Land developers, major wineries and other closely held companies have lobbied for a provision that would allow them to file as "subchapter s" firms. The provision, which has drawn strong committee support, would limit their corporate tax liability while passing losses and profits directly to stockholders.
Another provision favored by most of the tax-writing committee members would allow all corporations to write off their operating losses over a 15-year period, a special break not given to individuals and estimated to cost the state nearly $1 billion over the next four years.
The most controversial of the business tax breaks would allow financially faltering corporations--particularly the hard-hit semiconductor firms of the Silicon Valley--to retroactively write off $520 million in losses suffered by the industry in 1985 and 1986.
Double the Fee
Paying for those tax breaks will fall hardest on small, fledgling corporations that are having problems turning a profit. The committee has tentatively agreed to at least double the $200 yearly fee charged now to all corporations and to extend that fee to limited partnerships as well.
Sen. John Garamendi (D-Walnut Grove), who co-chairs the conference committee, strongly supports adding tax breaks for corporations but acknowledged that the proposals amount to "gimmies in a very big way." He noted, however, that the only way to forge an acceptable compromise in the short time that remains is to give a little to everyone.
"Everything has flaws," he said. "Nothing will make everyone happy."
But Assemblyman Dennis Brown (R-Signal Hill), the committee's staunchest proponent of full conformity with the federal laws, surprised his colleagues by describing the proposal as "a piece of trash."