Industry Voice: Newsom's proposed Calif. budget is friendly to manufacturers

By Gino DiCaro | Jan 17, 2022


The California Manufacturers & Technology Association (CMTA) and other employer groups have worked tirelessly with Gov. Newsom's Administration to both restore the state's net operating loss (NOL) offset provision and implement a research and development (R&D) tax credit. It is the first step of many to return California to a more competitive region to manufacture.

Newsom announced inclusion of both provisions at his press conference to unveil his proposed budget for 2022-23.

The NOL generally allows a company carrying losses to offset its tax payments in other tax periods through a provision called a loss carry forward. This and the R&D tax credit are key steps in the path toward making California more competitive for manufacturers to operate and invest.

Gov. Newsom also included $3 billion to help pay the state's unemployment insurance (UI) debt to help employers who pay for a majority of the program through a UI tax. CMTA has been part of a large coalition led by the California Business Roundtable to urge the governor to fund $10 billion in UI debt.

While this budget is simply a proposal before it gets revised and voted upon in the Legislature later in the year, it is a significant signal that the governor's Administration is committed to taking steps to fund ways to incent new production growth in California.

CMTA President Lance Hastings said the following in a media statement:

"Manufacturers across the U.S. are looking to scale up their highly specific operations with new products and technological advances, and those long-term investments will go to the most competitive and reliable locations.

"With one of the highest tax burdens in the country and many cost challenges in other operational areas, forging a path to California's competitiveness is essential to attract new manufacturing. If a product is innovated in California, it should be made in California.

"Gov. Newsom's proposed restoration of both the net operating loss tax provision and the state's research and development credit are significant signals that this Administration wants to attract the type of investment that grows production jobs.

"We commend the governor for this crucial step and look forward to working with him on these proposals and others to grow manufacturing."

Gino Dicaro is SVP at CMTA. Reach him at