INCENTIVES WATCH: CALIFORNIA GOVERNOR CONTINUES VETO RAMPAGE BY REJECTING TAX CREDIT BILLS

 Gov. Jerry Brown

Newsflash: water is wet. The sky is blue. And if you’re going to sue an eight-year-old, don’t let the Internet find out. As long as we’re talking about unsurprising statements, Gov. Jerry Brown of California vetoed nine bills related to tax credits on Oct. 10, according to a Daily Tax Report story by Laura Mahoney.

It is not as if these particular bills were doomed from the start, but Brown has already vetoed 133 bills this year, according to The Sacramento Bee. And it’s often difficult to predict what bills Brown will veto. As noted in the Los Angeles Times, there isn’t really a pattern to his vetoes. As for the current batch, in Brown’s brief veto message, he notes that “providing additional tax credits … will make balancing the state’s budget even more difficult.”

One of the more interesting vetoed bills was AB 428, which would have provided a 30 percent tax credit for seismic retrofit construction, making older buildings better able to withstand a major earthquake. The bill was seen as a way to offset the costs for new Los Angeles earthquake safety regulations, according to the Los Angeles Times. Twelve million dollars in personal and corporate income tax credits would have been available under the bill.

A pair of bills that would have made significant changes to the low-income housing credit in California was also vetoed. AB 35 would have more than doubled the amount of credits available, an increase of $100 million per year. Meanwhile, SB 377 would have, among other changes, allowed taxpayers to sell low-income housing credits to other parties for at least 80 percent of the credit’s value.

Still, some of the vetoed bills made relatively minor edits to existing law, but still weren’t spared Brown’s axe. For example, AB 931 proposed changes to a tax credit for employers who hired military veterans. Although the bill made some other small changes, the most notable change is that it expanded the definition of a veteran from someone who served in the armed forces within the past 12 months to someone who served in the past 36 months.

As The Sacramento Bee notes, the California legislature is likely to let these vetoes stand. However, Brown has been supportive of tax credits in the past. In May, Brown proposed the Earned Income Tax Credit in California, which was enacted. And just last year, Brown signed legislation that expanded California’s film credit program. So, although the tax credits will not be enacted now, perhaps they will be resurrected in the future.

Continue the discussion on LinkedIn:  Should tax credits be enacted in states experiencing a budget shortfall?