An act to amend Sections 26003, 26011.8, and 26025 of the Public Resources Code, and to amend Section 6010.8 of the Revenue and Taxation Code, relating to public resources, to take effect immediately, tax levy.
SB 86 extends and modifies California’s sales and use tax exclusion program administered by the California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA). The bill extends the authority to approve tax-exempt financing for qualifying projects from January 1, 2026 to January 1, 2028, and makes conforming changes to the Public Resources Code and Revenue and Taxation Code. It continues the program’s focus on California-based manufacturing, advanced manufacturing, advanced transportation technologies, and projects that reduce greenhouse gases, air and water pollution, or energy consumption.
The bill also expands the definition of eligible projects to include electrical generation facilities using nuclear fusion technology. In addition, for applicants that, together with their parent corporations and subsidiaries, employ 500 or more employees, the bill requires certification that the applicant and its contractors will meet specified labor standards beginning January 1, 2026, including comparatively good wages and benefits, workforce training or apprenticeship opportunities, and mechanisms for worker voice in the workplace. The bill preserves the existing structure allowing sales and use tax exclusions for tangible personal property used in approved projects and makes related conforming and operative-date changes.
SB 86 amends the statutory framework governing CAEATFA’s sales and use tax exclusion program, primarily by extending the program’s sunset date to January 1, 2028 and updating cross-references in the Public Resources Code and Revenue and Taxation Code. It adds nuclear fusion electrical generation facilities to the list of qualifying alternative-source projects and retains the program’s annual exclusion cap and reporting requirements. The bill also imposes new labor-certification conditions on larger applicants, affecting how the authority evaluates and approves projects for tax relief. Because it is a tax levy and takes effect immediately, the changes apply without delay to the program’s administration and eligible projects.
The bill appears to have broad support and moved through the Legislature with unanimous or near-unanimous votes at each recorded stage. It was approved in committee and on the floors of both houses without any recorded opposition in the provided vote history. The absence of dissent in the voting record suggests general agreement with extending the tax incentive program, adding fusion technology as an eligible category, and attaching labor-related conditions to larger beneficiaries.
The main policy tension in SB 86 is between using tax incentives to attract and retain advanced manufacturing investment and ensuring public benefits in the form of jobs, wages, and labor standards. Supporters likely viewed the extension as a way to continue promoting clean-energy and manufacturing projects in California, including emerging nuclear fusion facilities. Potential points of contention include the fiscal cost of the sales and use tax exclusion, whether the incentive sufficiently benefits the state relative to the foregone tax revenue, and whether the new labor certification requirements are appropriately targeted at larger firms. The bill’s inclusion of nuclear fusion and its worker-protection provisions suggest an effort to balance economic development interests with environmental and labor concerns.