The implementation of AB 1347 is poised to have significant implications for compliance among corporations and larger taxpayers in California. It seeks to ensure that businesses contribute to the economic empowerment of diverse suppliers, thereby promoting equity in state-supported procurement practices. Non-compliance can lead to audits by the Franchise Tax Board, which has the authority to impose penalties, potentially influencing taxpayer behavior and investment focus toward diverse suppliers.
Summary
Assembly Bill 1347 introduces amendments to California’s Revenue and Taxation Code regarding income tax credits tied to supplier diversity goals. The bill mandates that taxpayers claiming certain tax credits post-January 1, 2018, must meet progressive supplier diversity benchmarks. Specifically, these benchmarks are to procure a minimum of 5% of goods from certified diverse suppliers in the first taxable year, 10% in the third year, and 20% in the fifth year. This aligns with broader initiatives to foster diversity and inclusion in state contracting and procurement processes.
Contention
Opposition to AB 1347 may arise from sectors that argue that mandatory procurement quotas could impose undue burdens on businesses, particularly larger entities which may find it challenging to meet diverse supplier requirements consistently. Additionally, the bill excludes individuals and businesses with gross receipts of under $2 million from these requirements, leading to debates about the fairness and accessibility of the program for all business sizes. The centralized auditing process and accompanying penalties also raise concerns about administrative burdens and the financial implications for taxpayers under review.