Bill Text: CA SB79 | 2011-2012 | Regular Session | Amended
NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: State funds: State Agency Investment Fund.
Spectrum: Unknown
Status: (Passed) 2011-08-01 - Chaptered by Secretary of State. Chapter 142, Statutes of 2011. [SB79 Detail]
Download: California-2011-SB79-Amended.html
Bill Title: State funds: State Agency Investment Fund.
Spectrum: Unknown
Status: (Passed) 2011-08-01 - Chaptered by Secretary of State. Chapter 142, Statutes of 2011. [SB79 Detail]
Download: California-2011-SB79-Amended.html
BILL NUMBER: SB 79 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MARCH 17, 2011
AMENDED IN ASSEMBLY MARCH 14, 2011
INTRODUCED BY Committee on Budget and Fiscal Review
JANUARY 10, 2011
An act to amend Sections 12009, 12201, 12204, 12207, 12242,
12251, 12253, 12254, 12257, 12258, 12260, 12301, 12302, 12303, 12304,
12305, 12307, 12412, 12413, 12421, 12422, 12423, 12427, 12428,
12429, 12431, 12433, 12434, 12491, 12493, 12494, 12601, 12602, 12631,
12632, 12636, 12636.5, 12679, 12681, 12801, 12951, 12977, 12983,
12984, 13108, 17276.1, 17276.20, 23101, 24416.1, 24416.20, and
25128 of, to amend and repeal Sections 17053.33, 17053.34, 17053.45,
17053.46, 17053.47, 17053.70, 17053.74, 17053.75, 17235, 17267.2,
17267.6, 17268, 17276.2, 17276.4, 17276.5, 17276.6, 23612.2, 23622.7,
23622.8, 23633, 23634, 23645, 23646, 24356.6, 24356.7, 24356.8,
24384.5, 24416.2, 24416.4, 24416.5, and 24416.6 of, to amend, repeal,
and add Section 25136 of, to add Sections 17053.31 and 23611 to, to
repeal Section 25128.5 of, and to repeal and add Sections 17276.22
and 24416.22 of, the Revenue and Taxation Code, to amend
Sections 1661, 4601, 5902.5, and 9552 of the Vehicle Code, and to
amend Section 14301.11 of the Welfare and Institutions Code,
relating to taxation, making an appropriation therefor, and
declaring the urgency thereof, to take effect immediately,
tax levy bill related to the budget .
LEGISLATIVE COUNSEL'S DIGEST
SB 79, as amended, Committee on Budget and Fiscal Review.
Taxation: personal income and corporation taxes: managed care
plan taxes.
(1) The Personal Income Tax Law and the Corporation Tax Law allow
for various tax credits and deductions in computing the taxes imposed
by those laws, relating to enterprise zones, targeted tax areas,
local agency military base recovery areas, manufacturing enhancement
areas, and net operating losses.
This bill would make these provisions inoperative for taxable
years beginning on or after January 1, 2011, and would repeal these
provisions as of December 1, 2011. This bill would also prevent
carryovers for taxable years beginning on or after January 1, 2011,
for specified provisions. This bill would delete obsolete references
to conform to these changes.
(2) Existing law allows individual and corporate taxpayers to
utilize net operating losses and carryovers and carrybacks of those
losses for purposes of offsetting their individual and corporate tax
liabilities. Existing law, for net operating losses incurred in
taxable years beginning on or after January 1, 2008, provides a
carryover period of 20 years and allows net operating losses
attributable to taxable years beginning on or after January 1, 2011,
to be carrybacks to each of the preceding 2 taxable years, as
provided.
This bill would recalculate elected net operating loss carryovers
available, under specified provisions that have been repealed by this
bill, by applying the net operating loss rules applicable to the
taxable year in which the net operating loss was incurred.
(3) The Corporation Tax Law imposes taxes measured by income and,
in the case of a business with income derived from or attributable to
sources both within and without this state, apportions the income
between this state and other states and foreign countries in
accordance with a specified 4-factor formula based on the property,
payroll, and sales within and without this state, except that in the
case of an apportioning trade or business that derives more than 50%
of its gross business receipts from conducting one or more qualified
business activities, as defined, business income is apportioned in
accordance with a specified 3-factor formula. That law, for taxable
years beginning on or after January 1, 2011, allows a taxpayer to
have that income apportioned in accordance with a single sales factor
formula, except as provided, pursuant to an irrevocable annual
election, as specified. That law also provides that sales of tangible
and intangible personal property are in this state in accordance
with specified criteria.
This bill would, for taxable years beginning or after January 1,
2011, revise the rules which determine whether a taxpayer is doing
business within this state, revise the provisions which determine
whether specific sales occur in this state, and require a taxpayer,
except as provided, to apportion income in accordance with a single
sales factor.
(4) Existing law requires, until July 1, 2011, every return
required to be filed with the State Insurance Commissioner pursuant
to provisions governing taxes on the total operating revenue of
Medi-Cal managed care plans to be signed by the insurer or the
Medi-Cal managed care plan or an executive officer of the insurer or
the plan and to be made under oath or contain a written declaration
that is made under penalty of perjury.
This bill would, instead, require every return required to be
filed with the State Insurance Commissioner pursuant to provisions
governing taxes on the total operating revenue of Medi-Cal managed
care plans to be made under oath or contain a written declaration
that is made under penalty of perjury until January 1, 2014. By
expanding the crime of perjury, this bill would impose a
state-mandated local program.
(5) Existing law establishes fees for original and renewal
registration of vehicles to be collected by the Department of Motor
Vehicles. Existing law requires the department, with a specified
exception, to notify the registered owner of each vehicle of the date
that registration renewal fees for the vehicle are due, at least 60
days prior to that due date, and to indicate the fact that the
required notice was mailed by a notation in the department's records.
This bill would, commencing on June 8, 2011, and operative until
January 1, 2012, reduce the department's time period for notification
that vehicle registration renewal fees are due to 30 days prior to
the due date.
(6) Existing law requires that the renewal of registration for a
vehicle that is either currently registered or for which a specified
certification is filed be obtained not more than 75 days prior to the
expiration of the current registration or certification.
This bill would, commencing on June 8, 2011, and operative until
July 1, 2011, instead apply the above-specified requirement only to
the renewal of registration for any vehicle that expires on or before
June 30, 2011, and would require the renewal of registration for a
vehicle that expires on or after July 1, 2011, or for which a
specified certification is filed, to be obtained not more than 15
days prior to the expiration of the current registration or
certification.
(7) Existing law requires that if an application for a
registration transaction is filed with the Department of Motor
Vehicles during the 30 days immediately preceding the date of
expiration of registration of the vehicle, the application be
accompanied by the full renewal fees for the ensuing registration
year in addition to any other fees that are due and payable.
This bill would, commencing on the date that this bill becomes
operative and remaining operative until July 1, 2011, reduce the time
period to 10 days immediately preceding the date of expiration of
registration of the vehicle.
(8) Existing law provides that fees are delinquent if an
application for renewal of registration, or an application for
renewal of special license plates, is made after midnight of the
expiration date of the registration or special plates, or 60 days
after the date the registered owner is notified by the Department of
Motor Vehicles, whichever is later.
This bill would, commencing on June 8, 2011, and operative until
January 1, 2012, reduce the time period to 30 days after the date the
registered owner is notified by the department.
(9) Existing law establishes the Medi-Cal program, administered by
the State Department of Health Care Services, under which health
care services are provided to qualified, low-income persons. The
Medi-Cal program is, in part, governed and funded by federal Medicaid
Program provisions. Under existing law, one of the methods by which
Medi-Cal services are provided is pursuant to contracts with various
types of managed care plans. Existing law imposes various taxes,
including a tax at a specified rate on the gross premiums of an
insurer, as defined, and, until July 1, 2011, on the total operating
revenue, as specified, of a Medi-Cal managed care plan, as defined.
Existing law continuously appropriates the revenues derived from the
tax on Medi-Cal managed care plans for specified purposes.
This bill would extend the imposition of the tax on the total
operating revenue of Medi-Cal managed care plans until January 1,
2014, and make other conforming changes. By extending the imposition
of a tax whose revenues are continuously appropriated, this bill
would make an appropriation.
(10) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
(4)
(11) The California Constitution authorizes the
Governor to declare a fiscal emergency and to call the Legislature
into special session for that purpose. Governor Schwarzenegger issued
a proclamation declaring a fiscal emergency, and calling a special
session for this purpose, on December 6, 2010. Governor Brown issued
a proclamation on January 20, 2011, declaring and reaffirming that a
fiscal emergency exists and stating that his proclamation supersedes
the earlier proclamation for purposes of that constitutional
provision.
This bill would state that it addresses the fiscal emergency
declared and reaffirmed by the Governor by proclamation issued on
January 20, 2011, pursuant to the California Constitution.
(5) 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 2/3of the membership of
each house of the Legislature.
(6) This bill would take effect immediately as a tax levy.
(12) This bill would declare that it is to take immediate effect
as an urgency statute and a bill providing for appropriations related
to the Budget Bill.
Vote: 2/3. Appropriation: no yes .
Fiscal committee: yes. State-mandated local program: no
yes .
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 12009 of the Revenue
and Taxation Code is amended to read:
12009. (a) "Medi-Cal managed care plan" or "plan" means any
individual, organization, or entity, other than an insurer as
described in Section 12003 or a dental managed care plan as described
in Section 14087.46 of the Welfare and Institutions Code, that
enters into a contract with the State Department of Health Care
Services pursuant to Article 2.7 (commencing with Section 14087.3),
Article 2.8 (commencing with Section 14087.5), Article 2.81
(commencing with Section 14087.96), Article 2.9 (commencing with
Section 14088), or Article 2.91 (commencing with Section 14089) of
Chapter 7 of, or pursuant to Article 1 (commencing with Section
14200) or Article 7 (commencing with Section 14490) of Chapter 8 of,
Part 3 of Division 9 of the Welfare and Institutions Code.
(b) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 2. Section 12201 of the Revenue
and Taxation Code , as added by Section 31 of Chapter 717
of the Statutes of 2010, is amended to read:
12201. (a) Every insurer and Medi-Cal managed care plan doing
business in this state shall annually pay to the state a tax on the
bases, at the rates, and subject to the deductions from the tax
hereinafter specified. For purposes of the tax imposed by this
chapter, "insurer" shall be deemed to include a home protection
company as defined in Section 12740 of the Insurance Code.
(b) Notwithstanding Section 13340 of the Government Code, the
revenues derived from the imposition of the tax by this chapter on
Medi-Cal managed care plans are hereby continuously appropriated as
follows:
(1) A percentage of the revenues derived from the imposition of
the tax by this chapter on Medi-Cal managed care plans equal to the
difference between 100 percent and the applicable federal medical
assistance percentage (FMAP) to the department for purposes of the
Medi-Cal program.
(2) After deducting the revenues appropriated pursuant to
paragraph (1), any remaining revenue to the Managed Risk Medical
Insurance Board for purposes of the Healthy Families Program.
(c) The Insurance Commissioner shall report the amount of revenue
derived from the tax imposed on Medi-Cal managed care plans pursuant
to this section to the California Health and Human Services Agency,
the Joint Legislative Budget Committee, and the Department of
Finance.
(d) This section shall become operative on July 1, 2010.
(d) Notwithstanding any other law, the Controller may use the
funds in the Children's Health and Human Services Special Fund for
cashflow loans to the General Fund as provided in Sections 16310 and
16381 of the Government Code.
(e) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 3. Section 12201 of the Revenue
and Taxation Code , as amended by Section 32 of
Chapter 717 of the Statutes of 2010, is amended to read:
12201. (a) Every insurer doing business in this state shall
annually pay to the state a tax on the bases, at the rates, and
subject to the deductions from the tax hereinafter specified. For
purposes of the tax imposed by this chapter, "insurer" shall be
deemed to include a home protection company as defined in Section
12740 of the Insurance Code.
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 4. Section 12204 of the Revenue
and Taxation Code , as amended by Section 33 of
Chapter 717 of the Statutes of 2010, is amended to read:
12204. (a) The tax imposed on insurers by this chapter is in lieu
of all other taxes and licenses, state, county, and municipal, upon
those insurers and their property, except:
(1) Taxes upon their real estate.
(2) Any retaliatory exactions imposed by paragraph (3) of
subdivision (f) of Section 28 of Article XIII of the Constitution.
(3) The tax on ocean marine insurance.
(4) Motor vehicle and other vehicle registration license fees and
any other tax or license fee imposed by the state upon vehicles,
motor vehicles or the operation thereof.
(5) That each corporate or other attorney-in-fact of a reciprocal
or interinsurance exchange shall be subject to all taxes imposed upon
corporations or others doing business in the state, other than taxes
on income derived from its principal business as attorney-in-fact.
(b) This section shall not apply to any Medi-Cal managed care plan
and to any tax imposed on that plan by this chapter.
(c) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or extends
the dates on which it becomes inoperative and is repealed.
SEC. 5. Section 12204 of the Revenue
and Taxation Code , as amended by Section 34 of
Chapter 717 of the Statutes of 2010, is amended to read:
12204. (a) The tax imposed on insurers by this chapter is in lieu
of all other taxes and licenses, state, county, and municipal, upon
those insurers and their property, except:
(1) Taxes upon their real estate.
(2) Any retaliatory exactions imposed by paragraph (3) of
subdivision (f) of Section 28 of Article XIII of the California
Constitution.
(3) The tax on ocean marine insurance.
(4) Motor vehicle and other vehicle registration license fees and
any other tax or license fee imposed by the state upon vehicles,
motor vehicles or the operation thereof.
(5) That each corporate or other attorney-in-fact of a reciprocal
or interinsurance exchange shall be subject to all taxes imposed upon
corporations or others doing business in the state, other than taxes
on income derived from its principal business as attorney-in-fact.
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 6. Section 12207 of the Revenue
and Taxation Code is amended to read:
12207. (a) Notwithstanding any other provision of this part, no
credit shall be allowed under Section 12206, 12208, or 12209 against
the tax imposed on Medi-Cal managed care plans pursuant to Section
12201.
(b) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 7. Section 12242 of the Revenue
and Taxation Code is amended to read:
12242. This article shall become inoperative on July 1,
2011 January 1, 2014 , and, as of
January 1, 2012 July 1, 2014 , is repealed,
unless a later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes
or extends the dates on which it becomes inoperative and is repealed.
SEC. 8. Section 12251 of the Revenue
and Taxation Code , as amended by Section 37 of
Chapter 717 of the Statutes of 2010, is amended to read:
12251. (a) For the calendar year 1970, and each calendar year
thereafter, insurers transacting insurance in this state and whose
annual tax for the preceding calendar year was five thousand dollars
($5,000) or more shall make prepayments of the annual tax for the
current calendar year imposed by Section 28 of Article XIII of the
California Constitution and this part, provided that no prepayments
shall be made with respect to the tax on ocean marine insurance
underwriting profit or any retaliatory tax.
(b) Medi-Cal managed care plans shall make prepayments of the tax
imposed by Section 12201 for the current calendar year, except that
no prepayments shall be required prior to the effective date of the
act adding this subdivision, and no penalties and interest shall be
imposed pursuant to Section 12261 for not making those prepayments.
(c) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 9. Section 12251 of the Revenue
and Taxation Code , as amended by Section 38 of
Chapter 717 of the Statutes of 2010, is amended to read:
12251. (a) For the calendar year 1970, and each calendar year
thereafter, insurers transacting insurance in this state and whose
annual tax for the preceding calendar year was five thousand dollars
($5,000) or more shall make prepayments of the annual tax for the
current calendar year imposed by Section 28 of Article XIII of the
California Constitution and this part, provided that no prepayments
shall be made with respect to the tax on ocean marine insurance
underwriting profit or any retaliatory tax.
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 10. Section 12253 of the Revenue
and Taxation Code , as amended by Section 39 of
Chapter 717 of the Statutes of 2010, is amended to read:
12253. (a) Each insurer and Medi-Cal managed care plan required
to make prepayments shall remit them on or before each of the dates
of April 1st, June 1st, September 1st, and December 1st of the
current calendar year. Remittances for prepayments shall be made
payable to the Controller and shall be delivered to the office of the
commissioner, accompanied by a prepayment form prescribed by the
commissioner.
(b) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 11. Section 12253 of the Revenue
and Taxation Code , as amended by Section 40 of
Chapter 717 of the Statutes of 2010, is amended to read:
12253. (a) Each insurer required to make prepayments shall remit
them on or before each of the dates of April 1st, June 1st, September
1st, and December 1st of the current calendar year. Remittances for
prepayments shall be made payable to the Controller and shall be
delivered to the office of the commissioner, accompanied by a
prepayment form prescribed by the commissioner.
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 12. Section 12254 of the Revenue
and Taxation Code , as amended by Section 41 of
Chapter 717 of the Statutes of 2010, is amended to read:
12254. (a) (1) For each insurer, the amount of each prepayment
shall be 25 percent of the amount of the annual insurance tax
liability reported on the return of the insurer for the preceding
calendar year.
(2) For each Medi-Cal managed care plan, the amount of each
prepayment shall be 25 percent of the amount of tax the plan
estimates as the amount of tax imposed by Section 12201 with respect
to the plan.
(b) In establishing the prepayment amount of an insurer that has
acquired the business of another insurer, the amount of tax liability
of the acquiring insurer reported for the preceding calendar year
shall be deemed to include the amount of tax liability of the
acquired insurer reported for that year.
(c) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January 1,
2012 July 1, 2014 , is repealed, unless a later
enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 13. Section 12254 of the Revenue
and Taxation Code , as amended by Section 42 of
Chapter 717 of the Statutes of 2010, is amended to read:
12254. (a) The amount of each prepayment shall be 25 percent of
the amount of the annual insurance tax liability reported on the
return of the insurer for the preceding calendar year.
(b) In establishing the prepayment amount of an insurer that has
acquired the business of another insurer, the amount of tax liability
of the acquiring insurer reported for the preceding calendar year
shall be deemed to include the amount of tax liability of the
acquired insurer reported for that year.
(c) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 14. Section 12257 of the Revenue
and Taxation Code , as amended by Section 43 of
Chapter 717 of the Statutes of 2010, is amended to read:
12257. (a) If the total amount of prepayments for any calendar
year exceeds the amount of annual tax for that year, the excess shall
be treated as an overpayment of annual tax and, at the election of
the insurer or Medi-Cal managed care plan, may be credited against
the amounts due and payable for the first prepayment of the following
year. Any amount of the overpayment not so credited shall be allowed
as a credit or refund under Article 2 (commencing with Section
12977) of Chapter 7 of this part.
(b) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 15. Section 12257 of the Revenue
and Taxation Code , as amended by Section 44 of
Chapter 717 of the Statutes of 2010, is amended to read:
12257. (a) If the total amount of prepayments for any calendar
year exceeds the amount of annual tax for that year, the excess shall
be treated as an overpayment of annual tax and, at the election of
the insurer, may be credited against the amounts due and payable for
the first prepayment of the following year. Any amount of the
overpayment not so credited shall be allowed as a credit or refund
under Article 2 (commencing with Section 12977) of Chapter 7 of this
part.
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 16. Section 12258 of the Revenue
and Taxation Code , as amended by Section 45 of
Chapter 717 of the Statutes of 2010, is amended to read:
12258. (a) Any insurer or Medi-Cal managed care plan that fails
to pay any prepayment within the time required shall pay a penalty of
10 percent of the amount of the required prepayment, plus interest
at the modified adjusted rate per month, or fraction thereof,
established pursuant to Section 6591.5, from the due date of the
prepayment until the date of payment but not for any period after the
due date of the annual tax. Assessments of prepayment deficiencies
may be made in the manner provided by deficiency assessments of the
annual tax.
(b) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 17. Section 12258 of the Revenue
and Taxation Code , as amended by Section 46 of
Chapter 717 of the Statutes of 2010, is amended to read:
12258. (a) Any insurer that fails to pay any prepayment within
the time required shall pay a penalty of 10 percent of the amount of
the required prepayment, plus interest at the modified adjusted rate
per month, or fraction thereof, established pursuant to Section
6591.5, from the due date of the prepayment until the date of payment
but not for any period after the due date of the annual tax.
Assessments of prepayment deficiencies may be made in the manner
provided by deficiency assessments of the annual tax.
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 18. Section 12260 of the Revenue
and Taxation Code , as amended by Section 47 of
Chapter 717 of the Statutes of 2010, is amended to read:
12260. (a) Notwithstanding any other provision of this article,
the commissioner may relieve an insurer or Medi-Cal managed care plan
of its obligation to make prepayments where the insurer or Medi-Cal
managed care plan establishes to the satisfaction of the commissioner
that the insurer has ceased to transact insurance in this state or
the Medi-Cal managed care plan has ceased to operate a plan in this
state, or the insurer's or Medi-Cal managed care plan's annual tax
for the current year will be less than five thousand dollars
($5,000).
