California is phasing out its Enterprise Zone Program (“Program”) and replacing it with three new tax incentives, including a statewide sales tax exemption for some manufacturers and biotechnology companies. The changes were authorized by Assembly Bill 93 (“AB 93”), which passed the state Senate on June 25, 2013 and was approved by the Assembly on June 27, 2013. The bill was signed Thursday, July 11, 2013 by Governor Jerry Brown, who had earlier issued a statement calling AB 93 “a big bipartisan win for California businesses and working people. AB 93 will help grow our economy and create good manufacturing jobs.” On July 3, 2013, the Assembly passed Senate Bill 90 (“SB 90”), which further refined some of the changes that had been adopted in AB 93 and that was also signed on July 11, 2013.

The Program provided businesses operating in designated enterprise zones with certain tax preferences under both the state corporations tax and personal income tax, including an income tax credit for sales tax paid on certain business purchases, hiring credits, net interest deductions, business expense deductions, and net operating loss deductions. AB 93 eliminates the Program effective January 1, 2014, subject to the following:

• Unused sales or use tax credits may be carried forward for ten years.

• Unused hiring credits may be carried forward for up to ten years or through December 2023.

• The net interest deduction may be applied to interest received before January 1, 2014. The deduction will expire for taxable years beginning on or after January 1, 2014, and officially withdrawn on December 1, 2014. Read More