Republicans negotiating the state budget are demanding tax breaks for companies such as cable television providers and oil producers, sources said Tuesday.
Democrats so far have not agreed to the changes, which they estimate could cost the state as much as $500 million annually in future years. The tax dispute is one of several unresolved issues that legislative leaders and Gov. Arnold Schwarzenegger must negotiate before ending the state's record-long budget impasse.
Today marks the 91st day of the fiscal year without a budget. Legislative leaders and Schwarzenegger did not meet Tuesday because budget aides were still sorting out numbers, their offices said. Key sticking points include the tax issue, pension cuts and school funding.
Republicans want the new tax rules in exchange for suspending a business deduction known as "net operating loss." Senate Republican leader Dennis Hollingsworth, R-Murrieta, acknowledged Monday that Republicans have agreed to delay that deduction until 2012. The NOL benefit, which was supposed to begin this year, would give companies greater leeway to apply operating losses against past and future earnings.
Delaying the NOL would raise about $1.4 billion toward the state's projected $19 billion deficit and avoid deeper cuts in state spending.
But Republicans want to modify a 2009 law governing how companies calculate their tax burdens in California, said sources who would not speak on the record because of the sensitive nature of talks. The 2009 law, part of last February's budget agreement, enables companies to choose the more beneficial of two tax formulas.
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