1. (a) In General
2. (b) MIC for Qualified Costs Paid or Incurred in 1994 Must Be Claimed on Qualified Taxpayer's Return for First Income Year Beginning on or After January 1, 1995
3. (c) Cross References

4. (d) General References

   § 23649-2. Definitions

5. (a) Biopharmaceutical Activities
6. (b) Capitalized Labor
7. (c) Fabricating
8. (d) Gross Receipts
9. (e) Manufacturing
10. (f) Net Assets
11. (g) Other Biotechnology Activities
12. (h) Packaging
13. (i) Placed in Service
14. (j) Pollution Control
15. (k) Primarily
16. (l) Process
17. (m) Processing
18. (n) Qualified Activity
19. (o) Recycling
20. (p) Refining
21. (q) Research and Development
22. (r) SIC Codes
23. (s) SIC Manual
24. (t) Small Business

25. (u) Total MIC

    § 23649-3. Qualified Taxpayer

26. (a) In General

27. (b) Business Activities Treated as an Establishment

    1. (1) Establishment

       1. A. Activities Conducted at Different Physical Locations
       2. B. Activities Conducted at a Single Physical Location

    2. (2) Auxiliary Establishments

       1. A. Auxiliary Activities Conducted at a Different Physical Location than the Supported Establishment
       2. B. Auxiliary Activities Conducted at the Same Physical Location as the Supported Establishment
    3. (3) Operating Establishments
    4. (4) Determining Whether Employment is Significant

    5. (5) Activities Properly Assigned a SIC Code in a Non-Qualified Activity

       § 23649-4. Qualified Costs

28. (a) In General
29. (b) California Sales and Use Tax Payment Requirement
30. (c) Capitalization Requirement
31. (d) Capitalized Labor Costs

32. (e) Qualified Costs Paid or Incurred Pursuant to Binding Contracts

    1. (1) Allocation of Costs Actually Paid Prior to January 1, 1994
    2. (2) Binding Contracts
    3. (3) Successor or Replacement Contracts
    4. (4) Option Contracts

    5. (5) Conditional Contracts

       § 23649-5. Qualified Property

33. (a) In General

34. (b) General Requirements for Qualified Property

    1. (1) Tangible Personal Property
    2. (2) Section 1245(a) Property
    3. (3) Used in an Activity Described in Division D of the SIC Manual
    4. (4) Primarily Used in a Qualified Activity

35. (c) Special Purpose Buildings and Foundations

    1. (1) Defined
    2. (2) Exclusive Use for a Qualified Purpose
    3. (3) Property Which is not a Special Purpose Building and Foundation
    4. (4) Research Facilities

36. (d) Specifically Excluded Property

    1. (1) Furniture
    2. (2) Facilities Used for Warehousing Purposes
    3. (3) Inventory
    4. (4) Equipment Used in the Extraction Process
    5. (5) Equipment Used to Store Finished Products
    6. (6) Tangible Personal Property Used in Administration, General Management, or Marketing
    7. (7) Property for Which the California Low-Emission Vehicle Credit is Claimed
37. (e) Movement of Used Property Into This State

38. (f) Property Used to Refine Reformulated or Oxygenated Gasoline

    § 23649-6. Leasing

39. (a) In General

    1. (1) Lessor Not Entitled to MIC
    2. (2) Binding Contract Rules Applicable to Leases
    3. (3) Special Rule Applicable to All Leasing Transactions -- “Placed in Service”

40. (b) Operating Leases

    1. (1) In General

    2. (2) Applicable Requirements

       1. A. Lessee Must Be a Qualified Taxpayer
       2. B. Use of Property in a Qualified Activity
       3. C. Sales or Use Tax Payment Requirement
       4. D. Qualified Costs
       5. E. Chargeable to Capital Account

    3. (3) Amount of MIC Lessee May Claim

       1. A. Qualified Cost to Lessor
       2. B. Exception For Capitalized Labor

    4. (4) Special Rules for Operating Leases

       1. A. Transitional Election
       2. B. Limitation on Qualified Costs
       3. C. Reduction in Qualified Cost to Lessor
       4. D. Qualified Cost to Successor Lessor
       5. E. Acquisition by Lessee of Leased Property

    5. (5) Sale-Leaseback Transactions

       1. A. General Rule
       2. B. Acquisition Sale and Leaseback
    6. (6) Lessor Reporting Requirement

41. (c) Finance Leases

    1. (1) In General

    2. (2) Applicable Requirements

       1. A. Lessee Must Be a Qualified Taxpayer
       2. B. Use of Property in a Qualified Activity
       3. C. Sales or Use Tax Payment Requirement
       4. D. Qualified Costs
       5. E. Chargeable to Capital Account

    3. (3) Amount of MIC Lessee May Claim

       § 23649-7. Reserved

       § 23649-8. Recapture Rules

42. (a) In General
43. (b) Disposition
44. (c) Disposition of Qualified Property During the Income Year Placed in Service
45. (d) Disposition of Qualified Property During an Income Year Subsequent to the Income Year Placed in Service
46. (e) Adjustment of Carryforwards when Disposition Occurs

47. (f) Recapture of MIC Allowed to Pass-Through Entities

    1. (1) Partnerships and Partners

    2. (2) S Corporations and Shareholders

       1. A. Corporate Level Recapture
       2. B. Pass-through of MIC Recapture to Shareholders

48. (g) Recapture of MIC Allowed in 1994 or 1995 But Deferred Until Qualified Taxpayer's First Income Year Beginning on or after January 1, 1995

    § 23649-9. MIC Carryforwards

49. (a) In General
50. (b) Small Business Determination Made as of the Last Day of the Income Year for Which the MIC is allowed
51. (c) Special Rule for MIC Allowed in 1994 or 1995 But Deferred Until Qualified Taxpayer's First Income Year Beginning on or after January 1, 1995
52. (d) Small Business
53. (e) Carryforwards for Pass-Through Entities

54. (f) Carryforwards Permitted After Sunset

    § 23649-10. Recordkeeping Requirements

55. (a) In General
56. (b) Books and Records
57. (c) Affidavit Regarding Sales and Use Tax

58. (d) Written Statement by Lessor to Lessee

    § 23649-11. Miscellaneous Provisions

59. (a) Operative Dates of the MIC
60. (b) Los Angeles Revitalization Zone (LARZ) Credits
61. (c) Election to Claim Sales and Use Tax Refund in lieu of MIC under Revenue and Taxation Code Section 6902.2
62. (d) Sales and Use Tax Exemption under Revenue and Taxation Code Section 6377
63. (e) Special Rule Applicable to Fiscal Year Taxpayers

Regulation Sections 23649-1 Through 23649-11

§ 23649-1. The Manufacturers’ Investment Credit (MIC)

Note: Authority cited: Section 19503, Revenue and Taxation Code. Reference: Section 23649, Revenue and Taxation Code.

History

1. New article 3 (sections 23649-0--23649-11) and section filed 5-1-96; operative 5-31-96 (Register 96, No. 18). For prior history of article 3, see Register 82, No. 37.

2. Change without regulatory effect amending table of contents for section 23649-2 filed 8-14-97 pursuant to section 100, title 1, California Code of Regulations (Register 97, No. 33).

3. Editorial correction moving article 3 heading to precede section 23636-0 (Register 2004, No. 6).