as follows:
(1) Six percent for a taxpayer employing less than 100 people in a qualified business.
(2) Five percent for a taxpayer employing 100 or more people in a qualified business.
(d) (1) In the case where the credit allowed by subdivision (a) exceeds the “net tax,” the excess may be carried over to reduce the “net tax” in the following taxable year, and succeeding years if necessary, until the credit is exhausted, but no later than the date determined by paragraph (2).
(2) (A) A credit allowed for qualified personal tangible property paid or incurred by a taxpayer while employing less than 100 people in a qualified business shall not be carried over to reduce the “net tax” in a taxable year beginning on or after January 1, 2035.
(B) A credit allowed for qualified personal tangible property paid or incurred by a taxpayer while employing 100 or more people in a qualified business shall not be carried over to reduce the “net tax” in a taxable year beginning on or after January 1, 2034.

SEC. 3.

 Section 23036.3 of the Revenue and Taxation Code is amended to read:

23036.3.
 (a) Notwithstanding any provision of this part or Part 10.2 (commencing with Section 18401) to the contrary, except as provided in subdivision (d), for taxpayers not required to be included in a combined report under Section 25101 or 25110, or taxpayers not authorized to be included in a combined report under Section 25101.15, for each taxable year beginning on or after January 1, 2020, and before January 1, 2023, the total of all qualified business credits otherwise allowable under any provision of Chapter 3.5 (commencing with Section 23604) including the carryover of any credit under a former provision of that chapter, for the taxable year shall not reduce the “tax,” as defined in Section 23036, by more than five million dollars ($5,000,000).
(b) Notwithstanding any provision of this part or Part 10.2 (commencing with Section 18401) to the contrary, except as provided in subdivision (d), for taxpayers required to be included in a combined report under Section 25101 or 25110, or taxpayers authorized to be included in a combined report under Section 25101.15, for each taxable year beginning on or after January 1, 2020, and before January 1, 2023, the total of all qualified business credits otherwise allowable under any provision of Chapter 3.5 (commencing with Section 23604), including the carryover of any credit under a former provision of that chapter, by all members of the combined report shall not reduce the aggregate amount of “tax,” as defined in Section 23036, of all members of the combined report by more than five-million-dollars ($5,000,000).
(c) For purposes of this section, “qualified business credit” means a credit allowable under any provision of Chapter 3.5 (commencing with Section 23604) other than the credit allowed by Section 23650 (relating to a credit for manufacturers’ machinery and equipment).

(c)

(d) Any amounts included in an election pursuant to Section 6902.5, relating to an irrevocable election to apply credit amounts under Section 17053.85, 17053.95, 17053.98, 23685, 23695, or 23698 against qualified sales and use tax, as defined in Section 6902.5, are not included in the five million dollar ($5,000,000) limitation set forth in subdivision (a) or (b).

(d)

(e) The limitation under subdivision (a) or (b) shall not apply to the credit allowed by Section 23610.5 (relating to credit for low-income housing).

(e)

(f) The amount of any credit otherwise allowable for the taxable year under Section 23036 that is not allowed due to the application of this section shall remain a credit carryover amount under this part.

(f)

(g) The carryover period for any credit that is not allowed due to the application of this section shall be increased by the number of taxable years the credit or any portion thereof was not allowed.

(g)

(h) Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code does not apply to any standard, criterion, procedure, determination, rule, notice, or guideline established or issued by the Franchise Tax Board pursuant to this section.

SEC. 4.

