Bill Text: CA SB1467 | 2011-2012 | Regular Session | Amended
Bill Title: Business investment: tax credits.
Spectrum: Partisan Bill (Democrat 3-0)
Status: (Introduced - Dead) 2012-04-18 - Set, first hearing. Hearing canceled at the request of author. [SB1467 Detail]
Download: California-2011-SB1467-Amended.html
BILL NUMBER: SB 1467 AMENDED
BILL TEXT
AMENDED IN SENATE APRIL 17, 2012
INTRODUCED BY Senator DeSaulnier
(Coauthor: Senator Vargas)
(Coauthor: Assembly Member Hueso)
FEBRUARY 24, 2012
An act to add Division 3.5 (commencing with Section 28960) to
Title 4 of the Corporations Code, and to repeal and amend
Sections 17053.80 and 23623 of the Revenue and Taxation Code,
relating to business investment.
LEGISLATIVE COUNSEL'S DIGEST
SB 1467, as amended, DeSaulnier. Business investment: tax credits.
Existing law imposes a gross premiums tax on insurers in lieu of
other taxes, with certain exceptions. Existing law provides
for credits against tax liability for certain taxpayers meeting
various requirements. The Capital Access Company Law
provides for licensing and regulation by the Commissioner of
Corporations of capital access companies, which provide risk capital
and management assistance to business entities.
The Personal Income Tax Law and the Corporation Tax Law authorize
various credits against the taxes imposed by those laws, including a
credit in an amount equal to $3,000, prorated as provided, for each
full-time employee hired during the taxable year by a qualified
employer, as defined. Existing law caps the total amount of credit
which may be allocated under those provisions to $400,000,000.
This bill would enact the California Capital Access
Company Credit Act Jobs Act of 2012 , which
would provide an investment tax credit against insurer premium tax
liability to participating investors, as defined, and would provide
for sale or transfer of the tax credits to other parties. The bill
would provide for a maximum amount of tax credits under the act
of $200,000,000, which could be claimed over specified tax
years and carried forward until tax year 2037 , and
would also cap the total amount of the credit which may be allocated
under existing law provisions authorizing a credit for the
hire of full-time employees by qualified employers and the credit
authorized under this act to $400,000,000 . The bill would
provide for the Business, Transportation and Housing Agency
Department of Insurance, California Organized
Insurance Network (DI/COIN) to, among other things, qualify
applicants as qualified capital access companies, which would receive
investment commitments from participating investors and make
qualified investments in qualified businesses, subject to approval by
the agency DI/COIN . The bill would
specify the process for qualified distributions to be made by the
qualified capital access company to private investors and the state,
with the state share to be deposited in the General Fund or in the
Economic Development Fund, which would be created by the bill, as
specified. The bill would provide for certain application and
certification fees, and impose certain penalties, and provide for
these revenues to be deposited in the Economic Development Fund. The
bill would define various terms for purposes of the act.
This bill would include a change in state statute that would
result in a taxpayer paying a higher tax within the meaning of
Section 3 of Article XIII A of the California Constitution, and thus
would require for passage the approval of 2/3 of the membership of
each house of the Legislature.
Vote: majority 2/3 . Appropriation:
no. Fiscal committee: yes. State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Division 3.5 (commencing with Section 28960) is added
to Title 4 of the Corporations Code, to read:
DIVISION 3.5. CALIFORNIA CAPITAL ACCESS
JOBS COMPANY CREDIT ACT OF 2012
28960. This division shall be known and may be cited as the
California Capital Access Company Credit Act.
California Jobs Act of 2012.
28961. As used in this division:
(a) (1) "Affiliate" means either of the following:
(A) Any person who, directly or indirectly, beneficially owns,
controls, or holds power to vote 15 percent or more of the
outstanding voting securities or other voting ownership interest of a
qualified capital access company or insurance company.
(B) Any person, 15 percent or more of whose outstanding voting
securities or other voting ownership interests are directly or
indirectly beneficially owned, controlled, or held with power to vote
by a qualified capital access company or insurance company.
(2) Notwithstanding anything in this subdivision, an investment by
a participating investor in a qualified capital access company
pursuant to an allocation of investment tax credits under this
section division does not cause that
qualified capital access company to become an affiliate of that
participating investor.
(b) "Allocation amount" means the total amount of tax credits
allocated to the participating investors in a qualified capital
access company pursuant to this division.
(c) "Allocation date" means the date on which investment tax
credits under Section 28964 are allocated to the participating
investor of a qualified capital access company under this division.
(d) "Base investment amount" means not less than
fourteen million dollars ($14,000,000) in the case of a qualified
capital access company receiving one allocation of tax credits and
twenty-eight million dollars ($28,000,000) in the case of a qualified
capital access company receiving two allocations of tax credits,
which shall be available in cash or cash equivalents immediately
following the investment by a qualified capital access company's
participating private investors
and its owners on a one-to- one
matching basis ; provided, however, that a contract for payment
of cash or cash equivalents over a specified period of time by
the participating investor shall also be sufficient.
(e) "Capital access company" means a venture capital fund licensed
by the Department of Corporations under the Capital Access Company
Law (Division 3 (commencing with Section 28000)).
(f) "Designated capital" means an amount of money that is invested
by a participating investor in a qualified capital access company.
(g) "DI/COIN" means the Department of Insurance, California
Organized Insurance Network.
(g)
(h) "Distributable cash" means the excess of the sum of
all cash receipts of all kinds over cash disbursements for operating
expenses and qualified distributions, or reserves therefor. The
general partner may, at its sole discretion, retain reasonable
amounts for working capital and reserves for contingencies and
reasonably foreseeable obligations.
(h)
(i) "Investment period" means the period January 1,
2013, to December 31, 2021, inclusive.
(i)
(j) "Participating investor" means any insurance
company required to pay the gross premiums tax pursuant to Part 7 of
Division 2 (commencing with Section 12001) of the Revenue and
Taxation Code that contributes designated capital pursuant to this
division.
(j)
(k) "Percentage interest" means, with respect to a
private investor, the ratio of the private investor's capital
contribution to the total capital contributions of all private
investors, as adjusted from time to time.
(k)
(l) "Person" means a natural person or an entity,
including, but not limited to, a corporation, general or limited
partnership, trust, or limited liability company.
(l)
(m) "Private investor" means any investor in a capital
access company other than a participating investor or the manager of
a capital access company.
(m)
(n) "Profit share percentage" means allocation of
distributable cash as provided in Section 28968.
(n)
(o) (1) "Qualified business" means a business that is
independently owned and operated and meets all of the following
requirements:
(A) It is headquartered in California, its principal business
operations are located in California, and at least 60
percent of its employees are located in California.
(B) It has not more than 100 employees.
