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Public Policy Newsletter Article

State Legislature Passes Placeholder Budget; Negotiations Continue with Governor

  • 2020-06-18T15:00:00.000+0000
  • California
  • Author: Jimmy Jackson

On June 15, the California State Legislature passed a “placeholder” budget, meeting its constitutional deadline for approving a state budget. Unlike past years, however, the Governor and legislative leadership will continue to negotiate and the legislature will adopt further measures after the June 15th passage to reflect any changes that need to be made, according to a joint statement by Senate President Pro-Tempore Toni Atkins, Assembly Speaker Anthony Rendon, and Senate and Assembly Budget Chairs Holly Mitchell and Phil Ting.

Two proposals in the “placeholder” budget will directly impact some life science companies via temporary changes to the utilization of Net Operating Loss and Research & Development (R&D) credits. Per the Department of Finance summary, “…the May Revision suspends NOLs for three years for medium and large businesses and limits credit utilization to no more than $5 million in recognition of the COVID-19 Recession and its impacts on small businesses.” (pg 162-163 of the budget summary).

These items can be found in the budget trailer bill AB 85. Biocom continues to actively work within multiple coalitions trying to avert these proposals, including one of all the life science trade associations. Biocom was a principal architect author of this letter from the associations opposing this tax increase. We would like to thank Assemblymember Brian Maienschein for voting against the bill, and Assemblymembers Todd Gloria and Tasha Boerner-Horvath for working directly with Biocom in their efforts on behalf of the life science companies in their districts in the days before the vote. Additionally, Assemblymember Kevin Mullin urged the Governor and legislative leaders to revisit the issue after there is a greater understanding of the state’s revenue picture after the July 15th income tax deadline and argued that any stimulus enacted this summer must address this issue. He urged rapid restoration of the NOL and removal of the cap should revenue conditions warrant. Biocom will also continue our efforts at this time.

The Office of the Legislative Analyst (LAO) prepared this comparison of the Legislature’s budget compared to the Governor’s proposed budget. A summary of possible implications of the revised budget prepared by Biocom Sacramento contract lobbying firm Sloat, Higgins, Jensen & Associates is available here.