Laws, Regulations & Annotations

Property Taxes Law Guide – Revision 2013

Revenue and Taxation Code

Property Taxation

Part 9. Corrections, Cancellations, and Refunds

Chapter 5. Refunds

Article 1. Refunds Generally

Section 5108

5108. Interest payable. [Stats. 1976, Ch. 499, p. 1240, in effect January 1, 1977, renumbered the section as Section 5151.]

5108. Economic revitalization manufacturing property—property tax rebate. (a) For the 1994–95 fiscal year and each fiscal year thereafter, the governing body of a local agency shall have the authority, by a majority vote of that governing body, to rebate some or all of the property tax revenue that the local agency would receive from economic revitalization manufacturing property for a period of five fiscal years from the date the property was placed in service. For purposes of this section, a redevelopment agency shall obtain the approval, by a majority vote of the governing bodies of the city and the county in which the redevelopment agency is located, prior to having the authority to rebate some or all of that property tax revenue.

(b) For purposes of this section:

(1) "Economic revitalization manufacturing property" means tangible personal property that meets all of the following requirements:

(A) The property is directly involved in the manufacturing process in this state, and not in a preliminary or subsequent activity, or one incidental to manufacturing.

(B) Use of the property will lead to the creation of at least 10 new full-time manufacturing jobs or positions at salary levels of at least ten dollars ($10) per hour (twenty thousand dollars ($20,000) per year), and those jobs or positions will continue in existence for a continuous five-year period.

(C) A majority of the governing body of the local agency makes a finding, in its sole discretion, that the property is used in conjunction with the establishment or expansion of a manufacturing project or facility within the local agency's jurisdiction, and that the property meets the requirements of subparagraphs (A) and (B). In this connection, a majority of the governing body is hereby authorized, but not required, to make the finding specified herein, and thereby authorize the rebate provided pursuant to this section.

(D) The property is "qualified property" for purposes of the manufacturing investment credit under subdivision (d) of Sections 17053.49 and 23649.

(2) "Manufacturing process" 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.

(3) "Ten or more new employees" means a net increase by 10 or more of the total number of employees, as defined in Section 621 of the Unemployment Insurance Code, employed by the taxpayer in this state. The increase in the total number of employees employed in this state shall be determined by subtracting the total number of employees the taxpayer employed in the previous fiscal year from the total number of employees the taxpayer employed in the current fiscal year. The total number of employees employed in this state shall equal the sum of both of the following:

(A) The total number of hours worked by employees in this state for the taxpayer who are paid an hourly wage divided by the applicable hours per workyear.

(B) The total number of months worked by salaried employees in this state for the taxpayer divided by the applicable months per workyear.

(4) "Applicable workyear" means with respect to a worker paid an hourly wage, 2,000 paid hours and, with respect to a salaried employee, a total of 12 paid months. The applicable workyear, in the case of a manufacturing project or facility that becomes operational during the year, shall be the amounts in the foregoing sentence multiplied by a fraction, the numerator of which is the number of months of the year that the project or facility was operational and the denominator of which is 12.

An employee shall be deemed to be employed at a manufacturing project or facility if he or she utilizes the project or facility as his or her principal place of business.

(5) "Local agency" means a city, county, city and county, redevelopment agency, or special district, excluding any school district.

(c) If at any time within five years after granting a rebate pursuant to this section, the governing body finds that the recipient taxpayer has not complied with the conditions of paragraph (1) of subdivision (b), the governing body may recapture from that taxpayer all or any portion of the amount rebated.

(d) This section shall apply only to property that is placed in service on or after January 1, 1994.

(e) (1) On or before January 1, 2002, the Legislative Analyst shall prepare a report for the Legislature, which shall include, but not be limited to, the following information with respect to this section:

(A) A list of local agencies that have utilized the tax rebate provisions.

(B) The dollars expended by each agency utilizing the tax rebate provisions.

(C) The number of jobs created by each of the local agencies utilizing the tax rebate provisions.

(D) A reasoned estimate of the number of jobs created that, but for these provisions, would have been located outside the state.

(E) A reasoned estimate of the number of jobs that, but for these provisions, would have been located in another jurisdiction within the state.

(2) By granting this tax rebate, the granting agency agrees to cooperate fully with the Legislative Analyst.

(3) Beginning in 2000, each participating agency shall provide the Legislative Analyst annually with a complete set of data for the program, including all of the information required in paragraph (1).

(4) The final report by the Legislative Analyst, provided pursuant to paragraph (1), shall include an analysis of the cost per job of jobs created pursuant to this section, a comparison of this program to other economic development tools, and a recommendation as to whether this program should be continued in its present form, restructured, or eliminated.

(f) A local agency may enter into an agreement with a taxpayer to implement this section and the agreement shall be valid notwithstanding the subsequent repeal of this section.

(g) Nothing in this section shall be deemed to eliminate or reduce the obligation of a redevelopment agency to comply with Section 33334.2, 33334.6, 33607.5, or 33607.7 of the Health and Safety Code.

(h) This section shall remain in effect only until January 1, 2003, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2003, deletes or extends that date.

History.—Added by Stats. 1993, Ch. 868, in effect January 1, 1994. Stats. 1995, Ch. 204, in effect January 1, 1996, added the second sentence in subdivision (a); substituted "a net" for "an" after "means" in paragraph (3), and added "redevelopment agency," after "city and county," in paragraph (5) of subdivision (b); and added subdivisions (f) and (g). Stats. 1999, Ch. 274 (SB 943), in effect January 1, 2000, added paragraph (D) to subdivision (b) (1); substituted "workyear" for "work year" in subdivision (b)(3)(A) and (B) and in subdivision (b)(B)(4); substituted subdivision (e) for former subdivision (e), which provided that the section would remain in effect only until January 1, 2000; and added subdivision (h).

Note.—Section 1 of Stats. 1993, Ch. 868, provided that the Legislature finds and declares the following:

(a) Tax incentive proposals, when specifically targeted and carefully drawn up, may be a significant force in spurring economic development in California. The Legislature has found in its meetings with California businesses from across the state that tax incentives may assist in retaining business expansion and job growth in California.

(b) Any effective economic development proposal must be meaningful to the target company; that is, it must be targeted and of sufficient magnitude to make a difference in the decisionmaking process of a company to locate or relocate its operations.

(c) The personal property tax, particularly for high-tech manufacturing facilities, is one of the largest fixed costs that must be faced by companies. Moreover, it is highest exactly at the point where factories are their least profitable—at the outset when most factories are operating at a loss. Several states address this problem by "phasing in" personal property taxes on new manufacturing facilities. The Legislature believes such a system would be beneficial to California's economic development.