Bill Keeping State Competitive in Aerospace Flies Through Senate

A California Chamber of Commerce-supported bill that ensures California remains a competitive environment for an emerging multibillion-dollar industry passed the Senate Appropriations Committee with unanimous support recently and won Senate approval a few days later.

AB 777 (Muratsuchi; D-Torrance) updates the California tax code to include equipment used for spaceflight transportation within the business inventory exemption. The bill is consistent with the goals of CalChamber’s 2014 Solutions for a Strong California.

Innovation

California has long been the home of the world’s most advanced aeronautics and aerospace companies. Recently, this industry has seen innovation with the privatization of spaceflight transportation, which had historically been within the exclusive purview of the federal government.

This type of commercial space transportation currently delivers satellites into orbit and cargo to the international space station. This industry has the potential for future growth with the development of space tourism. To capture this growth, California needs to ensure its laws, including the tax code, keep pace with innovation.

Inventory Exemption

AB 777 codifies a recent Board of Equalization (BOE) legal opinion that recognizes propulsion systems—rockets used for spaceflight transportation—fit within the business inventory exemption in the tax code.

This issue stems from a recent decision by the Los Angeles County Assessor to tax propulsion systems as property that does not fit within the exemption.

In a well-reasoned opinion, the BOE found that these systems should qualify under the business inventory exemption when evaluated in the context of the policy that created the exemption and the heavily regulated nature of the spaceflight transportation industry.

Not only does the spaceflight transportation industry create high-pay manufacturing and engineering jobs for thousands of Californians; it draws billions in investment and, when space tourism begins, will attract millions in tourism revenue. The growth of this industry is poised not only to be a potential economic shot in the arm, but also a new phase of California’s innovative prowess.

Key Vote

AB 777 passed the Senate Appropriations Committee on April 7, 7-0.

Ayes: De León (D-Los Angeles), T. Gaines (R-Rocklin), Hill (D-San Mateo), Lara (D-Bell Gardens), Padilla (D-Pacoima), Steinberg (D-Sacramento), Walters (R-Irvine).

Staff Contact: Jeremy Merz

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