(C) It is not principally engaged in professional services
provided by accountants, doctors, physicians,
dentists, or lawyers; banking or lending; real estate
development; insurance; oil or gas exploration; or direct gambling
activities.
(D) It is not a franchise of, and has no financial relationship
with, a qualified capital access company or any affiliate of a
qualified capital access company prior to a qualified capital access
company's first qualified investment in the business; provided,
however, that if it the qualified capital
access co mpany continues to fulfill its fiduciary
duty to the program established by this division, then the business
may be one in which the qualified capital access company, its
affiliates, or a separate fund managed by the managers of the capital
access company was invested prior to the allocation of investment
tax credits to the capital access company; and provided, further,
that if the qualified capital access company continues to fulfill its
fiduciary duty to the program established by this division, then the
business may be one in which a separate fund managed by the managers
of the qualified capital access company makes an investment after
the investment by the qualified capital access company.
(2) (A) The requirements of paragraph (1) may, in the alternative,
be met if the qualified capital access company represents in its
application for funding approval that the business will, in the
definitive purchase agreements to be executed upon closing, agree to
both of the following:
(i) Commence locating its headquarters, its principal business
operations, and at least 60 percent of its employees in California.
(ii) Complete all of the required elements of paragraph (1) within
12 months after closing.
(B) If the business fails to fulfill the commitments specified in
subparagraph (A), the Secretary of Business, Transportation
and Housing DI/COIN may, in the
secretary's its sole discretion, impose a
penalty on the qualified capital access company. Notwithstanding
anything in this subdivision, the penalty shall be imposed such that
the profit share percentage, as otherwise defined in Section 28968,
shall be amended such that the profit share percentage distributed to
the state by the qualified capital access company shall equal
80 50 percent of any distributions
arising from the qualified capital access company's investments
, other than qualified distributions or distributions or
repayments of capital contributions by the qualified capital access
company's equity owners who are not participating investors.
instead of 40 percent as provided in subparagraph (C)
of paragraph (1) of subdivision (a) of Section 28968. The additional
10 percent shall result from a reduction in the profit share
percentage of the qualified capital access company manager from 20
percent to 10 percent.
(3) A business classified as a qualified business at the time of
the first qualified investment in the business shall remain
classified as a qualified business and may receive continuing
qualified investments from any qualified capital access company;
provided, however, that the business continues to meet the
requirements of paragraph (1).
(o)
(p) "Qualified capital access company" means a
qualified capital access company that has been approved to receive an
investment tax credit allocation.
(p)
(q) "Qualified distribution" means any distribution or
payment by a qualified capital access company other than pursuant to
a profit allocation in connection with any of the following:
(1) Costs and expenses of forming, syndicating, and organizing the
qualified capital access company, including fees paid for
professional services; provided, however, that startup costs shall
not exceed 2 percent of the total capital of the capital access
company or five hundred thousand dollars ($500,000).
(2) An annual management fee to offset the costs and expenses of
managing and operating a qualified capital access company; provided,
however, that in the first four years following its allocation date,
a qualified capital access company's management fee shall not exceed
2 percent of its base investment amount per annum and in the fifth to
10th years, inclusive, following its allocation date, a qualified
capital access company's management fee per annum shall not exceed 2
percent of the lesser of its base investment amount or its qualified
investments.
(3) Reasonable and necessary fees in accordance with industry
custom for ongoing professional services, including, but not limited
to, legal and accounting services related to the operation of a
qualified capital access company, not including any lobbying or
governmental relations; provided, however, professional service fees
shall not exceed two hundred thousand dollars ($200,000) annually.
(4) An increase or projected increase in federal or state taxes of
the private investors of a qualified capital access company
resulting from the earnings or other tax liability of a qualified
capital access company to the extent that the increase is related to
the ownership, management, or operation of a qualified capital access
company; provided, however, that those distributions shall not
exceed that actual tax liability due and payable on that investor's
actual return. Documents supporting the payments shall be provided to
the Franchise Tax Board DI/COIN upon
request.
(q)
(r) "Qualified investment" means the investment of cash
by a qualified capital access company in a qualified business for
the purchase of equity, equity options, warrants, or debt convertible
to equity. An investment by a qualified capital access company in a
debt instrument whose terms are substantially equivalent to terms
typically found in debt financing provided by banks to profitable
companies, such as security interests in tangible assets with readily
discernable discernible orderly
liquidation value in excess of the loan amount or personal
guarantees, shall not be deemed as a qualified investment. Qualified
investments determined to be seed or early stage investments shall be
increased by 300 percent for purposes of determining if a qualified
capital access company meets the investment thresholds in Section
28965.
(r)
(s) "Seed or early stage investment" means an
investment in a company that has a product or service in testing or
pilot production that may or may not be commercially available. The
company may or may not be generating revenues and may have been in
business less than three years at the time of investment.
(s)
(t) "State" means the State of California.
(t)
(u) "State premium tax liability" means any liability
incurred by an insurance company under the provisions of Part 7
(commencing with Section 12001) of Division 2 of the Revenue and
Taxation Code.
28962. (a) A participating investor shall earn an investment tax
credit against its state premium tax liability equal to 100 percent
of the investment tax credit allocated to the participating investor
under Section 28964. The participating investor's investment tax
credit shall be earned and vested upon making its investment in the
qualified capital access company. Beginning January 1, 2013,
2014, a participating investor may claim the
investment tax credit as follows:
(1) In tax years 2014, 2015, 2016, and 2017, an amount equal to 15
percent of the investment tax credit allocated to the participating
investor.
(2) In tax years 2018, 2019, 2020, and 2021, an amount equal to 10
percent of the investment tax credit allocated to the participating
investor.
(b) No participating investor's investment tax credit for any
taxable year shall exceed the participating investor's state premium
tax liability for that year. If the amount of the investment tax
credit determined under this section for any taxable year exceeds the
state premium tax liability, then the excess shall be an investment
tax credit carryover to future taxable years until tax year 2037.
Investment tax credits may be used in connection with both final
payments and prepayments of a participating investor's state premium
tax liability. Investment tax credits may be sold or otherwise
transferred by a participating investor to another entity, which may
likewise resell or transfer the tax credits, provided that
the Franchise Tax Board DI/COIN receives written
notification within 30 days of any sale or transfer and
approves the transferee as a participating investor . However,
investment tax credits are not refundable.
(c) A participating investor claiming an investment tax credit
under this section is not required to pay any additional retaliatory
tax levied as a result of claiming the investment tax credit.
(d) A participating investor is not required to reduce the amount
of tax pursuant to the state premium tax liability included by the
participating investor in connection with ratemaking for any
insurance contract written in this state because of a reduction in
the participating investor's tax liability based on the investment
tax credit allowed under this section.
(e) If the taxes paid by a participating investor with respect to
its state premium tax liability constitute a credit against any other
tax that is imposed by this state, the participating investor's
credit against the other tax shall not be reduced by virtue of the
reduction in the participating investor's tax liability based on the
investment tax credit allowed under this section.
