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More on SB 939

Last week I reported on Senator Aanestad’s new bill, SB 939, which would enable businesses in the Oroville Enterprise Zone to sell their tax credits.

The following is a press release from the Senator which explains some of the rationale behind the concept:

Senator Sam Aanestad (R-Grass Valley) has introduced new legislation that is designed to create new jobs and new business opportunities in Northern California, by focusing on the tax advantages that already exist in the Enterprise Zone located within the Butte County City of Oroville. SB 939 would allow businesses located within the Oroville Enterprise Zone to sell employee tax credits they cannot use.

The sale of these credits would generate a steady cash income that can be used to expand business operations, hire additional employees, make additional equipment purchases or be used for any other business-related expenses.

“Many of the businesses located within the Enterprise Zone have been unable to use these employee tax credits because they have zero state income tax liability,” said Senator Aanestad. “These credits only work if the business in question generates enough of a profit to have a state income tax liability. Many of them do not.”

Senator Aanestad says the sale of these credits would result in a win-win proposition for not only the seller – but also the purchaser.

“The sale of these credits will allow businesses within the Oroville Enterprise Zone to gain extra income they ordinarily would not receive, which will result in new employment opportunities,” said Senator Aanestad. “At the same time – the businesses purchasing these credits would receive tax breaks from the State of California – allowing the purchaser to invest the savings into business expansion efforts.”

The Oroville Enterprise Zone was first established in 1991 and re-designated in 2006. Businesses located within the zone can take advantage of five tax-related incentives: the hiring tax credit, the sales and use tax credit, business expense deduction for business property, net operating loss carryover deduction and net interest deduction for lenders.

“Oroville Vice-Mayor Jamie Johansson and Redevelopment Coordinator Tom Fitzpatrick have already indicated to me that some of the city’s largest manufacturers are so heavily capitalized that they can write off equipment depreciation to the point where they have absolutely no state income tax liability,” said Senator Aanestad. “We have a natural advantage in tax credits that we cannot use – and those credits can be used to create badly needed jobs.”

Senator Aanestad says the Governor has already indicated that jobs and job creation will be the first order of business during this Legislative Session and is hopeful that SB 939 will be received favorably in the Legislature.

“We need to get people working again,” said Senator Aanestad. “This is a positive step that government can take to create the new jobs and businesses that Northern California desperately needs.”

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