Gov. Jerry Brown signs aerospace tax bill that also includes language to benefit Tesla plant

Gov. Jerry Brown announced Thursday that he signed legislation creating a $420 million tax credit for aerospace contractor Lockheed Martin in a bill that also includes other tax incentives apparently designed to benefit California-based electric car maker Tesla Motors Inc.

California is one of five states competing for a $5 billion Tesla battery manufacturing plant, but Brown's administration has largely declined to discuss what the state is doing to persuade the company to build it in its home state.

A legislative debate that lasted for hours July 3 over AB2389 by Assemblyman Steve Fox, D-Palmdale, focused nearly entirely on the 15-year tax incentive for Lockheed Martin Corp., which is bidding for a $55 billion federal aerospace contract. Competitor Northrop Grumman Corp. complained it was unfair.

The tax changes, including the language helping battery manufacturers, were sought by the governor in the final days before the Legislature broke for its summer recess. That prompted the incoming leader of the state Senate, Sen. Kevin de Leon, D-Los Angeles, to call it a "jam job."

The changes sought by the Brown administration included adding language covering tax credits for a range of industries, but no companies are specifically named. The word "battery" never appears in the bill's language, but is referenced in an analysis prepared by the Senate Appropriations Committee dated July 3, the last legislative business day before the summer break and the same day lawmakers voted on it.

The analysis said tax relief would be available to companies that fall under federal NAICS manufacturing code 3359, which includes "battery manufacturing."

"The publicly stated intent of the bill is to support the aerospace industry; consequently, it is unclear why NAICS 3359 is also included," the analysis said.

The complex language of the bill appears to make Tesla eligible for the same tax credits as Lockheed Martin, but neither the bill's author nor the offices of other lawmakers who worked on the legislation could explain exactly what sweeteners are now available to Tesla.

"At their request we put the change in," said Fox's chief of staff, Ann Turtle.

She referred questions about the Tesla tax credit to Brown's GO-Biz Department, which submitted the language for AB2389 but declined to explain what incentives are available to Tesla. The agency instead issued a statement saying it is dedicated to promoting manufacturing in California.

Assemblywoman Shannon Grove, R-Bakersfield, referenced Tesla's battery plant in a previous floor debate on the bill, saying she had written a letter to Tesla CEO Elon Musk about the tax credits. The letter, which she later posted online, outlined competitive and legal challenges she said Tesla would face in building its battery factory in California.

"You and I both know that this offering does not do nearly enough to make the California business climate competitive in the national and global market," she said. "And you can bet the Legislature will brag about how accommodating they are being by tossing tax credits your way, yet offering nothing in substantial change to the anti-business climate in this state."