28963. (a) The Business, Transportation and Housing
Agency, in consultation with the Franchise Tax Board,
DI/COIN shall provide a standardized format for persons
attempting to qualify as a qualified capital access company.
(b) An applicant for qualification is required to do all of the
following:
(1) File an application with the Business, Transportation
and Housing Agency DI/COIN .
(2) Pay a nonrefundable application fee of seven thousand five
hundred dollars ($7,500) at the time of filing the application, to be
deposited in the Economic Development Fund.
(3) Submit, as part of its application, an audited balance sheet
that contains an unqualified opinion of an independent certified
public accountant issued not more than 60 days before the application
date that states that the applicant has an equity capitalization of
five million dollars ($5,000,000) or more in the form of unencumbered
cash, marketable securities, or other liquid assets.
(4) Submit, as part of its application, a certification from the
Commissioner of Corporations that the applicant is a capital access
company licensed under the California Capital Access Company Law
(Division 3 (commencing with Section 28000)).
(c) The Business, Transportation and Housing Agency and
the Franchise Tax Board DI/COIN shall review the
organizational documents of each applicant for certification and
determine whether the applicant has satisfied the requirements of
this division.
(d) Within 30 days after the receipt of an application,
the Business, Transportation and Housing Agency
DI/COIN shall issue the certification or refuse the
certification and communicate in detail to the applicant the grounds
for refusal, including suggestions for the removal of those grounds.
(e) The Business, Transportation and Housing Agency
DI/COIN shall begin accepting applications to
become a qualified capital access company by January 31, 2013. All
applications must shall be submitted to
the agency DI/COIN no later than
October 1, 2013.
28964. (a) The Business, Transportation and Housing
Agency, in consultation with the Franchise Tax Board,
DI/COIN shall provide a standardized format for a qualified
capital access company to apply for the investment tax credits.
(b) Applications shall contain the information as required by
the Franchise Tax Board and the Business, Transportation and
Housing Agency DI/COIN , including statements
regarding the ability to obtain the required investment commitments
from private investors . Each qualified capital access
company shall submit irrevocable investment commitments from
participating investors and qualified capital access company
private investors in an aggregate amount equal to at least
the base investment amount not later than November 30, 2013.
Qualified capital access companies that are awarded investment tax
credits under this chapter based on the asserted ability to raise the
required capital shall be subject to a fifty-thousand-dollar
($50,000) penalty for failure to perform. The proceeds from the
penalty shall be deposited into the Economic Development Fund to
further the state's economic development efforts.
(c) (1) The Franchise Tax Board and the Business,
Transportation and Housing Agency, DI/COIN, in
consultation with the Treasurer, shall review the applications and
award the investment tax credits to capital access companies based on
the overall strength of their applications using all of the
following criteria:
(A) (i) The applicant has at least two investment managers with
five or more years of experience in investment
experience or mezzanine lending .
(ii) The applicant has been based, as defined by having a
principal office, in the state for at least five years or has at
least five years of experience in investing or mezzanine lending
primarily in California-domiciled companies.
(iii) The applicant's proposed investment strategy for achieving
transformational economic development outcomes through focused
investments of capital in seed or early stage companies with
high-growth potential.
(iv) The applicant's demonstrated ability to lead investment
rounds, advise and mentor entrepreneurs, and
facilitate follow-on investments , and execute investment exits
.
(B) Qualified capital Capital access
companies that do not meet the criteria in clause (ii) of
subparagraph (A) may submit a joint application with an entity that
meets the criteria set out in clause (ii) of subparagraph (A) and
that application shall be judged based on the combined attributes of
the joint application.
(2) The awarding of investment tax credits shall be at the sole
discretion of the Franchise Tax Board and the Secretary of
Business, Transportation and Housing DI/COIN .
(d) (1) The aggregate amount of investment
tax credits to be allocated to all participating investors of
qualified capital access companies under this chapter shall not
exceed two hundred million dollars ($200,000,000). The investment tax
credits will be awarded in twenty-million-dollar ($20,000,000)
allocations. No qualified capital access company, on an aggregate
basis with its joint applicants, may apply for more than two
twenty-million-dollar ($20,000,000) allocations. No participating
investor, on an aggregate basis with its affiliates, may be allocated
more than 25 percent of the maximum amount of investment tax credits
authorized hereunder, regardless of whether the claim is made in
connection with one or more than one qualified capital access
company.
(2) DI/COIN shall not qualify capital access companies or award
investment tax credits pursuant to this division on or after the
cutoff date established by the Franchise Tax Board pursuant to
subdivision (f).
(e) The qualified capital access company
applicant shall receive, no later than December 31, 2013, a
written notice from the Business, Transportation and Housing
Agency DI/COIN stating whether or not it has
been approved as a qualified capital access company and, if
applicable, stating the amount of its investment tax credit
allocation.
(f) (1) (A) Credit under this division and Sections 17053.80 and
23623 of the Revenue and Taxation Code shall be allowed only for
credits claimed on timely filed original returns received by the
Franchise Tax Board on or before the cutoff date established by the
Franchise Tax Board.
(B) For purposes of this paragraph, the cutoff date shall be the
last day of the calendar quarter within which the Franchise Tax Board
estimates it will have received timely filed original returns
claiming credits under this section and Section 23623 of the Revenue
and Taxation Code that cumulatively total four hundred million
dollars ($400,000,000) for all taxable years.
(2) The date a return is received shall be determined by the
Franchise Tax Board.
(3) (A) The determinations of the Franchise Tax Board with respect
to the cutoff date, the date a return is received, and whether a
return has been timely filed for purposes of this subdivision may not
be reviewed in any administrative or judicial proceeding.
(B) Any disallowance of a credit claimed due to a determination
under this subdivision, including the application of the limitation
specified in paragraph (1), shall be treated as a mathematical error
appearing on the return. Any amount of tax resulting from this
disallowance may be assessed by the Franchise Tax Board in the same
manner as provided by Section 19051 of the Revenue and Taxation Code.
(4) The Franchise Tax Board shall periodically provide notice on
its Internet Web site and to the DI/COIN with respect to the amount
of credit under this division and Sections 17053.80 and 23623 of the
Revenue and Taxation Code claimed on timely filed original returns
received by the Franchise Tax Board.
28965. (a) (1) To maintain its certification, a qualified capital
access company shall make qualified investments, as follows:
(A) Within two years after the allocation date, a qualified
capital access company shall have invested an amount equal to at
least 50 percent of its base investment amount in qualified
investments.
(B) Within three years after the allocation date, a qualified
capital access company shall have invested an amount equal to at
least 70 percent of its base investment amount in qualified
investments.
