Here is the video of Governor Brown’s interview this morning with Charlie Rose:
Enterprise Zone in Los Angeles Helping Small Manufacturer Expand
Here is a nice article from the Los Angeles Daily News of how the Enterprise Zone is helping to expand manufacturing and create new jobs:
CHATSWORTH – Jonathan Ward has built a solid business out of crafting the ultimate custom getaway rides: state-of-the-automotive-art replicas of vintage utility vehicles such as Willys Jeeps, Toyota Land Cruisers and Ford Broncos.
His ICON vehicles are carefully custom-assembled to look like rugged off-roaders from decades ago, melded onto modern powertrains with amenities like Alpine sound systems.
It can take 10 to 12 months just to assemble one – and they’re not cheap: prices range from $78,000 to $215,000.
“They’re all bespoke tailored,” explained Ward, 42. “How tall are you? How old are you? How fat are you? Where do you live? How many kids do you have? Where is this going to be used? What are your hobbies? What are your goals?
“We have a standardized spreadsheet with all sorts of options that will usually meet someone’s needs, but almost everyone says they’re into falconry or pottery or something, and want us to accommodate that.”
Despite the price range and delayed delivery, business is booming. So much so, in fact, that the company found itself outgrowing its cramped Van Nuys quarters and just last month relocated to a spacious new 40,000-square-foot production facility in Chatsworth.
Most of that is assembly space for the company’s FJ (Land Cruiser), CJ (Willys) and Bronco lines. There’s also ample area for ICON’s one-off Derelicts and Reformers program, which basically puts any car shell from the ’30s to the ’60s on a computer-designed modern chassis.
Last year’s sales came in at $4.7 million, and this year is on track to be a $6 million one. There are 28 ICONS in the process of being made.
The move was informed by Ward’s desire to keep his business in L.A. for sentimental, pragmatic and – believe it or not – economic reasons.
In particular, what made Ward feel good about keeping his business in the San Fernando Valley were the economic incentives that Mayor Antonio Villaraigosa’s Development Services Case Management Office helped him attain.
Although he hadn’t really considered moving too far away – “I have lived in Sherman Oaks in the same house since 1987, and have raised my family here,” Ward said – he wanted to take advantage of state enterprise zones like the one he’s operating in now.
“It was easy for us because Jonathan has such a great passion and energy about being in L.A.,” said Rogelio Navar, senior policy director for the Mayor’s Office of Business and Economic Policy.
“We were able to highlight some of the incentives that he could take advantage of, such as employee-hiring tax credits for folks in certain target groups and sales and use tax credits, for machinery and machine parts he’s going to use there.”
The approximately year-old DSCMO – which brings together representatives from seven city departments to expedite business permitting – also helped Ward get a 30 percent cut on the first year of the new facility’s Department of Water and Power bill.
It should all aid Ward to meet the demand for new ICONs by increasing his current staff of 22 and enabling the company’s growth trajectory.
Read the rest of this entry »
The Wall Street Journal is Paying a Lot of Attention to California
The Wall Street Journal’s Bill McGurn today writes a reaction to Governor Brown’s May Revise presentation and contrasts how Governor Brown and New Jersey Governor Chris Christie are approaching similar problems in very different ways.
As a companion to that piece, the WSJ online also provides the following video discussion with Opinion Page editor Paul Gigot (related to this earlier editorial titled “California Ugly“)
Budget Update: The May Revise
Today Governor Brown released his updated budget proposal referred to as the “May Revise.” In contrast to the January and May 2011 budget proposals, the latest budget does not mention any alteration to the Enterprise Zone program as a source of additional revenue.
The Department of Finance summary of the budget can be found online here.
FTB “Tax News” May 2012
Here is FTB’s “Tax News” newsletter for May 2012.
The Watsonville Enterprise Zone Expires Today
The Watsonville Enterprise Zone expires today, April 30, 2012.
BNA Daily Tax Report on the Dicon Decision
The following is Laura Mahoney’s article for BNA on the Dicon v. FTB decision.
