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§ 10035. Regulatory Agreement and Compliance.

4 CA ADC § 10035Barclays Official California Code of RegulationsEffective: April 7, 2022

Barclays California Code of Regulations
Title 4. Business Regulations
Division 13. California Alternative Energy and Advanced Transportation Financing Authority
Article 2. Manufacturing Sales and Use Tax Exclusion Program
Effective: April 7, 2022
4 CCR § 10035
§ 10035. Regulatory Agreement and Compliance.
(a) Regulatory Agreement. All recipients of sales and use tax exclusions are required to execute a Regulatory Agreement as a condition to the Authority's making a finding and awarding a sales and use tax exclusion.
(1) This agreement, to be entered into between the Applicant and the Authority's Executive Director, will require the Applicant to comply with the requirements set forth in these regulations. This agreement must be signed by a representative of the Applicant's company authorized to enter into contracts on behalf of that company and returned to CAEATFA within 30 calendar days from the acceptance date shown on the notification provided pursuant to Section 10034(f).
(2) The Regulatory Agreement will commence upon execution and will continue in force for a period equal to the longer of (a) three years or (b) one-half of the Estimated Useful Lifespan of the longest lived item of Qualified Property identified in the Application. If the Applicant is granted an extension of the initial term to make Qualified Property purchases pursuant to Section 10035(b)(1)(B), below, the term of the Regulatory Agreement shall be extended for an equal amount of time.
(3) The Regulatory Agreement shall include but not be limited to the following:
(A) A requirement that the Applicant indemnify and hold harmless CAEATFA from claims connected with: 1) the Project, 2) transactions associated with the Project, 3) any violation of law connected with the Project, and 4) any dispute or ruling regarding the ultimate taxability of the sale or use of the Qualified Property.
(B) A requirement that the Qualified Property be installed, maintained and operated within the State of California, except as provided by this section.
(C) The Executive Director may approve a request to relocate Qualified Property outside of California in an amount up to fifteen percent (15%) of the dollar volume of Qualified Property included on all semi-annual reports to the Authority as of the date of the request. The amount of Qualified Property relocated shall be cumulative and the amount requested will be added to any previously approved request and compared to the dollar volume of Qualified Property included on all semi-annual reports to determine compliance with the fifteen percent (15%) limitation. The Executive Director shall approve a request pursuant to this section upon a finding that the relocation is part of an improvement, upgrade or increase in the economic efficiency of the Project and that approval of the requested relocation is likely to continue or increase the anticipated net benefits of the Project. Any denial of a request pursuant to this section may be reviewed by the Authority.
(D) Requests for relocation of Qualified Property in excess of the fifteen percent (15%) requirement set forth in (a)(3)(C) may be approved by the Authority based on a recommendation from the Executive Director and upon a finding that the relocation is part of an improvement, upgrade or increase in the economic efficiency of the Project and that approval of the requested relocation is likely to continue or increase the anticipated net benefits of the Project.
(E) Any amount of Qualified Property may be relocated outside of California upon a voluntary payment by the Applicant in an amount calculated by multiplying the original purchase price of the Qualified Property to be relocated by the average statewide sales tax rate at the time of the proposed relocation.
(F) A requirement that the Applicant file a semi-annual report. This report will identify purchases of Qualified Property, if any, made during the preceding two calendar quarters.
(i) Each semi-annual report shall include information about the Qualified Property purchased, including the acquisition date; vendor city, county, and country; cost; address where the Qualified Property will be located or installed; a description and explanation of the purpose of the Qualified Property; and any other information requested by the Executive Director that is reasonably related to the purposes of the Program.
(ii) The semi-annual report covering the first two calendar quarters of the year shall be submitted to the Authority on or before July 31; the semi-annual report covering the last two calendar quarters of the year shall be submitted to the Authority on or before January 31 of the immediately following calendar year.
(b) Compliance. Applicants are responsible for compliance with all applicable Program regulations, including the following:
(1) Exercise of sales and use tax exclusion. Except as noted in subparagraph (A) below, within eighteen (18) months of approval by the Authority, the Applicant must make purchases or have executed purchase orders of Qualified Property totaling not less than fifteen percent (15.0%) of the total amount listed in the approval resolution. Except as noted in subparagraph (B) below, all purchases of Qualified Property must be made within three years of Application approval. Regulatory Agreements for Facilities not meeting these requirements will be subject to termination, and no further purchases will be excluded from the imposition of the sales and use tax.