(C) Within four years after the allocation date, a qualified
capital access company shall have invested an amount equal to at
least 80 percent of its base investment amount in qualified
investments.
(D) Within six years or any year thereafter the allocation date, a
qualified capital access company shall have invested an amount equal
to at least 90 percent of its base investment amount in qualified
investments.
(2) Failure to meet the performance measures set out in paragraph
(1) during any calendar year shall result in a
two-hundred-fifty-thousand-dollar ($250,000) penalty to be imposed
against the qualified capital access company. The proceeds from the
penalty shall be deposited into the Economic Development Fund. Funds
related to the investment tax credit shall not be used to pay the
penalty.
(b) Prior to making a proposed qualified investment in a specific
business, a qualified capital access company shall request from
the Business, Transportation and Housing Agency
DI/COIN a written determination that the proposed
investment will qualify as a qualified investment in a qualified
business or, if applicable, as a seed or early stage investment.
The agency DI/COIN shall notify a
qualified capital access company within 10 business days from the
receipt of a request of its determination. If the agency
DI/COIN fails to notify the qualified capital
access company of its determination within 10 business days, the
proposed investment will be deemed to be a qualified investment in a
qualified business and, if applicable, as a seed or early stage
investment. If the agency DI/COIN
determines that the proposed investment does not meet the definition
of a qualified investment, qualified business, or seed or early stage
investment, the department DI/COIN may
nevertheless consider the proposed investment a qualified
investment, or a seed or early stage investment and, if necessary,
consider the business a qualified business, if the agency
DI/COIN determines that the proposed investment
will further state economic development.
(c) All designated capital not invested in qualified investments
by a qualified capital access company shall be held in an escrow
account maintained by the state Treasurer
and administered through the Business, Transportation
and Housing Agency DI/COIN .
(d) A qualified capital access company may not invest more than 15
percent of its designated capital in any one qualified business
without the specific approval of the Business,
Transportation and Housing Agency DI/COIN .
(e) Any amounts that have not been invested by the qualified
capital access company at the end of the investment period shall be
forfeited and paid to the state for deposit in the Economic
Development Fund.
(f) No qualified capital access company shall sell any interest in
a qualified business to an affiliate unless the qualified capital
access company has first obtained written authorization for the sale
from the Business, Transportation and Housing Agency
DI/COIN .
28966. An insurance company , or affiliate of an
insurance company , that is a participating investor shall
not, directly or indirectly, do any of the following:
(a) Beneficially own, whether through rights, options, convertible
interest, or otherwise, 15 percent or more of the voting securities
or other voting ownership interest of a qualified capital access
company.
(b) Manage a qualified capital access company (other than
exercising remedies for default).
(c) Control the direction of
investments for a qualified capital access company.
28967. Qualified distributions from a qualified capital access
company may be made at any time. Distributions other than qualified
distributions from a qualified capital access company may be paid out
annually or upon designated liquidity events as established by the
qualified capital access company. Distributions other than qualified
distributions may not reduce the base investment amount during any
calendar year. The profit share percentage shall be paid to the state
in the same time and manner as all other distributions as provided
in Section 28968. Those payments shall be deposited into the General
Fund or the Economic Development Fund as provided in Section 28968,
as directed by the Secretary of Business, Transportation and
Housing DI/COIN . Investment capital liquidated
during a liquidity event shall be given a one-year redeployment
period for purposes of calculating the investment thresholds in
Section 28965.
28968. (a) (1) At any time that the qualified capital access
company makes distributions of distributable cash, it shall make the
distributions in the following profit share
percentages indicated in the following priority, except as
provided in subdivision (o) of Section 28961 :
(A) First, 75 percent of distributable cash to the private
investors, in proportion to their respective percentage interest, and
25 percent to the state, until each private investor has received
cumulative distributions equal to 100 percent of his or her capital
contributions. The amount distributed to the state shall be deposited
in the General Fund.
(B) Second, 100 percent of distributable cash to the state, until
it has received 100 percent of its tax credit revenue loss
attributable to the qualified capital access company. This amount
shall be deposited in the General Fund.
(C) Third, 20 percent of distributable cash to the qualified
capital access company manager, and 80 40
percent of distributable cash dividend equally between
to the state , and 40 percent
of distributable cash to the private investors in accordance
with their respective percentage interest
interests . The amount distributed to the state shall be
deposited in the Economic Development Fund.
(2) Losses shall be allocated so that 75 percent of realized
losses are allocated to the state, and 25 percent are allocated to
the private investors in proportion to their respective percentage
interest, until distributions of distributable cash has restored the
capital accounts of the private investors to zero.
(b) The qualified capital access company and the state shall
structure the qualified distributions and distributions of
distributable cash and final distributions in a manner that minimizes
any related federal tax obligation. To the extent that the profit
share distribution to qualified capital access company private
investors is less than the state's share, pursuant to the profit
share percentage, due to federal income tax liabilities, the final
distribution may be adjusted to equalize the post-tax profit share
payments made during the investment period.
28969. (a) Each qualified capital access company shall report all
of the following to the Business, Transportation and
Housing Agency: DI/COIN:
(1) As soon as practicable, but no later than 30 days after the
receipt of designated capital:
(A) The name of each participating investor from which the
designated capital was received, including the participating investor'
s insurance tax identification number.
(B) The amount of each participating investor's investment of
designated capital.
(C) The date on which the designated capital was received.
(2) On an annual basis, on or before January 31 of each year:
(A) The amount of the qualified capital access company's remaining
uninvested designated capital at the end of the immediately
preceding taxable year.
(B) Whether or not the qualified capital access company has
invested more than 15 percent of its total designated capital in any
one business.
(C) All qualified investments that the qualified capital access
company has made in the previous taxable year, including the number
of employees of each qualified business in which it has made
investments at the time of the investment and as of December 1 of the
preceding taxable year.
(D) For any qualified business where the qualified capital access
company no longer has an investment, the qualified capital access
company must provide employment figures for that company as of the
last day before the investment was terminated.
(3) Other information that the agency
DI/COIN may reasonably request that will help the
agency DI/COIN ascertain the impact of the
qualified capital access company program, both directly and
indirectly, on the economy of the state.
(4) Within 180 days of the close of its fiscal year, annual
audited financial statements of the qualified capital access company,
which must include the opinion of an independent certified public
accountant.
(5) An "agreed upon procedures report" or equivalent regarding the
operations of the qualified capital access company.
(b) A qualified capital access company shall pay to the
Business, Transportation and Housing Agency DI/COIN
an annual, nonrefundable certification fee of five thousand
dollars ($5,000) on or before April 1, or ten thousand dollars
($10,000) if later. No annual certification fee is required if the
payment date is within six months of the date a qualified capital
access company is first certified by the agency
DI/COIN .