(b) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 19. Section 12260 of the Revenue
and Taxation Code , as amended by Section 48 of
Chapter 717 of the Statutes of 2010, is amended to read:
12260. (a) Notwithstanding any other
provision of this article, the commissioner may relieve an insurer of
its obligation to make prepayments where the insurer establishes to
the satisfaction of the commissioner that either the insurer has
ceased to transact insurance in this state, or the insurer's annual
tax for the current year will be less than five thousand dollars
($5,000).
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 20. Section 12301 of the Revenue
and Taxation Code , as amended by Section 49 of
Chapter 717 of the Statutes of 2010, is amended to read:
12301. (a) The taxes imposed upon insurers by Section 28 of
Article XIII of the California Constitution and this part, except
with respect to taxes on ocean marine insurance and retaliatory
taxes, are due and payable annually on or before April 1st of the
year following the calendar year in which the insurer engaged in the
business of insurance or transacted insurance in this state. The
taxes imposed with respect to ocean marine insurance are due and
payable on or before June 15th of that year.
(b) With respect to Medi-Cal managed care plans, the taxes imposed
by Section 12201 shall be due and payable on or before April 1st of
the year following the calendar year in which the plan contracted
with the State Department of Health Care Services as described in
Section 12009.
(c) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
However, any tax imposed by Section 12201 shall continue to be due
and payable until the tax is paid.
SEC. 21. Section 12301 of the Revenue
and Taxation Code , as amended by Section 50 of
Chapter 717 of the Statutes of 2010, is amended to read:
12301. (a) The taxes imposed upon insurers by Section 28 of
Article XIII of the California Constitution and this part, except
with respect to taxes on ocean marine insurance and retaliatory
taxes, are due and payable annually on or before April 1st of the
year following the calendar year in which the insurer engaged in the
business of insurance or transacted insurance in this state. The
taxes imposed with respect to ocean marine insurance are due and
payable on or before June 15th of that year.
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 22. Section 12302 of the Revenue
and Taxation Code , as amended by Section 51 of
Chapter 717 of the Statutes of 2010, is amended to read:
12302. (a) On or before April 1st (or June 15th with respect to
taxes on ocean marine insurance) every person that is subject to any
tax imposed by Section 28 of Article XIII of the California
Constitution or this part, in respect to the preceding calendar year
shall file, in duplicate, a tax return with the commissioner in the
form as the commissioner may prescribe. The return shall show that
information pertaining to its insurance business, or in the case of a
Medi-Cal managed care plan, pertaining to contracts for providing
services as described in Section 12009, in this state as will reflect
the basis of its tax as set forth in Chapter 2 (commencing with
Section 12071) and Chapter 3 (commencing with Section 12201) of this
part, the computation of the amount of tax for the period covered by
the return, the total amount of any tax prepayments made pursuant to
Article 5 (commencing with Section 12251) of Chapter 3 of this part,
and any other information as the commissioner may require to carry
out the purposes of this part. Separate returns shall be filed with
respect to the following kinds of insurance:
(1) Life insurance (or life insurance and disability insurance).
(2) Ocean marine insurance.
(3) Title insurance.
(4) Insurance other than life insurance (or life insurance and
disability insurance), ocean marine insurance or title insurance.
(b) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 23. Section 12302 of the Revenue
and Taxation Code , as amended by Section 52 of
Chapter 717 of the Statutes of 2010, is amended to read:
12302. (a) On or before April 1st (or June 15th with respect to
taxes on ocean marine insurance) every person that is subject to any
tax imposed by Section 28 of Article XIII of the California
Constitution or this part, in respect to the preceding calendar year
shall file, in duplicate, an insurance tax return with the
commissioner in the form as the commissioner may prescribe. The
return shall show that information pertaining to its insurance
business in this state as will reflect the basis of its tax as set
forth in Chapter 2 (commencing with Section 12071) and Chapter 3
(commencing with Section 12201) of this part, the computation of the
amount of tax for the period covered by the return, the total amount
of any tax prepayments made pursuant to Article 5 (commencing with
Section 12251) of Chapter 3 of this part, and any other information
as the commissioner may require to carry out the purposes of this
part. Separate returns shall be filed with respect to the following
kinds of insurance:
(1) Life insurance (or life insurance and disability insurance).
(2) Ocean marine insurance.
(3) Title insurance.
(4) Insurance other than life insurance (or life insurance and
disability insurance), ocean marine insurance or title insurance.
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 24. Section 12303 of the Revenue
and Taxation Code , as amended by Section 53 of
Chapter 717 of the Statutes of 2010, is amended to read:
12303. (a) Every return required by this article to be filed with
the commissioner shall be signed by the insurer or Medi-Cal managed
care plan or an executive officer of the insurer or plan and shall be
made under oath or contain a written declaration that it is made
under penalty of perjury. A return of a foreign insurer may be signed
and verified by its manager residing within this state. A return of
an alien insurer may be signed and verified by the United States
manager of the insurer.
(b) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 25. Section 12303 of the Revenue
and Taxation Code , as amended by Section 54 of
Chapter 717 of the Statutes of 2010, is amended to read:
12303. (a) Every return required by this article to be filed with
the commissioner shall be signed by the insurer or an executive
officer of the insurer and shall be made under oath or contain a
written declaration that it is made under penalty of perjury. A
return of a foreign insurer may be signed and verified by its manager
residing within this state. A return of an alien insurer may be
signed and verified by the United States manager of the insurer.
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 26. Section 12304 of the Revenue
and Taxation Code , as amended by Section 55 of
Chapter 717 of the Statutes of 2010, is amended to read:
12304. (a) Blank forms of returns shall be furnished by the
commissioner on application, but failure to secure the form shall not
relieve any insurer or Medi-Cal managed care plan from making or
filing a timely return.
(b) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC.
27. Section 12304 of the Revenue and Taxation
Code , as amended by Section 56 of Chapter 717
of the Statutes of 2010, is amended to read:
12304. (a) Blank forms of returns shall be furnished by the
commissioner on application, but failure to secure the form shall not
relieve any insurer from making or filing a timely return.
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 28. Section 12305 of the Revenue
and Taxation Code , as amended by Section 57 of
Chapter 717 of the Statutes of 2010, is amended to read:
12305. (a) The insurer or Medi-Cal managed care plan required to
file a return shall deliver the return in duplicate, together with a
remittance payable to the Controller, for the amount of tax computed
and shown thereon, less any prepayments made pursuant to Article 5
(commencing with Section 12251) of Chapter 3 of this part, to the
office of the commissioner.
(b) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 29. Section 12305 of the Revenue
and Taxation Code , as amended by Section 58 of
Chapter 717 of the Statutes of 2010, is amended to read:
12305. (a) The insurer required to file a return shall deliver
the return in duplicate, together with a remittance payable to the
Controller, for the amount of tax computed and shown thereon, less
any prepayments made pursuant to Article 5 (commencing with Section
12251) of Chapter 3 of this part, to the office of the commissioner.
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 30. Section 12307 of the Revenue
and Taxation Code , as amended by Section 59 of
Chapter 717 of the Statutes of 2010, is amended to read:
12307. (a) Any insurer or Medi-Cal managed care plan to which an
extension is granted shall pay, in addition to the tax, interest at
the modified adjusted rate per month, or fraction thereof,
established pursuant to Section 6591.5, from April 1st until the date
of payment.
(b) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January 1,
2012 July 1, 2014 , is repealed, unless a later
enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 31. Section 12307 of the Revenue
and Taxation Code , as amended by Section 60 of
Chapter 717 of the Statutes of 2010, is amended to read:
12307. (a) Any insurer that is granted an extension shall pay, in
addition to the tax, interest at the modified adjusted rate per
month, or fraction thereof, established pursuant to Section 6591.5,
from April 1st until the date of payment.
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 32. Section 12412 of the Revenue
and Taxation Code , as amended by Section 61 of
Chapter 717 of the Statutes of 2010, is amended to read:
12412. (a) Upon receipt of the duplicate copy of the return of an
insurer or Medi-Cal managed care plan the board shall initially
assess the tax in accordance with the data as reported by the insurer
or Medi-Cal managed care plan on the return.
(b) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 33. Section 12412 of the Revenue
and Taxation Code , as amended by
Section 62 of Chapter 717 of the Statutes of 2010, is amended to
read:
12412. (a) Upon receipt of the duplicate copy of the return of an
insurer the board shall initially assess the tax in accordance with
the data as reported by the insurer on the return.
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 34. Section 12413 of the Revenue
and Taxation Code , as amended by Section 63 of
Chapter 717 of the Statutes of 2010, is amended to read:
12413. (a) The board shall promptly transmit notice of its
initial assessment to the commissioner and the Controller, and if the
initial assessment differs from the amount computed by the insurer
or Medi-Cal managed care plan, notice shall also be given to the
insurer or Medi-Cal managed care plan.
(b) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 35. Section 12413 of the Revenue
and Taxation Code , as amended by Section 64 of
Chapter 717 of the Statutes of 2010, is amended to read:
12413. (a) The board shall promptly transmit notice of its
initial assessment to the commissioner and the Controller, and if the
initial assessment differs from the amount computed by the insurer,
notice shall also be given to the insurer.
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 36. Section 12421 of the Revenue
and Taxation Code , as amended by Section 65 of
Chapter 717 of the Statutes of 2010, is amended to read:
12421. (a) As soon as practicable after an insurer's, surplus
line broker's, or Medi-Cal managed care plan's return is filed, the
commissioner shall examine it, together with any information within
his or her possession or that may come into his or her possession,
and he or she shall determine the correct amount of tax of the
insurer, surplus line broker, or Medi-Cal managed care plan.
(b) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 37. Section 12421 of the Revenue
and Taxation Code , as amended by Section 66 of
Chapter 717 of the Statutes of 2010, is amended to read:
12421. (a) As soon as practicable after an insurer's or surplus
line broker's return is filed, the commissioner shall examine it,
together with any information within his or her possession or that
may come into his or her possession, and he or she shall determine
the correct amount of tax of the insurer or surplus line broker.
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 38. Section 12422 of the Revenue
and Taxation Code , as amended by Section 67 of
Chapter 717 of the Statutes of 2010, is amended to read:
12422. (a) If the commissioner determines that the amount of tax
disclosed by the insurer's tax return and assessed by the board is
less than the amount of tax disclosed by his or her examination, he
or she shall propose, in writing, to the board a deficiency
assessment for the difference. The proposal shall set forth the basis
for the deficiency assessment and the details of its computation.
(b) If the commissioner determines that the amount of tax
disclosed by the surplus line broker's tax return is less than the
amount of tax disclosed by his or her examination, he or she shall
propose, in writing, to the board a deficiency assessment for the
difference. The proposal shall set forth the basis for the deficiency
assessment and the details of its computation.
(c) If the commissioner determines that the amount of tax
disclosed by the Medi-Cal managed care plan's tax return is less than
the amount of tax disclosed by his or her examination, he or she
shall propose, in writing, to the board a deficiency assessment for
the difference. The proposal shall set forth the basis for the
deficiency assessment and the details of its computation.
(d) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 39. Section 12422 of the Revenue
and Taxation Code , as amended by Section 68 of
Chapter 717 of the Statutes of 2010, is amended to read:
12422. (a) If the commissioner determines that the amount of tax
disclosed by the insurer's tax return and assessed by the board is
less than the amount of tax disclosed by his or her examination, he
or she shall propose, in writing, to the board a deficiency
assessment for the difference. The proposal shall set forth the basis
for the deficiency assessment and the details of its computation.
(b) If the commissioner determines that the amount of tax
disclosed by the surplus line broker's tax return is less than the
amount of tax disclosed by his or her examination, he or she shall
propose, in writing, to the board a deficiency assessment for the
difference. The proposal shall set forth the basis for the deficiency
assessment and the details of its computation.
(c) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 40. Section 12423 of the Revenue
and Taxation Code , as amended by Section 69 of
Chapter 717 of the Statutes of 2010, is amended to read:
12423. (a) If an insurer, surplus line broker, or Medi-Cal
managed care plan fails to file a return, the commissioner may
require a return by mailing notice to the insurer, surplus line
broker, or Medi-Cal managed care plan to file a return by a specified
date or he or she may without requiring a return, or upon no return
having been filed pursuant to the demand therefor, make an estimate
of the amount of tax due for the calendar year or years in respect to
which the insurer, surplus line broker, or Medi-Cal managed care
plan failed to file the return. The estimate shall be made from any
available information which is in the commissioner's possession or
may come into his or her possession, and the commissioner shall
propose, in writing, to the board a deficiency assessment for the
amount of the estimated tax. The proposal shall set forth the basis
of the estimate and the details of the computation of the tax.
(b) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 41. Section 12423 of the Revenue
and Taxation Code , as amended by Section 70 of
Chapter 717 of the Statutes of 2010, is amended to read:
12423. (a) If an insurer or surplus line broker fails to file a
return, the commissioner may require a return by mailing notice to
the insurer or surplus line broker to file a return by a specified
date or he or she may without requiring a return, or upon no return
having been filed pursuant to the demand therefor, make an estimate
of the amount of tax due for the calendar year or years in respect to
which the insurer or surplus line broker failed to file the return.
The estimate shall be made from any available information which is in
the commissioner's possession or may come into his or her
possession, and the commissioner shall propose, in writing, to the
board a deficiency assessment for the amount of the estimated tax.
The proposal shall set forth the basis of the estimate and the
details of the computation of the tax.
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 42. Section 12427 of the Revenue
and Taxation Code , as amended by Section 71 of
Chapter 717 of the Statutes of 2010, is amended to read:
12427. (a) The board shall promptly notify the insurer, surplus
line broker, or Medi-Cal managed care plan of a deficiency assessment
made against the insurer, surplus line broker, or Medi-Cal managed
care plan.
(b) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January 1,
2012 July 1, 2014 , is repealed, unless a later
enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 43. Section 12427 of the Revenue
and Taxation Code , as amended by Section 72 of
Chapter 717 of the Statutes of 2010, is amended to read:
12427. (a) The board shall promptly notify the insurer or surplus
line broker of a deficiency assessment made against the insurer or
surplus line broker.
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 44. Section 12428 of the Revenue
and Taxation Code , as amended by Section 73 of
Chapter 717 of the Statutes of 2010, is amended to read:
12428. (a) An insurer, surplus line broker, or Medi-Cal managed
care plan against which a deficiency assessment is made under Section
12424 or 12425 may petition for redetermination of the deficiency
assessment within 30 days after service upon the insurer, surplus
line broker, or Medi-Cal managed care plan of the notice thereof, by
filing with the board a written petition setting forth the grounds of
objection to the deficiency assessment and the correction sought. At
the time the petition is filed with the board, a copy of the
petition shall be filed with the commissioner.
If a petition for redetermination is not filed within the period
prescribed by this section, the deficiency assessment becomes final
and due and payable at the expiration of that period.
(b) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 45. Section 12428 of the Revenue
and Taxation Code , as amended by Section 74 of
Chapter 717 of the Statutes of 2010, is amended to read:
12428. (a) An insurer or surplus line broker against which a
deficiency assessment is made under Section 12424 or 12425 may
petition for redetermination of the deficiency assessment within 30
days after service upon the insurer or surplus line broker of the
notice thereof, by filing with the board a written petition setting
forth the grounds of objection to the deficiency assessment and the
correction sought. At the time the petition is filed with the board,
a copy of the petition shall be filed with the commissioner.
If a petition for redetermination is not filed within the period
prescribed by this section, the deficiency assessment becomes final
and due and payable at the expiration of that period.
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 46. Section 12429 of the Revenue
and Taxation Code , as amended by
Section 75 of Chapter 717 of the Statutes of 2010, is amended to
read:
12429. (a) If a petition for redetermination of a deficiency
assessment is filed within the time allowed under Section 12428, the
board shall reconsider the deficiency assessment and, if the insurer,
surplus line broker, or Medi-Cal managed care plan has so requested
in the petition, shall grant an oral hearing for the presentation of
evidence and argument before the board or its authorized
representative. The board shall give the petitioner and the
commissioner at least 20 days' notice of the time and place of
hearing. The hearing may be continued from time to time as may be
necessary.
(b) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 47. Section 12429 of the Revenue
and Taxation Code , as amended by Section 76 of
Chapter 717 of the Statutes of 2010, is amended to read:
12429. (a) If a petition for redetermination of a deficiency
assessment is filed within the time allowed under Section 12428, the
board shall reconsider the deficiency assessment and, if the insurer
or surplus line broker has so requested in the petition, shall grant
an oral hearing for the presentation of evidence and argument before
the board or its authorized representative. The board shall give the
petitioner and the commissioner at least 20 days' notice of the time
and place of hearing. The hearing may be continued from time to time
as may be necessary.
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 48. Section 12431 of the Revenue
and Taxation Code , as amended by Section 77 of
Chapter 717 of the Statutes of 2010, is amended to read:
12431. (a) The order or decision of the board upon a petition for
redetermination of a deficiency assessment becomes final 30 days
after service on the insurer, surplus line broker, or Medi-Cal
managed care plan of a notice thereof, and any resulting deficiency
assessment is due and payable at the time the order or decision
becomes final.
(b) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 49. Section 12431 of the Revenue
and Taxation Code , as amended by Section 78 of
Chapter 717 of the Statutes of 2010, is amended to read:
12431. (a) The order or decision of the board upon a petition for
redetermination of a deficiency assessment becomes final 30 days
after service on the insurer or surplus line broker of a notice
thereof, and any resulting deficiency assessment is due and payable
at the time the order or decision becomes final.
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 50. Section 12433 of the Revenue
and Taxation Code , as amended by Section 79 of
Chapter 717 of the Statutes of 2010, is amended to read:
12433. (a) If before the expiration of the time prescribed in
Section 12432 for giving of a notice of deficiency assessment the
insurer, surplus line broker, or Medi-Cal managed care plan has
consented in writing to the giving of the notice after that time, the
notice may be given at any time prior to the expiration of the time
agreed upon. The period so agreed upon may be extended by subsequent
agreements in writing made before the expiration of the period
previously agreed upon.
(b) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 51. Section 12433 of the Revenue
and Taxation Code , as amended by Section 80 of
Chapter 717 of the Statutes of 2010, is amended to read:
12433. (a) If before the expiration of the time prescribed in
Section 12432 for giving of a notice of deficiency assessment the
insurer or surplus line broker has consented in writing to the giving
of the notice after that time, the notice may be given at any time
prior to the expiration of the time agreed upon. The period so agreed
upon may be extended by subsequent agreements in writing made before
the expiration of the period previously agreed upon.
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 52. Section 12434 of the Revenue
and Taxation Code , as amended by Section 81 of
Chapter 717 of the Statutes of 2010, is amended to read:
12434. (a) Any notice required by this article shall be placed in
a sealed envelope, with postage paid, addressed to the insurer,
surplus line broker, or Medi-Cal managed care plan at its address as
it appears in the records of the commissioner or the board. The
giving of notice shall be deemed complete at the time of deposit of
the notice in the United States Post Office, or a mailbox, subpost
office, substation or mail chute or other facility regularly
maintained or provided by the United States Postal Service, without
extension of time for any reason. In lieu of mailing, a notice may be
served personally by delivering to the person to be served and
service shall be deemed complete at the time of the delivery.
Personal service to a corporation may be made by delivery of a notice
to any person designated in the Code of Civil Procedure to be served
for the corporation with summons and complaint in a civil action.
(b) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 53. Section 12434 of the Revenue
and Taxation Code , as amended by Section 8
2 of Chapter 717 of the Statutes of 2010, is amended to
read:
12434. (a) Any notice required by this article shall be placed in
a sealed envelope, with postage paid, addressed to the insurer or
surplus line broker at its address as it appears in the records of
the commissioner or the board. The giving of notice shall be deemed
complete at the time of deposit of the notice in the United States
Post Office, or a mailbox, subpost office, substation or mail chute
or other facility regularly maintained or provided by the United
States Postal Service, without extension of time for any reason. In
lieu of mailing, a notice may be served personally by delivering to
the person to be served and service shall be deemed complete at the
time of the delivery. Personal service to a corporation may be made
by delivery of a notice to any person designated in the Code of Civil
Procedure to be served for the corporation with summons and
complaint in a civil action.
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 54. Section 12491 of the Revenue
and Taxation Code , as amended by Section 83 of
Chapter 717 of the Statutes of 2010, is amended to read:
12491. (a) Every tax levied upon an insurer under Article XIII of
the California Constitution and this part is a lien upon all
property and franchises of every kind and nature belonging to the
insurer, and has the effect of a judgment against the insurer.
(b) (1) Every tax levied upon a surplus line broker under Part 7.5
(commencing with Section 13201) of Division 2 is a lien upon all
property and franchises of every kind and nature belonging to the
surplus line broker, and has the effect of a judgment against the
surplus line broker.