 Section 23650 is added to the Revenue and Taxation Code, to read:

23650.
 (a) For each taxable year beginning on or after January 1, 2021, and before January 1, 2032, there shall be allowed as a credit against the “tax,” defined by Section 23036, to a qualified taxpayer for a percentage determined by subdivision (c) of the amount paid or incurred during the taxable year for qualified personal tangible property up to one million dollars ($1,000,000).
(b) For purposes of this section, the following definitions shall apply:
(1) “Fabricating” means to make, build, create, produce, or assemble components or tangible personal property to work in a new or different manner.
(2) “Manufacturing” means the activity of converting or conditioning tangible personal property by changing the form, composition, quality, or character of the property for ultimate sale at retail or use in the manufacturing of a product to be ultimately sold at retail. Manufacturing includes any improvements to tangible personal property that result in a greater service life or greater functionality than that of the original property.
(3) “Primarily” means 50 percent or more of the time.
(4) “Process” means the period beginning at the point at which any raw materials are received by the qualified person and introduced into the manufacturing, processing, refining, fabricating, or recycling activity of the qualified person and ending at the point at which the manufacturing, processing, refining, fabricating, or recycling activity of the qualified person has altered tangible personal property to its completed form, including packaging, if required. Raw materials shall be considered to have been introduced into the process when the raw materials are stored on the same premises where the qualified person’s manufacturing, processing, refining, fabricating, or recycling activity is conducted. Raw materials that are stored on premises other than where the qualified person’s manufacturing, processing, refining, fabricating, or recycling activity is conducted shall not be considered to have been introduced into the manufacturing, processing, refining, fabricating, or recycling process.
(5) “Processing” means the physical application of the materials and labor necessary to modify or change the characteristics of tangible personal property.
(6) “Qualified business” means a business described in Sector Codes 31 to 33, inclusive, of the North American Industry Classification System (NAICS) published by the United States Office of Management and Budget (OMB), 2017 edition.
(7) (A) “Qualified personal tangible property” includes, but is not limited to, all of the following:
(i) Machinery and equipment, including component parts and contrivances such as belts, shafts, moving parts, and operating structures.
(ii) Equipment or devices used or required to operate, control, regulate, or maintain the machinery, including, but not limited to, computers, data processing equipment, and computer software, together with all repair and replacement parts with a useful life of one or more years therefor, whether purchased separately or in conjunction with a complete machine and regardless of whether the machine or component parts are assembled by the qualified person or another party.
(iii) Tangible personal property used in pollution control that meets standards established by this state or any local or regional governmental agency within this state.
(iv) Special purpose buildings and foundations used as an integral part of the manufacturing, processing, refining, fabricating, or recycling process, or that constitute a research or storage facility used during those processes. Buildings used solely for warehousing purposes after completion of those processes are not included.
(B) “Qualified tangible personal property” shall not include any of the following:
(i) Consumables with a useful life of less than one year.
(ii) Furniture, inventory, and equipment used in the extraction process, or equipment used to store finished products that have completed the manufacturing, processing, refining, fabricating, or recycling process.
(iii) Tangible personal property used primarily in administration, general management, or marketing.
(8) “Qualified taxpayer” means a taxpayer that, on and after January 1, 2020, is primarily engaged in a qualified business.
(9) “Refining” means the process of converting a natural resource to an intermediate or finished product.
(10) “Useful life” for tangible personal property that is treated as having a useful life of one or more years for state income or franchise tax purposes shall be deemed to have a useful life of one or more years for purposes of this section. “Useful life” for tangible personal property that is treated as having a useful life of less than one year for state income or franchise tax purposes shall be deemed to have a useful life of less than one year for purposes of this section. For the purposes of this paragraph, tangible personal property that is deducted under Section 17201, 17255, or 24356 shall be deemed to have a useful life of one or more years.
(c) The percentage of the credit for the amount paid or incurred during the taxable year for qualified personal tangible property provided by subdivision (a) shall be determined as follows:
(1) Six percent for taxpayers employing less than 100 people in a qualified business.
(2) Five percent for taxpayers employing 100 or more people in a qualified business.
(d) (1) In the case where the credit allowed by subdivision (a) exceeds the “tax,” the excess may be carried over to reduce the “net tax” in the following taxable year, and succeeding years if necessary, until the credit is exhausted, but no later than the date determined by paragraph (2).
(2) (A) A credit allowed for qualified personal tangible property paid or incurred by a taxpayer while employing less than 100 people in a qualified business shall not be carried over to reduce the “tax” in a taxable year beginning on or after January 1, 2035.
(B) A credit allowed for qualified personal tangible property paid or incurred by a taxpayer while employing 100 or more people in a qualified business shall not be carried over to reduce the “tax” in a taxable year beginning on or after January 1, 2034.