(c) Upon satisfying of the requirements of
paragraph (1) of subdivision (a) of Section 28965, a qualified
capital access company shall provide notice to the Business,
Transportation and Housing Agency, and the agency
DI/COIN, and DI/COIN shall, within 60 days of receipt of the
notice, either confirm that the qualified capital access company has
satisfied the requirement of that paragraph as of that date or
provide notice of noncompliance and an explanation of any existing
deficiencies. If the agency DI/COIN
does not provide such notification within 60 days, the qualified
capital access company shall be deemed to have met the requirement of
that paragraph.
(d) (1) For the purposes of this subdivision, "key person" means
either of the following:
(A) The qualified capital access company's investment managers
listed in the qualified capital access company's application under
Section 28964.
(B) The individuals on the list of investment managers as has been
previously approved by the Business, Transportation and
Housing Agency DI/COIN under paragraph (2) or
otherwise.
(2) A qualified capital access company's success shall be deemed
to depend, in particular, on the qualified capital access company's
key person or persons. On or before July 1, 2013, each qualified
capital access company shall provide to the Business,
Transportation and Housing Agency DI/COIN a
description of the qualified capital access company's procedure for
choosing a successor should any key person die, become legally
incapacitated, or cease to be involved in the management of the
qualified capital access company for more than 90 consecutive days.
In the event that a majority of key persons do die, become legally
incapacitated, or cease to be involved in the management of the
qualified capital access company for more than 90 consecutive days
for any reason, the Secretary of Business, Transportation
and Housing, in consultation with the Franchise Tax Board and the
Treasurer or any other appropriate professional adviser,
DI/COIN shall determine whether a new individual or
individuals will be able to assume the role of key person so that the
qualified capital access company's performance will remain
unimpaired. If the secretary DI/COIN
determines, in the secretary's its sole
discretion, that the key person cannot be adequately replaced and
the qualified capital access company's performance therefor will be
impaired, then any funds not already invested by the qualified
capital access company shall be deposited into an escrow account
unless the Franchise Tax Board certifies,
DI/COIN determines that the total amount of payments deposited
in the General Fund under this division equals or exceeds the total
amount of revenue foregone pursuant to the credits used as provided
in Section 28962. If the Franchise Tax Board
DI/COIN has made that determination, then any funds not already
invested by the qualified capital access company shall be deposited
into the Economic Development Fund to further support the state's
economic development efforts.
28970. (a) The Business, Transportation and Housing
Agency DI/COIN shall conduct an
annual review of each qualified capital access company to determine
if it is abiding by the requirements of the program and to ensure
that no investments have been made in violation of this division. The
cost of the annual review shall be paid by each qualified capital
access company according to a reasonable fee schedule adopted by
the agency DI/COIN .
(b) The agency DI/COIN shall provide
the qualified capital access company a summary of findings including
any areas of noncompliance. The qualified capital access company
shall have 60 days to cure any areas of noncompliance. Failure to
cure the areas of noncompliance within 60 days shall result in a
penalty of ten thousand dollars ($10,000) per day until the
noncompliance is cured. The proceeds from the penalty shall be
deposited into the Economic Development Fund to further the state's
economic development efforts. Funds related to the investment tax
credit shall not be used to pay the penalty imposed under this
section.
(c) To promote openness and transparency, a copy of each annual
report received by the Business, Transportation and Housing
Agency DI/COIN pursuant to this section shall be
posted on the agency's DI/COIN's
Internet Web site.
(d) The Business, Transportation and Housing Agency
DI/COIN shall provide the Treasurer, upon
request, a copy of any written findings made in connection with the
annual review required under subdivision (a) and a copy of the
summary of findings provided to the qualified capital access company
pursuant to subdivision (b).
28971. The Economic Development Fund is hereby created in the
State Treasury. Money in the fund from application fees pursuant to
paragraph (2) of subdivision (b) of Section 28963 and from
recertification fees pursuant to subdivision (b) of Section 28969
shall be available, upon appropriation by the Legislature, for
administration of this division. Money in the fund from penalties
imposed pursuant to this division or from qualified distributions
pursuant to Section 28968 shall be available, upon appropriation by
the Legislature, to further the state's economic development efforts,
as specified by the Legislature.
SEC. 2. Section 17053.80 of the Revenue
and Taxation Code , as added by Section 3 of Chapter 10
of the Third Extraordinary Session of the Statutes of
2009, is repealed.
17053.80. (a) For each taxable year beginning on or after January
1, 2009, there shall be allowed as a credit against the "net tax,"
as defined in Section 17039, three thousand dollars ($3,000) for each
net increase in qualified full-time employees, as specified in
subdivision (c), hired during the taxable year by a qualified
employer.
(b) For purposes of this section:
(1) "Acquired" includes any gift, inheritance, transfer incident
to divorce, or any other transfer, whether or not for consideration.
(2) "Qualified full-time employee" means:
(A) A qualified employee who was paid qualified wages by the
qualified employer for services of not less than an average of 35
hours per week.
(B) A qualified employee who was a salaried employee and was paid
compensation during the taxable year for full-time employment, within
the meaning of Section 515 of the Labor Code, by the qualified
employer.
(3) A "qualified employee" shall not include any of the following:
(A) An employee certified as a qualified employee in an enterprise
zone designated in accordance with Chapter 12.8 (commencing with
Section 7070) of Division 7 of Title 1 of the Government Code.
(B) An employee certified as a qualified disadvantaged individual
in a manufacturing enhancement area designated in accordance with
Section 7073.8 of the Government Code.
(C) An employee certified as a qualified employee in a targeted
tax area designated in accordance with Section 7097 of the Government
Code.
(D) An employee certified as a qualified disadvantaged individual
or a qualified displaced employee in a local agency military base
recovery area (LAMBRA) designated in accordance with Chapter 12.97
(commencing with Section 7105) of Division 7 of Title 1 of the
Government Code.
(E) An employee whose wages are included in calculating any other
credit allowed under this part.
(4) "Qualified employer" means a taxpayer that, as of the last day
of the preceding taxable year, employed a total of 20 or fewer
employees.
(5) "Qualified wages" means wages subject to Division 6
(commencing with Section 13000) of the Unemployment Insurance Code.
(6) "Annual full-time equivalent" means either of the following:
(A) In the case of a full-time employee paid hourly qualified
wages, "annual full-time equivalent" means the total number of hours
worked for the taxpayer by the employee (not to exceed 2,000 hours
per employee) divided by 2,000.
(B) In the case of a salaried full-time employee, "annual
full-time equivalent" means the total number of weeks worked for the
taxpayer by the employee divided by 52.
(c) The net increase in qualified full-time employees of a
qualified employer shall be determined as provided by this
subdivision:
(1) (A) The net increase in qualified full-time employees shall be
determined on an annual full-time equivalent basis by subtracting
from the amount determined in subparagraph (C) the amount determined
in subparagraph (B).
