1. (a) Operative Dates of the MIC. The MIC shall cease to be operative on January 1, 2001, or on the earliest January 1 thereafter, if the total employment in this state, excluding employment in the aerospace sector, as determined by the Employment Development Department on the preceding January 1, does not exceed by 100,000 jobs the total manufacturing sector employment in this state on January 1, 1994.
2. (b) Los Angeles Revitalization Zone (LARZ) Credits. Under Revenue and Taxation Code Section 23612.6, relating to the Los Angeles Revitalization Zone (“LARZ”), in any case where a credit would be allowed for qualified property under both that provision and the MIC, a qualified taxpayer must make an election, on the return filed for each income year, as to whether to claim the MIC or the LARZ credit. Thus, a qualified taxpayer may not claim both the MIC and a LARZ credit for the costs of the same qualified property.

3. (c) Election to Claim Sales and Use Tax Refund in lieu of MIC under Revenue and Taxation Code Section 6902.2. Under Revenue and Taxation Code Section 6902.2, a qualified taxpayer may elect to claim a refund of a portion of the California sales and use tax paid with respect to qualified property from the California State Board of Equalization in lieu of claiming the MIC. Under that section, however, refunds may only be claimed at the times and in the amounts that the MIC could have been actually used by the qualified taxpayer to offset its California franchise or income tax liability for the income year or years in which the refund claim is filed. Finally, the in-lieu election required under Revenue and Taxation Code Section 6902.2 shall apply to each specific item of qualified property and shall also include any capitalized labor costs that are directly allocable to such item of qualified property.

   EXAMPLE: Assume that in X's income year beginning in 1995, X, a qualified taxpayer, incurs $100 in qualified costs (none of which are attributable to directly allocable capitalized labor) for an item of qualified property. Under these facts, X would be entitled to a MIC of $6 (6% of $100). X may generally claim the MIC on X's 1995 franchise or income tax return, or, under Revenue and Taxation Code Section 6902.2, X may instead elect to apply for a refund from the State Board of Equalization of the amount of such MIC that X could have utilized to offset X's 1995 franchise or income tax liability. Thus, for example, if X had a 1995 income or franchise tax liability of $3 BEFORE application of the $6 MIC, X could claim a $6 MIC, $3 of which is applied to X's 1995 tax liability and $3 of which is carried forward to subsequent income years. Similarly, X may only claim a $3 refund under Revenue and Taxation Code Section 6902.2 since this is the amount that “could have been used” by X to offset X's income or franchise tax liability for 1995. Finally, any MIC amounts that would have been required to be carried forward to future income years may not instead be claimed as a refund under Revenue and Taxation Code Section 6902.2 in lieu of claiming the MIC.

4. (d) Sales and Use Tax Exemption under Revenue and Taxation Code Section 6377. Under Revenue and Taxation Code Section 6377, a qualified taxpayer that is treated as a “new business” may be eligible to receive an exemption from California sales and use tax with respect to certain acquisitions of property (some of which may also be treated as qualified property under the MIC). However, Revenue and Taxation Code Section 6377(b)(9)(C) provides that such sales and use tax exemption is not available with respect to any property for which the MIC is claimed.
5. (e) Special Rule Applicable to Fiscal Year Taxpayers. Fiscal year taxpayers who paid or incurred qualified costs on or after January 1, 1994, and during the qualified taxpayer's income year beginning in 1993, shall treat any such income year 1993 qualified costs as 1994 qualified costs to be claimed on the qualified taxpayer's 1995 income year return. As a result, fiscal year taxpayers that pay or incur qualified costs during both their fiscal years beginning in 1993 and 1994 would treat such amounts as 1994 qualified costs under Regulations 23649-1 through 23649-11, inclusive.

(See Section 23649-0 for Table of Contents.)

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

History

1. New section filed 5-1-96; operative 5-31-96 (Register 96, No. 18).