(2) A lien levied pursuant to this subdivision shall not exceed
the amount of unpaid tax collected by the surplus line broker.
(c) (1) Every tax levied upon a Medi-Cal managed care plan under
Chapter 1 (commencing with Section 12001) is a lien upon all property
and franchises of every kind and nature belonging to the Medi-Cal
managed care plan, and has the effect of a judgment against the
Medi-Cal managed care plan.
(2) A lien levied pursuant to this subdivision shall not exceed
the amount of unpaid tax collected by the Medi-Cal managed care plan.
(d) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 55. Section 12491 of the Revenue
and Taxation Code , as amended by Section 84 of
Chapter 717 of the Statutes of 2010, is amended to read:
12491. (a) Every tax levied upon an insurer under the provisions
of Article XIII of the California Constitution and of this part is a
lien upon all property and franchises of every kind and nature
belonging to the insurer, and has the effect of a judgment against
the insurer.
(b) (1) Every tax levied upon a surplus line broker under the
provisions of Part 7.5 (commencing with Section 13201) of Division 2
is a lien upon all property and franchises of every kind and nature
belonging to the surplus line broker, and has the effect of a
judgment against the surplus line broker.
(2) A lien levied pursuant to this subdivision shall not exceed
the amount of unpaid tax collected by the surplus line broker.
(c) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 56. Section 12493 of the Revenue
and Taxation Code , as amended by Section 85 of
Chapter 717 of the Statutes of 2010, is amended to read:
12493. (a) Every lien has the effect of an execution duly levied
against all property of a delinquent insurer, surplus line broker, or
Medi-Cal managed care plan.
(b) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute,
that becomes operative on or before January 1, 2012
July 1, 2014 , deletes or extends the dates on
which it becomes inoperative and is repealed.
SEC. 57. Section 12493 of the Revenue
and Taxation Code , as amended by Section 86 of
Chapter 717 of the Statutes of 2010, is amended to read:
12493. (a) Every lien has the effect of an execution duly levied
against all property of a delinquent insurer or surplus line broker.
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 58. Section 12494 of the Revenue
and Taxation Code , as amended by Section 87 of
Chapter 717 of the Statutes of 2010, is amended to read:
12494. (a) No judgment is satisfied nor lien removed until
either:
(1) The taxes, interest, penalties, and costs are paid.
(2) The insurer's, surplus line broker's, or Medi-Cal managed care
plan's property is sold for the payment thereof.
(b) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 59. Section 12494 of the Revenue
and Taxation Code , as amended by Section 88 of
Chapter 717 of the Statutes of 2010, is amended to read:
12494. (a) No judgment is satisfied nor lien removed until
either:
(1) The taxes, interest, penalties, and costs are paid.
(2) The insurer's or surplus line broker's property is sold for
the payment thereof.
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 60. Section 12601 of the Revenue
and Taxation Code , as amended by Section 89 of
Chapter 717 of the Statutes of 2010, is amended to read:
12601. (a) Amounts of taxes, interest, and penalties not remitted
to the commissioner with the original return of the insurer or
Medi-Cal managed care plan shall be payable to the Controller.
(b) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 61. Section 12601 of the Revenue
and Taxation Code , as amended by Section 90 of
Chapter 717 of the Statutes of 2010, is amended to read:
12601. (a) Amounts of taxes, interest, and penalties not remitted
to the commissioner with the original return of the insurer shall be
payable to the Controller.
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 62. Section 12602 of the Revenue
and Taxation Code , as amended by Section 91 of
Chapter 717 of the Statutes of 2010, is amended to read:
12602. (a) (1) On and after January 1, 1994, and before January
1, 1995, each insurer whose annual taxes exceed fifty thousand
dollars ($50,000) shall make payment by electronic funds transfer, as
defined by Section 45 of the Insurance Code. On and after January 1,
1995, each insurer whose annual taxes exceed twenty thousand dollars
($20,000) shall make payment by electronic funds transfer. The
insurer shall choose one of the acceptable methods described in
Section 45 of the Insurance Code for completing the electronic funds
transfer.
(2) Each Medi-Cal managed care plan shall make payment by
electronic funds transfer, as defined by Section 45 of the Insurance
Code. The plan shall choose one of the acceptable methods described
in Section 45 of the Insurance Code for completing the electronic
funds transfer.
(b) Payment shall be deemed complete on the date the electronic
funds transfer is initiated, if settlement to the state's demand
account occurs on or before the banking day following the date the
transfer is initiated. If settlement to the state's demand account
does not occur on or before the banking day following the date the
transfer is initiated, payment shall be deemed to occur on the date
settlement occurs.
(c) (1) Any insurer or Medi-Cal managed care plan required to
remit taxes by electronic funds transfer pursuant to this section
that remits those taxes by means other than an appropriate electronic
funds transfer, shall be assessed a penalty in an amount equal to 10
percent of the taxes due at the time of the payment.
(2) If the Department of Insurance finds that an insurer's or
Medi-Cal managed care plan's failure to make payment by an
appropriate electronic funds transfer in accordance with subdivision
(a) is due to reasonable cause or circumstances beyond the insurer's
or Medi-Cal managed care plan's control, and occurred notwithstanding
the exercise of ordinary care and in the absence of willful neglect,
that insurer or Medi-Cal managed care plan shall be relieved of the
penalty provided in paragraph (1).
(3) Any insurer or Medi-Cal managed care plan seeking to be
relieved of the penalty provided in paragraph (1) shall file with the
Department of Insurance a statement under penalty of perjury setting
forth the facts upon which the claim for relief is based.
(d) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 63. Section 12602 of the Revenue
and Taxation Code , as amended by Section 92 of
Chapter 717 of the Statutes of 2010, is amended to read:
12602. (a) On and after January 1, 1994, and before January 1,
1995, each insurer whose annual taxes exceed fifty thousand dollars
($50,000) shall make payment by electronic funds transfer, as defined
by Section 45 of the Insurance Code. On and after January 1, 1995,
each insurer whose annual taxes exceed twenty thousand dollars
($20,000) shall make payment by electronic funds transfer. The
insurer shall choose one of the acceptable methods described in
Section 45 of the Insurance Code for completing the electronic funds
transfer.
(b) Payment shall be deemed complete on the date the electronic
funds transfer is initiated, if settlement to the state's demand
account occurs on or before the banking day following the date the
transfer is initiated. If settlement to the state's demand account
does not occur on or before the banking day following the date the
transfer is initiated, payment shall be deemed to occur on the date
settlement occurs.
(c) (1) Any insurer required to remit taxes by electronic funds
transfer pursuant to this section that remits those taxes by means
other than an appropriate electronic funds transfer, shall be
assessed a penalty in an amount equal to 10 percent of the taxes due
at the time of the payment.
(2) If the Department of Insurance finds that an insurer's failure
to make payment by an appropriate electronic funds transfer in
accordance with subdivision (a) is due to reasonable cause or
circumstances beyond the insurer's control, and occurred
notwithstanding the exercise of ordinary care and in the absence of
willful neglect, that insurer shall be relieved of the penalty
provided in paragraph (1).
(3) Any insurer seeking to be relieved of the penalty provided in
paragraph (1) shall file with the Department of Insurance a statement
under penalty of perjury setting forth the facts upon which the
claim for relief is based.
(d) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 64. Section 12631 of the Revenue
and Taxation Code , as amended by Section 93 of
Chapter 717 of the Statutes of 2010, is amended to read:
12631. (a) Any insurer or Medi-Cal managed care plan that fails
to pay any tax, except a tax determined as a deficiency assessment by
the board under Article 3 (commencing with Section 12421) of Chapter
4, within the time required, shall pay a penalty of 10 percent of
the amount of the tax in addition to the tax, plus interest at the
modified adjusted rate per month, or fraction thereof, established
pursuant to Section 6591.5, from the due date of the tax until the
date of payment.
(b) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 65. Section 12631 of the Revenue
and Taxation Code , as amended by Section 94 of
Chapter 717 of the Statutes of 2010, is amended to read:
12631. (a) Any insurer that fails to pay any tax, except a tax
determined as a deficiency assessment by the board under Article 3
(commencing with Section 12421) of Chapter 4, within the time
required, shall pay a penalty of 10 percent of the amount of the tax
in addition to the tax, plus interest at the modified adjusted rate
per month, or fraction thereof, established pursuant to Section
6591.5, from the due date of the tax until the date of payment.
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 66. Section 12632 of the Revenue
and Taxation Code , as amended by Section 95 of
Chapter 717 of the Statutes of 2010, is amended to read:
12632. (a) An insurer or Medi-Cal managed care plan that fails to
pay any deficiency assessment when it becomes due and payable shall,
in addition to the deficiency assessment, pay a penalty of 10
percent of the amount of the deficiency assessment, exclusive of
interest and penalties. The amount of any deficiency assessment,
exclusive of penalties, shall bear interest at the modified adjusted
rate per month, or fraction thereof, established pursuant to Section
6591.5, from the date on which the amount, or any portion thereof,
would have been payable if properly reported and assessed until the
date of payment.
(b) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 67. Section 12632 of the Revenue
and Taxation Code , as amended by Section 96 of
Chapter 717 of the Statutes of 2010, is amended to read:
12632. (a) An insurer that fails to pay any deficiency assessment
when it becomes due and payable shall, in addition to the deficiency
assessment, pay a penalty of 10 percent of the amount of the
deficiency assessment, exclusive of interest and penalties. The
amount of any deficiency assessment, exclusive of penalties, shall
bear interest at the modified adjusted rate per month, or fraction
thereof, established pursuant to Section 6591.5, from the date on
which the amount, or any portion thereof, would have been payable if
properly reported and assessed until the date of payment.
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 68. Section 12636 of the Revenue
and Taxation Code , as amended by Section 97 of
Chapter 717 of the Statutes of 2010, is amended to read:
12636. (a) If the board finds that an insurer's or Medi-Cal
managed care plan's failure to make a timely return or payment is due
to reasonable cause and to circumstances beyond the insurer's or
Medi-Cal managed care plan's control, and which occurred despite the
exercise of ordinary care and in the absence of willful neglect, the
insurer or Medi-Cal managed care plan may be relieved of the penalty
provided by Section 12258, 12282, 12287, 12631, 12632, or 12633.
Any insurer or Medi-Cal managed care plan seeking to be relieved
of the penalty shall file with the board a statement under penalty of
perjury setting forth the facts upon which the claim for relief is
based.
(b) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or extends
the dates on which it becomes inoperative and is repealed.
SEC. 69. Section 12636 of the Revenue
and Taxation Code , as amended by Section 98 of
Chapter 717 of the Statutes of 2010, is amended to read:
12636. (a) If the board finds that an insurer's failure to make a
timely return or payment is due to reasonable cause and to
circumstances beyond the insurer's control, and which occurred
despite the exercise of ordinary care and in the absence of willful
neglect, the insurer may be relieved of the penalty provided by
Section 12258, 12282, 12287, 12631, 12632, or 12633.
Any insurer seeking to be relieved of the penalty shall file with
the board a statement under penalty of perjury setting forth the
facts upon which the claim for relief is based.
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 70. Section 12636.5 of the Revenue
and Taxation Code , as amended by Section 99
of Chapter 717 of the Statutes of 2010, is amended to read:
12636.5. (a) Every payment on an insurer's, surplus line broker'
s, or Medi-Cal managed care plan's delinquent annual tax shall be
applied as follows:
(1) First, to any interest due on the tax.
(2) Second, to any penalty imposed by this part.
(3) The balance, if any, to the tax itself.
(b) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 71. Section 12636.5 of the Revenue
and Taxation Code , as amended by Section 100
of Chapter 717 of the Statutes of 2010, is amended to read:
12636.5. (a) Every payment on an insurer's or surplus line broker'
s delinquent annual tax shall be applied as follows:
(1) First, to any interest due on the tax.
(2) Second, to any penalty imposed by this part.
(3) The balance, if any, to the tax itself.
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 72. Section 12679 of the Revenue
and Taxation Code , as amended by Section 101
of Chapter 717 of the Statutes of 2010, is amended to read:
12679. (a) If an insurer's or Medi-Cal managed care plan's right
to do business has been forfeited or its corporate powers suspended,
service of summons may be made upon the persons designated by law to
be served as agents or officers of the insurer or Medi-Cal managed
care plan, and these persons are the agents of the insurer or
Medi-Cal managed care plan for all purposes necessary in order to
prosecute the action. In the case of corporations whose powers have
been suspended, the persons constituting the board of directors may
defend the action.
(b) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 73. Section 12679 of the Revenue
and Taxation Code , as amended by Section 102
of Chapter 717 of the Statutes of 2010, is amended to read:
12679. (a) If an insurer's right to do business has been
forfeited or its corporate powers suspended, service of summons may
be made upon the persons designated by law to be served as agents or
officers of the insurer, and these persons are the agents of the
insurer for all purposes necessary in order to prosecute the action.
In the case of corporations whose powers have been suspended, the
persons constituting the board of directors may defend the action.
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 74. Section 12681 of the Revenue
and Taxation Code , as amended by Section 103 of
Chapter 717 of the Statutes of 2010, is amended to read:
12681. (a) In the action, a certificate of the Controller or of
the secretary of the board, showing unpaid taxes against an insurer
or Medi-Cal managed care plan is prima facie evidence of:
(1) The assessment of the taxes.
(2) The delinquency.
(3) The amount of the taxes, interest, and penalties due and
unpaid to the state.
(4) That the insurer or Medi-Cal managed care plan is indebted to
the state in the amount of taxes, interest, and penalties appearing
unpaid.
(5) That there has been compliance with all the requirements of
law in relation to the assessment of the taxes.
(b) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January 1,
2012 July 1, 2014 , is repealed, unless a later
enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 75. Section 12681 of the Revenue
and Taxation Code , as amended by Section 104
of Chapter 717 of the Statutes of 2010, is amended to read:
12681. (a) In the action, a certificate of the Controller or of
the secretary of the board, showing unpaid taxes against an insurer
is prima facie evidence of:
(1) The assessment of the taxes.
(2) The delinquency.
(3) The amount of the taxes, interest, and penalties due and
unpaid to the state.
(4) That the insurer is indebted to the state in the amount of
taxes, interest, and penalties appearing unpaid.
(5) That there has been compliance with all the requirements of
law in relation to the assessment of the taxes.
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 76. Section 12801 of the Revenue
and Taxation Code , as amended by Section 105
of Chapter 717 of the Statutes of 2010, is amended to read:
12801. (a) Annually, between December 10th and 15th, the
Controller shall transmit to the commissioner a statement showing the
names of all insurers and Medi-Cal managed care plans that failed to
pay on or before December 10th the whole or any portion of the tax
that became delinquent in the preceding June or which has been unpaid
for more than 30 days from the date it became due and payable as a
deficiency assessment under this part or the whole or any part of the
interest or penalties due with respect to the tax. The statement
shall show the amount of the tax, interest, and penalties due from
each insurer or Medi-Cal managed care plan.
(b) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 77. Section 12801 of the Revenue
and Taxation Code , as amended by Section 106
of Chapter 717 of the Statutes of 2010, is amended to read:
12801. (a) Annually, between December 10th and 15th, the
Controller shall transmit to the commissioner a statement showing the
names of all insurers that failed to pay on or before December 10th
the whole or any portion of the tax that became delinquent in the
preceding June or which has been unpaid for more than 30 days from
the date it became due and payable as a deficiency assessment under
this part or the whole or any part of the interest or penalties due
with respect to the tax. The statement shall show the amount of the
tax, interest, and penalties due from each insurer.
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 78. Section 12951 of the Revenue
and Taxation Code , as amended by Section 107
of Chapter 717 of the Statutes of 2010, is amended to read:
12951. (a) If any amount has been illegally assessed, the board
shall set forth that fact in its records, certify the amount
determined to be assessed in excess of the amount legally assessed
and the insurer, surplus line broker, or Medi-Cal managed care plan
against which the assessment was made, and authorize the cancellation
of the amount upon the records of the Controller and the board. The
board shall mail a notice to the insurer, surplus line broker, or
Medi-Cal managed care plan of any cancellation authorized. Any
proposed determination by the board pursuant to this section with
respect to an amount in excess of fifty thousand dollars ($50,000)
shall be available as a public record for at least 10 days prior to
the effective date of that determination.
(b) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 79. Section 12951 of the Revenue
and Taxation Code , as amended by Section 108
of Chapter 717 of the Statutes of 2010, is amended to read:
12951. (a) If any amount has been illegally assessed, the board
shall set forth that fact in its records, certify the amount
determined to be assessed in excess of the amount legally assessed
and the insurer or surplus line broker against which the assessment
was made, and authorize the cancellation of the amount upon the
records of the Controller and the board. The board shall mail a
notice to the insurer or surplus line broker of any cancellation
authorized. Any proposed determination by the board pursuant to this
section with respect to an amount in excess of fifty thousand dollars
($50,000) shall be available as a public record for at least 10 days
prior to the effective date of that determination.
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 80. Section 12977 of the Revenue
and Taxation Code , as amended by Section 109
of Chapter 717 of the Statutes of 2010, is amended to read:
12977. (a) If the board determines that any tax, interest, or
penalty has been paid more than once or has been erroneously or
illegally collected or computed, the board shall set forth that fact
in its records of the board, certify the amount of the taxes,
interest, or penalties collected in excess of what was legally due,
and from whom they were collected or by whom paid, and certify the
excess to the Controller for credit or refund.
(b) The Controller upon receipt of a certification for credit or
refund shall credit the excess on any amounts then due and payable
from the insurer, surplus line broker, or Medi-Cal managed care plan
under this part and refund the balance.
(c) Any proposed determination by the board pursuant to this
section with respect to an amount in excess of fifty thousand dollars
($50,000) shall be available as a public record for at least 10 days
prior to the effective date of that determination.
(d) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 81. Section 12977 of the Revenue
and Taxation Code , as amended by Section 110
of Chapter 717 of the Statutes of 2010, is amended to read:
12977. (a) If the board determines that any tax, interest, or
penalty has been paid more than once or has been erroneously or
illegally collected or computed, the board shall set forth that fact
in its records of the board, certify the amount of the taxes,
interest, or penalties collected in excess of what was legally due,
and from whom they were collected or by whom paid, and certify the
excess to the Controller for credit or refund.
(b) The Controller upon receipt of a certification for credit or
refund shall credit the excess on any amounts then due and payable
from the insurer or surplus line broker under this part and refund
the balance.
(c) Any proposed determination by the board pursuant to this
section with respect to an amount in excess of fifty thousand dollars
($50,000) shall be available as a public record for at least 10 days
prior to the effective date of that determination.
(d) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 82. Section 12983 of the Revenue
and Taxation Code , as amended by Section 111
of Chapter 717 of the Statutes of 2010, is amended to read:
12983. (a) Interest shall be allowed upon the amount of any
overpayment of tax by an insurer or Medi-Cal managed care plan
pursuant to this part at the modified adjusted rate per month
established pursuant to Section 6591.5, from the first day of the
monthly period following the period during which the overpayment was
made. For purposes of this section, "monthly period" means the month
commencing on the day after the due date of the payment through the
same date as the due date in each successive month. In addition, a
refund or credit shall be made of any interest imposed upon the
claimant with respect to the amount being refunded or credited.
The interest shall be paid as follows:
(1) In the case of a refund, to the last day of the calendar month
following the date upon which the claimant is notified in writing
that a claim may be filed or the date upon which the claim is
approved by the board, whichever date is the earlier.
(2) In the case of a
credit, to the same date as that to which interest is computed on the
tax or amount against which the credit is applied.
(b) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 83. Section 12983 of the Revenue
and Taxation Code , as amended by Section 112
of Chapter 717 of the Statutes of 2010, is amended to read:
12983. (a) Interest shall be allowed upon the amount of any
overpayment of tax by an insurer pursuant to this part at the
modified adjusted rate per month established pursuant to Section
6591.5, from the first day of the monthly period following the period
during which the overpayment was made. For purposes of this section,
"monthly period" means the month commencing on the day after the due
date of the payment through the same date as the due date in each
successive month. In addition, a refund or credit shall be made of
any interest imposed upon the claimant with respect to the amount
being refunded or credited.
The interest shall be paid as follows:
(1) In the case of a refund, to the last day of the calendar month
following the date upon which the claimant is notified in writing
that a claim may be filed or the date upon which the claim is
approved by the board, whichever date is the earlier.
(2) In the case of a credit, to the same date as that to which
interest is computed on the tax or amount against which the credit is
applied.
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 84. Section 12984 of the Revenue
and Taxation Code , as amended by Section 113
of Chapter 717 of the Statutes of 2010, is amended to read:
12984. (a) If the board determines that any overpayment has been
made intentionally or made not incident to a bona fide and orderly
discharge of a liability reasonably assumed by the insurer, surplus
line broker, or Medi-Cal managed care plan to be imposed by law, no
interest shall be allowed on the overpayment.
