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Brown signs tax bill that will benefit Tesla plant

SACRAMENTO -- Gov. Jerry Brown announced Thursday that he signed legislation that creates a $420 million tax credit for aerospace contractor Lockheed Martin and includes similar tax incentives designed to benefit California-based electric car maker Tesla Motors Inc.

California is one of five states competing for a $5 billion Tesla (Nasdaq: TSLA) 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. (NYSE: LMT), which is bidding for a $55 billion federal aerospace contract. Competitor Northrop Grumman Corp. (NYSE: NOC) 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.

Fox's office referred questions about the Tesla tax credit to Brown's GO-Biz Department, which issued a statement saying it was dedicated to promoting manufacturing in California.

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