AB 732

Under current law, a corporation may claim income and franchise tax credits

based on its qualified research expenses. A corporation may claim 5 percent of its

increase in qualified research expenses over a base year, except that a corporation

may claim 10 percent of the increase in qualified research expenses over the base

year for qualified research expenses related to designing internal combustion

engines for vehicles or designing and manufacturing certain energy efficient

equipment. A corporation may also claim 5 percent of the amount it paid in the

taxable year to construct and equip new facilities or expand existing facilities used

in this state for qualified research, except that a corporation may claim 10 percent

of such amounts if the research is related to designing internal combustion engines

for vehicles or designing and manufacturing certain energy efficient equipment.

Under current law, partnerships, limited liability companies, tax-option

corporations, partners of a partnership, members of a limited liability company, and

shareholders of a tax-option corporation may not claim the credits.

Under this bill, a taxpayer may claim an income and franchise tax credit equal

to 15 percent of the taxpayer's qualified research expenses paid in the taxable year

that are directly or indirectly related to designing internal combustion engines for

vehicles and an amount equal to 15 percent of the amount paid in the taxable year

to construct and equip new facilities or expand existing facilities used in this state

for qualified research directly or indirectly related to designing internal combustion

engines for vehicles. Under the bill, partnerships, limited liability companies, and

tax-option corporations may not claim the credit, but may compute the credit based

on amounts paid by the entity and pass the credit on to the partners, members, or

shareholders who may claim the credit.

Because this bill relates to an exemption from state or local taxes, it may be

referred to the Joint Survey Committee on Tax Exemptions for a report to be printed

as an appendix to the bill.