Amid talks of more space travel, California has drafted a plan that would tax the state’s thriving rocket industry. The tax plan is still just a proposal, and the public can still have their say on the matter until June.
Taxing By Mileage
In an attempt to solidify California’s rocket industry, the state’s Franchise Tax Board has released a draft of their proposed tax plan for private space transportation companies based in the state.
The plan isn’t quite as complicated as one would think rocket taxing would be, as it runs similar to how commercial terrestrial vehicles are taxed. The difference is that rockets would be taxed based on how far and how often they would travel to space instead of from one state to another.
Though quite unusual especially since other states actually provide incentives for space programs run in their territories, companies such as California-based SpaceX and United Launch Alliance, which is Colorado-based but uses California launch pads quite often, are actually in support of the tax plan because it would solidify their tax status.
In fact, a letter obtained by Quartz written by SpaceX CFO Bret Johnsen to the California Franchise Tax Board states his support for the plan and how it may help the industry as a whole.
“The proposed regulation provides certainty for us, as well as other taxpayers in the industry, for our California franchise tax filings going forward,” said Johnsen in the letter.
What’s The Plan?
Basically, the two main commercial space transportation companies that will possibly be affected by the proposed tax plan will have to compute their tax contributions based on two factors: Mileage and Departure.
In the drafted plan, the mileage factor will be determined by computing the mileage incurred for each launch contract that generates revenue in the taxable year.
Should the Internal Revenue Service or the Franchise Tax Board be hindered from making the computations by secrecy or confidentiality impositions by government authorities, then the mileage ratio denominator of those contracts will be presumed to be 310 statutory miles, multiplied by the number of launches.
The departure factor in a specific contract, on the other hand, will be computed using the number of launches in the state as specified in the contract as the numerator, and the company’s total number of launches everywhere at the time of the contract’s execution.
It’s still too early to tell whether the tax plan will push through, but for now, the Franchise Tax Board is open to public comment and input until June 16 when they will be voting on the proposal.
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