California Code of Regulations › Title 18 - Public Revenues › Division 3 - Franchise Tax Board › Chapter 3.5 - Bank and Corporation Tax › Subchapter 3 - Corporation Income Tax › Article 3 - Tax Credits › Section 23649-11 - Miscellaneous Provisions

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(See Section
						23649-0 for Table of
						Contents.)
(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.
(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.
(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.
(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.
(e)
Special Rule Applicable to Fiscal
					 Year Taxpayer
s. 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.
1. New
						section filed 5-1-96; operative 5-31-96 (Register 96, No.
						18).
Note: Authority cited: Section
						  19503,
						  Revenue and Taxation Code. Reference: Section
						  23649,
						  Revenue and Taxation Code.