(b) If any insurer, surplus line broker, or Medi-Cal managed care
plan which has filed a claim for refund requests the board to defer
action on its claim, the board, as a condition to deferring action,
may require the claimant to waive interest for the period during
which the insurer, surplus line broker, or Medi-Cal managed care plan
requests the board to defer action on the claim.
(c) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 85. Section 12984 of the Revenue
and Taxation Code , as amended by Section 114
of Chapter 717 of the Statutes of 2010, is amended to read:
12984. (a) If the board determines that any overpayment has been
made intentionally or made not incident to a bona fide and orderly
discharge of a liability reasonably assumed by the insurer or surplus
line broker to be imposed by law, no interest shall be allowed on
the overpayment.
(b) If any insurer or surplus line broker which has filed a claim
for refund requests the board to defer action on its claim, the
board, as a condition to deferring action, may require the claimant
to waive interest for the period during which the insurer or surplus
line broker requests the board to defer action on the claim.
(c) This section shall become operative on July 1, 2011
January 1, 2014 .
SEC. 86. Section 13108 of the Revenue
and Taxation Code , as amended by Section 115 of Chapter
717 of the Statutes of 2010, is amended to read:
13108. (a) A judgment shall not be rendered in favor of the
plaintiff when the action is brought by or in the name of an assignee
of the insurer paying the tax, interest, or penalties, or by any
person other than the insurer or Medi-Cal managed care plan that has
paid the tax, interest, or penalties.
(b) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January
1, 2012 July 1, 2014 , is repealed, unless a
later enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 87. Section 13108 of the Revenue
and Taxation Code , as amended by Section 116 of Chapter
717 of the Statutes of 2010, is amended to read:
13108. (a) A judgment shall not be rendered in favor of the
plaintiff when the action is brought by or in the name of an assignee
of the insurer paying the tax, interest, or penalties, or by any
person other than the insurer that has paid the tax, interest, or
penalties.
(b) This section shall become operative on July 1, 2011
January 1, 2014 .
SECTION 1. SEC. 88. Section 17053.31
is added to the Revenue and Taxation Code, to read:
17053.31. (a) Notwithstanding any other provision or former
provision of this part to the contrary, a credit available for
carryover under former sections of this part identified in
subdivision (b) shall not be allowed to be carried over to any
taxable year beginning on or after January 1, 2011.
(b) This section shall apply to credit carryovers under the
following former sections of this part:
(1) Former Section 17052.15, as identified in subparagraph (G) of
paragraph (1) of subdivision (c) of Section 17039, as in effect on
the effective date of the act adding this section.
(2) Former Section 17053.10, as identified in subparagraph (K) of
paragraph (1) of subdivision (c) of Section 17039, as in effect on
the effective date of the act adding this section.
(3) Former Section 17053.17, as identified in subparagraph (M) of
paragraph (1) of subdivision (c) of Section 17039, as in effect on
the effective date of the act adding this section.
SEC. 2. SEC. 89. Section 17053.33 of
the Revenue and Taxation Code is amended to read:
17053.33. (a) For each taxable year beginning on or after January
1, 1998, there shall be allowed as a credit against the "net tax"
(as defined in Section 17039) for the taxable year an amount equal to
the sales or use tax paid or incurred during the taxable year by the
qualified taxpayer in connection with the qualified taxpayer's
purchase of qualified property.
(b) For purposes of this section:
(1) "Qualified property" means property that meets all of the
following requirements:
(A) Is any of the following:
(i) Machinery and machinery parts used for fabricating,
processing, assembling, and manufacturing.
(ii) Machinery and machinery parts used for the production of
renewable energy resources.
(iii) Machinery and machinery parts used for either of the
following:
(I) Air pollution control mechanisms.
(II) Water pollution control mechanisms.
(iv) Data processing and communications equipment, such as
computers, computer-automated drafting systems, copy machines,
telephone systems, and faxes.
(v) Motion picture manufacturing equipment central to production
and post production, such as cameras, audio recorders, and digital
image and sound processing equipment.
(B) The total cost of qualified property purchased and placed in
service in any taxable year that may be taken into account by any
qualified taxpayer for purposes of claiming this credit shall not
exceed one million dollars ($1,000,000).
(C) The qualified property is used by the qualified taxpayer
exclusively in a targeted tax area.
(D) The qualified property is purchased and placed in service
before the date the targeted tax area designation expires, is
revoked, is no longer binding, or becomes inoperative.
(2) (A) "Qualified taxpayer" means a person or entity that meets
both of the following:
(i) Is engaged in a trade or business within a targeted tax area
designated pursuant to Chapter 12.93 (commencing with Section 7097)
of Division 7 of Title 1 of the Government Code.
(ii) Is engaged in those lines of business described in Codes 2000
to 2099, inclusive; 2200 to 3999, inclusive; 4200 to 4299,
inclusive; 4500 to 4599, inclusive; and 4700 to 5199, inclusive, of
the Standard Industrial Classification (SIC) Manual published by the
United States Office of Management and Budget, 1987 edition.
(B) In the case of any pass-through entity, the determination of
whether a taxpayer is a qualified taxpayer under this section shall
be made at the entity level and any credit under this section or
Section 23633 shall be allowed to the pass-through entity and passed
through to the partners or shareholders in accordance with applicable
provisions of this part or Part 11 (commencing with Section 23001).
For purposes of this subparagraph, the term "pass-through entity"
means any partnership or S corporation.
(3) "Targeted tax area" means the area designated pursuant to
Chapter 12.93 (commencing with Section 7097) of Division 7 of Title 1
of the Government Code.
(c) If the qualified taxpayer is allowed a credit for qualified
property pursuant to this section, only one credit shall be allowed
to the taxpayer under this part with respect to that qualified
property.
(d) If the qualified taxpayer has purchased property upon which a
use tax has been paid or incurred, the credit provided by this
section shall be allowed only if qualified property of a comparable
quality and price is not timely available for purchase in this state.
(e) In the case where the credit otherwise allowed under this
section exceeds the "net tax" for the taxable year, that portion of
the credit that exceeds the "net tax" may be carried over and added
to the credit, if any, in the following year, and succeeding years if
necessary, until the credit is exhausted. The credit shall be
applied first to the earliest taxable years possible.
(f) Any qualified taxpayer who elects to be subject to this
section shall not be entitled to increase the basis of the qualified
property as otherwise required by Section 164(a) of the Internal
Revenue Code with respect to sales or use tax paid or incurred in
connection with the qualified taxpayer's purchase of qualified
property.
(g) (1) The amount of the credit otherwise allowed under this
section and Section 17053.34, including any credit carryover from
prior years, that may reduce the "net tax" for the taxable year shall
not exceed the amount of tax that would be imposed on the qualified
taxpayer's business income attributable to the targeted tax area
determined as if that attributable income represented all of the
income of the qualified taxpayer subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the targeted
tax area. For that purpose, the taxpayer's business income
attributable to sources in this state first shall be determined in
accordance with Chapter 17 (commencing with Section 25101) of Part
11. That business income shall be further apportioned to the targeted
tax area in accordance with Article 2 (commencing with Section
25120) of Chapter 17 of Part 11, modified for purposes of this
section in accordance with paragraph (3).
(3) Business income shall be apportioned to the targeted tax area
by multiplying the total California business income of the taxpayer
by a fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is two. For purposes of
this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the targeted tax area during the
taxable year, and the denominator of which is the average value of
all the taxpayer's real and tangible personal property owned or
rented and used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the targeted tax area during
the taxable year for compensation, and the denominator of which is
the total compensation paid by the taxpayer in this state during the
taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "net tax" for the
taxable year, as provided in subdivision (e).
(5) In the event that a credit carryover is allowable under
subdivision (e) for any taxable year after the targeted tax area
designation has expired, has been revoked, is no longer binding, or
has become inoperative, the targeted tax area shall be deemed to
remain in existence for purposes of computing the limitation
specified in this subdivision.
(h) The amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 1998.
(i) (1) This section shall cease to be operative for taxable years
beginning on or after January 1, 2011.
(2) In the case of any portion of a credit available for carryover
to a taxable year beginning on or after January 1, 2011, under
subdivision (e), as that subdivision read prior to the amendments
made by the act adding this subdivision, neither that subdivision nor
subdivision (d) of Section 17039 shall apply, and those unused
credit amounts shall not be carried over to any taxable year
beginning on or after January 1, 2011.
(j) This section shall be repealed as of December 1, 2011.
SEC. 3. SEC. 90. Section 17053.34 of
the Revenue and Taxation Code is amended to read:
17053.34. (a) For each taxable year beginning on or after January
1, 1998, there shall be allowed a credit against the "net tax" (as
defined in Section 17039) to a qualified taxpayer who employs a
qualified employee in a targeted tax area during the taxable year.
The credit shall be equal to the sum of each of the following:
(1) Fifty percent of qualified wages in the first year of
employment.
(2) Forty percent of qualified wages in the second year of
employment.
(3) Thirty percent of qualified wages in the third year of
employment.
(4) Twenty percent of qualified wages in the fourth year of
employment.
(5) Ten percent of qualified wages in the fifth year of
employment.
(b) For purposes of this section:
(1) "Qualified wages" means:
(A) That portion of wages paid or incurred by the qualified
taxpayer during the taxable year to qualified employees that does not
exceed 150 percent of the minimum wage.
(B) Wages received during the 60-month period beginning with the
first day the employee commences employment with the qualified
taxpayer. Reemployment in connection with any increase, including a
regularly occurring seasonal increase, in the trade or business
operations of the qualified taxpayer does not constitute commencement
of employment for purposes of this section.
(C) Qualified wages do not include any wages paid or incurred by
the qualified taxpayer on or after the targeted tax area expiration
date. However, wages paid or incurred with respect to qualified
employees who are employed by the qualified taxpayer within the
targeted tax area within the 60-month period prior to the targeted
tax area expiration date shall continue to qualify for the credit
under this section after the targeted tax area expiration date, in
accordance with all provisions of this section applied as if the
targeted tax area designation were still in existence and binding.
(2) "Minimum wage" means the wage established by the Industrial
Welfare Commission as provided for in Chapter 1 (commencing with
Section 1171) of Part 4 of Division 2 of the Labor Code.
(3) "Targeted tax area expiration date" means the date the
targeted tax area designation expires, is revoked, is no longer
binding, or becomes inoperative.
(4) (A) "Qualified employee" means an individual who meets all of
the following requirements:
(i) At least 90 percent of his or her services for the qualified
taxpayer during the taxable year are directly related to the conduct
of the qualified taxpayer's trade or business located in a targeted
tax area.
(ii) Performs at least 50 percent of his or her services for the
qualified taxpayer during the taxable year in a targeted tax area.
(iii) Is hired by the qualified taxpayer after the date of
original designation of the area in which services were performed as
a targeted tax area.
(iv) Is any of the following:
(I) Immediately preceding the qualified employee's commencement of
employment with the qualified taxpayer, was a person eligible for
services under the federal Job Training Partnership Act (29 U.S.C.
Sec. 1501 et seq.), or its successor, who is receiving, or is
eligible to receive, subsidized employment, training, or services
funded by the federal Job Training Partnership Act, or its successor.
(II) Immediately preceding the qualified employee's commencement
of employment with the qualified taxpayer, was a person eligible to
be a voluntary or mandatory registrant under the Greater Avenues for
Independence Act of 1985 (GAIN) provided for pursuant to Article 3.2
(commencing with Section 11320) of Chapter 2 of Part 3 of Division 9
of the Welfare and Institutions Code, or its successor.
(III) Immediately preceding the qualified employee's commencement
of employment with the qualified taxpayer, was an economically
disadvantaged individual 14 years of age or older.
(IV) Immediately preceding the qualified employee's commencement
of employment with the qualified taxpayer, was a dislocated worker
who meets any of the following:
(aa) Has been terminated or laid off or who has received a notice
of termination or layoff from employment, is eligible for or has
exhausted entitlement to unemployment insurance benefits, and is
unlikely to return to his or her previous industry or occupation.
(bb) Has been terminated or has received a notice of termination
of employment as a result of any permanent closure or any substantial
layoff at a plant, facility, or enterprise, including an individual
who has not received written notification but whose employer has made
a public announcement of the closure or layoff.
(cc) Is long-term unemployed and has limited opportunities for
employment or reemployment in the same or a similar occupation in the
area in which the individual resides, including an individual 55
years of age or older who may have substantial barriers to employment
by reason of age.
(dd) Was self-employed (including farmers and ranchers) and is
unemployed as a result of general economic conditions in the
community in which he or she resides or because of natural disasters.
(ee) Was a civilian employee of the Department of Defense employed
at a military installation being closed or realigned under the
Defense Base Closure and Realignment Act of 1990.
(ff) Was an active member of the Armed Forces or National Guard as
of September 30, 1990, and was either involuntarily separated or
separated pursuant to a special benefits program.
(gg) Is a seasonal or migrant worker who experiences chronic
seasonal unemployment and underemployment in the agriculture
industry, aggravated by continual advancements in technology and
mechanization.
(hh) Has been terminated or laid off, or has received a notice of
termination or layoff, as a consequence of compliance with the Clean
Air Act.
(V) Immediately preceding the qualified employee's commencement of
employment with the qualified taxpayer, was a disabled individual
who is eligible for or enrolled in, or has completed a state
rehabilitation plan or is a service-connected disabled veteran,
veteran of the Vietnam era, or veteran who is recently separated from
military service.
(VI) Immediately preceding the qualified employee's commencement
of employment with the qualified taxpayer, was an ex-offender. An
individual shall be treated as convicted if he or she was placed on
probation by a state court without a finding of guilty.
(VII) Immediately preceding the qualified employee's commencement
of employment with the qualified taxpayer, was a person eligible for
or a recipient of any of the following:
(aa) Federal Supplemental Security Income benefits.
(bb) Aid to Families with Dependent Children.
(cc) Food stamps.
(dd) State and local general assistance.
(VIII) Immediately preceding the qualified employee's commencement
of employment with the qualified taxpayer, was a member of a
federally recognized Indian tribe, band, or other group of Native
American descent.
(IX) Immediately preceding the qualified employee's commencement
of employment with the qualified taxpayer, was a resident of a
targeted tax area.
(X) Immediately preceding the qualified employee's commencement of
employment with the taxpayer, was a member of a targeted group as
defined in Section 51(d) of the Internal Revenue Code, or its
successor.
(B) Priority for employment shall be provided to an individual who
is enrolled in a qualified program under the federal Job Training
Partnership Act or the Greater Avenues for Independence Act of 1985
or who is eligible as a member of a targeted group under the Work
Opportunity Tax Credit (Section 51 of the Internal Revenue Code), or
its successor.
(5) (A) "Qualified taxpayer" means a person or entity that meets
both of the following:
(i) Is engaged in a trade or business within a targeted tax area
designated pursuant to Chapter 12.93 (commencing with Section 7097)
of Division 7 of Title 1 of the Government Code.
(ii) Is engaged in those lines of business described in Codes 2000
to 2099, inclusive; 2200 to 3999, inclusive; 4200 to 4299,
inclusive; 4500 to 4599, inclusive; and 4700 to 5199, inclusive, of
the Standard Industrial Classification (SIC) Manual published by the
United States Office of Management and Budget, 1987 edition.
(B) In the case of any passthrough entity, the determination of
whether a taxpayer is a qualified taxpayer under this section shall
be made at the entity level and any credit under this section or
Section 23634 shall be allowed to the passthrough entity and passed
through to the partners or shareholders in accordance with applicable
provisions of this part or Part 11 (commencing with Section 23001).
For purposes of this subdivision, the term "passthrough entity" means
any partnership or S corporation.
(6) "Seasonal employment" means employment by a qualified taxpayer
that has regular and predictable substantial reductions in trade or
business operations.
(c) If the qualified taxpayer is allowed a credit for qualified
wages pursuant to this section, only one credit shall be allowed to
the taxpayer under this part with respect to those qualified wages.
(d) The qualified taxpayer shall do both of the following:
(1) Obtain from the Employment Development Department, as
permitted by federal law, the local county or city Job Training
Partnership Act administrative entity, the local county GAIN office
or social services agency, or the local government administering the
targeted tax area, a certification that provides that a qualified
employee meets the eligibility requirements specified in clause (iv)
of subparagraph (A) of paragraph (4) of subdivision (b). The
Employment Development Department may provide preliminary screening
and referral to a certifying agency. The Department of Housing and
Community Development shall develop regulations governing the
issuance of certificates pursuant to Section 7097 of the Government
Code, and shall develop forms for this purpose.
(2) Retain a copy of the certification and provide it upon request
to the Franchise Tax Board.
(e) (1) For purposes of this section:
(A) All employees of trades or businesses, which are not
incorporated, that are under common control shall be treated as
employed by a single taxpayer.
(B) The credit, if any, allowable by this section with respect to
each trade or business shall be determined by reference to its
proportionate share of the expense of the qualified wages giving rise
to the credit, and shall be allocated in that manner.
(C) Principles that apply in the case of controlled groups of
corporations, as specified in subdivision (d) of Section 23634, shall
apply with respect to determining employment.
(2) If an employer acquires the major portion of a trade or
business of another employer (hereinafter in this paragraph referred
to as the "predecessor") or the major portion of a separate unit of a
trade or business of a predecessor, then, for purposes of applying
this section (other than subdivision (f)) for any calendar year
ending after that acquisition, the employment relationship between a
qualified employee and an employer shall not be treated as terminated
if the employee continues to be employed in that trade or business.
(f) (1) (A) If the employment, other than seasonal employment, of
any qualified employee, with respect to whom qualified wages are
taken into account under subdivision (a) is terminated by the
qualified taxpayer at any time during the first 270 days of that
employment (whether or not consecutive) or before the close of the
270th calendar day after the day in which that employee completes 90
days of employment with the qualified taxpayer, the tax imposed by
this part for the taxable year in which that employment is terminated
shall be increased by an amount equal to the credit allowed under
subdivision (a) for that taxable year and all prior taxable years
attributable to qualified wages paid or incurred with respect to that
employee.
(B) If the seasonal employment of any qualified employee, with
respect to whom qualified wages are taken into account under
subdivision (a) is not continued by the qualified taxpayer for a
period of 270 days of employment during the 60-month period beginning
with the day the qualified employee commences seasonal employment
with the qualified taxpayer, the tax imposed by this part, for the
taxable year that includes the 60th month following the month in
which the qualified employee commences seasonal employment with the
qualified taxpayer, shall be increased by an amount equal to the
credit allowed under subdivision (a) for that taxable year and all
prior taxable years attributable to qualified wages paid or incurred
with respect to that
qualified employee.
(2) (A) Subparagraph (A) of paragraph (1) shall not apply to any
of the following:
(i) A termination of employment of a qualified employee who
voluntarily leaves the employment of the qualified taxpayer.
(ii) A termination of employment of a qualified employee who,
before the close of the period referred to in subparagraph (A) of
paragraph (1), becomes disabled and unable to perform the services of
that employment, unless that disability is removed before the close
of that period and the qualified taxpayer fails to offer reemployment
to that employee.
(iii) A termination of employment of a qualified employee, if it
is determined that the termination was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that employee.
(iv) A termination of employment of a qualified employee due to a
substantial reduction in the trade or business operations of the
qualified taxpayer.
(v) A termination of employment of a qualified employee, if that
employee is replaced by other qualified employees so as to create a
net increase in both the number of employees and the hours of
employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of
the following:
(i) A failure to continue the seasonal employment of a qualified
employee who voluntarily fails to return to the seasonal employment
of the qualified taxpayer.
(ii) A failure to continue the seasonal employment of a qualified
employee who, before the close of the period referred to in
subparagraph (B) of paragraph (1), becomes disabled and unable to
perform the services of that seasonal employment, unless that
disability is removed before the close of that period and the
qualified taxpayer fails to offer seasonal employment to that
qualified employee.
(iii) A failure to continue the seasonal employment of a qualified
employee, if it is determined that the failure to continue the
seasonal employment was due to the misconduct (as defined in Sections
1256-30 to 1256-43, inclusive, of Title 22 of the California Code of
Regulations) of that qualified employee.
(iv) A failure to continue seasonal employment of a qualified
employee due to a substantial reduction in the regular seasonal trade
or business operations of the qualified taxpayer.
(v) A failure to continue the seasonal employment of a qualified
employee, if that qualified employee is replaced by other qualified
employees so as to create a net increase in both the number of
seasonal employees and the hours of seasonal employment.
(C) For purposes of paragraph (1), the employment relationship
between the qualified taxpayer and a qualified employee shall not be
treated as terminated by reason of a mere change in the form of
conducting the trade or business of the qualified taxpayer, if the
qualified employee continues to be employed in that trade or business
and the qualified taxpayer retains a substantial interest in that
trade or business.
(3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
(g) In the case of an estate or trust, both of the following
apply:
(1) The qualified wages for any taxable year shall be apportioned
between the estate or trust and the beneficiaries on the basis of the
income of the estate or trust allocable to each.
