Welcome
Daily Tax Report: State

Lockheed, Northrop Promise Jobs To Win California Tax Credits

Nov. 13, 2019, 10:25 PM

Aerospace and defense companies won big in the latest round of income tax credits the California governor’s office is awarding to companies that promise to hire more people and invest in the state.

Lockheed Martin Corp. will get $39.5 million for aerospace manufacturing at Vandenburg and Beale Air Force bases and four other locations as long as it hires 500 more workers and invests $150 million in its facilities.

The company won a similar credit award in 2018, also for $39.5 million, requiring 450 new hires and $150 million in investments, making its total commitment $300 million in investments and 950 in new hires by 2023 for $79 million in credits.

Northrop Grumman Systems Corp. will get $30 million if it fulfills its plans to invest $1.1 billion and hire 1,001 more people by 2023 to work in aircraft manufacturing at six facilities in the state, including Edwards Air Force Base in Kern County.

The Governor’s Office of Business and Economic Development (Go-Biz) approved the credit award as a five-year, $10 million credit agreement from 2015 expires at the end of 2019. The company fulfilled the terms of the expiring agreement, a Go-Biz spokeswoman said.

The California Competes credits to Lockheed and Northrop Grumman were the two largest in a round of 14 credits totaling $88.7 million awarded Nov. 12. A five-member California Competes Tax Credit Committee awards credits three times a year to companies that meet milestones for job creation and investment. The state can recapture credits from companies that don’t meet their milestones.

Rockets and Aircraft

Rocket Lab USA Inc., a private developer of rockets that deliver small satellites into orbit, also secured $5 million to add 147 employees and invest $25 million at its southern California locations.

United Technologies Corp. will get $2.25 million for hiring 60 more workers and investing $49.9 million at its aircraft engine manufacturing plant in Carlsbad.

Go-Biz also awarded nine other credits at its Nov. 12 meeting, ranging from $3.3 million to grocer Kroger Co. for a new warehouse to $185,000 for OMNI Enclosures Inc., an office furniture and lab equipment manufacturer, for a total of $88.4 million in awards.

QVC Misses Target

The committee also recaptured $10 million in previously awarded credits from eight companies that didn’t meet milestones. Among them is QVC Inc., which can’t claim $900,000 of the $1.4 million in credits Go-Biz awarded in 2015 for creation of a warehouse in the city of Ontario. The retailer said in 2015 it would employ 521 people by 2018.

QVC has also received $1.8 million from Ontario in the first three years of a sales-tax sharing agreement that could span 41 years, Bloomberg Tax found in an examination of city payment records through March 2019. Ontario’s payments to QVC, based on city sales tax revenue generated through sales fulfilled at the warehouse, are below the $2.5 million a year the city and the company projected when they entered the agreement in 2015.

Go-Biz director Lenny Mendonca, State Treasurer Fiona Ma (D), Department of Finance Director Keely Bosler, and appointees from the Senate and Assembly serve on the California Competes committee. The program has been in place since 2014.

To contact the reporter on this story: Laura Mahoney in Sacramento, Calif. at lmahoney@bloomberglaw.com

To contact the editors responsible for this story: Jeff Harrington at jharrington@bloombergtax.com; Kathy Larsen at klarsen@bloombergtax.com