As reported in a previous release, California is considering legislation to revise its research and development sales tax exemption for manufacturers. The proposal to fully exempt California manufacturing research and development equipment from sales and use tax—AB 1951—was approved by the Assembly Appropriations Committee on May 19, 2022. The amendments made by the committee would limit the exemption to equipment purchases under $200 million, the cap currently used for the existing partial exemption. The proposal originally provided that the cap would be eliminated for purchases made between 2023 and 2028. All other changes proposed will be considered going forward, including updating certain definitions to agree to federal guidelines and the elimination of the useful life of one year or more for qualifying purchases.
The bill was heard by the full Assembly on May 25, 2022, and was unanimously passed, as amended for the purchases cap. On its way to the full Senate hearing, the bill will first be reviewed in the Senate Governance and Finance Committee. If any changes are made in this committee, the bill will revert to the Assembly for further consideration. No date has been set for this next hearing.
We will keep you updated as this proposal progresses.
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