Reproduced with permission from Daily Tax Report, 81 DTR K-1 (Apr. 27, 2012). Copyright 2012 by The Bureau of National Affairs, Inc (800-372-1033) <http://www.bna.com>
BNA Snapshot
Dicon Fiberoptics v. Franchise Tax Board, Cal., No. S173860, 4/26/2012
Key Holding: FTB has authority to audit tax credit vouchers that local governments issue to employers in enterprise zones.
Key Takeaway: Burden of proof remains with taxpayer to show that FTB’s denial of enterprise zone credit was incorrect.
By Laura Mahoney
SACRAMENTO, Calif.—In a win for the Franchise Tax Board, the California Supreme Court unanimously said April 26 that FTB has the authority to audit the validity of tax credit vouchers that local governments issue for hiring qualified workers in enterprise zones (Dicon Fiberoptics v. Franchise Tax Board, Cal., No. S173860, 4/26/2012).
The seven justices reversed a state appellate court ruling from 2009 (Dicon Fiberoptics Inc. v. Franchise Tax Board, 92 Cal. Rptr. 3d 902 (Ct. App. 2009); 88 DTR K-2, 5/11/09), and rejected arguments from Dicon Fiberoptics Inc. that the EZ tax credit vouchers issued by local agencies are valid on their face, and FTB has the burden to show the credits should be invalid.
In a 22-page opinion, the court repeatedly cited FTB’s authority under the Revenue and Taxation Code to review returns and require taxpayers to provide information necessary to determine the correct amount of tax.
FTB’s authority places the burden of proof on the taxpayer, and the tax agency is not bound by the determination of a local officer or administrative agency, the court said. The statute establishing the EZ program does not trump FTB’s authority.
“Although obtaining a voucher is necessary for an employer to claim a hiring credit, the statute does not say that doing so shall be sufficient and conclusive in every case,” the court said. “The Enterprise Zone Act was enacted against a backdrop of the general statutes conferring broad power on the FTB as well as our precedents placing the burden of proof on the taxpayer.”
Case Stems From 2006 SBOE Ruling
At issue was $1.1 million Dicon claimed in 2001 for hiring disadvantaged workers who qualified the company for credit under the EZ program. FTB granted $2 million in EZ credits for the 2001 tax year but rejected another $1.1 million in credits, and Dicon sued after FTB refused its request for a refund.
The case was one of first impression, and was filed in 2007 to challenge a 2006 ruling from the State Board of Equalization that upheld FTB’s authority to audit EZ vouchers (In re Appeal of Deluxe Corp., No. 297128, Dec. 12, 2006; 243 DTR H-2, 12/19/06).
“The court’s decision affirms FTB’s role in ensuring the integrity of tax credit programs,” SBOE Member Betty Yee (D), who voted in favor of FTB in Deluxe, told BNA April 26. “This decision provides necessary guidance in response to questions that have arisen with respect to the quality of the vouchers. Ultimately, the court came to the same conclusion as the Board did in the Deluxe case in 2006.”
An FTB spokeswoman told BNA the tax agency declined to comment on the ruling.
An attorney for Dicon, Marty Dakessian with Reed Smith in Los Angeles, told BNA the ruling does not change Dicon’s entitlement to the credits because they are well documented. Dicon expects to win at the trial court level on FTB’s denial of the credits.
The court recognized that several of Dicon’s arguments and interpretations of law were reasonable and strong, Dakessian said. Dicon’s loss “is based on a very stringent standard of review—whereby the court states it must accept the FTB’s interpretation if it is merely reasonable (even if our interpretation is more reasonable),” Dakessian said in an email to BNA.
“In the end, the Supreme Court’s decision is further evidence of the strong institutional bias in favor of the state and protecting the [fiscal condition] and an indication of what taxpayers face in connection with refund actions in general and the specifically bargained for benefits in connection with the EZ program in particular,” Dakessian said.
Lower Court’s ‘Middle Ground’ Rejected
The Supreme Court rejected what it called “a middle ground” the appellate court had taken in its 2009 ruling, in which it said FTB has the authority to audit vouchers issued by local EZ authorities to employers, but the agency must meet the burden of rebutting a voucher’s prima facie validity.
The court said FTB has a reasonable approach to the voucher process, which complements its own audit process and provides another level of review. FTB said in its briefs that it is not required, nor does it intend, to audit every voucher in every case. Given budgetary constraints, review is likely to occur only “in cases where FTB has information that vouchers may have been improperly issued,” the court quoted from FTB’s briefs.
