California – Manufacturing and Research & Development Partial Exemption (Proposed Reg. 1525.4)

SALT Report 3242 –The California State Board of Equalization Tax Policy Division released the Third Discussion Paper on the Proposed Regulation 1525.4, Manufacturing and Research & Development Equipment.

Dates to remember:

  • February 18, 2014 – Third Interested Party Meeting – Call in # 1-888-636-3807; Access Code: 499201
  • February, 28, 2014 – Written Comments Due – email to Susanne.buehler@boe.ca.gov
  • April 22, 2014 – Business Taxes Committee presentation is scheduled

The Third Discussion Paper contains revisions to the proposed Regulation 1525.4 taking into consideration various submissions as a result of the Second Interested party meeting held on December 5, 2013.  The proposed regulation intends to clarify the application and enforcement of the partial sales and use tax exemption codified in California Revenue and Taxation Code Section 6377.1 (AB 93 and SB 90 – see SR 3208).

It should be noted that this law and regulation are being modeled after California’s former partial exemption for new manufacturers codified in California Revenue and Taxation Code Section 6377 and interpreted in Regulation 1525.2 Manufacturing Equipment.  This prior program ran from January 1, 1994 to December 31, 2003 and ended simultaneously with the Manufacturers’ Investment Credit (MIC).  During the 94 to 03 period a company could only claim one (Section 6377) or the other (MIC) and most claimed the MIC.

Per Regulation 1525.4 the partial exemption will take effect on July 1, 2014.  Presently the partial exemption is intended to target companies spanning the SIC codes 3111 to 3399 and NAICS codes 541711 (Biotechnology) and 541712 (Life sciences).  The partial exemption will be 4.1875% for the period July 1, 2014 to December 31, 2016 and then will adjust to 3.9375% on January 1, 2017 through the end of the program on June 30, 2022.

For Further Information:

BOE Third Discussion Paper Proposed Regulation 1525.4

SALT Report 3208