San Francisco Chronicle | January 17, 2018 –
A bill introduced Wednesday would block the state’s tax on space transportation companies.
Assemblyman Tom Lackey, R-Palmdale (Los Angeles County), said AB1878 would exempt space transportation companies from a tax enacted by the Franchise Tax Board last year. The tax is collected on space companies based on a formula that factors in the frequency of launches from California soil and the distance a spacecraft travels into space.
“We are sending a terrible message by taxing an industry that is only in its infancy,” Lackey said in a statement. “Instead, California should continue to protect its role as an aerospace leader and offer an incentive for companies that choose to operate here.”
The rules were designed to apply to any company operating that generated at least half its income from “space transportation,” which was defined as the movement of people or property 62 miles above the surface of the Earth.
The bill would repeal the space tax formula and exempt space flight income from state taxes, which Lackey contends would give companies like SpaceX, Virgin Galactic and United Launch Alliance an incentive to stay in the state. For example, Moon Express, a startup working to mine the moon for natural resources, moved from Mountain View to Florida in 2016, Lackey said.
In an email, Moon Express CEO and founder Bob Richard reiterated a statement he made last year that the decision to move was “in part due to the state of Florida’s progressive economic development incentives designed to attract commercial space companies.”
The tax board, however, said it created the rules to give space entrepreneurs more certainty about California’s tax regulations. The regulations resembled a draft submitted by one of the biggest players in the private space industry, SpaceX of Hawthorne (Los Angeles County).
The space transportation industry is an emerging industry with significant growth potential,” the tax board said in a report on the reasons for the proposed tax.
“Industry representatives have informed staff that promulgation of this regulation will encourage existing space transportation companies to continue to do business here and expand as appropriate,” the report said. “Absent this regulation, uncertainty about California tax treatment could cause the industry to focus its expansion or location efforts elsewhere.”
Lackey said his bill is supported by the Howard Jarvis Taxpayers Association.
“Space exploration has led to advances that fundamentally change lives, including solar panels and artificial limbs,” association president Jon Coupal said in a statement. “Government has no business excessively stifling this innovation economy with new taxes and regulations.”