(A) Upon a finding of extraordinary circumstances and that it is in the public interest and advances the purposes of the Program, the Authority shall waive the requirement that the Applicant make purchases or have executed purchase orders of Qualified Property totaling not less than fifteen percent (15.0%) of the total amount of Qualified Property listed in the approval resolution within eighteen (18) months of Application approval. Extraordinary circumstances may include, but are not limited to, unforeseen permitting delays.
(B) Upon a finding that it is in the public interest and advances the purposes of the Program, the Authority may waive the requirement that all purchases of Qualified Property be made within three years of Application approval.
(2) Obligation to inform the Authority. During the term of the Regulatory Agreement, Applicants must inform the Authority if the Qualified Property is moved out of the State of California or of any change in the ownership of the Qualified Property, including the name, ownership percentage, and mailing address of the new owners.
(A) Any transfer of Qualified Property ownership prior to the expiration of the Regulatory Agreement shall be evidenced by a written agreement between the parties to the transfer. Such sale or transfer may require Applicant to repay the amount of the sales and use tax exclusion if the new owner of the Qualified Property does not enter into a Regulatory Agreement with the Authority within 30 calendar days of the close of the transaction in which the owner acquires title to the Qualified Property.
(3) Certification letter and compliance report. During the term of the Regulatory Agreement, Applicants must submit an annual certification and compliance report. The certification letter must document that the Qualified Property was used for the purposes specified in the Application for the entire period since the signing of the Regulatory Agreement as required by these regulations. The certification letter and compliance report must be submitted to the Authority by January 31 with information reported for the previous calendar year. The annual compliance report shall contain:
(A) total payroll;
(B) number of full time equivalent permanent jobs at the Applicant's Facility;
(C) number of full time equivalent construction or installation jobs created as a result of the Qualified Property purchases;
(D) total annual product sales (in dollars) including the fraction in California;
(E) total number of units sold including the fraction in California;
(F) anticipated corporate or personal income tax related to the Facility for the preceding calendar year; if the Facility makes multiple products, include information relating to the tax liability associated with the production of Qualified Products;
(G) the amount spent on supplier purchases for Qualified Products, including the fraction of such purchases from California Suppliers;
(H) the total amount of Qualified Property purchased as of the date specified in the compliance report;
(I) a narrative description of the project status and consistency with the timeline contained in the Application, anticipated purchase dates of any additional items of Qualified Property, and an explanation of any material changes to the product or manufacturing process implemented since the approval of the Application;
(J) a statement indicating the fraction of the time that the Qualified Property has been used to make Qualified Products; and
(K) any other information requested by the Executive Director that is reasonably related to the purposes of the Program.
(4) Retention of records. Applicants must retain records necessary to document information provided in the annual compliance reports and certification letters for at least five (5) years following the date of the latest certification letter or compliance report required.
(5) False Information. Upon a finding that information supplied by an Applicant, or any person acting on behalf of an Applicant, is false or no longer true, and the Applicant has not notified the Authority in writing, the Authority may, after written notice to the Applicant, rescind the approval resolution, in addition to other remedies.
(6) Rescission. Following a finding that an Applicant has provided false information pursuant to paragraph (5) or has otherwise violated the Regulatory Agreement, the Authority may, after written notice to the Applicant, terminate or rescind the approval resolution, in addition to other remedies. Applicants may request an opportunity to be heard in front of the Authority to contest rescission. Any such request must be made in writing to the Authority and postmarked no later than fifteen (15) calendar days following the mailing of written notice from the Authority. Upon a final decision by the Authority, the approval resolution shall be rescinded, and notice of the rescission may be provided to the Department of Tax and Fee Administration.
(7) Reporting. The Authority may from time to time publish the actual total value of the Qualified Property purchased within each city or county in California. If the Executive Director determines that publishing such information could cause the price paid by an Applicant to a supplier for a Qualified Property purchase or the identity of that supplier to become known, then the information from multiple cities or counties will be aggregated so as to protect the confidentiality of this information.
(8) Suspension. If the Applicant violates statute, regulations, or the terms of the Regulatory Agreement, the Executive Director may suspend the Regulatory Agreement until the Executive Director certifies that the Applicant is once again in compliance. Purchases made during this suspension will not be excluded from the imposition of sales and use tax.
