For Immediate Release
April 6, 2004

California – Breathing Life Back Into the Manufacturer’s Investment Credit (“MIC”)

Is the MIC really dead?  Maybe not, inasmuch as four bills have been introduced in the California legislature that would rejuvenate or, at least, reshape the credit.

The MIC, a credit against corporation franchise (income) and personal income taxes for qualifying Taxpayers (manufacturers), was repealed by its own terms and ceased existence as of January 1, 2004, due to a reduction in the number of jobs in California’s manufacturing sector. 

Two of the bills would allow the credit against California corporation franchise (income) and personal income taxes for calendar years beginning after 2004.  The credit would be equal to 6% of the amount paid or incurred by a Taxpayer during the taxable year for qualified property placed in service in the state.  Both of these bills would also provide an exemption from California sales and use taxes for gross receipts from the sale, storage, use or other consumption of tangible personal property purchased for use by a qualified person engaged in manufacturing.  This provision would also be effective for calendar years beginning after 2004.

A third bill would provide a similar exemption for purchases used in manufacturing, but the exemption would be effective for calendars years beginning after 2003.  The bill would also allow the credit against corporation franchise (income) and personal income taxes, with two changes – the credit would be for taxable years beginning after 2003 and would be equal to 8% of the amount paid or incurred by a Taxpayer during the taxable year for qualified property places in service in California.

The last of the 4 bills would allow the credit for taxable years beginning after 2003, equal to 6% of the amount paid or incurred by a Taxpayer for qualified property placed in service in the state with respect to generation of electric power.

Each of these bills would take effect immediately.  However, considering California’s current budget woes, experts predict that it is unlikely that a new MIC will make its comeback this year.

If you would like additional information on this topic or have any questions, please contact Peter Maack, Business Development Manager (415) 435-6684.  E-mail pmaack@thesaltgroup.com

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