Personal income taxes: credit: manufacturing: sales and use taxes.

Senator Grayson's proposal creates new tax credits for California manufacturers and researchers to offset local sales and use taxes on qualifying equipment purchases between 2026 and 2030. The credits would apply to transactions that would otherwise qualify for existing state-level manufacturing exemptions but remain subject to local taxes.

The measure establishes parallel credits under both personal income and corporate tax codes, allowing taxpayers to recover amounts paid in local sales tax reimbursements and use taxes on eligible manufacturing and research equipment. Unused credits may be carried forward for up to eight years. The Department of Finance must annually estimate revenue impacts, and the credits will only be available in years when the Legislature appropriates funds for their administration.

To maintain accountability, the bill requires taxpayers to file amended returns if qualifying equipment is moved out of state within one year. The Franchise Tax Board and California Department of Tax and Fee Administration will share information to verify eligibility, with the Franchise Tax Board authorized to develop implementing regulations. The provisions include a sunset date of December 2031, with a final program evaluation report due to the Legislature by April 2033 detailing credit usage and taxpayer participation.