(B) The total number of qualified full-time employees employed in
the preceding taxable year by the taxpayer and by any trade or
business acquired by the taxpayer during the current taxable year.
(C) The total number of full-time employees employed in the
current taxable year by the taxpayer and by any trade or business
acquired during the current taxable year.
(2) For taxpayers who first commence doing business in this state
during the taxable year, the number of full-time employees for the
immediately preceding prior taxable year shall be zero.
(d) In the case where the credit allowed by this section exceeds
the "net tax," the excess may be carried over to reduce the "net tax"
in the following year, and succeeding seven years if necessary,
until the credit is exhausted.
(e) Any deduction otherwise allowed under this part for qualified
wages shall not be reduced by the amount of the credit allowed under
this section.
(f) For purposes of this section:
(1) All employees of the trades or businesses that are treated as
related under either Section 267, 318, or 707 of the Internal Revenue
Code shall be treated as employed by a single taxpayer.
(2) In determining whether the taxpayer has first commenced doing
business in this state during the taxable year, the provisions of
subdivision (f) of Section 17276, without application of paragraph
(7) of that subdivision, shall apply.
(g) (1) (A) Credit under this section and Section 23623 shall be
allowed only for credits claimed on timely filed original returns
received by the Franchise Tax Board on or before the cut-off date
established by the Franchise Tax Board.
(B) For purposes of this paragraph, the cut-off date shall be the
last day of the calendar quarter within which the Franchise Tax Board
estimates it will have received timely filed original returns
claiming credits under this section and Section 23623 that
cumulatively total four hundred million dollars ($400,000,000) for
all taxable years.
(2) The date a return is received shall be determined by the
Franchise Tax Board.
(3) (A) The determinations of the Franchise Tax Board with respect
to the cut-off date, the date a return is received, and whether a
return has been timely filed for purposes of this subdivision may not
be reviewed in any administrative or judicial proceeding
(B) Any disallowance of a credit claimed due to a determination
under this subdivision, including the application of the limitation
specified in paragraph (1), shall be treated as a mathematical error
appearing on the return. Any amount of tax resulting from such
disallowance may be assessed by the Franchise Tax Board in the same
manner as provided by Section 19051.
(4) The Franchise Tax Board shall periodically provide notice on
its Web site with respect to the amount of credit under this section
and Section 23623 claimed on timely filed original returns received
by the Franchise Tax Board.
(h) (1) The Franchise Tax Board may prescribe rules, guidelines or
procedures necessary or appropriate to carry out the purposes of
this section, including any guidelines regarding the limitation on
total credits allowable under this section and Section 23623 and
guidelines necessary to avoid the application of paragraph (2) of
subdivision (f) through split-ups, shell corporations, partnerships,
tiered ownership structures, or otherwise.
(2) Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code does not apply to any
standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the Franchise Tax Board pursuant
to this section.
(i) This section shall remain in effect only until December 1 of
the calendar year after the year of the cut-off date, and as of that
December 1 is repealed.
SEC. 3. Section 17053.80 of the Revenue
and Taxation Code , as added by Section 3 of Chapter 17
of the Third Extraordinary Session of the Statutes of
2009, is amended to read:
17053.80. (a) For each taxable year beginning on or after January
1, 2009, there shall be allowed as a credit against the "net tax,"
as defined in Section 17039, three thousand dollars ($3,000) for each
net increase in qualified full-time employees, as specified in
subdivision (c), hired during the taxable year by a qualified
employer.
(b) For purposes of this section:
(1) "Acquired" includes any gift, inheritance, transfer incident
to divorce, or any other transfer, whether or not for consideration.
(2) "Qualified full-time employee" means:
(A) A qualified employee who was paid qualified wages by the
qualified employer for services of not less than an average of 35
hours per week.
(B) A qualified employee who was a salaried employee and was paid
compensation during the taxable year for full-time employment, within
the meaning of Section 515 of the Labor Code, by the qualified
employer.
(3) A "qualified employee" shall not include any of the following:
(A) An employee certified as a qualified employee in an enterprise
zone designated in accordance with Chapter 12.8 (commencing with
Section 7070) of Division 7 of Title 1 of the Government Code.
(B) An employee certified as a qualified disadvantaged individual
in a manufacturing enhancement area designated in accordance with
Section 7073.8 of the Government Code.
(C) An employee certified as a qualified employee in a targeted
tax area designated in accordance with Section 7097 of the Government
Code.
(D) An employee certified as a qualified disadvantaged individual
or a qualified displaced employee in a local agency military base
recovery area (LAMBRA) designated in accordance with Chapter 12.97
(commencing with Section 7105) of Division 7 of Title 1 of the
Government Code.
(E) An employee whose wages are included in calculating any other
credit allowed under this part.
(4) "Qualified employer" means a taxpayer that, as of the last day
of the preceding taxable year, employed a total of 20 or fewer
employees.
(5) "Qualified wages" means wages subject to Division 6
(commencing with Section 13000) of the Unemployment Insurance Code.
(6) "Annual full-time equivalent" means either of the following:
(A) In the case of a full-time employee paid hourly qualified
wages, "annual full-time equivalent" means the total number of hours
worked for the taxpayer by the employee (not to exceed 2,000 hours
per employee) divided by 2,000.
(B) In the case of a salaried full-time employee, "annual
full-time equivalent" means the total number of weeks worked for the
taxpayer by the employee divided by 52.
(c) The net increase in qualified full-time employees of a
qualified employer shall be determined as provided by this
subdivision:
(1) (A) The net increase in qualified full-time employees shall be
determined on an annual full-time equivalent basis by subtracting
from the amount determined in subparagraph (C) the amount determined
in subparagraph (B).
(B) The total number of qualified full-time employees employed in
the preceding taxable year by the taxpayer and by any trade or
business acquired by the taxpayer during the current taxable year.
(C) The total number of full-time employees employed in the
current taxable year by the taxpayer and by any trade or business
acquired during the current taxable year.
(2) For taxpayers who first commence doing business in this state
during the taxable year, the number of full-time employees for the
immediately preceding prior taxable year shall be zero.
(d) In the case where the credit allowed by this section exceeds
the "net tax," the excess may be carried over to reduce the "net tax"
in the following year, and succeeding seven years if necessary,
until the credit is exhausted.
(e) Any deduction otherwise allowed under this part for qualified
wages shall not be reduced by the amount of the credit allowed under
this section.
(f) For purposes of this section:
(1) All employees of the trades or businesses that are treated as
related under either Section 267, 318, or 707 of the Internal Revenue
Code shall be treated as employed by a single taxpayer.
(2) In determining whether the taxpayer has first commenced doing
business in this state during the taxable year, the provisions of
subdivision (f) of Section 17276, without application of paragraph
(7) of that subdivision, shall apply.