The court also noted FTB’s argument that at the time the vouchers were issued to Dicon, the vouchering process had several weaknesses including the lack of statutory or regulatory requirements for documentation necessary to obtain a voucher. Many of those weaknesses were address through new regulations issued in 2006.
“[I]t is not unreasonable for the FTB to require a taxpayer to prove that a worker meets the statutory definition of a qualified employee when the FTB lacks confidence in a voucher’s accuracy,” the court said. “We can address situations in which the FTB is alleged to have acted arbitrarily or unreasonably if and when they arise.”
Dicon’s Strongest Point Not Strong Enough
The court rejected several arguments from Dicon, including what it called Dicon’s strongest point raised—that the statutory incentive for hiring disadvantaged workers would be diluted by exposing enterprise zone employers to the risk that the agency certification determinations might be undone years later by FTB auditors simply because the FTB disagrees with discretionary determinations made by the certifying agencies.
The California Taxpayers Association also argued this point in a friend-of-the-court brief, saying taxpayers will not take advantage of tax incentives if they prove to be unpredictable.
Although the legislative history of the 1994 EZ law is not decisive, it is not unreasonable to assume the Legislature added the voucher certification scheme to work in addition to FTB’s audit authority and not to supplant it, the court said.
“Although Dicon is correct that the hiring incentive would be incrementally stronger if a certification were prima facie (or conclusive) evidence that a worker is a qualified employee, the corresponding risk of abuse would be greater as well,” the court said.
Justice Goodwin Liu wrote the unanimous opinion for the court.
Breaking: California Supreme Court Sides With FTB in Dicon Case
In a decision published today, the California Supreme Court has decided that FTB does have the authority to audit “behind the voucher” in determining the legitimacy of tax credit claims. The Court states:
For the reasons that follow, we conclude that the FTB may conduct an audit to determine whether a taxpayer is entitled to the enterprise zone hiring tax credit. During such an audit, the FTB may require the taxpayer to establish that the worker is a ?qualified employee? within the meaning of the statute. The FTB is not required to accept a certification or voucher as conclusive or prima facie proof that an employee is qualified, nor is the FTB required to establish that the worker is not a ?qualified employee? under Revenue and Taxation Code section 23622.7, subdivision (c).
California Supreme Court to Post Opinion on Dicon v FTB on April 26
The California Supreme Court has announced that they will post an opinion on Dicon Fiberoptics v. FTB tomorrow (Thurs., April 26) at 10:00 am.
The case deals with FTB’s power within an audit to override the validity of a hiring credit voucher issued by a local Enterprise Zone.
Breaking: San Francisco and Los Angeles Receive Final Enterprise Zone Designations
I have received confirmation that the San Francisco and Los Angeles Harbor Enterprise Zones have received their final designations as of today.
HCD: Today is the Deadline
Today is the last day for HCD to issue final designations to three conditionally designated Enterprise Zones: San Francisco, Los Angeles Harbor, and Pittsburg.
Santa Clarita received its final designation notice on April 9.
Will they meet the deadline? What will happen if they don’t?
Breaking: Santa Clarita Receives Final Enterprise Zone Designation
With one day to go before HCD’s self-imposed deadline of April 10, Santa Clarita has just released a notice that their Enterprise Zone has been granted final designation and that they are now ready to accept applications.
The press release can be found here.
San Diego Enterprise Zone Receives Final Designation
As we approach HCD’s deadline of April 10 to issue five outstanding final designations, that list has now shrunk to four with news that San Diego has received their final designation letter.
Final Countdown to Final Designations
On October 10, 2011 HCD issued a memo in which they established a 180 day deadline for eight conditionally designated Enterprise Zones to comply with all outstanding requirements and receive final designation. That 180 day period comes to an end on April 10, and, to date, only three of the eight zones have received final designations.
Sources within HCD have made repeated assurances that all of the zones are expected to receive their final designations before the April 10 deadline.
The five zones still requiring final designation are: San Diego, San Francisco, Los Angeles Harbor, Santa Clarita, and Pittsburg.
