Tax Policy

Issue Summary

The Silicon Valley Leadership Group has a strong tradition of finding regional, state and federal bi-partisan policy solutions which recognize the innovation economy by bringing California and the U.S. tax codes up to date. Our top priorities are creating level playing fields on business sales and use as well as property tax rates and incentives that are competitive globally and with other states.

For businesses to expand jobs, retain commerce, and continue innovation and economic growth depends on the soundness, stability and quality of the state’s and locality’s tax policies. California’s tax system seems disorganized, because it is. California’s tax code is a patchwork of political compromises largely borne out of the negative legacies and unintended consequences of previous policies which threaten future economic competitiveness and growth.

California is beginning to take incremental steps toward strengthening our economic competitiveness to help businesses retain and grow facilities and jobs. California should continue to find ways to be fiscally responsible, lower overall tax burdens and proactively address employers’ retention, expansion, and growth needs through appropriate tax-based incentives (without unduly jeopardizing local goods and services).

Past Wins

Protecting the State and Federal R&D Tax Credit

California R&D Tax Credit: Due to state budget shortfalls, the state R&D tax credit has been recommended for suspension, or even worse – repeal. The Leadership Group has successfully blocked attempts through a broad coalition of organization and business partners any attempts to scale back or suspend the state R&D tax credit. More details

 And, more recently, the Leadership Group continues to work toward federally conforming the state credit rate that allows a 15% credit on the investment with the federal R&D tax at a higher 20% credit rate of return on all purchases.California currently provides one-fifth of all R&D activity in the U.S. In Silicon Valley alone, employers annually invest more than $41 billion in research and development and would invest even more with a permanent and expanded R&D credit. Longevity and predictability of the credit are critical because future decisions on R&D investments are based on knowing that the credit will be in place at the time the R&D project is completed, which can easily take 5 to 10 years. 

U.S. R&D Tax Credit: Each year, the Leadership Group is an active member of broad national coalition to successfully extend and enhance the federal R&D tax credit. Research and development (R&D) is critical as a means for increasing competitiveness and well-being in America. For more information and analysis: National R&D Credit CoalitionMore details

 However, the Leadership Group agrees with the President and Congress that the U.S. must encourage R&D spending through a permanent and enhanced U.S. R&D tax credit, which promotes job creation and innovation.  To further fuel these efforts, increased funding to basic research, working to uncover new, fundamental knowledge, will help to provide the foundation for major technological advances.

Elevating Temporary Repatriation of Foreign Earnings as a Bridge to Comprehensive Corporate Tax Reform

In partnership with the Leadership Group’s Federal Issues Committee and the “WIN America Coalition” – WIN America Coalition– helped to place the temporary repatriation back on the front burner. More details

 The Leadership Group discussed the proposal with President Obama’s administration and Congress on the benefits of a $1 trillion temporary repatriation of U.S. foreign earnings at a lower rate to the U.S. economy.

  • Since the annual CEO trip to D.C., Leadership Group members have reinforced against making piecemeal changes in the corporate tax code and vocally opposed to reduce or eliminate a U.S. employers’ ability to defer U.S. taxes on foreign earnings.
  • A fall follow-up trip to D.C. included Capitol Hill and Administration visits to encourage any proposed changes in U.S. international tax deferral laws and regulations should be considered as part of a broader, comprehensive effort to reform U.S. tax laws and include temporary repatriation as a bridge to broader reform.
  • Leadership Group Board members, Varian CEO Tim Guertin and Brocade CEO Mike Klayko, coauthored an op-ed in “The Hill”, Wall Street Journal and Sacramento Bee entitled “Start Small – Think Big” highlighting the positive benefits of temporary repatriation to the U.S. economy.
  • Co-signed national coalition letter by the PACE Coalition – Protect America’s Competitive Edge coalition to caution Congress and the Administration of the negative impacts of incremental tax reform changes to the U.S. economy during deficit reduction negotiations.
  • Co-signed national coalition letter by WIN America with nearly 50 other CEOs encouraging swift action to include in any final package recommended by the U.S. Joint Select Committee on Deficit Reduction.

 

No on Prop 24 – Protecting California’s Single Sales Factor

The Leadership Group successfully worked with a broad, statewide coalition of businesses, chambers of commerce and other statewide business organizations to defeat Proposition 24 in 2010. The “No on Prop. 24’s” goal was to protect the elective single sales factor apportionment, net Operating Loss carryforward and credit sharing. More details

 The Leadership Group and its members engaged in the following as a strong endorser of “No on Prop. 24”. Proposition 24 was successfully defeated 41.5% to 58.5% particularly given the millions of dollars CTA invested into the support side.

The Leadership Group provided leadership on several fronts:

  • Galvanized member support behind the No on Prop 24 coalition.
  • No on Prop 23/24 Full-page ad in the Mercury News with more than $16,000 in contributions. Thank you to all of the Leadership Group members who contributed to this effort.
  • Enabled a No endorsement by the SJ Mercury News editorial board.
  • Prompted letters to the editor to counter the Yes campaign’s claims.
  • Participated in Silicon Valley news conference.
  • In-house Leadership Group member employee notices.
  • Conducted interviews with Bay Area print media outlets.
  • Posted link and information on website.