(2) Any beneficiary to whom any qualified wages have been
apportioned under paragraph (1) shall be treated, for purposes of
this part, as the employer with respect to those wages.
(h) For purposes of this section, "targeted tax area" means an
area designated pursuant to Chapter 12.93 (commencing with Section
7097) of Division 7 of Title 1 of the Government Code.
(i) In the case where the credit otherwise allowed under this
section exceeds the "net tax" for the taxable year, that portion of
the credit that exceeds the "net tax" may be carried over and added
to the credit, if any, in succeeding taxable years, until the credit
is exhausted. The credit shall be applied first to the earliest
taxable years possible.
(j) (1) The amount of the credit otherwise allowed under this
section and Section 17053.33, including any credit carryover from
prior years, that may reduce the "net tax" for the taxable year shall
not exceed the amount of tax that would be imposed on the qualified
taxpayer's business income attributable to the targeted tax area
determined as if that attributable income represented all of the
income of the qualified taxpayer subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the targeted
tax area. For that purpose, the taxpayer's business income
attributable to sources in this state first shall be determined in
accordance with Chapter 17 (commencing with Section 25101) of Part
11. That business income shall be further apportioned to the targeted
tax area in accordance with Article 2 (commencing with Section
25120) of Chapter 17 of Part 11, modified for purposes of this
section in accordance with paragraph (3).
(3) Business income shall be apportioned to the targeted tax area
by multiplying the total California business income of the taxpayer
by a fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is two. For purposes of
this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the targeted tax area during the
taxable year, and the denominator of which is the average value of
all the taxpayer's real and tangible personal property owned or
rented and used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the targeted tax area during
the taxable year for compensation, and the denominator of which is
the total compensation paid by the taxpayer in this state during the
taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "net tax" for the
taxable year, as provided in subdivision (h).
(5) In the event that a credit carryover is allowable under
subdivision (h) for any taxable year after the targeted tax area
expiration date, the targeted tax area shall be deemed to remain in
existence for purposes of computing the limitation specified in this
subdivision.
(k) (1) This section shall cease to be operative for taxable years
beginning on or after January 1, 2011.
(2) In the case of any portion of a credit available for carryover
to a taxable year beginning on or after January 1, 2011, under
subdivision (i), as that subdivision read prior to the amendments
made by the act adding this subdivision, neither that subdivision nor
subdivision (d) of Section 17039 shall apply, and those unused
credit amounts shall not be carried over to any taxable year
beginning on or after January 1, 2011.
(l) This section shall be repealed as of December 1, 2011.
SEC. 4. SEC. 91. Section 17053.45 of
the Revenue and Taxation Code is amended to read:
17053.45. (a) For each taxable year beginning on or after January
1, 1995, there shall be allowed as a credit against the "net tax"
(as defined by Section 17039) an amount equal to the sales or use tax
paid or incurred by the taxpayer in connection with the purchase of
qualified property to the extent that the qualified property does not
exceed a value of one million dollars ($1,000,000).
(b) For purposes of this section:
(1) "LAMBRA" means a local agency military base recovery area
designated in accordance with Section 7114 of the Government Code.
(2) "Taxpayer" means a taxpayer that conducts a trade or business
within a LAMBRA and, for the first two taxable years, has a net
increase in jobs (defined as 2,000 paid hours per employee per year)
of one or more employees in the LAMBRA.
(A) The net increase in the number of jobs shall be determined by
subtracting the total number of full-time employees (defined as 2,000
paid hours per employee per year) the taxpayer employed in this
state in the taxable year prior to commencing business operations in
the LAMBRA from the total number of full-time employees the taxpayer
employed in this state during the second taxable year after
commencing business operations in the LAMBRA. For taxpayers who
commence doing business in this state with their LAMBRA business
operation, the number of employees for the taxable year prior to
commencing business operations in the LAMBRA shall be zero. If the
taxpayer has a net increase in jobs in the state, the credit shall be
allowed only if one or more full-time employees is employed within
the LAMBRA.
(B) The total number of employees employed in the LAMBRA shall
equal the sum of both of the following:
(i) The total number of hours worked in the LAMBRA for the
taxpayer by employees (not to exceed 2,000 hours per employee) who
are paid an hourly wage divided by 2,000.
(ii) The total number of months worked in the LAMBRA for the
taxpayer by employees who are salaried employees divided by 12.
(C) In the case of a taxpayer who first commences doing business
in the LAMBRA during the taxable year, for purposes of clauses (i)
and (ii), respectively, of subparagraph (B), the divisors "2,000" and
"12" shall be multiplied by a fraction, the numerator of which is
the number of months of the taxable year that the taxpayer was doing
business in the LAMBRA and the denominator of which is 12.
(3) "Qualified property" means property that is each of the
following:
(A) Purchased by the taxpayer for exclusive use in a trade or
business conducted within a LAMBRA.
(B) Purchased before the date the LAMBRA designation expires, is
no longer binding, or becomes inoperative.
(C) Any of the following:
(i) High technology equipment, including, but not limited to,
computers and electronic processing equipment.
(ii) Aircraft maintenance equipment, including, but not limited
to, engine stands, hydraulic mules, power carts, test equipment,
handtools, aircraft start carts, and tugs.
(iii) Aircraft components, including, but not limited to, engines,
fuel control units, hydraulic pumps, avionics, starts, wheels, and
tires.
(iv) Section 1245 property, as defined in Section 1245(a)(3) of
the Internal Revenue Code.
(c) The credit provided under subdivision (a) shall be allowed
only for qualified property manufactured in California unless
qualified property of a comparable quality and price is not available
for timely purchase and delivery from a California manufacturer.
(d) In the case where the credit otherwise allowed under this
section exceeds the "net tax" for the taxable year, that portion of
the credit which exceeds the "net tax" may be carried over and added
to the credit, if any, in succeeding years, until the credit is
exhausted. The credit shall be applied first to the earliest taxable
years possible.
(e) Any taxpayer who elects to be subject to this section shall
not be entitled to increase the basis of the property as otherwise
required by Section 164(a) of the Internal Revenue Code with respect
to sales or use tax paid or incurred in connection with the purchase
of qualified property.
(f) (1) The amount of credit otherwise allowed under this section
and Section 17053.46, including any credit carryover from prior
years, that may reduce the "net tax" for the taxable year shall not
exceed the amount of tax that would be imposed on the taxpayer's
business income attributed to a LAMBRA determined as if that
attributable income represented all the income of the taxpayer
subject to tax under this part.
(2) Attributable income is that portion of the taxpayer's
California source business income that is apportioned to the LAMBRA.
For that purpose, the taxpayer's business income that is attributable
to sources in this state shall first be determined in accordance
with Chapter 17 (commencing with Section 25101) of Part 11. That
business income shall be further apportioned to the LAMBRA in
accordance with Article 2 (commencing with Section 25120) of Chapter
17 of Part 11, as modified for purposes of this section in accordance
with paragraph (3).
(3) Income shall be apportioned to a LAMBRA by multiplying the
total California business income of the taxpayer by a fraction, the
numerator of which is the property factor, plus the payroll factor,
and the denominator of which is two. For purposes of this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the LAMBRA during the taxable
year, and the denominator of which is the average value of all the
taxpayer's real and tangible personal property owned or rented and
used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the LAMBRA during the
taxable year for compensation, and the denominator of which is the
total compensation paid by the taxpayer in this state during the
taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "net tax" for the
taxable year, as provided in subdivision (d).
(g) (1) If the qualified property is disposed of or no longer used
by the taxpayer in the LAMBRA, at any time before the close of the
second taxable year after the property is placed in service, the
amount of the credit previously claimed, with respect to that
property, shall be added to the taxpayer's tax liability in the
taxable year of that disposition or nonuse.
(2) At the close of the second taxable year, if the taxpayer has
not increased the number of its employees as determined by paragraph
(2) of subdivision (b), then the amount of the credit previously
claimed shall be added to the taxpayer's net tax for the taxpayer's
second taxable year.
(h) If the taxpayer is allowed a credit for qualified property
pursuant to this section, only one credit shall be allowed to the
taxpayer under this part with respect to that qualified property.
(i) The amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 1998.
(j) (1) This section shall cease to be operative for taxable years
beginning on or after January 1, 2011.
(2) In the case of any portion of a credit available for carryover
to a taxable year beginning on or after January 1, 2011, under
subdivision (d), as that subdivision read prior to the amendments
made by the act adding this subdivision, neither that subdivision nor
subdivision (d) of Section 17039 shall apply, and those unused
credit amounts shall not be carried over to any taxable year
beginning on or after January 1, 2011.
(k) This section shall be repealed as of December 1, 2011.
SEC. 5. SEC. 92. Section 17053.46 of
the Revenue and Taxation Code is amended to read:
17053.46. (a) For each taxable year beginning on or after January
1, 1995, there shall be allowed as a credit against the "net tax"
(as defined in Section 17039) to a qualified taxpayer for hiring a
qualified disadvantaged individual or a qualified displaced employee
during the taxable year for employment in the LAMBRA. The credit
shall be equal to the sum of each of the following:
(1) Fifty percent of the qualified wages in the first year of
employment.
(2) Forty percent of the qualified wages in the second year of
employment.
(3) Thirty percent of the qualified wages in the third year of
employment.
(4) Twenty percent of the qualified wages in the fourth year of
employment.
(5) Ten percent of the qualified wages in the fifth year of
employment.
(b) For purposes of this section:
(1) "Qualified wages" means:
(A) That portion of wages paid or incurred by the employer during
the taxable year to qualified disadvantaged individuals or qualified
displaced employees that does not exceed 150 percent of the minimum
wage.
(B) The total amount of qualified wages which may be taken into
account for purposes of claiming the credit allowed under this
section shall not exceed two million dollars ($2,000,000) per taxable
year.
(C) Wages received during the 60-month period beginning with the
first day the individual commences employment with the taxpayer.
Reemployment in connection with any increase, including a regularly
occurring seasonal increase, in the trade or business operations of
the qualified taxpayer does not constitute commencement of employment
for purposes of this section.
(D) Qualified wages do not include any wages paid or incurred by
the qualified taxpayer on or after the LAMBRA expiration date.
However, wages paid or incurred with respect to qualified
disadvantaged individuals or qualified displaced employees who are
employed by the qualified taxpayer within the LAMBRA within the
60-month period prior to the LAMBRA expiration date shall continue to
qualify for the credit under this section after the LAMBRA
expiration date, in accordance with all provisions of this section
applied as if the LAMBRA designation were still in existence and
binding.
(2) "Minimum wage" means the wage established by the Industrial
Welfare Commission as provided for in Chapter 1 (commencing with
Section 1171) of Part 4 of Division 2 of the Labor Code.
(3) "LAMBRA" means a local agency military base recovery area
designated in accordance with Section 7114 of the Government Code.
(4) "Qualified disadvantaged individual" means an individual who
satisfies all of the following requirements:
(A) (i) At least 90 percent of whose services for the taxpayer
during the taxable year are directly related to the conduct of the
taxpayer's trade or business located in a LAMBRA.
(ii) Who performs at least 50 percent of his or her services for
the taxpayer during the taxable year in the LAMBRA.
(B) Who is hired by the employer after the designation of the area
as a LAMBRA in which the individual's services were primarily
performed.
(C) Who is any of the following immediately preceding the
individual's commencement of employment with the taxpayer:
(i) An individual who has been determined eligible for services
under the federal Job Training Partnership Act (29 U.S.C. Sec. 1501
et seq.).
(ii) Any voluntary or mandatory registrant under the Greater
Avenues for Independence Act of 1985 as provided pursuant to Article
3.2 (commencing with Section 11320) of Chapter 2 of Part 3 of
Division 9 of the Welfare and Institutions Code.
(iii) An economically disadvantaged individual age 16 years or
older.
(iv) A dislocated worker who meets any of the following
conditions:
(I) Has been terminated or laid off or who has received a notice
of termination or layoff from employment, is eligible for or has
exhausted entitlement to unemployment insurance benefits, and is
unlikely to return to his or her previous industry or occupation.
(II) Has been terminated or has received a notice of termination
of employment as a result of any permanent closure or any substantial
layoff at a plant, facility, or enterprise, including an individual
who has not received written notification but whose employer has made
a public announcement of the closure or layoff.
(III) Is long-term unemployed and has limited opportunities for
employment or reemployment in the same or a similar occupation in the
area in which the individual resides, including an individual 55
years of age or older who may have substantial barriers to employment
by reason of age.
(IV) Was self-employed (including farmers and ranchers) and is
unemployed as a result of general economic conditions in the
community in which he or she resides or because of natural disasters.
(V) Was a civilian employee of the Department of Defense employed
at a military installation being closed or realigned under the
Defense Base Closure and Realignment Act of 1990.
(VI) Was an active member of the Armed Forces or National Guard as
of September 30, 1990, and was either involuntarily separated or
separated pursuant to a special benefits program.
(VII) Experiences chronic seasonal unemployment and
underemployment in the agriculture industry, aggravated by continual
advancements in technology and mechanization.
(VIII) Has been terminated or laid off or has received a notice of
termination or layoff as a consequence of compliance with the Clean
Air Act.
(v) An individual who is enrolled in or has completed a state
rehabilitation plan or is a service-connected disabled veteran,
veteran of the Vietnam era, or veteran who is recently separated from
military service.
(vi) An ex-offender. An individual shall be treated as convicted
if he or she was placed on probation by a state court without a
finding of guilty.
(vii) A recipient of:
(I) Federal Supplemental Security Income benefits.
(II) Aid to Families with Dependent Children.
(III) Food stamps.
(IV) State and local general assistance.
(viii) Is a member of a federally recognized Indian tribe, band,
or other group of Native American descent.
(5) "Qualified taxpayer" means a taxpayer or partnership that
conducts a trade or business within a LAMBRA and, for the first two
taxable years, has a net increase in jobs (defined as 2,000 paid
hours per employee per year) of one or more employees in the LAMBRA.
(A) The net increase in the number of jobs shall be determined by
subtracting the total number of full-time employees (defined as 2,000
paid hours per employee per year) the taxpayer employed in this
state in the taxable year prior to commencing business operations in
the LAMBRA from the total number of full-time employees the taxpayer
employed in this state during the second taxable year after
commencing business operations in the LAMBRA. For taxpayers who
commence doing business in this state with their LAMBRA business
operation, the number of employees for the taxable year prior to
commencing business operations in the LAMBRA shall be zero. If the
taxpayer has a net increase in jobs in the state, the credit shall be
allowed only if one or more full-time employees is employed within
the LAMBRA.
(B) The total number of employees employed in the LAMBRA shall
equal the sum of both of the following:
(i) The total number of hours worked in the LAMBRA for the
taxpayer by employees (not to exceed 2,000 hours per employee) who
are paid an hourly wage divided by 2,000.
(ii) The total number of months worked in the LAMBRA for the
taxpayer by employees who are salaried employees divided by 12.
(C) In the case of a taxpayer who first commences doing business
in the LAMBRA during the taxable year, for purposes of clauses (i)
and (ii), respectively, of subparagraph (B), the divisors "2,000" and
"12" shall be multiplied by a fraction, the numerator of which is
the number of months of the taxable year that the taxpayer was doing
business in the LAMBRA and the denominator of which is 12.
(6) "Qualified displaced employee" means an individual who
satisfies all of the following requirements:
(A) Any civilian or military employee of a base or former base who
has been displaced as a result of a federal base closure act.
(B) (i) At least 90 percent of whose services for the taxpayer
during the taxable year are directly related to the conduct of the
taxpayer's trade or business located in a LAMBRA.
(ii) Who performs at least 50 percent of his or her services for
the taxpayer during the taxable year in a LAMBRA.
(C) Who is hired by the employer after the designation of the area
in which services were performed as a LAMBRA.
(7) "Seasonal employment" means employment by a qualified taxpayer
that has regular and predictable substantial reductions in trade or
business operations.
(8) "LAMBRA expiration date" means the date the LAMBRA designation
expires, is no longer binding, or becomes inoperative.
(c) For qualified disadvantaged individuals or qualified displaced
employees hired on or after January 1, 2001, the taxpayer shall do
both of the following:
(1) Obtain from the Employment Development Department, as
permitted by federal law, the local county or city Job Training
Partnership Act administrative entity, the local county GAIN office
or social services agency, or the local government administering the
LAMBRA, a certification that provides that a qualified disadvantaged
individual or qualified displaced employee meets the eligibility
requirements specified in subparagraph (C) of paragraph (4) of
subdivision (b) or subparagraph (A) of paragraph (6) of subdivision
(b). The Employment Development Department may provide preliminary
screening and referral to a certifying agency. The Department of
Housing and Community Development shall develop regulations governing
the issuance of certificates pursuant to Section 7114.2 of the
Government Code and shall develop forms for this purpose.
(2) Retain a copy of the certification and provide it upon request
to the Franchise Tax Board.
(d) (1) For purposes of this section, both of the following apply:
(A) All employees of trades or businesses that are under common
control shall be treated as employed by a single employer.
(B) The credit (if any) allowable by this section with respect to
each trade or business shall be determined by reference to its
proportionate share of the qualified wages giving rise to the credit.
The regulations prescribed under this paragraph shall be based on
principles similar to the principles that apply in the case of
controlled groups of corporations specified in subdivision (d) of
Section 23622.7.
(2) If an employer acquires the major portion of a trade or
business of another employer (hereinafter in this paragraph referred
to as the "predecessor") or the major portion of a separate unit of a
trade or business of a predecessor, then, for purposes of applying
this section (other than subdivision (d)) for any calendar year
ending after that acquisition, the employment relationship between an
employee and an employer shall not be treated as terminated if the
employee continues to be employed in that trade or business.
(e) (1) (A) If the employment, other than seasonal employment, of
any employee, with respect to whom qualified wages are taken into
account under subdivision (a)
is terminated by the taxpayer at any time during the first
270 days of that employment (whether or not consecutive) or before
the close of the 270th calendar day after the day in which that
employee completes 90 days of employment with the taxpayer, the tax
imposed by this part for the taxable year in which that employment is
terminated shall be increased by an amount (determined under those
regulations) equal to the credit allowed under subdivision (a) for
that taxable year and all prior taxable years attributable to
qualified wages paid or incurred with respect to that employee.
(B) If the seasonal employment of any qualified disadvantaged
individual, with respect to whom qualified wages are taken into
account under subdivision (a) is not continued by the qualified
taxpayer for a period of 270 days of employment during the 60-month
period beginning with the day the qualified disadvantaged individual
commences seasonal employment with the qualified taxpayer, the tax
imposed by this part, for the taxable year that includes the 60th
month following the month in which the qualified disadvantaged
individual commences seasonal employment with the qualified taxpayer,
shall be increased by an amount equal to the credit allowed under
subdivision (a) for that taxable year and all prior taxable years
attributable to qualified wages paid or incurred with respect to that
qualified disadvantaged individual.
(2) (A) Subparagraph (A) of paragraph (1) shall not apply to any
of the following:
(i) A termination of employment of an employee who voluntarily
leaves the employment of the taxpayer.
(ii) A termination of employment of an individual who, before the
close of the period referred to in subparagraph (A) of paragraph (1),
becomes disabled to perform the services of that employment, unless
that disability is removed before the close of that period and the
taxpayer fails to offer reemployment to that individual.
(iii) A termination of employment of an individual, if it is
determined that the termination was due to the misconduct (as defined
in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that individual.
(iv) A termination of employment of an individual due to a
substantial reduction in the trade or business operations of the
taxpayer.
(v) A termination of employment of an individual, if that
individual is replaced by other qualified employees so as to create a
net increase in both the number of employees and the hours of
employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of
the following:
(i) A failure to continue the seasonal employment of a qualified
disadvantaged individual who voluntarily fails to return to the
seasonal employment of the qualified taxpayer.
(ii) A failure to continue the seasonal employment of a qualified
disadvantaged individual who, before the close of the period referred
to in subparagraph (B) of paragraph (1), becomes disabled and unable
to perform the services of that seasonal employment, unless that
disability is removed before the close of that period and the
qualified taxpayer fails to offer seasonal employment to that
individual.
(iii) A failure to continue the seasonal employment of a qualified
disadvantaged individual, if it is determined that the failure to
continue the seasonal employment was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that qualified disadvantaged
individual.
(iv) A failure to continue seasonal employment of a qualified
disadvantaged individual due to a substantial reduction in the
regular seasonal trade or business operations of the qualified
taxpayer.
(v) A failure to continue the seasonal employment of a qualified
disadvantaged individual, if that individual is replaced by other
qualified displaced employees so as to create a net increase in both
the number of seasonal employees and the hours of seasonal
employment.
(C) For purposes of paragraph (1), the employment relationship
between the taxpayer and an employee shall not be treated as
terminated by reason of a mere change in the form of conducting the
trade or business of the taxpayer, if the employee continues to be
employed in that trade or business and the taxpayer retains a
substantial interest in that trade or business.