(g) (1) (A) Credit under this section and Section 23623 of
this code and Division 3.5 (commencing with Section 28960) of Title 4
of the Corporations Code shall be allowed only for credits
claimed on timely filed original returns received by the Franchise
Tax Board on or before the cut-off cutoff
date established by the Franchise Tax Board.
(B) For purposes of this paragraph, the cut-off date shall be the
last day of the calendar quarter within which the Franchise Tax Board
estimates it will have received timely filed original returns
claiming credits under this section and Section 23623 of this
code and Division 3.5 (commencing with Section 28960) of Title 4 of
the Corporations Code that cumulatively total four hundred
million dollars ($400,000,000) for all taxable years.
(2) The date a return is received shall be determined by the
Franchise Tax Board.
(3) (A) The determinations of the Franchise Tax Board with respect
to the cut-off cutoff date, the date a
return is received, and whether a return has been timely filed for
purposes of this subdivision may not be reviewed in any
administrative or judicial proceeding
proceeding.
(B) Any disallowance of a credit claimed due to a determination
under this subdivision, including the application of the limitation
specified in paragraph (1), shall be treated as a mathematical error
appearing on the return. Any amount of tax resulting from such
disallowance may be assessed by the Franchise Tax Board in the same
manner as provided by Section 19051.
(4) The Franchise Tax Board shall periodically provide notice on
its Internet Web site with respect to the amount of credit
under this section and Section 23623 claimed on timely filed
original returns received by the Franchise Tax Board.
(h) (1) The Franchise Tax Board may prescribe rules, guidelines
, or procedures necessary or appropriate to carry out the
purposes of this section, including any guidelines regarding the
limitation on total credits allowable under this section and Section
23623 and guidelines necessary to avoid the application of paragraph
(2) of subdivision (f) through split-ups, shell corporations,
partnerships, tiered ownership structures, or otherwise.
(2) Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code does not apply to any
standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the Franchise Tax Board pursuant
to this section.
(i) This section shall remain in effect only until December 1 of
the calendar year after the year of the cut-off
cutoff date, and as of that December 1 is repealed.
SEC. 4. Section 23623 of the Revenue
and Taxation Code , as added by Section 8 of Chapter 10 of
the Third Extraordinary Session of the Statutes of
2009, is repealed.
23623. (a) For each taxable year beginning on or after January 1,
2009, there shall be allowed as a credit against the "tax," as
defined in Section 23036, three thousand dollars ($3,000) for each
net increase in qualified full-time employees, as specified in
subdivision (c), hired during the taxable year by a qualified
employer.
(b) For purposes of this section:
(1) "Acquired" includes any gift, inheritance, transfer incident
to divorce, or any other transfer, whether or not for consideration.
(2) "Qualified full-time employee" means:
(A) A qualified employee who was paid qualified wages during the
taxable year by the qualified employer for services of not less than
an average of 35 hours per week.
(B) A qualified employee who was a salaried employee and was paid
compensation during the taxable year for full-time employment, within
the meaning of Section 515 of the Labor Code, by the qualified
employer.
(3) A "qualified employee" shall not include any of the following:
(A) An employee certified as a qualified employee in an enterprise
zone designated in accordance with Chapter 12.8 (commencing with
Section 7070) of Division 7 of Title 1 of the Government Code.
(B) An employee certified as a qualified disadvantaged individual
in a manufacturing enhancement area designated in accordance with
Section 7073.8 of the Government Code.
(C) An employee certified as a qualified employee in a targeted
tax area designated in accordance with Section 7097 of the Government
Code.
(D) An employee certified as a qualified disadvantaged individual
or a qualified displaced employee in a local agency military base
recovery area (LAMBRA) designated in accordance with Chapter 12.97
(commencing with Section 7105) of Division 7 of Title 1 of the
Government Code.
(E) An employee whose wages are included in calculating any other
credit allowed under this part.
(4) "Qualified employer" means a taxpayer that, as of the last day
of the preceding taxable year, employed a total of 20 or fewer
employees.
(5) "Qualified wages" means wages subject to Division 6
(commencing with Section 13000) of the Unemployment Insurance Code.
(6) "Annual full-time equivalent" means either of the following:
(A) In the case of a full-time employee paid hourly qualified
wages, "annual full-time equivalent" means the total number of hours
worked for the taxpayer by the employee (not to exceed 2,000 hours
per employee) divided by 2,000.
(B) In the case of a salaried full-time employee, "annual
full-time equivalent" means the total number of weeks worked for the
taxpayer by the employee divided by 52.
(c) The net increase in qualified full-time employees of a
qualified employer shall be determined as provided by this
subdivision:
(1) (A) The net increase in qualified full-time employees shall be
determined on an annual full-time equivalent basis by subtracting
from the amount determined in subparagraph (C) the amount determined
in subparagraph (B).
(B) The total number of qualified full-time employees employed in
the preceding taxable year by the taxpayer and by any trade or
business acquired by the taxpayer during the current taxable year.
(C) The total number of full-time employees employed in the
current taxable year by the taxpayer and by any trade or business
acquired during the current taxable year.
(2) For taxpayers who first commence doing business in this state
during the taxable year, the number of full-time employees for the
immediately preceding prior taxable year shall be zero.
(d) In the case where the credit allowed by this section exceeds
the "tax," the excess may be carried over to reduce the "tax" in the
following year, and succeeding seven years if necessary, until the
credit is exhausted.
(e) Any deduction otherwise allowed under this part for qualified
wages shall not be reduced by the amount of the credit allowed under
this section.
(f) For purposes of this section:
(1) All employees of the trades or businesses that are treated as
related under either Section 267, 318, or 707 of the Internal Revenue
Code shall be treated as employed by a single taxpayer.
(2) In determining whether the taxpayer has first commenced doing
business in this state during the taxable year, the provisions of
subdivision (f) of Section 17276, without application of paragraph
(7) of that subdivision, shall apply.
(g) (1) (A) Credit under this section and Section 17053.80 shall
be allowed only for credits claimed on timely filed original returns
received by the Franchise Tax Board on or before the cut-off date
established by the Franchise Tax Board.
(B) For purposes of this paragraph, the cut-off date shall be the
last day of the calendar quarter within which the Franchise Tax Board
estimates it will have received timely filed original returns
claiming credits under this section and Section 17053.80 that
cumulatively total four hundred million dollars ($400,000,000) for
all taxable years.
(2) The date a return is received shall be determined by the
Franchise Tax Board.
(3) (A) The determinations of the Franchise Tax Board with respect
to the cut-off date, the date a return is received, and whether a
return has been timely filed for purposes of this subdivision may not
be reviewed in any administrative or judicial proceeding.
(B) Any disallowance of a credit claimed due to a determination
under this subdivision, including the application of the limitation
specified in paragraph (1), shall be treated as a mathematical error
appearing on the return. Any amount of tax resulting from such
disallowance may be assessed by the Franchise Tax Board in the same
manner as provided by Section 19051.