SEC. 5.

 (a) For purposes of Section 41 of the Revenue and Taxation Code, with respect to the tax expenditure created by the amendments to Sections 17053.50 and 23650 of the Revenue and Taxation Code made by this act, the Legislature finds and declares the following:
(1) The specific goals, purposes, and objectives of this bill are as follows:
(A) To incentivize manufacturers to make capital investments and encourage increased production in California.
(B) To provide additional economic incentives to both attract and retain manufacturing in the state while mitigating other costs, impacts, and pressures of operating in California.
(C) To support small and medium-sized manufacturers that have borne a disproportionate share of the economic burdens and increased capital costs causes by COVID-19.
(2) To measure whether the credit achieves its intended purpose, the Franchise Tax Board shall prepare a written report on all of the following:
(A) The number of taxpayers claiming the credit.
(B) The average credit amount on tax returns claiming the credit.
(C) The number of taxpayers claiming the credit in a taxable year that have not claimed the credit for a previous taxable year.
(b) Notwithstanding Section 19542 of the Revenue and Taxation Code, the Franchise Tax Board shall provide the written report prepared pursuant to paragraph (2) of subdivision (a) to the Senate Committee on Budget and Fiscal Review, the Assembly Committee on Budget, the Senate and Assembly Committees on Appropriations, the Senate Committee on Governance and Finance, and the Assembly Committee on Revenue and Taxation.

SEC. 6.

 This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.
SECTION 1.Section 51298 of the Government Code is amended to read:
51298.

It is the intent of the Legislature in enacting this chapter to provide local governments with opportunities to attract large manufacturing facilities to invest in their communities and to encourage industries, such as high technology, aerospace, automotive, biotechnology, software, environmental sources, and others, to locate and invest in those facilities in California.

(a)Commencing in the 1998–99 fiscal year, the governing body of a county, city and county, or city, may, by means of an ordinance or resolution approved by a majority of its entire membership, elect to establish a capital investment incentive program. In a county, city and county, or city in which the governing body has so elected, the county, city and county, or city shall, upon the approval by a majority of the entire membership of its governing body of a written request therefor, pay a capital investment incentive amount to the proponent of a qualified manufacturing facility for up to 15 consecutive fiscal years. A request for the payment of capital investment incentive amounts shall be filed by a proponent in writing with the governing body of an electing county, city and county, or city in the time and manner specified in procedures adopted by that governing body. In the case in which the governing body of an electing county, city and county, or city approves a request for the payment of capital investment incentive amounts, both of the following conditions shall apply:

(1)The consecutive fiscal years during which a capital investment incentive amount is to be paid shall commence with the first fiscal year commencing after the date upon which the qualified manufacturing facility is certified for occupancy or, if no certification is issued, the first fiscal year commencing after the date upon which the qualified manufacturing facility commences operation.

(2)In accordance with paragraph (4) of subdivision (d), the annual payment to a proponent of each capital investment incentive amount shall be contingent upon the proponent’s payment of a community services fee.

(b)For purposes of this section:

(1)“Qualified manufacturing facility” means a proposed manufacturing facility that meets all of the following criteria:

(A)The proponent’s initial investment in that facility, in real and personal property, necessary for the full and normal operation of that facility, made pursuant to the capital investment incentive program, that comprises any portion of that facility or has its situs at that facility, exceeds one hundred fifty million dollars ($150,000,000). Compliance with this subparagraph shall be certified by the Governor’s Office of Business and Economic Development upon the director’s approval of a proponent’s application for certification of a qualified manufacturing facility. An application for certification shall be submitted by a proponent to the Governor’s Office of Business and Economic Development in writing in the time and manner as specified by the director.

