Apple Could Save Millions if Bill Passes in Legislature

Apple Computer Inc. could save as much as $15 million if a bill exempting money-losing computer makers from sales taxes on manufacturing equipment passes the California Legislature.

The bill is being sponsored, at Apple’s request, by state Sen. John Vasconcellos, a Democrat whose district includes the Cupertino headquarters of the troubled company. The measure would modify a law passed in 1993 at the height of California’s recession to encourage investment in the state. That bill lets companies receive a tax credit against income for sales tax paid on manufacturing equipment.

Apple is “excluded from the manufacturers’ tax credit because they do not show a profit,” said Rand Martin, chief of staff to Vasconcellos. “This would level the playing field.”

Other money-losing companies in industries such as biotechnology also could receive the tax break as a result of the Apple initiative.

Last week, Apple reported a wider-than-expected fiscal second-quarter loss from operations of $186 million, or $1.48 a share, and with restructuring and acquisition charges a final loss of $708 million, or $5.64. Apple has lost about $1.5 billion in the last six quarters.

Apple Chairman Gilbert Amelio said the company expects to return to sustainable profitability in the fiscal fourth quarter.

Martin said the bill would cap the potential benefit to Apple at $15 million over seven years.

“We’re not asking for something for nothing,” said Terry Ryan, Apple’s senior tax manager. As the law stands, “You can have two identical companies buying the same machine and the profitable company gets the credit and the one that’s not profitable doesn’t,” Ryan said.

An analysis by the Senate revenue and tax committee staff found that other companies probably would seek the same benefit if the Apple bill passes.

Sen. Bruce McPherson (R-Santa Cruz) is sponsoring a separate bill to allow biotechnology companies, which frequently operate at a loss for years while they develop products, to receive the same treatment.

If both bills pass it could cost the state as much as $29 million for the 1997-98 fiscal year, the staff analysis found.

Hearings on both bills are scheduled for next month.

Apple stock rose 50 cents to close at $18.50 on Nasdaq.