California Air Resources Board

Summary 

Would have converted the current General Fund (GF) sales and use tax (SUT) partial exemption for the purchase of manufacturing equipment into a full exemption by exempting the local and district portions of the existing SUT to incentivize manufacturing within the State. The full exemption would have commenced on January 1, 2023, and end on January 1, 2028, at which time the partial exemption would have been re-instated through 2030. As related to CARB, this bill would have maintained the annual transfer of specified moneys dedicated to backfilling the manufacturing SUT exemption from the Greenhouse Gas Reduction Fund to the GF.

View full bill text here

Governor’s Veto Message

To the Members of the California State Assembly:

I am returning Assembly Bill 1951 without my signature.

This bill replaces the current partial manufacturing sales tax exemption with a full exemption until January 1, 2028. This change would result in substantial revenue loss to local governments, which impacts essential health, safety, welfare, and transportation services. Assuming there are no changes in taxpayer behavior, local agencies are estimated to lose over half a billion dollars each year.

As a strong supporter of California 's business climate and manufacturing industry, I agree with the intent of this bill to invest in California's economy, incentivize innovation, and spur a manufacturing marketplace that is competitive nation-wide. However, we cannot ask our local governments to bear this loss in revenue.

With our state facing lower-than-expected revenues over the first few months of this fiscal year, it is important to remain disciplined. The Legislature sent measures with potential costs of well over $20 billion in one-time spending commitments and more than $10 billion in ongoing commitments not accounted for in the state budget. Bills with significant cost pressures, such as this measure, should be considered as part of the annual budget process. For these reasons, I cannot sign this bill.

I look forward to working with the Legislature and stakeholders to propose something on this topic next year.

Sincerely,

Gavin Newsom

View Governor’s veto message here