(B)The facility is to be located within the jurisdiction of the electing county, city and county, or city to which the request is made for payment of capital investment incentive amounts.

(C)The facility is operated by any of the following:

(i)A business described in Codes 3321 to 3399, inclusive, or Codes 541711 or 541712 of the 2012 North American Industry Classification System (NAICS) Manual published by the United States Office of Management and Budget.

(ii)A business engaged in the recovery of minerals from geothermal resources, including the proportional amount of a geothermal electric generating plant that is integral to the recovery process by providing electricity for it.

(iii)A business engaged in the manufacturing of parts or components related to the production of electricity using solar, wind, biomass, hydropower, or geothermal resources on or after July 1, 2010.

(D)The proponent is currently engaged in any of the following:

(i)Commercial production.

(ii)The perfection of the manufacturing process.

(iii)The perfection of a product intended to be manufactured.

(2)“Proponent” means a party or parties that meet all of the following criteria:

(A)The party is named in the application to the county, city and county, or city within which the qualified manufacturing facility would be located for a permit to construct a qualified manufacturing facility.

(B)The party will be the fee owner of the qualified manufacturing facility upon the completion of that facility. Notwithstanding the previous sentence, the party may enter into a sale-leaseback transaction and nevertheless be considered the proponent.

(C)If a proponent that is receiving capital investment incentive amounts subsequently leases the subject qualified manufacturing facility to another party, the lease may provide for the payment to that lessee of any portion of a capital investment incentive amount. Any lessee receiving any portion of a capital investment incentive amount shall also be considered a proponent for the purposes of subdivision (d).

(3)“Capital investment incentive amount” means, with respect to a qualified manufacturing facility for a relevant fiscal year, an amount up to or equal to the amount of ad valorem property tax revenue allocated to the participating local agency, which excludes the revenue transfers required by Sections 97.2 and 97.3 of the Revenue and Taxation Code, from the taxation of that portion of the total assessed value of that real and personal property described in subparagraph (A) of paragraph (1) that is in excess of one hundred fifty million dollars ($150,000,000).

(4)“Manufacturing” means the activity of converting or conditioning property by changing the form, composition, quality, or character of the property for ultimate sale at retail or use in the manufacturing of a product to be ultimately sold at retail. Manufacturing includes any improvements to tangible personal property that result in a greater service life or greater functionality than that of the original property.

(c)A city or special district may, upon the approval by a majority of the entire membership of its governing body, pay to the county, city and county, or city an amount equal to the amount of ad valorem property tax revenue allocated to that city or special district, but not the actual allocation, derived from the taxation of that portion of the total assessed value of that real and personal property described in subparagraph (A) of paragraph (1) of subdivision (b) that is in excess of one hundred fifty million dollars ($150,000,000).

(d)A proponent whose request for the payment of capital investment incentive amounts is approved by an electing county, city and county, or city shall enter into a community services agreement with that county, city and county, or city that includes, but is not limited to, all of the following provisions:

(1)A provision requiring that a community services fee be remitted by the proponent to the county, city and county, or city, in each fiscal year, in an amount that is equal to 25 percent of the capital investment incentive amount calculated for that proponent for that fiscal year, except that in no fiscal year shall the amount of the community services fee exceed two million dollars ($2,000,000).

(2)A provision specifying the dates in each relevant fiscal year upon which payment of the community services fee is due and delinquent, and the rate of interest to be charged to a proponent for any delinquent portion of the community services fee amount.

(3)A provision specifying the procedures and rules for the determination of underpayments or overpayments of a community services fee, for the appeal of determinations of any underpayment, and for the refunding or crediting of any overpayment.

