California State Treasurer Fiona Ma announced that an authority she chairs has provided $24.5 million in sales tax benefits on equipment purchases to two major companies in California, Northrup Grumman, and Tesla, to support a combined total of 8,530 manufacturing jobs.
“This far-sighted program helps California compete in a fiercely competitive global economy,” said Ma. “It helps us retain and create high-paying manufacturing jobs that benefit our economy by providing carefully targeted tax benefits to companies that are investing in our state, creating jobs, and helping our environment.”
The California Alternative Energy and Advanced Transportation Finance Authority (CAEATFA) awarded up to $17.7 million in sales tax exclusions to Nothrup Grumman Systems Corporation on the purchase of up to $211.9 million in equipment that will be used to expand and upgrade its existing Aerospace Manufacturing facility in Palmdale. The facility makes a variety of aircraft systems, including the F-35 Lightning II fuselage, the Trion and EuroHawk.
The project is anticipated to support 4,417 production-related jobs and 469 construction jobs. It is also estimated to benefit the environment by reducing greenhouse gas emissions by 30 percent, solid waste production by 70 percent, and water consumption by 20 percent.
CAEATFA also awarded up to $6.8 million in sales tax exclusions to Tesla, one of the largest manufacturers in California, on the purchase of $81 million of machinery and equipment to expand its Fremont factory. The investments will finish its expansion of its body shop, stamping line, vehicle assembly, plastics shop, production control, tooling and prototyping to design and manufacture its Model 3 electric vehicle.
The award is anticipated to support 4,113 production-related jobs and convey $925,345 in environmental benefits through reduced fossil fuel consumption and greenhouse gas emissions. Last month, the board heard testimony from Tesla and a variety of other speakers about health and safety issues.
As part of the award agreement, Tesla will continue to update the CAEATFA board on its progress toward production goals and improving the health and safety at its facilities every four months.
CAEATFA was established to provide an alternative method of financing to promote and advance the state’s goals of reducing greenhouse gas emissions, promoting renewable energy, and creating and retaining jobs. The sales and use tax exclusion program was created by Senate Bill 71, sponsored by then-State Senator Alex Padilla. It was approved by the Legislature in 2010.
It is not a broad or typical tax incentive. To win a tax benefit, each project has to demonstrate that the anticipated fiscal and environmental benefits of the project are greater than the foregone sales tax. Once approved, applicants have three years to purchase the approved equipment. To date more than 50 percent of the projects have been awarded in areas with unemployment higher than the state average. The program can make up to $100 million in awards each year. A majority of awards have been under $1 million. https://www.treasurer.ca.gov/caeatfa/ste/index.asp
This article was released by the California State Treasurer’s Office.