If that wasn’t controversial enough, now word has surfaced that the bill also included a hidden perk for electric auto maker Tesla Motors Inc.

According to a report by Juliet Williams of the Associated Press, an overlooked section of the bill included language to provide tax breaks to companies that manufacture batteries:

“The word ‘battery’ never appears in the bill’s language, but is referenced in an analysis prepared by the Senate Appropriations Committee dated July 3, the last legislative business day before the summer break and the same day lawmakers voted on it. The analysis said tax relief would be available to companies that fall under federal NAICS manufacturing code 3359, which includes ‘battery manufacturing’.”

That perk, signed into law on the 157th birthday of the company’s namesake, Nikola Tesla, is designed to persuade the company to build a new $5 billion manufacturing plant in California.

Reducing assessed value by $125 million

Under that neglected section of the bill, battery manufacturers would be eligible for a reduction in the assessed value of a qualified manufacturing facility.

“This bill would, until July 1, 2015, reduce the assessed value threshold for calculating the capital investment incentive amount from $150,000,000 to $25,000,000 and would define ‘qualified manufacturing facility’ to include, among others, facilities operated by certain businesses described in specified provisions of the North American Industry Classification System Manual,” the final version of the bill stated.

That language apparently baffled the bill’s author as well as Senate committee staff, who were unaware of its purpose.

“This tax credit is exactly what the aerospace industry needs to remain competitive for the next decade,” Assemblyman Steve Fox, D-Palmdale, author of Assembly Bill 2389, said of the bill’s purpose. He never acknowledged a second benefit provided to battery manufacturers.

The legislative process was described by one state senator as a “jam job.” State lawmakers weren’t given any information about the project, all while being told they needed to pass the bill before the summer recess. Only one committee analysis made reference to the obscure federal manufacturing code.

“The publicly stated intent of the bill is to support the aerospace industry; consequently, it is unclear why NAICS 3359 is also included,” that Senate Appropriations Committee analysis uncovered by the Associated Press found.

$420 million corporate tax break for defense contractors

Prior to the AP’s report, the debate about Assembly Bill 2389 focused on a special $420 million corporate subsidy to a joint partnership between Lockheed Martin and Boeing. The companies are working to obtain a federal contract to build a fleet of next-generation stealth bombers.

Drafted at the governor’s behest, the tax break is available exclusively to “a major first-tier subcontractor awarded a subcontract to manufacture property for ultimate use in or as a component of a new advanced strategic aircraft for the United States Air Force.”

It’s written so narrowly that even other aerospace companies wouldn’t qualify. If Boeing and Lockheed Martin land the project, it could lead to thousands of quality jobs in California.

“This is a big roll-of-the-dice in a state that has been looking for ways to trim minor expenses to fund its many spending priorities,” wrote UT San Diego columnist Steven Greenhut.

Double benefit: tax credit and deduction

Not only does the bill offer special perks to favored companies, it also contains an unprecedented double counting of tax benefits. Those businesses will be able to receive a tax credit and deduction for the same qualifying act.

“This bill would allow a qualified taxpayer a double benefit: first, a deduction, and then a credit calculated based on the same wages paid by a qualified taxpayer for qualified full-time employees,” according to the Assembly floor analysis of the bill. “Generally, a credit is allowed in lieu of a deduction in order to eliminate multiple tax benefits for the same item or expense.”

As CalWatchdog.com’s Joseph Perkins has previously written, AB2389 is nothing more than government picking winners and losers.

“Lawmakers can debate the prudence of bestowing as much as $840 million in tax subsidies to two of the nation’s largest aerospace companies to bid on an Air Force contract,” Perkins wrote earlier this week. “But all can agree that, if the state is going to award tax credits, it should not pick winners and losers among competing companies.”

In the State Assembly, Democrats Mike Gatto and Mark Stone opposed the bill. In the State Senate, six Democrats — Noreen Evans, Cathleen Galgiani, Loni Hancock, Ben Hueso, Mark Leno and Bill Monning — withstood intense pressure from corporate lobbyists.

It passed anyway.

An Air Force request for proposal (RFP) for the next generation stealth bomber is about to hit the street. The contract is worth an estimated $55 billion.

Aerospace giants Lockheed Martin Corp. and Northrop Grumman – both of which have a major presence here in California – are in a dog fight for the federal contract. Lockheed Martin is teaming up with Boeing, which also has major operations in the Golden State.

However, the Legislature last week voted to grant Lockheed Martin a $420 million tax break to sweeten its bid to build 80 to 100 of the state-of-the-art long-range bombers.

“This tax credit is exactly what the aerospace industry needs to remain competitive for the next decade,” said Assemblyman Steve Fox, D-Palmdale, author of Assembly Bill 2389, which created the Aerospace Industry Tax Credit.

But Northrop Grumman, which was headquartered in Los Angeles until 2011 (when it moved to Northern Virginia), which remains the Golden State’s largest aerospace employer, strenuously disagreed with Fox.

The defense contractor said it was “extremely disappointed” the legislation fast-tracked by Fox and his fellow lawmakers to Gov. Jerry Brown’s desk – “a jam job,” Senate Appropriations Committee chairman Kevin de Leon, D-Los Angeles, criticized –  “favors only one aerospace company.”

Fox maintains the Legislature’s $420 million tax break to Lockheed Martin “will create and retain aerospace jobs in California.”

Indeed, the Bethesda, Maryland-headquartered Fortune 500 company said the gift from Sacramento will result in 1,100 California jobs (provided, of course, that it outbids Lockheed Martin). Some 750 of those jobs would be created, while 350 existing California jobs would be retained.

Even without a state tax break, said Tom Vice, president of Northrop Grumman Aerospace Services, his company would create 1,500 new jobs in Palmdale if it wins the Air Force contract.

Underbid

However, it is unlikely Northrop Grumman can beat out its competition when the $420 million its rival Lockheed Martin was gifted by from Legislature enables Lockheed Martin to underbid Northrop Grumman.

Meanwhile, the Legislature has tacitly acknowledged its unwise decision to favor one aerospace company over the other. Fox and his fellow lawmakers assured Northrop Grumman they will consider a tax break for the company as soon as they return to Sacramento from their summer recess.

Lawmakers can debate the prudence of bestowing as much as $840 million in tax subsidies to two of the nation’s largest aerospace companies to bid on an Air Force contract.

But all can agree that, if the state is going to award tax credits, it should not pick winners and losers among competing companies.

Expense

The proposed bomber has been criticized for its high cost, as much as $550 million per plane before the usual cost overruns. DoD Buzz.com reported in April:

“The figure refers to the estimated unit production cost of the Long-Range Strike Bomber, or LRS-B, and doesn’t include research and development expenses, which are likely to be significant. [Undersecretary of the Air Force Eric] Fanning declined to specify what the latter might be, only that they wouldn’t ‘double’ the overall cost of the plane.”

So the Air Force admits the final cost could soar to $1 billion per copy.

It’s possible the new bomber could be canceled in favor of keeping the aging B-2 Spirit, which first became operational in 1997. In June, the B-2 was granted funds for upgrades to keep it flying until 2058.

And in May, the even older B-52 bombers, which flew their first missions in 1957, were given their first new communications system since the 1960s.