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Budget Deal Details Released

Here is the summary of the deal reached by the “Big 5″ to solve the budget. The Budget Conference Committee will hold a hearing this afternoon to review the proposals.

Here are revenue raising proposals:

The negotiated budget includes $2.5 billion in revenue solutions. More that half of this, $1.4 billion, is from the Legislative Analyst’s revenue forecast, which was $1.4 billion higher than the Governor’s May Revision – three months into the fiscal year, this additional revenue has already been realized. The remainder of the revenue change is from the following:

• Extend the Net Operating Loss (NOL) suspension: The budget continues the suspension of the NOL corporate tax benefit for an additional two years, which results in increased tax revenue of about $1.2 billion in 2010-11. Over 90 percent of all corporations are exempted from this suspension.
• Corporate underpayment penalties and “Cost of Performance” rule change. The budget proposal revises recent corporate tax law changes related to penalties assessed when a corporation underpays their tax liability by more than $1 million. The budget proposal also restores the old “cost of performance” rules for the sourcing of intangibles and services related to calculation of multi-state apportionment. These changes will reduce tax revenue by about $132 million in 2010-11.

There does not appear to be any provision effecting the status quo of the Enterprise Zone program in the budget proposal.

This proposal no longer delays new corporate tax cuts including the Elective Single Sales Factor change for apportioning corporate income and the new tax credit sharing rules created by AB 1452. Of course we still have Proposition 24 on the ballot for November 2 which, if passed, will eliminate these benefits regardless of what is done in the budget now.

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