(4) The Franchise Tax Board shall periodically provide notice on
its Web site with respect to the amount of credit under this section
and Section 17053.80 claimed on timely filed original returns
received by the Franchise Tax Board.
(h) (1) The Franchise Tax Board may prescribe rules, guidelines or
procedures necessary or appropriate to carry out the purposes of
this section, including any guidelines regarding the limitation on
total credits allowable under this section and Section 17053.80 and
guidelines necessary to avoid the application of paragraph (2) of
subdivision (f) through split-ups, shell corporations, partnerships,
tiered ownership structures, or otherwise.
(2) Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code does not apply to any
standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the Franchise Tax Board pursuant
to this section.
(i) This section shall remain in effect only until December 1 of
the calendar year after the year of the cut-off date, and as of that
December 1 is repealed.
SEC. 5. Section 23623 of the Revenue
and Taxation Code , as added by Section 8 of Chapter 17 of
the Third Extraordinary Session of the Statutes of 2009,
is amended to read:
23623. (a) For each taxable year beginning on or after January 1,
2009, there shall be allowed as a credit against the "tax," as
defined in Section 23036, three thousand dollars ($3,000) for each
net increase in qualified full-time employees, as specified in
subdivision (c), hired during the taxable year by a qualified
employer.
(b) For purposes of this section:
(1) "Acquired" includes any gift, inheritance, transfer incident
to divorce, or any other transfer, whether or not for consideration.
(2) "Qualified full-time employee" means:
(A) A qualified employee who was paid qualified wages during the
taxable year by the qualified employer for services of not less than
an average of 35 hours per week.
(B) A qualified employee who was a salaried employee and was paid
compensation during the taxable year for full-time employment, within
the meaning of Section 515 of the Labor Code, by the qualified
employer.
(3) A "qualified employee" shall not include any of the following:
(A) An employee certified as a qualified employee in an enterprise
zone designated in accordance with Chapter 12.8 (commencing with
Section 7070) of Division 7 of Title 1 of the Government Code.
(B) An employee certified as a qualified disadvantaged individual
in a manufacturing enhancement area designated in accordance with
Section 7073.8 of the Government Code.
(C) An employee certified as a qualified employee in a targeted
tax area designated in accordance with Section 7097 of the Government
Code.
(D) An employee certified as a qualified disadvantaged individual
or a qualified displaced employee in a local agency military base
recovery area (LAMBRA) designated in accordance with Chapter 12.97
(commencing with Section 7105) of Division 7 of Title 1 of the
Government Code.
(E) An employee whose wages are included in calculating any other
credit allowed under this part.
(4) "Qualified employer" means a taxpayer that, as of the last day
of the preceding taxable year, employed a total of 20 or fewer
employees.
(5) "Qualified wages" means wages subject to Division 6
(commencing with Section 13000) of the Unemployment Insurance Code.
(6) "Annual full-time equivalent" means either of the following:
(A) In the case of a full-time employee paid hourly qualified
wages, "annual full-time equivalent" means the total number of hours
worked for the taxpayer by the employee (not to exceed 2,000 hours
per employee) divided by 2,000.
(B) In the case of a salaried full-time employee, "annual
full-time equivalent" means the total number of weeks worked for the
taxpayer by the employee divided by 52.
(c) The net increase in qualified full-time employees of a
qualified employer shall be determined as provided by this
subdivision:
(1) (A) The net increase in qualified full-time employees shall be
determined on an annual full-time equivalent basis by subtracting
from the amount determined in subparagraph (C) the amount determined
in subparagraph (B).
(B) The total number of qualified full-time employees employed in
the preceding taxable year by the taxpayer and by any trade or
business acquired by the taxpayer during the current taxable year.
(C) The total number of full-time employees employed in the
current taxable year by the taxpayer and by any trade or business
acquired during the current taxable year.
(2) For taxpayers who first commence doing business in this state
during the taxable year, the number of full-time employees for the
immediately preceding prior taxable year shall be zero.
(d) In the case where the credit allowed by this section exceeds
the "tax," the excess may be carried over to reduce the "tax" in the
following year, and succeeding seven years if necessary, until the
credit is exhausted.
(e) Any deduction otherwise allowed under this part for qualified
wages shall not be reduced by the amount of the credit allowed under
this section.
(f) For purposes of this section:
(1) All employees of the trades or businesses that are treated as
related under either Section 267, 318, or 707 of the Internal Revenue
Code shall be treated as employed by a single taxpayer.
(2) In determining whether the taxpayer has first commenced doing
business in this state during the taxable year, the provisions of
subdivision (f) of Section 17276, without application of paragraph
(7) of that subdivision, shall apply.
(g) (1) (A) Credit under this section and Section 17053.80 of
this code and Division 3.5 (commencing with
Section 28960) of Title 4 of the Corporations Code shall be
allowed only for credits claimed on timely filed original returns
received by the Franchise Tax Board on or before the cut-off date
established by the Franchise Tax Board.
(B) For purposes of this paragraph, the cut-off date shall be the
last day of the calendar quarter within which the Franchise Tax Board
estimates it will have received timely filed original returns
claiming credits under this section and Section 17053.80 of this
code and Division 3.5 (commencing with Section 28960) of
Title 4 of the Corporations Code that cumulatively total four
hundred million dollars ($400,000,000) for all taxable years.
(2) The date a return is received shall be determined by the
Franchise Tax Board.
(3) (A) The determinations of the Franchise Tax Board with respect
to the cut-off date, the date a return is received, and whether a
return has been timely filed for purposes of this subdivision may not
be reviewed in any administrative or judicial proceeding.
(B) Any disallowance of a credit claimed due to a determination
under this subdivision, including the application of the limitation
specified in paragraph (1), shall be treated as a mathematical error
appearing on the return. Any amount of tax resulting from such
disallowance may be assessed by the Franchise Tax Board in the same
manner as provided by Section 19051.
(4) The Franchise Tax Board shall periodically provide notice on
its Internet Web site with respect to the amount of credit
under this section and Section 17053.80 claimed on timely filed
original returns received by the Franchise Tax Board.
(h) (1) The Franchise Tax Board may prescribe rules, guidelines
, or procedures necessary or appropriate to carry out the
purposes of this section, including any guidelines regarding the
limitation on total credits allowable under this section and Section
17053.80 and guidelines necessary to avoid the application of
paragraph (2) of subdivision (f) through split-ups, shell
corporations, partnerships, tiered ownership structures, or
otherwise.
(2) Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code does not apply to any
standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the Franchise Tax Board pursuant
to this section.
(i) This section shall remain in effect only until December 1 of
the calendar year after the year of the cut-off date, and as of that
December 1 is repealed.