(c) Recovery of Financial Assistance. The Regulatory Agreement shall contain a provision under which the Authority may seek recovery of the Financial Assistance provided plus interest at a rate to be reasonably determined by the Authority and specified in the Regulatory Agreement. The Authority may seek recovery of the Financial Assistance actually utilized in cases in which the Applicant: (1) does not meet the substantial use requirements identified in Section 10033(b)(1)(A) or (2) removes the Qualified Property purchased from the State of California prior to the shorter of (a) the expiration of the term of the Regulatory Agreement or (b) three years, except in compliance with section 10035(b)(1)(F).

Credits

Note: Authority cited: Section 26009, Public Resources Code; and Section 26011.8, Public Resources Code. Reference: Section 26011.8, Public Resources Code; and Section 6010.8, Revenue and Taxation Code.
History
1. New section filed 10-4-2010 as an emergency; operative 10-4-2010 (Register 2010, No. 41). A Certificate of Compliance must be transmitted to OAL by 4-4-2011 or emergency language will be repealed by operation of law on the following day
2. New section refiled 4-1-2011 as an emergency; operative 4-1-2011 (Register 2011, No. 13). A Certificate of Compliance must be transmitted to OAL by 6-30-2011 or emergency language will be repealed by operation of law on the following day.
3. New section refiled 6-24-2011 as an emergency; operative 6-24-2011 (Register 2011, No. 25). A Certificate of Compliance must be transmitted to OAL by 9-22-2011 or emergency language will be repealed by operation of law on the following day.
4. Certificate of Compliance as to 6-24-2011 order, including amendment of section and Note, transmitted to OAL 6-29-2011 and filed 8-10-2011; operative 9-28-2011 (Register 2011, No. 32).
5. Amendment of subsections (b)(1)(C) and (b)(1)(F), new subsections (b)(1)(F)(i)-(iii) and amendment of subsections (c)(1), (c)(3), (c)(6) and (d) deemed necessary for the immediate preservation of the public peace, health and safety, and general welfare by the Legislature pursuant to section 26011.8 of the Public Resources Code; filed 3-8-2012 as an emergency; operative 3-8-2012 (Register 2012, No. 10). A Certificate of Compliance must be transmitted to OAL by 9-4-2012 or emergency language will be repealed by operation of law on the following day.
6. Amendment of subsections (b)(1)(C) and (b)(1)(F), new subsections (b)(1)(F)(i)-(iii) and amendment of subsections (c)(1), (c)(3), (c)(6) and (d) deemed necessary for the immediate preservation of the public peace, health and safety, and general welfare by the Legislature pursuant to section 26011.8 of the Public Resources Code; refiled 9-4-2012 as an emergency; operative 9-4-2012 (Register 2012, No. 36). A Certificate of Compliance must be transmitted to OAL by 12-3-2012 or emergency language will be repealed by operation of law on the following day.
7. Amendment of subsections (b)(1)(C) and (b)(1)(F), new subsections (b)(1)(F)(i)-(iii) and amendment of subsections (c)(1), (c)(3), (c)(6) and (d) deemed necessary for the immediate preservation of the public peace, health and safety, and general welfare by the Legislature pursuant to section 26011.8 of the Public Resources Code; refiled 12-3-2012 as an emergency; operative 12-3-2012 (Register 2012, No. 49). A Certificate of Compliance must be transmitted to OAL by 3-4-2013 or emergency language will be repealed by operation of law on the following day.
8. Certificate of Compliance as to 12-3-2012 order transmitted to OAL 2-28-2013 and filed 4-2-2013 (Register 2013, No. 14).
9. Amendment filed 10-7-2013 as a deemed emergency pursuant to Public Resources Code section 26009; operative 10-7-2013 (Register 2013, No. 41). A Certificate of Compliance must be transmitted to OAL by 4-7-2014 or emergency language will be repealed by operation of law on the following day.
10. Amendment refiled 4-3-2014 as a deemed emergency pursuant to Public Resources Code section 26009; operative 4-3-2014 (Register 2014, No. 14). A Certificate of Compliance must be transmitted to OAL by 7-2-2014 or emergency language will be repealed by operation of law on the following day.
11. Amendment of section, including further amendment of subsection (b)(6), refiled 6-30-2014 as a deemed emergency pursuant to Public Resources Code section 26009; operative 6-30-2014 (Register 2014, No. 27). A Certificate of Compliance must be transmitted to OAL by 9-29-2014 or emergency language will be repealed by operation of law on the following day.
