California Bill to End Tax Breaks for Trump Wall Builders Advances

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By Laura Mahoney

A bill to block companies from using five state tax breaks if they participate in building President Donald Trump’s wall on the California border with Mexico cleared its first legislative hurdle May 7.

A.B. 2355, by Assemblyman Phil Ting (D), passed the Assembly Revenue and Taxation Committee 6-3 and will be heard next in the Assembly Appropriations Committee. It would prohibit companies that contract or subcontract to build the wall from receiving:

  •  a sales and use tax exemption on purchases of manufacturing, research, and development equipment;
  •  a sales and use tax exclusion for equipment purchased for projects to promote use of alternative energy administered by the California Alternative Energy and Advanced Transportation Financing Authority;
  •  an income tax credit for employers that hire employees in certain economically disadvantaged areas;
  •  the California Competes credit for companies that commit to locating or expanding in California, administered by the Governor’s Office of Business and Economic Development; and
  •  an income tax credit for qualified research expenses.
“The wall as we know is a very divisive project,” Ting said before the vote. “I personally believe this is a significant waste of taxpayer dollars and I don’t believe that Californians should have to foot any part of that bill. “

Timing Unclear

The bill doesn’t say if the tax benefits would be lost for a specific taxable year or lost completely, or if the loss would be retroactive or prospective, according to a committee staff analysis.

The bill has no registered opposition and is supported by the California Immigrant Policy Center, California Federation of Teachers, and California Tax Reform Association.

Trump visited California in March to tour prototypes for the wall he wants to build on the U.S-Mexico border. More than 375 companies have responded to federal solicitations for proposals on the wall project. Although Trump asked for $18 billion in the federal budget for wall construction, Congress adopted a plan in March that includes just $1.3 billion for new fencing and repairs to old fencing where he wants the wall to stand.

Caddell Construction Co. of Montgomery, Ala.; KWR Construction of Sierra Vista, Ariz.; ELTA North America Inc. of Annapolis Junction, Md.; W.G. Yates & Sons Construction Co. of Philadelphia, Miss.; Fisher Sand & Gravel Co. of Tempe, Ariz.; and Texas Sterling Construction Co. of Houston won contracts to build mock-ups or concrete prototypes of the wall.

To contact the reporter on this story: Laura Mahoney in Sacramento, Calif., at lmahoney@bloomberglaw.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bloombergtax.com

For More Information

More information about the bill is at http://src.bna.com/yCh.

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