Assembly approves tax credits for aerospace industry

The California Assembly on Thursday approved a fast-tracked proposal to provide up to $420 million in tax breaks over 15 years for the aerospace industry.

The bill by Assemblyman Steve Fox (D-Palmdale) would offer credits for an “advanced strategic aircraft program.” The credits would be capped at $25 million annually the first five years, $28 million per year for the next five years and $31 million annually for the final five years.

The tax credit program would expire after 15 years.

The tax credits, should they go into effect, could help boost the chances for aerospace companies, such as Lockheed Martin, that are bidding for contracts for the Defense Department’s Advanced Strategic Aircraft Program.

“We need to pass this tax credit to make California bidders have a more competitive edge in the bidding process,” Fox said.

Lockheed’s aeronautics division has a major presence in Palmdale, which is in Fox’s district.

“We cannot let aerospace leave, as it is a vital part of the California economy,” said Fox, who is facing a tough reelection battle in November.

The bill, AB 2389, passed on a bipartisan 66-2 vote. But though Republicans said they supported the intent of the bill, some expressed displeasure with how it came to the floor. The bill was amended Wednesday, using a process called gut-and-amend, to be a vehicle for the tax credits. It was then fast-tracked through a key Assembly panel Thursday morning.

Republicans also noted that state Sen. Stephen Knight (R-Palmdale) had also been working on an aerospace tax credit for several years.

“I know it is sometimes frustrating for an author to have their bill taken and placed in another vehicle in another house,” said Assembly Minority Leader Connie Conway (R-Tulare), who added that Knight was in support of the Assembly bill.

Former Speaker John A. Perez (D-Los Angeles) rebutted the notion that Fox’s bill was identical to Knight’s proposal.

“It attempts to solve the same problem -- to increase the level of competitiveness of California to get this work,” Perez said, but he maintained that Knight’s proposal was structured differently than Fox’s bill and that Knight’s bill was not supported by leadership in the Senate.

Fox’s bill now heads to the Senate.

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