A small group of companies that paid no state income tax have begun receiving millions of dollars in refunds after a state board ignored its staff and ordered the checks written...
SACRAMENTO, Calif. — A small group of companies that paid no state income tax have begun receiving millions of dollars in refunds after a state board ignored its staff and ordered the checks written.
Critics call it an $82 million corporate giveaway at a time when California has no money to spare. The dispute has revived calls from some people to abolish the agency that issued the ruling: the state’s five-person Board of Equalization.
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“I can’t imagine anyone would be so brazen, particularly when the budget deficit is as large as it is and possibly growing,” said Assemblyman Mark Ridley-Thomas, D-Los Angeles.
The Board of Equalization, which implements state tax policy, voted 4-0 with one abstention this month to begin writing checks.
The first batch of checks, totaling $5 million, went to Conexant Systems of Newport Beach, Grundfos U.S. Holding of Fresno and Lightwave Electronics of Mountain View. In all, 22 companies that paid no income tax are positioned to receive $82 million under a manufacturing tax credit.
State tax attorneys said the credit, which expired in 2003, was intended to attract and keep manufacturers in California, but never to provide refunds to companies paying no income tax.
Board members disagreed.
“High-tech companies often have no income in the beginning,” said board member Bill Leonard, a Republican. “They lose money, especially in the first two years or so, when a lot goes into research and development. This credit was designed to help them.”
Paul Hefner, a spokesman for state Controller Steve Westly, a Democratic member of the board who also voted for the refunds, said: “From our perspective, the board was only carrying out what was a legislative compromise.”
But former Assembly Budget Committee Chairman Darrell Steinberg called the decision “an example of how unfair the tax system is in California.”