Business climate policies targeted - R&D, NOL and enterprise zone program

By CMTA Staff

Capitol Update, Feb. 22, 2008 Share this on FacebookTweet thisEmail this to a friend

The non-partisan Legislative Analyst’s Office (LAO) is out with a new report on the State’s overall budget crisis, including ways to raise revenue. This report was prepared for the Joint Legislative Budget Committee to consider in upcoming budget deliberations.

 Three proposals stand out:  (1) Limit the Research and Development (R&D) credit, (2) Limit Net Operating Loss (NOL) deductions for corporations, and (3) Phase out the Enterprise Zone (EZ) Program.
 
R&D - Limit the amount of credits that may be claimed in any one year to two-thirds of a taxpayer's liability. Like current law, unused credits could still be carried over. This proposal is suggested to raise $355 million in 2008/09 and $290 million in 2009/10.
 
NOL - Reduce NOL deductions to 50 percent of a taxpayer's net income in a given year. Such a reduction is estimated to generate $330 million in 2008/09 and $410 million in 2009/10.
 
EZ Phase Out - Cancel all recent re-designations of EZs and deny any future extensions for all EZs. Dismantling the EZ program is expected to raise $100 million in 2008/09 and $120 million in 2009/10.
 
The full report can be seen via this link:
www.lao.ca.gov/analysis_2008/2008_pandi/pandi_08.pdf
 
The Senate Revenue and Taxation Committee will hold a hearing next Wednesday, February 27, to examine such "tax expenditure" programs.
 
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