Assemblymen Rocky Chavez and Al Muratsuchi talk sequestration and its impact on aerospace last May. Photo by Rachel Reeves
In an effort to entice aerospace companies to remain in California, Assemblymember Al Muratsuchi – who represents the Beach Cities in the State Assembly and chairs a select committee on aerospace – last year authored a bill exempting rocketships from being subject to certain taxes.
On Jan. 29, the bill, dubbed AB777, passed in the Assembly with overwhelming (68 to 5) bipartisan support.
AB777 classifies rocketships built by private space exploration companies, such as SpaceX in Hawthorne, as business inventory, thereby exempting them from property taxes.
“The bill seeks to codify a recent legal opinion issued by the state Board of Equalization, which found that as a matter of law, spaceflight property like rocket ships should be classified as business inventory and therefore qualify for an [exemption] from tax,” Muratsuchi told Easy Reader News.
“I’m not creating a corporate tax loophole, but I’m trying to codify this legal opinion of the Board of Equalization so that companies can have the legal certainty they need to make infrastructure [investment decisions]. Without this bill, again, SpaceX is talking about moving over 3,600 manufacturing jobs which exist right back here in our backyard in the South Bay.”
Muratsuchi said he introduced the bill on the heels of a SpaceX facility tour he took early last year.
“I was just blown away by the exciting company and their building [of] rocket ships from beginning to end there,” he said. “I spoke with one of the representatives and I was told that they were hit last year by an unexpected tax bill from the L.A. County Assessor Office. They were concerned that they would have to move the production of the rocket ships to the facility in Texas, so right away I started discussing some potential solution, and that’s how AB777 came to be.”
The bill’s overarching goal is to breathe life into Southern California’s aerospace industry, which has undergone a severe contraction since the end of the Cold War. Jobs have dwindled, and major companies have moved to other states like Texas, Georgia, Virginia, and Alabama – climates made attractive by more relaxed regulations, appealing tax incentives, and comparatively low labor and manufacturing costs. Muratsuchi is hopeful that bills like AB777 will entice aerospace pioneers like SpaceX to remain grounded in California.
SpaceX made headlines last year when it won a $440 million contract to develop a successor to the space shuttle; recently it also became the first private company to build a spacecraft that successfully docked at the International Space Station. Its successes represent a new era for California’s aerospace industry.
In a statement, SpaceX President Gwynne Shotwell applauded AB777 as a “pro-growth, pro-jobs” initiative.
AB777 has yet to be considered by the State Senate, but is expected to be in effect by the end of this year. The bill will expire in 2024, Muratsuchi said, “to address some of the Democrats’ concerns that this is a corporate tax loophole.”