(3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
(4) At the close of the second taxable year, if the taxpayer has
not increased the number of its employees as determined by paragraph
(5) of subdivision (b), then the amount of the credit previously
claimed shall be added to the taxpayer's net tax for the taxpayer's
second taxable year.
(f) In the case of an estate or trust, both of the following
apply:
(1) The qualified wages for any taxable year shall be apportioned
between the estate or trust and the beneficiaries on the basis of the
income of the estate or trust allocable to each.
(2) Any beneficiary to whom any qualified wages have been
apportioned under paragraph (1) shall be treated (for purposes of
this part) as the employer with respect to those wages.
(g) The credit shall be reduced by the credit allowed under
Section 17053.7. The credit shall also be reduced by the federal
credit allowed under Section 51 of the Internal Revenue Code.
In addition, any deduction otherwise allowed under this part for
the wages or salaries paid or incurred by the taxpayer upon which the
credit is based shall be reduced by the amount of the credit, prior
to any reduction required by subdivision (h) or (i).
(h) In the case where the credit otherwise allowed under this
section exceeds the "net tax" for the taxable year, that portion of
the credit that exceeds the "net tax" may be carried over and added
to the credit, if any, in succeeding years, until the credit is
exhausted. The credit shall be applied first to the earliest taxable
years possible.
(i) (1) The amount of credit otherwise allowed under this section
and Section 17053.45, including prior year credit carryovers, that
may reduce the "net tax" for the taxable year shall not exceed the
amount of tax that would be imposed on the taxpayer's business income
attributed to a LAMBRA determined as if that attributed income
represented all of the net income of the taxpayer subject to tax
under this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the LAMBRA.
For that purpose, the taxpayer's business income that is attributable
to sources in this state first shall be determined in accordance
with Chapter 17 (commencing with Section 25101) of Part 11. That
business income shall be further apportioned to the LAMBRA in
accordance with Article 2 (commencing with Section 25120) of Chapter
17 of Part 11, modified for purposes of this section in accordance
with paragraph (3).
(3) Income shall be apportioned to a LAMBRA by multiplying the
total California business income of the taxpayer by a fraction, the
numerator of which is the property factor plus the payroll factor,
and the denominator of which is two. For purposes of this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the LAMBRA during the taxable
year, and the denominator of which is the average value of all the
taxpayer's real and tangible personal property owned or rented and
used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the LAMBRA during the
taxable year for compensation, and the denominator of which is the
total compensation paid by the taxpayer in this state during the
taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "net tax" for the
taxable year, as provided in subdivision (h).
(j) If the taxpayer is allowed a credit pursuant to this section
for qualified wages paid or incurred, only one credit shall be
allowed to the taxpayer under this part with respect to any wage
consisting in whole or in part of those qualified wages.
(k) (1) This section shall cease to be operative for taxable years
beginning on or after January 1, 2011.
(2) In the case of any portion of a credit available for carryover
to a taxable year beginning on or after January 1, 2011, under
subdivision (h), as that subdivision read prior to the amendments
made by the act adding this subdivision, neither that subdivision nor
subdivision (d) of Section 17039 shall apply, and those unused
credit amounts shall not be carried over to any taxable year
beginning on or after January 1, 2011.
(l) This section shall be repealed as of December 1, 2011.
SEC. 6. SEC. 93. Section 17053.47 of
the Revenue and Taxation Code is amended to read:
17053.47. (a) For each taxable year beginning on or after January
1, 1998, there shall be allowed a credit against the "net tax" (as
defined in Section 17039) to a qualified taxpayer for hiring a
qualified disadvantaged individual during the taxable year for
employment in the manufacturing enhancement area. The credit shall be
equal to the sum of each of the following:
(1) Fifty percent of the qualified wages in the first year of
employment.
(2) Forty percent of the qualified wages in the second year of
employment.
(3) Thirty percent of the qualified wages in the third year of
employment.
(4) Twenty percent of the qualified wages in the fourth year of
employment.
(5) Ten percent of the qualified wages in the fifth year of
employment.
(b) For purposes of this section:
(1) "Qualified wages" means:
(A) That portion of wages paid or incurred by the qualified
taxpayer during the taxable year to qualified disadvantaged
individuals that does not exceed 150 percent of the minimum wage.
(B) The total amount of qualified wages which may be taken into
account for purposes of claiming the credit allowed under this
section shall not exceed two million dollars ($2,000,000) per taxable
year.
(C) Wages received during the 60-month period beginning with the
first day the qualified disadvantaged individual commences employment
with the qualified taxpayer. Reemployment in connection with any
increase, including a regularly occurring seasonal increase, in the
trade or business operations of the taxpayer does not constitute
commencement of employment for purposes of this section.
(D) Qualified wages do not include any wages paid or incurred by
the qualified taxpayer on or after the manufacturing enhancement area
expiration date. However, wages paid or incurred with respect to
qualified employees who are employed by the qualified taxpayer within
the manufacturing enhancement area within the 60-month period prior
to the manufacturing enhancement area expiration date shall continue
to qualify for the credit under this section after the manufacturing
enhancement area expiration date, in accordance with all provisions
of this section applied as if the manufacturing enhancement area
designation were still in existence and binding.
(2) "Minimum wage" means the wage established by the Industrial
Welfare Commission as provided for in Chapter 1 (commencing with
Section 1171) of Part 4 of Division 2 of the Labor Code.
(3) "Manufacturing enhancement area" means an area designated
pursuant to Section 7073.8 of the Government Code according to the
procedures of Chapter 12.8 (commencing with Section 7070) of Division
7 of Title 1 of the Government Code.
(4) "Manufacturing enhancement area expiration date" means the
date the manufacturing enhancement area designation expires, is no
longer binding, or becomes inoperative.
(5) "Qualified disadvantaged individual" means an individual who
satisfies all of the following requirements:
(A) (i) At least 90 percent of whose services for the qualified
taxpayer during the taxable year are directly related to the conduct
of the qualified taxpayer's trade or business located in a
manufacturing enhancement area.
(ii) Who performs at least 50 percent of his or her services for
the qualified taxpayer during the taxable year in the manufacturing
enhancement area.
(B) Who is hired by the qualified taxpayer after the designation
of the area as a manufacturing enhancement area in which the
individual's services were primarily performed.
(C) Who is any of the following immediately preceding the
individual's commencement of employment with the qualified taxpayer:
(i) An individual who has been determined eligible for services
under the federal Job Training Partnership Act (29 U.S.C. Sec. 1501
et seq.), or its successor.
(ii) Any voluntary or mandatory registrant under the Greater
Avenues for Independence Act of 1985, or its successor, as provided
pursuant to Article 3.2 (commencing with Section 11320) of Chapter 2
of Part 3 of Division 9 of the Welfare and Institutions Code.
(iii) Any individual who has been certified eligible by the
Employment Development Department under the federal Targeted Jobs Tax
Credit Program, or its successor, whether or not this program is in
effect.
(6) "Qualified taxpayer" means any taxpayer engaged in a trade or
business within a manufacturing enhancement area designated pursuant
to Section 7073.8 of the Government Code and who meets all of the
following requirements:
(A) Is engaged in those lines of business described in Codes 0211
to 0291, inclusive, Code 0723, or in Codes 2011 to 3999, inclusive,
of the Standard Industrial Classification (SIC) Manual published by
the United States Office of Management and Budget, 1987 edition.
(B) At least 50 percent of the qualified taxpayer's workforce
hired after the designation of the manufacturing enhancement area is
composed of individuals who, at the time of hire, are residents of
the county in which the manufacturing enhancement area is located.
(C) Of this percentage of local hires, at least 30 percent shall
be qualified disadvantaged individuals.
(7) "Seasonal employment" means employment by a qualified taxpayer
that has regular and predictable substantial reductions in trade or
business operations.
(c) (1) For purposes of this section, all of the following apply:
(A) All employees of trades or businesses that are under common
control shall be treated as employed by a single qualified taxpayer.
(B) The credit (if any) allowable by this section with respect to
each trade or business shall be determined by reference to its
proportionate share of the expense of the qualified wages giving rise
to the credit and shall be allocated in that manner.
(C) Principles that apply in the case of controlled groups of
corporations, as specified in subdivision (d) of Section 23622.7,
shall apply with respect to determining employment.
(2) If a qualified taxpayer acquires the major portion of a trade
or business of another employer (hereinafter in this paragraph
referred to as the "predecessor") or the major portion of a separate
unit of a trade or business of a predecessor, then, for purposes of
applying this section (other than subdivision (d)) for any calendar
year ending after that acquisition, the employment relationship
between a qualified disadvantaged individual and a qualified taxpayer
shall not be treated as terminated if the qualified disadvantaged
individual continues to be employed in that trade or business.
(d) (1) (A) If the employment, other than seasonal employment, of
any qualified disadvantaged individual, with respect to whom
qualified wages are taken into account under subdivision (b) is
terminated by the qualified taxpayer at any time during the first 270
days of that employment (whether or not consecutive) or before the
close of the 270th calendar day after the day in which that qualified
disadvantaged individual completes 90 days of employment with the
qualified taxpayer, the tax imposed by this part for the taxable year
in which that employment is terminated shall be increased by an
amount equal to the credit allowed under subdivision (a) for that
taxable year and all prior taxable years attributable to qualified
wages paid or incurred with respect to that qualified disadvantaged
individual.
(B) If the seasonal employment of any qualified disadvantaged
individual, with respect to whom qualified wages are taken into
account under subdivision (a) is not continued by the qualified
taxpayer for a period of 270 days of employment during the 60-month
period beginning with the day the qualified disadvantaged individual
commences seasonal employment with the qualified taxpayer, the tax
imposed by this part, for the taxable year that includes the 60th
month following the month in which the qualified disadvantaged
individual commences seasonal employment with the qualified taxpayer,
shall be increased by an amount equal to the credit allowed under
subdivision (a) for that taxable year and all prior taxable years
attributable to qualified wages paid or incurred with respect to that
qualified disadvantaged individual.
(2) (A) Subparagraph (A) of paragraph (1) does not apply to any of
the following:
(i) A termination of employment of a qualified disadvantaged
individual who voluntarily leaves the employment of the qualified
taxpayer.
(ii) A termination of employment of a qualified disadvantaged
individual who, before the close of the period referred to in
subparagraph (A) of paragraph (1), becomes disabled to perform the
services of that employment, unless that disability is removed before
the close of that period and the taxpayer fails to offer
reemployment to that individual.
(iii) A termination of employment of a qualified disadvantaged
individual, if it is determined that the termination was due to the
misconduct (as defined in Sections 1256-30 to 1256-43, inclusive, of
Title 22 of the California Code of Regulations) of that individual.
(iv) A termination of employment of a qualified disadvantaged
individual due to a substantial reduction in the trade or business
operations of the qualified taxpayer.
(v) A termination of employment of a qualified disadvantaged
individual, if that individual is replaced by other qualified
disadvantaged individuals so as to create a net increase in both the
number of employees and the hours of employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of
the following:
(i) A failure to continue the seasonal employment of a qualified
disadvantaged individual who voluntarily fails to return to the
seasonal employment of the qualified taxpayer.
(ii) A failure to continue the seasonal employment of a qualified
disadvantaged individual who, before the close of the period referred
to in subparagraph (B) of paragraph (1), becomes disabled and unable
to perform the services of that seasonal employment, unless that
disability is removed before the close of that period and the
qualified taxpayer fails to offer seasonal employment to that
qualified disadvantaged individual.
(iii) A failure to continue the seasonal employment of a qualified
disadvantaged individual, if it is determined that the failure to
continue the seasonal employment was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that qualified disadvantaged
individual.
(iv) A failure to continue seasonal employment of a qualified
disadvantaged individual due to a substantial reduction in the
regular seasonal trade or business operations of the qualified
taxpayer.
(v) A failure to continue the seasonal employment of a qualified
disadvantaged individual, if that qualified disadvantaged individual
is replaced by other qualified disadvantaged individuals so as to
create a net increase in both the number of seasonal employees and
the hours of seasonal employment.
(C) For purposes of paragraph (1), the employment relationship
between the qualified taxpayer and a qualified disadvantaged
individual shall not be treated as terminated by reason of a mere
change in the form of conducting the trade or business of the
qualified taxpayer, if the qualified disadvantaged individual
continues to be employed in that trade or business and the qualified
taxpayer retains a substantial interest in that trade or business.
(3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
(e) In the case of an estate or trust, both of the following
apply:
(1) The qualified wages for any taxable year shall be apportioned
between the estate or trust and the beneficiaries on the basis of the
income of the estate or trust allocable to each.
(2) Any beneficiary to whom any qualified wages have been
apportioned under paragraph (1) shall be treated (for purposes of
this part) as the employer with respect to those wages.
(f) The credit shall be reduced by the credit allowed under
Section 17053.7. The credit shall also be reduced by the federal
credit allowed under Section 51 of the Internal Revenue Code.
In addition, any deduction otherwise allowed under this part for
the wages or salaries paid or incurred by the qualified taxpayer upon
which the credit is based shall be reduced by the amount of the
credit, prior to any reduction required by subdivision (g) or (h).
(g) In the case where the credit otherwise allowed under this
section exceeds the "net tax" for the taxable year, that portion of
the credit that exceeds the "net tax" may be carried over and added
to the credit, if any, in succeeding years, until the credit is
exhausted. The credit shall be applied first to the earliest taxable
years possible.
(h) (1) The amount of credit otherwise allowed under this section,
including prior year credit carryovers, that may reduce the "net tax"
for the taxable year shall not exceed the amount of tax that would
be imposed on the qualified taxpayer's business income attributed to
a manufacturing enhancement area determined as if that attributed
income represented all of the net income of the qualified taxpayer
subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the
manufacturing enhancement area. For that purpose, the taxpayer's
business income that is attributable to sources in this state first
shall be determined in accordance with Chapter 17 (commencing with
Section 25101) of Part 11. That business income shall be further
apportioned to the manufacturing enhancement area in accordance with
Article 2 (commencing with Section 25120) of Chapter 17 of Part 11,
modified for purposes of this section in accordance with paragraph
(3).
(3) Income shall be apportioned to a manufacturing enhancement
area by multiplying the total California business income of the
taxpayer by a fraction, the numerator of which is the property factor
plus the payroll factor, and the denominator of which is two. For
purposes of this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the manufacturing enhancement
area during the taxable year, and the denominator of which is the
average value of all the taxpayer's real and tangible personal
property owned or rented and used in this state during the taxable
year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the manufacturing
enhancement area during the taxable year for compensation, and the
denominator of which is the total compensation paid by the taxpayer
in this state during the taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "net tax" for the
taxable year, as provided in subdivision (g).
(i) If the taxpayer is allowed a credit pursuant to this section
for qualified wages paid or incurred, only one credit shall be
allowed to the taxpayer under this part with respect to any wage
consisting in whole or in part of those qualified wages.
(j) The qualified taxpayer shall do both of the following:
(1) Obtain from the Employment Development Department, as
permitted by federal law, the local county or city Job Training
Partnership Act administrative entity, the local county GAIN office
or social services agency, or the local government administering the
manufacturing enhancement area, a certification that provides that a
qualified disadvantaged individual meets the eligibility requirements
specified in paragraph (5) of subdivision (b). The Employment
Development Department may provide preliminary screening and referral
to a certifying agency. The Department of Housing and Community
Development shall develop regulations governing the issuance of
certificates pursuant to subdivision (d) of Section 7086 of the
Government Code and shall develop forms for this purpose.
(2) Retain a copy of the certification and provide it upon request
to the Franchise Tax Board.
(k) (1) This section shall cease to be operative for taxable years
beginning on or after January 1, 2011.
(2) In the case of any portion of a credit available for carryover
to a taxable year beginning on or after January 1, 2011, under
subdivision (g), as that subdivision read prior to the amendments
made by the act adding this subdivision, neither that subdivision nor
subdivision (d) of Section 17039 shall apply, and those unused
credit amounts shall not be carried over to any taxable year
beginning on or after January 1, 2011.
(l) This section shall be repealed as of December 1, 2011.
SEC. 7. SEC. 94. Section 17053.70 of
the Revenue and Taxation Code is amended to read:
17053.70. (a) There shall be allowed as a credit against the "net
tax" (as defined in Section 17039) for the taxable year an amount
equal to the sales or use tax paid or incurred during the taxable
year by the taxpayer in connection with the taxpayer's purchase of
qualified property.
(b) For purposes of this section:
(1) "Taxpayer" means a person or entity engaged in a trade or
business within an enterprise zone.
(2) "Qualified property" means:
(A) Any of the following:
(i)
Machinery and machinery parts used for fabricating, processing,
assembling, and manufacturing.
(ii) Machinery and machinery parts used for the production of
renewable energy resources.
(iii) Machinery and machinery parts used for either of the
following:
(I) Air pollution control mechanisms.
(II) Water pollution control mechanisms.
(iv) Data processing and communications equipment, including, but
not limited, to computers, computer-automated drafting systems, copy
machines, telephone systems, and faxes.
(v) Motion picture manufacturing equipment central to production
and postproduction, including, but not limited to, cameras, audio
recorders, and digital image and sound processing equipment.
(B) The total cost of qualified property purchased and placed in
service in any taxable year that may be taken into account by any
taxpayer for purposes of claiming this credit shall not exceed one
million dollars ($1,000,000).
(C) The qualified property is used by the taxpayer exclusively in
an enterprise zone.
(D) The qualified property is purchased and placed in service
before the date the enterprise zone designation expires, is no longer
binding, or becomes inoperative.
(3) "Enterprise zone" means the area designated as an enterprise
zone pursuant to Chapter 12.8 (commencing with Section 7070) of
Division 7 of Title 1 of the Government Code.
(c) If the taxpayer has purchased property upon which a use tax
has been paid or incurred, the credit provided by this section shall
be allowed only if qualified property of a comparable quality and
price is not timely available for purchase in this state.
(d) In the case where the credit otherwise allowed under this
section exceeds the "net tax" for the taxable year, that portion of
the credit that exceeds the "net tax" may be carried over and added
to the credit, if any, in succeeding taxable years, until the credit
is exhausted. The credit shall be applied first to the earliest
taxable years possible.
(e) Any taxpayer who elects to be subject to this section shall
not be entitled to increase the basis of the qualified property as
otherwise required by Section 164(a) of the Internal Revenue Code
with respect to sales or use tax paid or incurred in connection with
the taxpayer's purchase of qualified property.
(f) (1) The amount of the credit otherwise allowed under this
section and Section 17053.74, including any credit carryover from
prior years, that may reduce the "net tax" for the taxable year shall
not exceed the amount of tax that would be imposed on the taxpayer's
business income attributable to the enterprise zone determined as if
that attributable income represented all of the income of the
taxpayer subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the
enterprise zone. For that purpose, the taxpayer's business income
attributable to sources in this state first shall be determined in
accordance with Chapter 17 (commencing with Section 25101) of Part
11. That business income shall be further apportioned to the
enterprise zone in accordance with Article 2 (commencing with Section
25120) of Chapter 17 of Part 11, modified for purposes of this
section in accordance with paragraph (3).
(3) Business income shall be apportioned to the enterprise zone by
multiplying the total California business income of the taxpayer by
a fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is two. For purposes of
this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the enterprise zone during the
taxable year, and the denominator of which is the average value of
all the taxpayer's real and tangible personal property owned or
rented and used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the enterprise zone during
the taxable year for compensation, and the denominator of which is
the total compensation paid by the taxpayer in this state during the
taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "net tax" for the
taxable year, as provided in subdivision (d).
(g) The amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 1998.
(h) (1) This section shall cease to be operative for taxable years
beginning on or after January 1, 2011.
(2) In the case of any portion of a credit available for carryover
to a taxable year beginning on or after January 1, 2011, under
subdivision (d), as that subdivision read prior to the amendments
made by the act adding this subdivision, neither that subdivision nor
subdivision (d) of Section 17039 shall apply, and those unused
credit amounts shall not be carried over to any taxable year
beginning on or after January 1, 2011.
(i) This section shall be repealed as of December 1, 2011.
SEC. 8. SEC. 95. Section 17053.74 of
the Revenue and Taxation Code is amended to read:
17053.74. (a) There shall be allowed a credit against the "net
tax" (as defined in Section 17039) to a taxpayer who employs a
qualified employee in an enterprise zone during the taxable year. The
credit shall be equal to the sum of each of the following:
(1) Fifty percent of qualified wages in the first year of
employment.
(2) Forty percent of qualified wages in the second year of
employment.
(3) Thirty percent of qualified wages in the third year of
employment.
(4) Twenty percent of qualified wages in the fourth year of
employment.
(5) Ten percent of qualified wages in the fifth year of
employment.
