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California weighs tax break for space exploration firms

SACRAMENTO, Calif. — For-profit space explorers who make California their headquarters would not have to pay property taxes on their rockets and space stations under a bill that advanced in the state legislature on Wednesday.

The move is aimed at stopping an effort by Los Angeles County to collect levies on equipment owned by the privately held SpaceX in Hawthorne, Calif. It is part of a broader effort by lawmakers to revitalize California's flagging aerospace sector, once among the nation's largest and key to the state's economy.

"This bill will create thousands of new, high-paying jobs right here in California," said state Democratic Assemblyman Al Muratsuchi, the bill's author. His measure passed the Assembly 64-5, and will now go to the state Senate.

Muratsuchi said he submitted his measure after Los Angeles County presented Space Exploration Technologies, or SpaceX, with a property tax bill on rockets and other equipment.

The company, which did not immediately respond to a request for comment from Reuters, is in the midst of appealing the tax demand, a Muratsuchi aide said.

SpaceX, founded by PayPal entrepreneur Elon Musk, has already won tax credits at the local level, resulting in a commitment to stay in Hawthorne, a Los Angeles suburb.

The company, along with Virginia-based Orbital Sciences Corp., have NASA contracts worth a combined $3.5 billion for a total of 20 cargo flights to the International Space Station, a $100 billion research complex owned by the United States, Russia, Europe, Japan and Canada.

SpaceX is preparing for its third cargo run to the space station on Feb. 22. Other private space exploration companies have also set up shop in California, including Virgin Galactic.

Assemblyman Jeff Gorell, a Republican whose district north of Los Angeles is near the Virgin Galactic headquarters, said lawmakers were working hard to restore California's glory as a hub for aerospace.

"The golden days of aerospace were in California," Gorell said. "It's not that case anymore. We have to really focus and fight to keep those jobs here in California."

The state's huge population growth after World War II was due in part to plentiful jobs at such aerospace giants as Douglas Aircraft, Hughes Aircraft and Lockheed Corp. But the industry shrank dramatically in the early 1990s, contributing to a crash in the state's economy from which some areas have never recovered.

The tax exemption bill was opposed by the California State Association of Counties, whose 58 members collect property taxes, which are then used to help fund local governments and schools.

The state will lose about $1 million annually in tax revenues if the bill is passed, the state's analysis of the bill predicted.