California Alternative Energy and Advanced Transportation Financing Authority Act: sales and use tax exclusion.

Senator McNerney steers a measure that tightens and extends California’s incentives for manufacturing and advanced transportation projects by authorizing a sales and use tax exclusion for a longer period and broadening the eligible technologies to include nuclear fusion facilities. The proposal contends with the existing framework by extending the authority’s ability to provide financial assistance in the form of the exclusion through January 1, 2028 and by adding nuclear fusion generation facilities to the types of projects that may qualify.

Starting in 2026, the measure introduces labor-related prerequisites for applicants that, together with their parent entities, employ 500 or more workers. Eligible projects would not be approved unless the applicant certifies that the applicant and its contractors will provide comparatively good wages and benefits, invest in employee training and workforce development, and adopt mechanisms that give workers a voice in the workplace. The bill preserves the existing framework for public hearings and the governing authority’s discretion to approve projects by resolution, while conditioning approval on the new labor commitments for large employers.

Key mechanics and definitions anchor how the program operates. The act continues to define a “project” as tangible personal property used for or to support the design, manufacture, production, or assembly of advanced manufacturing, advanced transportation technologies, or alternative source components, with a separate emphasis on projects that process recycled feedstock or contribute to soil amendments. “Alternative sources” encompass technologies used for renewable generation, combined heat and power, distributed generation and energy storage, or facilities designed for producing renewable fuels. The authority may approve projects for the tax exclusion, and the program’s criteria include the project’s local manufacturing footprint, the anticipated state benefits relative to the exclusion, job creation and wage levels, and potential environmental or energy-efficiency improvements. The bill also preserves and revises prior eligibility mechanics for participating parties, including extending eligibility to certain out-of-state entities that commit to establishing a California manufacturing facility, and it retains a lithium-related carve-out for specific years with corresponding caps and relocation considerations.

In addition to extending the program, the measure retains reporting and sunset features: the authority must study and report to the Legislature by early 2027 on job and economic outcomes and environmental effects, and the tax exclusion framework is scheduled for repeal on January 1, 2028. The act becomes operative as a tax levy with immediate effect, and it updates related definitions and references within the Revenue and Public Resources Codes to reflect the extended authorization, new eligibility considerations, and the labor certification requirements for large employers. Overall, the bill situates itself within a framework aimed at promoting California-based manufacturing and job creation while codifying specific labor, eligibility, and measurement provisions for projects funded through the sales and use tax exclusion.