12. Certificate of Compliance as to 6-30-2014 order, including amendment of subsections (a) and (a)(3)(D), transmitted to OAL 9-29-2014 and filed 11-10-2014; amendments effective 11-10-2014 pursuant to Government Code section 11343.4(b)(3) (Register 2014, No. 46).
13. Amendment of subsection (b)(1) and new subsection (b)(8) filed 8-9-2016 as a deemed emergency pursuant to Public Resources Code section 26009; operative 8-9-2016 (Register 2016, No. 33). A Certificate of Compliance must be transmitted to OAL by 2-6-2017 or emergency language will be repealed by operation of law on the following day.
14. Amendment of subsection (b)(1) and new subsection (b)(8) refiled 2-7-2017 as a deemed emergency pursuant to Public Resources Code section 26009; operative 2-7-2017 (Register 2017, No. 6). A Certificate of Compliance must be transmitted to OAL by 5-8-2017 or emergency language will be repealed by operation of law on the following day.
15. Amendment of subsection (b)(1) and new subsection (b)(8) refiled 5-4-2017 as a deemed emergency pursuant to Public Resources Code section 26009; operative 5-9-2017 (Register 2017, No. 18). A Certificate of Compliance must be transmitted to OAL by 8-7-2017 or emergency language will be repealed by operation of law on the following day.
16. Reinstatement of section as it existed prior to 8-9-2016 emergency amendment by operation of Government Code section 11346.1(f) (Register 2017, No. 36).
17. Amendment of subsection (b)(1) and new subsection (b)(8) filed 10-31-2017; operative 10-31-2017 pursuant to Government Code section 11343.4(b)(3) (Register 2017, No. 44).
18. Amendment of subsection (b)(1), new subsection (b)(1)(A) and subsection relettering filed 12-16-2019 as a deemed emergency pursuant to Public Resources Code section 26009; operative 12-16-2019 (Register 2019, No. 51). A Certificate of Compliance must be transmitted to OAL by 6-15-2020 or emergency language will be repealed by operation of law on the following day.
19. Emergency filed 12-16-2019 extended 60 days (Executive Order N-40-20). A Certificate of Compliance must be transmitted to OAL by 8-14-2020 or emergency language will be repealed by operation of law on the following day.
20. Emergency filed 12-16-2019 extended an additional 60 days (Executive Order N-66-20). A Certificate of Compliance must be transmitted to OAL by 10-14-2020 or emergency language will be repealed by operation of law on the following day.
21. Reinstatement of section as it existed prior to 12-16-2019 emergency amendment by operation of Government Code section 11346.1(f) (Register 2020, No. 43).
22. Amendment of subsections (a)(2) and (b)(1), new subsection (b)(1)(A), subsection relettering and amendment of subsection (b)(6) filed 11-4-2020 as a deemed emergency pursuant to Public Resources Code section 26009; operative 11-4-2020. Emergency expiration extended 60 days (Executive Order N-40-20) plus an additional 60 days (Executive Order N-66-20) (Register 2020, No. 45). A Certificate of Compliance must be transmitted to OAL by 8-31-2021 or emergency language will be repealed by operation of law on the following day.
23. Amendment of subsections (a)(2) and (b)(1), new subsection (b)(1)(A), subsection relettering and amendment of subsection (b)(6) refiled 8-30-2021 as a deemed emergency pursuant to Public Resources Code section 26009; operative 9-1-2021 (Register 2021, No. 36). A Certificate of Compliance must be transmitted to OAL by 11-30-2021 or emergency language will be repealed by operation of law on the following day.
24. Amendment of subsections (a)(2) and (b)(1), new subsection (b)(1)(A), subsection relettering and amendment of subsection (b)(6) refiled 11-29-2021 as a deemed emergency pursuant to Public Resources Code section 26009; operative 12-1-2021 (Register 2021, No. 49). A Certificate of Compliance must be transmitted to OAL by 3-1-2022 or emergency language will be repealed by operation of law on the following day.
25. Certificate of Compliance as to 11-29-2021 order, including amendment of Note, transmitted to OAL and filed 4-7-2022; amendments effective 4-7-2022 (Register 2022, No. 14).
This database is current through 4/12/24 Register 2024, No. 15.
Cal. Admin. Code tit. 4, § 10035, 4 CA ADC § 10035
End of Document