(April 17, 2013) A California Chamber of Commerce-opposed “job killer” bill that imposes an arbitrary maximum 10-year sunset on all future tax credits has advanced and already awaits action by the entire Senate.

SB 365 (Wolk; D-Davis) creates uncertainty for California employers making long-term investment decisions by requiring tax incentives end 10 years after their effective date.

The CalChamber supports efforts of the state to consider the effectiveness of tax policies and programmatic expenditures. SB 365, however, attempts to address this periodic review and good government structure related to tax policy by mandating a maximum 10-year sunset on all future tax credits. This would have the adverse effect of creating uncertainty about the future of the state’s tax structure.

When businesses choose to locate in a state, factors such as the availability of a skilled workforce, infrastructure, regulatory environment, and tax structure all play a significant role. Businesses evaluate whether they can rely on these factors to remain relatively stable and consistent in the long term

Furthermore, for capital-intensive industries like manufacturing and research and development, investment decisions are made many years into the future. The ability for corporate decision makers in these industries to plan anticipated costs over a span of many years is an important factor when determining locations for these investments.

Establishing an arbitrary maximum 10-year sunset puts the long-term viability of any credit in jeopardy and, in many cases, could ultimately render the credit’s value useless in a company’s final decision on a location.

The CalChamber believes that the arbitrary maximum 10-year sunset requirement should be amended to allow tax credits introduced in the future to be evaluated on their own merit. A reasonable sunset should be applied only if appropriate.

Action Needed

SB 365 is awaiting a vote by the entire Senate. Contact your senator and urge a vote to oppose SB 365.