(b) For purposes of this section:
(1) "Qualified wages" means:
(A) (i) Except as provided in clause (ii), that portion of wages
paid or incurred by the taxpayer during the taxable year to qualified
employees that does not exceed 150 percent of the minimum wage.
(ii) For up to 1,350 qualified employees who are employed by the
taxpayer in the Long Beach Enterprise Zone in aircraft manufacturing
activities described in Codes 3721 to 3728, inclusive, and Code 3812
of the Standard Industrial Classification (SIC) Manual published by
the United States Office of Management and Budget, 1987 edition,
"qualified wages" means that portion of hourly wages that does not
exceed 202 percent of the minimum wage.
(B) Wages received during the 60-month period beginning with the
first day the employee commences employment with the taxpayer.
Reemployment in connection with any increase, including a regularly
occurring seasonal increase, in the trade or business operations of
the taxpayer does not constitute commencement of employment for
purposes of this section.
(C) Qualified wages do not include any wages paid or incurred by
the taxpayer on or after the zone expiration date. However, wages
paid or incurred with respect to qualified employees who are employed
by the taxpayer within the enterprise zone within the 60-month
period prior to the zone expiration date shall continue to qualify
for the credit under this section after the zone expiration date, in
accordance with all provisions of this section applied as if the
enterprise zone designation were still in existence and binding.
(2) "Minimum wage" means the wage established by the Industrial
Welfare Commission as provided for in Chapter 1 (commencing with
Section 1171) of Part 4 of Division 2 of the Labor Code.
(3) "Zone expiration date" means the date the enterprise zone
designation expires, is no longer binding, or becomes inoperative.
(4) (A) "Qualified employee" means an individual who meets all of
the following requirements:
(i) At least 90 percent of whose services for the taxpayer during
the taxable year are directly related to the conduct of the taxpayer'
s trade or business located in an enterprise zone.
(ii) Performs at least 50 percent of his or her services for the
taxpayer during the taxable year in an enterprise zone.
(iii) Is hired by the taxpayer after the date of original
designation of the area in which services were performed as an
enterprise zone.
(iv) Is any of the following:
(I) Immediately preceding the qualified employee's commencement of
employment with the taxpayer, was a person eligible for services
under the federal Job Training Partnership Act (29 U.S.C. Sec. 1501
et seq.), or its successor, who is receiving, or is eligible to
receive, subsidized employment, training, or services funded by the
federal Job Training Partnership Act, or its successor.
(II) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a person eligible to be a
voluntary or mandatory registrant under the Greater Avenues for
Independence Act of 1985 (GAIN) provided for pursuant to Article 3.2
(commencing with Section 11320) of Chapter 2 of Part 3 of Division 9
of the Welfare and Institutions Code, or its successor.
(III) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was an economically disadvantaged
individual 14 years of age or older.
(IV) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a dislocated worker who meets
any of the following:
(aa) Has been terminated or laid off or who has received a notice
of termination or layoff from employment, is eligible for or has
exhausted entitlement to unemployment insurance benefits, and is
unlikely to return to his or her previous industry or occupation.
(bb) Has been terminated or has received a notice of termination
of employment as a result of any permanent closure or any substantial
layoff at a plant, facility, or enterprise, including an individual
who has not received written notification but whose employer has made
a public announcement of the closure or layoff.
(cc) Is long-term unemployed and has limited opportunities for
employment or reemployment in the same or a similar occupation in the
area in which the individual resides, including an individual 55
years of age or older who may have substantial barriers to employment
by reason of age.
(dd) Was self-employed (including farmers and ranchers) and is
unemployed as a result of general economic conditions in the
community in which he or she resides or because of natural disasters.
(ee) Was a civilian employee of the Department of Defense employed
at a military installation being closed or realigned under the
Defense Base Closure and Realignment Act of 1990.
(ff) Was an active member of the armed forces or National Guard as
of September 30, 1990, and was either involuntarily separated or
separated pursuant to a special benefits program.
(gg) Is a seasonal or migrant worker who experiences chronic
seasonal unemployment and underemployment in the agriculture
industry, aggravated by continual advancements in technology and
mechanization.
(hh) Has been terminated or laid off, or has received a notice of
termination or layoff, as a consequence of compliance with the Clean
Air Act.
(V) Immediately preceding the qualified employee's commencement of
employment with the taxpayer, was a disabled individual who is
eligible for or enrolled in, or has completed a state rehabilitation
plan or is a service-connected disabled veteran, veteran of the
Vietnam era, or veteran who is recently separated from military
service.
(VI) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was an ex-offender. An individual
shall be treated as convicted if he or she was placed on probation by
a state court without a finding of guilt.
(VII) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a person eligible for or a
recipient of any of the following:
(aa) Federal Supplemental Security Income benefits.
(bb) Aid to Families with Dependent Children.
(cc) Food stamps.
(dd) State and local general assistance.
(VIII) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a member of a federally
recognized Indian tribe, band, or other group of Native American
descent.
(IX) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a resident of a targeted
employment area, as defined in Section 7072 of the Government Code.
(X) An employee who qualified the taxpayer for the enterprise zone
hiring credit under former Section 17053.8 or the program area
hiring credit under former Section 17053.11.
(XI) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a member of a targeted group, as
defined in Section 51(d) of the Internal Revenue Code, or its
successor.
(B) Priority for employment shall be provided to an individual who
is enrolled in a qualified program under the federal Job Training
Partnership Act or the Greater Avenues for Independence Act of 1985
or who is eligible as a member of a targeted group under the Work
Opportunity Tax Credit (Section 51 of the Internal Revenue Code), or
its successor.
(5) "Taxpayer" means a person or entity engaged in a trade or
business within an enterprise zone designated pursuant to Chapter
12.8 (commencing with Section 7070) of the Government Code.
(6) "Seasonal employment" means employment by a taxpayer that has
regular and predictable substantial reductions in trade or business
operations.
(c) The taxpayer shall do both of the following:
(1) Obtain from the Employment Development Department, as
permitted by federal law, the local county or city Job Training
Partnership Act administrative entity, the local county GAIN office
or social services agency, or the local government administering the
enterprise zone, a certification which provides that a qualified
employee meets the eligibility requirements specified in clause (iv)
of subparagraph (A) of paragraph (4) of subdivision (b). The
Employment Development Department may provide preliminary screening
and referral to a certifying agency. The Employment Development
Department shall develop a form for this purpose. The Department of
Housing and Community Development shall develop regulations governing
the issuance of certificates by local governments pursuant to
subdivision (a) of Section 7086 of the Government Code.
(2) Retain a copy of the certification and provide it upon request
to the Franchise Tax Board.
(d) (1) For purposes of this section:
(A) All employees of trades or businesses, which are not
incorporated, that are under common control shall be treated as
employed by a single taxpayer.
(B) The credit, if any, allowable by this section with respect to
each trade or business shall be determined by reference to its
proportionate share of the expense of the qualified wages giving rise
to the credit, and shall be allocated in that manner.
(C) Principles that apply in the case of controlled groups of
corporations, as specified in subdivision (d) of Section 23622.7,
shall apply with respect to determining employment.
(2) If an employer acquires the major portion of a trade or
business of another employer (hereinafter in this paragraph referred
to as the "predecessor") or the major portion of a separate unit of a
trade or business of a predecessor, then, for purposes of applying
this section (other than subdivision (e)) for any calendar year
ending after that acquisition, the employment relationship between a
qualified employee and an employer shall not be treated as terminated
if the employee continues to be employed in that trade or business.
(e) (1) (A) If the employment, other than seasonal employment, of
any qualified employee, with respect to whom qualified wages are
taken into account under subdivision (a) is terminated by the
taxpayer at any time during the first 270 days of that employment
(whether or not consecutive) or before the close of the 270th
calendar day after the day in which that employee completes 90 days
of employment with the taxpayer, the tax imposed by this part for the
taxable year in which that employment is terminated shall be
increased by an amount equal to the credit allowed under subdivision
(a) for that taxable year and all prior taxable years attributable to
qualified wages paid or incurred with respect to that employee.
(B) If the seasonal employment of any qualified employee, with
respect to whom qualified wages are taken into account under
subdivision (a) is not continued by the taxpayer for a period of 270
days of employment during the 60-month period beginning with the day
the qualified employee commences seasonal employment with the
taxpayer, the tax imposed by this part, for the taxable year that
includes the 60th month following the month in which the qualified
employee commences seasonal employment with the taxpayer, shall be
increased by an amount equal to the credit allowed under subdivision
(a) for that taxable year and all prior taxable years attributable to
qualified wages paid or incurred with respect to that qualified
employee.
(2) (A) Subparagraph (A) of paragraph (1) shall not apply to any
of the following:
(i) A termination of employment of a qualified employee who
voluntarily leaves the employment of the taxpayer.
(ii) A termination of employment of a qualified employee who,
before the close of the period referred to in paragraph (1), becomes
disabled and unable to perform the services of that employment,
unless that disability is removed before the close of that period and
the taxpayer fails to offer reemployment to that employee.
(iii) A termination of employment of a qualified employee, if it
is determined that the termination was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that employee.
(iv) A termination of employment of a qualified employee due to a
substantial reduction in the trade or business operations of the
taxpayer.
(v) A termination of employment of a qualified employee, if that
employee is replaced by other qualified employees so as to create a
net increase in both the number of employees and the hours of
employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of
the following:
(i) A failure to continue the seasonal employment of a qualified
employee who voluntarily fails to return to the seasonal employment
of the taxpayer.
(ii) A failure to continue the seasonal employment of a qualified
employee who, before the close of the period referred to in
subparagraph (B) of paragraph (1), becomes disabled and unable to
perform the services of that seasonal employment, unless that
disability is removed before the close of that period and the
taxpayer fails to offer seasonal employment to that qualified
employee.
(iii) A failure to continue the seasonal employment of a qualified
employee, if it is determined that the failure to continue the
seasonal employment was due to the misconduct (as defined in Sections
1256-30 to 1256-43, inclusive, of Title 22 of the California Code of
Regulations) of that qualified employee.
(iv) A failure to continue seasonal employment of a qualified
employee due to a substantial reduction in the regular seasonal trade
or business operations of the taxpayer.
(v) A failure to continue the seasonal employment of a qualified
employee, if that qualified employee is replaced by other qualified
employees so as to create a net increase in both the number of
seasonal employees and the hours of seasonal employment.
(C) For purposes of paragraph (1), the employment relationship
between the taxpayer and a qualified employee shall not be treated as
terminated by reason of a mere change in the form of conducting the
trade or business of the taxpayer, if the qualified employee
continues to be employed in that trade or business and the taxpayer
retains a substantial interest in that trade or business.
(3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
(f) In the case of an estate or trust, both of the following
apply:
(1) The qualified wages for any taxable year shall be apportioned
between the estate or trust and the beneficiaries on the basis of the
income of the estate or trust allocable to each.
(2) Any beneficiary to whom any qualified wages have been
apportioned under paragraph (1) shall be treated, for purposes of
this part, as the employer with respect to those wages.
(g) For purposes of this section, "enterprise zone" means an area
designated as an enterprise zone pursuant to Chapter 12.8 (commencing
with Section 7070) of Division 7 of Title 1 of the Government Code.
(h) The credit allowable under this section shall be reduced by
the credit allowed under Sections 17053.10, 17053.17 and 17053.46
claimed for the same employee. The credit shall also be reduced by
the federal credit allowed under Section 51 of the Internal Revenue
Code.
In addition, any deduction otherwise allowed under this part for
the wages or salaries paid or incurred by the taxpayer upon which the
credit is based shall be reduced by the amount of the credit, prior
to any reduction required by subdivision (i) or (j).
(i) In the case where the credit otherwise allowed under this
section exceeds the "net tax" for the taxable year, that portion of
the credit that exceeds the "net tax" may be carried over and added
to the credit, if any, in succeeding taxable years, until the credit
is exhausted. The credit shall be applied first to the earliest
taxable years possible.
(j) (1) The amount of the credit otherwise allowed under this
section and Section 17053.70, including any credit carryover from
prior years, that may reduce the "net tax" for the taxable year shall
not exceed the amount of tax which would be imposed on the taxpayer'
s business income attributable to the enterprise zone determined as
if that attributable income represented all of the income of the
taxpayer subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the
enterprise zone. For that purpose, the taxpayer's business income
attributable to sources in this state first shall be determined in
accordance with Chapter 17 (commencing with Section 25101) of Part
11. That business income shall be further apportioned to the
enterprise zone in accordance with Article 2 (commencing with Section
25120) of Chapter 17 of Part 11, modified for purposes of this
section in accordance with paragraph (3).
(3) Business income shall be apportioned to the enterprise zone by
multiplying the total California business income of the taxpayer by
a fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is two. For purposes of
this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the enterprise zone during the
taxable year, and the denominator of which is the average value of
all the taxpayer's real and tangible personal property owned or
rented and used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the enterprise zone during
the taxable year for compensation, and the denominator of which is
the total compensation paid by the taxpayer in this state during the
taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "net tax" for the
taxable year, as provided in subdivision (i).
(k) The changes made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 1997.
(l) (1) This section shall cease to be operative for taxable years
beginning on or after January 1, 2011.
(2) In the case of any portion of a credit available for carryover
to a taxable year beginning on or after January 1, 2011, under
subdivision (i), as that subdivision read prior to the amendments
made by the act adding this subdivision, neither that subdivision nor
subdivision (d) of Section 17039 shall apply, and those unused
credit amounts shall not be carried over to any taxable year
beginning on or after January 1, 2011.
(m) This section shall be repealed as of December 1, 2011.
SEC. 9. SEC. 96. Section 17053.75 of
the Revenue and Taxation Code is amended to read:
17053.75. (a) There shall be allowed as a credit against the "net
tax" (as defined by Section 17039) for the taxable year an amount
equal to five percent of the qualified wages received by the taxpayer
during the taxable year.
(b) For purposes of this section:
(1) "Qualified employee" means a taxpayer who meets both of the
following:
(A) Is described in clauses (i) and (ii) of subparagraph (A) of
paragraph (4) of subdivision (b) of Section 17053.74.
(B) Is not an employee of the federal government or of this state
or of any political subdivision of this state.
(2) (A) "Qualified wages" means "wages," as defined in subsection
(b) of Section 3306 of the Internal Revenue Code, attributable to
services performed for an employer with respect to whom the taxpayer
is a qualified employee in an amount that does not exceed one and
one-half times the dollar limitation specified in that subsection.
(B) "Qualified wages" does not include any compensation received
from the federal government or this state or any political
subdivision of this state.
(C) "Qualified wages" does not include any wages received on or
after the date the enterprise zone designation expires, is no longer
binding, or becomes inoperative.
(3) "Enterprise zone" means any area designated as an enterprise
zone pursuant to Chapter 12.8 (commencing with Section 7070) of
Division 7 of Title 1 of the Government Code.
(c) For each dollar of income received by the taxpayer in excess
of qualified wages, as defined in this section, the credit shall be
reduced by nine cents ($0.09).
(d) The amount of the credit allowed by this section in any
taxable year shall not exceed the amount of tax that would be imposed
on the taxpayer's income
attributable to employment within the enterprise zone as if that
income represented all of the income of the taxpayer subject to tax
under this part.
(e) (1) This section shall cease to be operative for taxable years
beginning on or after January 1, 2011.
(2) This section shall be repealed as of December 1, 2011.
SEC. 10. SEC. 97. Section 17235 of
the Revenue and Taxation Code is amended to read:
17235. (a) There shall be allowed as a deduction the amount of
net interest received by the taxpayer in payment on indebtedness of a
person or entity engaged in the conduct of a trade or business
located in an enterprise zone.
(b) No deduction shall be allowed under this section unless at the
time the indebtedness is incurred each of the following requirements
are met:
(1) The trade or business is located solely within an enterprise
zone.
(2) The indebtedness is incurred solely in connection with
activity within the enterprise zone.
(3) The taxpayer has no equity or other ownership interest in the
debtor.
(c) "Enterprise zone" means an area designated as an enterprise
zone pursuant to Chapter 12.8 (commencing with Section 7070) of
Division 7 of Title 1 of the Government Code.
(d) (1) This section shall cease to be operative for taxable years
beginning on or after January 1, 2011.
(2) This section shall be repealed as of December 1, 2011.
SEC. 11. SEC. 98. Section 17267.2 of
the Revenue and Taxation Code is amended to read:
17267.2. (a) A taxpayer may elect to treat 40 percent of the cost
of any Section 17267.2 property as an expense which is not
chargeable to a capital account. Any cost so treated shall be allowed
as a deduction for the taxable year in which the taxpayer places the
Section 17267.2 property in service.
(b) In the case of a husband and wife filing separate returns for
a taxable year, the applicable amount under subdivision (a) shall be
equal to 50 percent of the percentage specified in subdivision (a).
(c) (1) An election under this section for any taxable year shall
do both of the following:
(A) Specify the items of Section 17267.2 property to which the
election applies and the percentage of the cost of each of those
items that are to be taken into account under subdivision (a).
(B) Be made on the taxpayer's original return of the tax imposed
by this part for the taxable year.
(2) Any election made under this section, and any specification
contained in that election, may not be revoked except with the
consent of the Franchise Tax Board.
(d) (1) For purposes of this section, "Section 17267.2 property"
means any recovery property that is:
(A) Section 1245 property (as defined in Section 1245(a) (3) of
the Internal Revenue Code).
(B) Purchased and placed in service by the taxpayer for exclusive
use in a trade or business conducted within an enterprise zone
designated pursuant to Chapter 12.8 (commencing with Section 7070) of
Division 7 of Title 1 of the Government Code.
(C) Purchased and placed in service before the date the enterprise
zone designation expires, is no longer binding, or becomes
inoperative.
(2) For purposes of paragraph (1), "purchase" means any
acquisition of property, but only if both of the following apply:
(A) The property is not acquired from a person whose relationship
to the person acquiring it would result in the disallowance of losses
under Section 267 or Section 707 (b) of the Internal Revenue Code.
However, in applying Section 267(b) and 267(c) for purposes of this
section, Section 267(c) (4) shall be treated as providing that the
family of an individual shall include only the individual's spouse,
ancestors, and lineal descendants.
(B) The basis of the property in the hands of the person acquiring
it is not determined in whole or in part by reference to the
adjusted basis of that property in the hands of the person from whom
it is acquired.
(3) For purposes of this section, the cost of property does not
include that portion of the basis of the property that is determined
by reference to the basis of other property held at any time by the
person acquiring the property.
(4) This section shall not apply to estates and trusts.
(5) This section shall not apply to any property for which the
taxpayer may not make an election for the taxable year under Section
179 of the Internal Revenue Code because of the application of the
provisions of Section 179(d) of the Internal Revenue Code.
(6) In the case of a partnership, the percentage limitation
specified in subdivision (a) shall apply at the partnership level and
at the partner level.
(e) For purposes of this section, "taxpayer" means a person or
entity who conducts a trade or business within an enterprise zone
designated pursuant to Chapter 12.8 (commencing with Section 7070) of
Division 7 of Title 1 of the Government Code.
(f) Any taxpayer who elects to be subject to this section shall
not be entitled to claim for the same property, the deduction under
Section 179 of the Internal Revenue Code, relating to an election to
expense certain depreciable business assets. However, the taxpayer
may claim depreciation by any method permitted by Section 168 of the
Internal Revenue Code, commencing with the taxable year following the
taxable year in which the Section 17267.2 property is placed in
service.
(g) The aggregate cost of all Section 17267.2 property that may be
taken into account under subdivision (a) for any taxable year shall
not exceed the following applicable amount for the taxable year of
the designation of the relevant enterprise zone and taxable years
thereafter:
The applicable
amount is:
Taxable year of designation..... $100,000
1st taxable year thereafter..... 100,000
2nd taxable year thereafter..... 75,000
3rd taxable year thereafter..... 75,000
Each taxable year thereafter.... 50,000
(h) Any amounts deducted under subdivision (a) with respect to
property subject to this section that ceases to be used in the
taxpayer's trade or business within an enterprise zone at any time
before the close of the second taxable year after the property is
placed in service shall be included in income in the taxable year in
which the property ceases to be so used.
(i) (1) This section shall cease to be operative for taxable years
beginning on or after January 1, 2011.
(2) This section shall be repealed as of December 1, 2011.
SEC. 12. SEC. 99. Section 17267.6 of
the Revenue and Taxation Code is amended to read:
17267.6. (a) For each taxable year beginning on or after January
1, 1998, a qualified taxpayer may elect to treat 40 percent of the
cost of any Section 17267.6 property as an expense that is not
chargeable to a capital account. Any cost so treated shall be allowed
as a deduction for the taxable year in which the qualified taxpayer
places the Section 17267.6 property in service.
(b) In the case of a husband and wife filing separate returns for
a taxable year, the applicable amount under subdivision (a) shall be
equal to 50 percent of the percentage specified in subdivision (a).
