CALIFORNIA PASSES LEGISLATION TO AVERT TAX WAR WITH UK

CALIFORNIA PASSES LEGISLATION TO AVERT TAX WAR WITH UK

California Gov. Pete Wilson signed sweeping tax reform legislation aimed at averting the threat of a tax war with Britain while giving a shot in the arm to the recession-bound California economy.

The legislation:* Creates a 6 percent tax credit for buying manufacturing equipment after Jan. 1, 1994.

* Makes permanent a research and development tax credit due to expire in 1998.

* Provides a state and local sales tax exemption for the purchase of equipment used in commercial space launches from Vandenberg Air Force Base.

* Excludes from taxation 50 percent of capital gains from the sale of a

qualified small business stock held for more than five years.

* Sets an an eight-year carry-over period for losses incurred by businesses in their first year of operation.

A key plank of the legislation is its reform of the unitary taxation system, which assesses taxes based on the proportion of a company's worldwide business done in the state.