(4)A provision specifying that a proponent is ineligible to receive a capital investment incentive amount if that proponent is currently delinquent in the payment of any portion of a community services fee amount, if the qualified manufacturing facility is constructed in a manner materially different from the facility as described in building permit application materials, or if the facility is no longer operated as a qualified manufacturing facility meeting the requirements of paragraph (1) of subdivision (b). If a proponent becomes ineligible to receive a capital investment incentive amount as a result of an agreement provision included pursuant to this subparagraph, the running of the number of consecutive fiscal years specified in an agreement made pursuant to subdivision (a) is not tolled during the period in which the proponent is ineligible.

(5)A provision that sets forth a job creation plan with respect to the relevant qualified manufacturing facility. The plan shall specify the number of jobs to be created by that facility, and the types of jobs and compensation ranges to be created thereby. The plan shall also specify that for the entire term of the community services agreement, both of the following shall apply:

(A)All of the employees working at the qualified manufacturing facility shall be covered by an employer-sponsored health benefits plan, with the exception of any employee who was offered but declined coverage due to other available group coverage.

(B)The average weekly wage, exclusive of overtime, paid to all of the employees working at the qualified manufacturing facility, who are not management or supervisory employees, shall be not less than the state average weekly wage. For the purpose of this subdivision, “state average weekly wage” means the average weekly wage paid by employers to employees covered by unemployment insurance, as reported to the Employment Development Department for the four calendar quarters ending June 30 of the preceding calendar year.

(6)(A)In the case in which the proponent fails to operate the qualified manufacturing facility as required by the community services agreement, a provision that requires the recapture of any portion of any capital investment incentive amounts previously paid to the proponent equal to the lesser of the following:

(i)All of the capital investment incentive amounts paid to the proponent, less all of the community services fees received from the proponent, and less any capital investment incentive amounts previously recaptured.

(ii)The last capital investment incentive amount paid to the proponent, less the last community services fee received from the proponent, multiplied by 40 percent of the number of years remaining in the community services agreement, but not to exceed 10 years, and less any capital investment incentive amounts previously recaptured.

(B)If the proponent fails to operate the qualified manufacturing facility as required by the community services agreement, the county, city and county, or city may, upon a finding that good cause exists, waive any portion of the recapture of any capital investment incentive amount due under this subdivision. For the purpose of this subdivision, good cause includes, but is not limited to, the following:

(i)The proponent has sold or leased the property to a person who has entered into an agreement with the county, city and county, or city to assume all of the responsibilities of the proponent under the community services agreement.

(ii)The qualified manufacturing facility has been rendered inoperable and beyond repair as a result of an act of God, civil disorder, failure of power, riots, insurrections, war, acts of terrorism, or any other causes, whether the kind herein enumerated or otherwise, not within the control of the qualified manufacturing facility claiming good cause, which restrict or interfere with a qualified manufacturing facility’s ability to timely perform, and which by the exercise of reasonable due diligence, such party is or would have been unable to prevent or overcome.

(C)For purposes of this subdivision, failure to operate a qualified manufacturing facility as required by the community services agreement includes, but is not limited to, failure to establish the number of jobs specified in the jobs creation plan created pursuant to paragraph (5).

(e)(1)Each county, city and county, or city that elects to establish a capital investment incentive program shall notify the Governor’s Office of Business and Economic Development of its election to do so no later than June 30th of the fiscal year in which the election was made.

(2)In addition to the information required to be reported pursuant to paragraph (1), each county, city and county, or city that has elected to establish a capital investment incentive program shall notify the Governor’s Office of Business and Economic Development each fiscal year no later than June 30th of the amount of any capital investment incentive payments made and the proponent of the qualified manufacturing facility to whom the payments were made during that fiscal year.

(3)The Governor’s Office of Business and Economic Development shall compile the information submitted by each county, city and county, and city pursuant to paragraphs (1) and (2) and submit a report to the Legislature containing this information no later than October 1, every two years commencing October 1, 2016.

(f)This section shall become operative on July 1, 2015.