News and Insights

California Legislature Excludes Manufacturers' Investment Credit from New England Budget

Tax Development Aug 18, 2003

The Manufacturers' Investment Credit ("MIC"), which allows a 6% credit against income for purchases of qualified manufacturing equipment, did not make the cut in the recently passed California budget. In an effort to narrow the nearly $40 billion budget deficit, the California legislature did not include the MIC in the budget, opting instead for the $350 - $450 million in estimated additional tax revenue annually. Despite Governor Davis' recent public support for the MIC as a valuable tool to bring California out of recession, he is expected to sign the new budget, allowing the MIC to expire at the end of the year.

Since the MIC became effective in 1994, it has fallen under much criticism for failing to deliver on its promise of an increase in higher-wage manufacturing jobs. Proponents of the MIC and the manufacturing industry bemoan the loss of the credit and argue that the loss will result in fewer manufacturers expanding in California and more jobs going elsewhere. Currently, there are several bills before the California legislature that would extend the MIC. Taxpayers should be advised that the credit is still available for open periods through the end of the year and any planned purchases of qualifying property should be made prior to the calendar year end in order to receive credit.

If you have any questions regarding this information, please contact Mr. G. Brint Ryan, Managing Principal of Ryan & Company, at 972.934.0022. Mr. Ryan can also be reached via e-mail.