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Associated Press
Jan 25, 2005

by JIM WASSERMAN, Associated Press Writer

Eighteen California companies win $80.8 million in tax refunds

Critics claim the companies recently paid no state income taxes.
SACRAMENTO -- Eighteen California companies, including some of the state's largest high-tech firms, won approval Tuesday for $80.6 million in tax refunds even as critics claimed they recently paid no state income taxes.

The state Board of Equalization, a group of elected officials who oversee state tax policy, approved the 18 refunds after drawing fire for $5 million in similar refunds last month to three California companies. Refunds approved Tuesday will go to such industry giants as Hewlett Packard Co., Rockwell Automation, Inc., Intel Corp. and Sun Microsystems, Inc. Other recipients include Cypress Semiconductor Corp., and LSI Logic Corp., a pair of San Jose firms which received $6.3 million in similar refunds last year.

The board awarded the refunds with little discussion and no public documents detailing the size of individual refunds despite testimony calling them an "absurd giveaway" as the state contends with budget deficits. Officials at the tax policy agency said tax information is confidential.

"This amounts to an $80 million tax hike for Californians," said Jerry Flanagan, representing the Foundation for Taxpayer and Consumer Rights. "We ask you not to do it."

The refunds stem from a 1991 Manufacturers Investment Tax Credit designed to reimburse companies for new equipment purchases in hopes it would stimulate business investments and spur 100,000 jobs. Lawmakers ended the program last year after state reports said it wasn't creating the jobs and controversy ensued over the refunds to Cypress and LSI Logic.

Supporters of the refunds said they are fair because last-minute changes to the bill ending the refund program allowed consideration for companies which had already applied for them.

After last month's vote, board member and former legislator Bill Leonard said the original law allowed the tax credit to be taken against state sales taxes already paid or as a refund from state income taxes.

"We're implementing the law as it's held forth," he said.

But Lenny Goldberg, director of the California Tax Reform Association, disagreed, telling board members their decision "is grossly in violation of the law in California."

Numerous state lawmakers wrote board members before last month's vote, urging support for the refunds, saying it would damage the state's business image to deny a credit that was "on the books" and relied upon by companies.

Goldberg and the FTCR filed a public records act request with the Board of Equalization on Tuesday to obtain analyses, documents and memos, as well as the amounts refunded to individual companies. Their letter cited Proposition 59 passed by voters last November requiring officials and judges to interpret state law broadly in considering such requests.

Five board members elected from different regions of California include Leonard, Claude Parrish, John Chiang, Betty Yee and state Controller Steve Westly.

Attorneys for the Board of Equalization argued last year that such refunds were improper, according to state law, and the board's staff opposed last month's requests. Tuesday, the staff's recommendation to the board was to approve the new requests.

Other companies due to receive refunds include Symbol Technologies, Inc.; Exar Corp.; LAM Research Corp.; KLA-Tencor Corp.; National Semiconductor Corp.; Advanced Cardiovascular Systems, Inc.; Adaptec, Inc.; Powerwave Technologies, Inc.; ESS Technology, Inc.; Beckman Coulter, Inc.; Integrated Device Technology, Inc.; and Level One Communications, Inc.
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On the Net:
California Board of Equalization: www.boe.ca.gov

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