California has consistently been an industrial “hot bed”, laden in technological and scientific innovation. In recent years, though, there has been a noticeable trend in companies leaving the Golden State to conduct and grow their business. A reformation of California’s enterprise zones looks to buck that trend and has been the main focus of Governor Jerry Brown in recent months. His new proposal of tax credits have the potential to help manufacturers and some biotech and medical device companies buy equipment for research and development, thus pushing the state to once again become a leader in manufacturing. Gov. Brown states that the program is designed to, “grow our economy and create good manufacturing jobs.” This couldn’t have come to fruition at a more opportune time! As our economy delicately climbs its way out of the hole dug by years past, it is imperative that policies are in place to ensure we do not make the same mistakes again. This mindset is clearly exemplified in Governor Brown’s 2014 State of the State Address. Speaking passionately about an industry that employs more than a quarter million people in California, Governor Brown laid out how important it is for California to foster the economic growth of the life sciences industry in our state and beyond.
Collectively, the new law implements new sales and use tax exemption, a hiring credit, and the “California Competes” tax credit. The sales and use tax exemption allows for manufacturing and biotechnology equipment, including equipment for research and development, to be exempt as of January 1st from the state portion of the sales and use tax. In certain areas, such as historic enterprise zones, this credit applies for 6.5 years. For companies outside of those districts, the credit applies for 4.5 years. The hiring credit goes into effect as of July 1st and has particular restrictions on whom it applies to. This credit can be taken by companies whose new employees perform at least half of their work inside defined districts, similar to the old enterprise zones. The credit is expected to be for 35% of wages of employees who ear 150% to 350% of the minimum wage. Lastly, “California Competes” is focused on bringing new companies that want to operate and grow in the state of California. It creates a fund that is capped at a $30 million state contribution in fiscal 2014, $150 million in 2015 and $200 million in 2016.
Governor Brown also went on to give praise and remind his constituents of California’s longstanding history of being the nation’s leader in developing medical and scientific advances that have continued to combat diseases and deliver top-caliber care to a varying range of social classes. Brown also highlighted the fact that California is home to six of America’s twelve top-performing metropolitan areas in biotechnology: San Diego, San Jose, San Francisco, Oakland, Los Angeles, and Orange County as well as four of the world’s twenty leading academic bioscience institutions in UC San Francisco, UC Berkeley, UC Los Angeles, Stanford and UC San Diego. Undoubtedly, California boasts a multitude of strengths that the Governor aims to capitalize on. All of these movements help contribute to pushing the biotech industry further, faster. All in all, the preceding changes could possibly save biotech companies hundreds of millions of dollars a year, which, in addition to the lovely weather, should be significant driving factor in attracting companies to California.