No Tax Breaks for Trump Wall Builders: California Bill

Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...

By Laura Mahoney

Companies that participate in building President Trump’s wall on the California border with Mexico would lose five state tax breaks under a newly amended bill.

Assemblyman Phil Ting (D) announced his bill as Trump visited California for the first time during his presidency to tour prototypes for the wall he is pushing to build on the U.S.-Mexico border to prevent immigration. The prototypes are in the border town of Otay Mesa, near San Diego.

Amendments to A.B. 2355 would prohibit companies that contract or subcontract to build the wall from receiving five state tax breaks:

  •  a sales and use tax exemption on purchases of manufacturing and 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 credits 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.

Californians Oppose Wall

“We want to make sure no California tax dollars are spent on building the wall,” Ting told Bloomberg Tax March 14.

About 73 percent of Californians oppose the border wall, Ting said, citing a September 2017 poll from the Public Policy Institute of California. Mexico is California’s largest trading partner, and undocumented immigrants make up 10 percent of California’s workforce, according to a fact sheet about the bill.

Trump’s budget plan includes $18 billion to fund the wall. More than 375 companies have responded to federal solicitations for proposals on the wall project, the fact sheet said.

Ting said the amendments to his bill will be official next week, and he expects the bill to be referred to the Assembly Revenue and Taxation Committee. The bill could be heard in April.

Ting proposed a bill in 2017 that would have required the pension systems for California state workers and teachers to divest from companies that help build the wall. The bill died without action in last year’s session.

His tax bill may have stronger prospects because it doesn’t involve the pension systems, but it requires a two-thirds vote in both houses that may be difficult, Ting said.

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

Text of A.B. 2355 is at http://src.bna.com/w4u.

Text of the fact sheet is at http://src.bna.com/w4v.

Copyright © 2018 Tax Management Inc. All Rights Reserved.

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