(c) (1) An election under this section for any taxable year shall
do both of the following:
(A) Specify the items of Section 17267.6 property to which the
election applies and the percentage of the cost of each of those
items that are to be taken into account under subdivision (a).
(B) Be made on the qualified taxpayer's original return of the tax
imposed by this part for the taxable year.
(2) Any election made under this section, and any specification
contained in that election, may not be revoked except with the
consent of the Franchise Tax Board.
(d) (1) For purposes of this section, "Section 17267.6 property"
means any recovery property that is:
(A) Section 1245 property (as defined in Section 1245(a)(3) of the
Internal Revenue Code).
(B) Purchased and placed in service by the qualified taxpayer for
exclusive use in a trade or business conducted within a targeted tax
area designated pursuant to Chapter 12.93 (commencing with Section
7097) of Division 7 of Title 1 of the Government Code.
(C) Purchased and placed in service before the date the targeted
tax area designation expires, is revoked, is no longer binding, or
becomes inoperative.
(2) For purposes of paragraph (1), "purchase" means any
acquisition of property, but only if both of the following apply:
(A) The property is not acquired from a person whose relationship
to the person acquiring it would result in the disallowance of losses
under Section 267 or Section 707(b) of the Internal Revenue Code.
However, in applying Sections 267(b) and 267(c) for purposes of this
section, Section 267(c)(4) shall be treated as providing that the
family of an individual shall include only the individual's spouse,
ancestors, and lineal descendants.
(B) The basis of the property in the hands of the person acquiring
it is not determined in whole or in part by reference to the
adjusted basis of that property in the hands of the person from whom
it is acquired.
(3) For purposes of this section, the cost of property does not
include that portion of the basis of the property that is determined
by reference to the basis of other property held at any time by the
person acquiring the property.
(4) This section shall not apply to estates and trusts.
(5) This section shall not apply to any property for which the
qualified taxpayer may not make an election for the taxable year
under Section 179 of the Internal Revenue Code because of the
application of the provisions of Section 179(d) of the Internal
Revenue Code.
(6) In the case of a partnership, the percentage limitation
specified in subdivision (a) shall apply at the partnership level and
at the partner level.
(e) (1) For purposes of this section, "qualified taxpayer" means a
person or entity that meets both of the following:
(A) Is engaged in a trade or business within a targeted tax area
designated pursuant to Chapter 12.93 (commencing with Section 7097)
of Division 7 of Title 1 of the Government Code.
(B) Is engaged in those lines of business described in Codes 2000
to 2099, inclusive; 2200 to 3999, inclusive; 4200 to 4299, inclusive;
4500 to 4599, inclusive, and 4700 to 5199, inclusive, of the
Standard Industrial Classification (SIC) Manual published by the
United State Office of Management and Budget, 1987 edition.
(2) In the case of any pass-through entity, the determination of
whether a taxpayer is a qualified taxpayer under this section shall
be made at the entity level and any deduction under this section or
Section 24356.6 shall be allowed to the pass-through entity and
passed through to the partners or shareholders in accordance with
applicable provisions of this part of Part 11 (commencing with
Section 23001). For purposes of this subparagraph, the term
"pass-through entity" means any partnership or S corporation.
(f) Any qualified taxpayer who elects to be subject to this
section shall not be entitled to claim for the same property, the
deduction under Section 179 of the Internal Revenue Code, relating to
an election to expense certain depreciable business assets. However,
the qualified taxpayer may claim depreciation by any method
permitted by Section 168 of the Internal Revenue Code, commencing
with the taxable year following the taxable year in which the Section
17267.6 property is placed in service.
(g) The aggregate cost of all Section 17267.6 property that may be
taken into account under subdivision (a) for any taxable year shall
not exceed the following applicable amount for the taxable year of
the designation of the relevant targeted tax area and taxable years
thereafter:
The applicable
amount is:
Taxable year of designation.... $100,000
1st taxable year thereafter.... 100,000
2nd taxable year thereafter.... 75,000
3rd taxable year thereafter.... 75,000
Each taxable year thereafter... 50,000
(h) Any amounts deducted under subdivision (a) with respect to
Section 17267.6 property that ceases to be used in the qualified
taxpayer's trade or business within a targeted tax area at any time
before the close of the second taxable year after the property is
placed in service shall be included in income in the taxable year in
which the property ceases to be so used.
(i) (1) This section shall cease to be operative for taxable years
beginning on or after January 1, 2011.
(2) This section shall be repealed as of December 1, 2011.
SEC. 13. SEC. 100. Section 17268 of
the Revenue and Taxation Code is amended to read:
17268. (a) For each taxable year beginning on or after January 1,
1995, a taxpayer may elect to treat 40 percent of the cost of any
Section 17268 property as an expense that is not chargeable to the
capital account. Any cost so treated shall be allowed as a deduction
for the taxable year in which the taxpayer places the Section 17268
property in service.
(b) In the case of a husband or wife filing separate returns for a
taxable year in which a spouse is entitled to the deduction under
subdivision (a), the applicable amount shall be equal to 50 percent
of the amount otherwise determined under subdivision (a).
(c) (1) An election under this section for any taxable year shall
meet both of the following requirements:
(A) Specify the items of Section 17268 property to which the
election applies and the portion of the cost of each of those items
that is to be taken into account under subdivision (a).
(B) Be made on the taxpayer's return of the tax imposed by this
part for the taxable year.
(2) Any election made under this section, and any specification
contained in that election, may not be revoked except with the
consent of the Franchise Tax Board.
(d) (1) For purposes of this section, "Section 17268 property"
means any recovery property that is each of the following:
(A) Section 1245 property (as defined in Section 1245(a)(3) of the
Internal Revenue Code).
(B) Purchased by the taxpayer for exclusive use in a trade or
business conducted within a LAMBRA.
(C) Purchased before the date the LAMBRA designation expires, is
no longer binding, or becomes inoperative.
(2) For purposes of paragraph (1), "purchase" means any
acquisition of property, but only if both of the following apply:
(A) The property is not acquired from a person whose relationship
to the person acquiring it would result in the disallowance of losses
under Section 267 or 707(b) of the Internal Revenue Code (but, in
applying Section 267(b) and Section 267(c) of the Internal Revenue
Code for purposes of this section, Section 267(c)(4) of the Internal
Revenue Code shall be treated as providing that the family of an
individual shall include only his or her spouse, ancestors, and
lineal descendants).
(B) The basis of the property in the hands of the person acquiring
it is not determined by either of the following:
(i) In whole or in part by reference to the adjusted basis of the
property in the hands of the person from whom acquired.
(ii) Under Section 1014 of the Internal Revenue Code, relating to
basis of property acquired from a decedent.
(3) For purposes of this section, the cost of property does not
include that portion of the basis of the property that is determined
by reference to the basis of other property held at any time by the
person acquiring the property.
(4) This section shall not apply to estates and trusts.
(5) This section shall not apply to any property for which the
taxpayer may not make an election for the taxable year under Section
179 of the Internal Revenue Code because of the provisions of Section
179(d) of the Internal Revenue Code.
(6) In the case of a partnership, the dollar limitation in
subdivision (f) shall apply at the partnership level and at the
partner level.
(7) This section shall not apply to any property described in
Section 168(f) of the Internal Revenue Code, relating to property to
which Section 168 of the Internal Revenue Code does not apply.
(e) For purposes of this section:
(1) "LAMBRA" means a local agency military base recovery area
designated in accordance with the provisions of Section 7114 of the
Government Code.
(2) "Taxpayer" means a taxpayer that conducts a trade or business
within a LAMBRA and, for the first two taxable years, has a net
increase in jobs (defined as 2,000 paid hours per employee per year)
of one or more employees in the LAMBRA.
(A) The net increase in the number of jobs shall be determined by
subtracting the total number of full-time employees (defined as 2,000
paid hours per employee per year) the taxpayer employed in this
state in the taxable year prior to commencing business operations in
the LAMBRA from the total number of full-time employees the taxpayer
employed in this state during the second taxable year after
commencing business operations in the LAMBRA. For taxpayers who
commence doing business in this state with their LAMBRA business
operation, the number of employees for the taxable year prior to
commencing business operations in the LAMBRA shall be zero. If the
taxpayer has a net increase in jobs in the state, the credit shall be
allowed only if one or more full-time employees is employed within
the LAMBRA.
(B) The total number of employees employed in the LAMBRA shall
equal the sum of both of the following:
(i) The total number of hours worked in the LAMBRA for the
taxpayer by employees (not to exceed 2,000 hours per employee) who
are paid an hourly wage divided by 2,000.
(ii) The total number of months worked in the LAMBRA for the
taxpayer by employees who are salaried employees divided by 12.
(C) In the case of a taxpayer who first commences doing business
in the LAMBRA during the taxable year, for purposes of clauses (i)
and (ii), respectively, of subparagraph (B) the divisors "2,000" and
"12" shall be multiplied by a fraction, the numerator of which is the
number of months of the taxable year that the taxpayer was doing
business in the LAMBRA and the denominator of which is 12.
(f) The aggregate cost of all Section 17268 property that may be
taken into account under subdivision (a) for any taxable year shall
not exceed the following applicable amounts for the taxable year of
the designation of the relevant LAMBRA and taxable years thereafter:
The applicable
amount is:
Taxable year of designation..... $100,000
1st taxable year thereafter..... 100,000
2nd taxable year thereafter..... 75,000
3rd taxable year thereafter..... 75,000
Each taxable year thereafter.... 50,000
(g) This section shall apply only to property that is used
exclusively in a trade or business conducted within a LAMBRA.
(h) (1) Any amounts deducted under subdivision (a) with respect to
property that ceases to be used in the trade or business within a
LAMBRA at any time before the close of the second taxable year after
the property was placed in service shall be included in income for
that year.
(2) At the close of the second taxable year, if the taxpayer has
not increased the number of its employees as determined by paragraph
(2) of subdivision (e), then the amount of the deduction previously
claimed shall be added to the taxpayer's taxable income for the
taxpayer's second taxable year.
(i) Any taxpayer who elects to be subject to this section shall
not be entitled to claim for the same property the deduction under
Section 179 of the Internal Revenue Code, relating to an election to
expense certain depreciable business assets.
(j) (1) This section shall cease to be operative for taxable years
beginning on or after January 1, 2011.
(2) This section shall be repealed as of December 1, 2011.
SEC. 14. SEC. 101. Section 17276.1
of the Revenue and Taxation Code is amended to read:
17276.1. (a) A qualified taxpayer, as defined in Section 17276.7,
may elect to take the deduction provided by Section 172 of the
Internal Revenue Code, relating to the net operating loss deduction,
as modified by Section 17276.20, with the following exceptions:
(1) Subdivision (a) of Section 17276.20, relating to years in
which allowable losses are sustained, shall not be applicable.
(2) Subdivision (b) of Section 17276.20, relating to the
50-percent reduction of losses, shall not be applicable.
(b) The election to compute the net operating loss under this
section shall be made in a statement attached to the original return,
timely filed for the year in which the net operating loss is
incurred and shall be irrevocable. In addition to the exceptions
specified in subdivision (a), the provisions of Section 17276.7 shall
be applicable.
(c) The changes to this section made by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 2011.
SEC. 15. SEC. 102. Section 17276.2
of the Revenue and Taxation Code is amended to read:
17276.2. (a) The term "qualified taxpayer" as used in Section
17276.1 includes a person or entity engaged in the conduct of a trade
or business within an enterprise zone designated pursuant to Chapter
12.8 (commencing with Section 7070) of Division 7 of Title 1 of the
Government Code. For purposes of this subdivision, all of the
following shall apply:
(1) A net operating loss shall not be a net operating loss
carryback to any taxable year and a net operating loss for any
taxable year beginning on or after the date that the area in which
the taxpayer conducts a trade or business is designated as an
enterprise zone shall be a net operating loss carryover to each of
the 15 taxable years following the taxable year of loss.
(2) For purposes of this subdivision:
(A) "Net operating loss" means the loss determined under Section
172 of the Internal Revenue Code, as modified by Section 17276.1,
attributable to the taxpayer's business activities within the
enterprise zone (as defined in Chapter 12.8 (commencing with Section
7070) of Division 7 of Title 1 of the Government Code) prior to the
enterprise zone expiration date. That attributable loss shall be
determined in accordance with Chapter 17 (commencing with Section
25101) of Part 11, modified for purposes of this subdivision, as
follows:
(i) Loss shall be apportioned to the enterprise zone by
multiplying total loss from the business by a fraction, the numerator
of which is the property factor plus the payroll factor, and the
denominator of which is two.
(ii) "The enterprise zone" shall be substituted for "this state."
(B) A net operating loss carryover shall be a deduction only with
respect to the taxpayer's business income attributable to the
enterprise zone as defined in Chapter 12.8 (commencing with Section
7070) of Division 7 of Title 1 of the Government Code.
(C) Attributable income is that portion of the taxpayer's
California source business income that is apportioned to the
enterprise zone. For that purpose, the taxpayer's business income
attributable to sources in this state first shall be determined in
accordance with Chapter 17 (commencing with Section 25101) of Part
11. That business income shall be further apportioned to the
enterprise zone in accordance with Article 2 (commencing with Section
25120) of Chapter 17 of Part 11, modified for purposes of this
subdivision as follows:
(i) Business income shall be apportioned to the enterprise zone by
multiplying the total California business income of the taxpayer by
a fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is two. For purposes of
this clause:
(I) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the enterprise zone during the
taxable year, and the denominator of which is the average value of
all the taxpayer's real and tangible personal property owned or
rented and used in this state during the taxable year.
(II) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the enterprise zone during
the taxable year for compensation, and the denominator of which is
the total compensation paid by the taxpayer in this state during the
taxable year.
(ii) If a loss carryover is allowable pursuant to this section for
any taxable year after the enterprise zone designation has expired,
the enterprise zone shall be deemed to remain in existence for
purposes of computing the limitation set forth in subparagraph (B)
and allowing a net operating loss deduction.
(D) "Enterprise zone expiration date" means the date the
enterprise zone designation expires, is no longer binding, or becomes
inoperative.
(3) The changes made to this subdivision by the act adding this
paragraph shall apply to taxable years beginning on or after January
1, 1998.
(b) A taxpayer who qualifies as a "qualified taxpayer" under one
or more sections shall, for the taxable year of the net operating
loss and any taxable year to which that net operating loss may be
carried, designate on the original return filed for each year the
section which applies to that taxpayer with respect to that net
operating loss. If the taxpayer is eligible to qualify under more
than one section, the designation is to be made after taking into
account subdivision (c).
(c) If a taxpayer is eligible to qualify under this section and
either Section 17276.4, 17276.5, or 17276.6 as a "qualified taxpayer,"
with respect to a net operating loss in a taxable year, the taxpayer
shall designate which section is to apply to the taxpayer.
(d) Notwithstanding Section 17276, the amount of the loss
determined under this section or Section 17276.4, 17276.5, or 17276.6
shall be the only net operating loss allowed to be carried over from
that taxable year and the designation under subdivision (b) shall be
included in the election under Section 17276.1.
(e) (1) This section shall cease to be operative for taxable years
beginning on or after January 1, 2011.
(2) This section shall be repealed as of December 1, 2011.
SEC. 16. SEC. 103. Section 17276.4
of the Revenue and Taxation Code is amended to read:
17276.4. (a) The term "qualified taxpayer" as used in Section
17276.1 includes a person or entity engaged in the conduct of a trade
or business within the Los Angeles Revitalization Zone designated
pursuant to the former Section 7102 of the Government Code. For
purposes of this subdivision, all of the following shall apply:
(1) A net operating loss
shall not be a net operating loss carryback for any taxable year, and
a net operating loss for any taxable year beginning on or after the
date the area in which the taxpayer conducts a trade or business is
designated the Los Angeles Revitalization Zone shall be a net
operating loss carryover to each following taxable year that ends
before the Los Angeles Revitalization Zone expiration date or to each
of the 15 taxable years following the taxable year of loss, if
longer.
(2) "Net operating loss" means the loss determined under Section
172 of the Internal Revenue Code, as modified by Section 17276.1,
attributable to the taxpayer's business activities within the Los
Angeles Revitalization Zone (as defined in the former Section 7102 of
the Government Code) prior to the Los Angeles Revitalization Zone
expiration date. The attributable loss shall be determined in
accordance with Chapter 17 (commencing with Section 25101) of Part
11, modified as follows:
(A) Loss shall be apportioned to the Los Angeles Revitalization
Zone by multiplying total loss from the business by a fraction, the
numerator of which is the property factor plus the payroll factor,
and the denominator of which is 2.
(B) "The Los Angeles Revitalization Zone" shall be substituted for
"this state."
(3) A net operating loss carryover shall be a deduction only with
respect to the taxpayer's business income attributable to the Los
Angeles Revitalization Zone (as defined in the former Section 7102 of
the Government Code) determined in accordance with subdivision (c).
(4) If a loss carryover is allowable pursuant to this section for
any taxable year after the Los Angeles Revitalization Zone
designation has expired, the Los Angeles Revitalization Zone shall be
deemed to remain in existence for purposes of computing the
limitation set forth in paragraph (2) and allowing a net operating
loss deduction.
(5) Attributable income shall be that portion of the taxpayer's
California source business income which is apportioned to the Los
Angeles Revitalization Zone. For that purpose, the taxpayer's
business income attributable to sources in this state first shall be
determined in accordance with Chapter 17 (commencing with Section
25101) of Part 11. That business income shall be further apportioned
to the Los Angeles Revitalization Zone in accordance with Article 2
(commencing with Section 25120) of Chapter 17 of Part 11, modified as
follows:
(A) Business income shall be apportioned to the Los Angeles
Revitalization Zone by multiplying total California business income
of the taxpayer by a fraction, the numerator of which is the property
factor plus the payroll factor, and the denominator of which is 2.
(B) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the Los Angeles Revitalization
Zone during the taxable year and the denominator of which is the
average value of all the taxpayer's real and tangible personal
property owned or rented and used in this state during the taxable
year.
(C) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the Los Angeles
Revitalization Zone during the taxable year for compensation, and the
denominator of which is the total compensation paid by the taxpayer
in this state during the taxable year.
(6) "Los Angeles Revitalization Zone expiration date" means the
date the Los Angeles Revitalization Zone designation expires, is
repealed, or becomes inoperative pursuant to the former Section 7102,
7103, or 7104 of the Government Code.
(b) This section shall be inoperative on the first day of the
taxable year beginning on or after the determination date, and each
taxable year thereafter, with respect to the taxpayer's business
activities within a geographic area that is excluded from the map
pursuant to the former Section 7102 of the Government Code, or an
excluded area determined pursuant to the former Section 7104 of the
Government Code. The determination date is the earlier of the first
effective date of a determination under the former Section 7102 of
the Government Code occurring after December 1, 1994, or the first
effective date of an exclusion of an area from the amended Los
Angeles Revitalization Zone under the former Section 7104 of the
Government Code. However, if the taxpayer has any unused loss amount
as of the date this section becomes inoperative, that unused loss
amount may continue to be carried forward as provided in this
section.
(c) A taxpayer who qualifies as a "qualified taxpayer" under one
or more sections shall, for the taxable year of the net operating
loss and any taxable year to which that net operating loss may be
carried, designate on the original return filed for each year the
section that applies to that taxpayer with respect to that net
operating loss. If the taxpayer is eligible to qualify under more
than one section, the designation is to be made after taking into
account subdivision (d).
(d) If a taxpayer is eligible to qualify under this section and
either Section 17276.2, 17276.5, or 17276.6 as a "qualified taxpayer,"
with respect to a net operating loss in a taxable year, the taxpayer
shall designate which section is to apply to the taxpayer.
(e) Notwithstanding Section 17276, the amount of the loss
determined under this section or Section 17276.2, 17276.5, or 17276.6
shall be the only net operating loss allowed to be carried over from
that taxable year and the designation under subdivision (c) shall be
included in the election under Section 17276.1.
(f) This section shall cease to be operative on December 1, 1998.
(g) (1) The changes made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 2011.
(2) This section shall be repealed as of December 1, 2011.
SEC. 17. SEC. 104. Section 17276.5
of the Revenue and Taxation Code is amended to read:
17276.5. (a) For each taxable year beginning on or after January
1, 1995, the term "qualified taxpayer" as used in Section 17276.1
includes a taxpayer engaged in the conduct of a trade or business
within a LAMBRA. For purposes of this subdivision, all of the
following shall apply:
(1) A net operating loss shall not be a net operating loss
carryback for any taxable year, and a net operating loss for any
taxable year beginning on or after the date the area in which the
taxpayer conducts a trade or business is designated a LAMBRA shall be
a net operating loss carryover to each following taxable year that
ends before the LAMBRA expiration date or to each of the 15 taxable
years following the taxable year of loss, if longer.
(2) "LAMBRA" means a local agency military base recovery area
designated in accordance with Section 7114 of the Government Code.
(3) "Taxpayer" means a person or entity that conducts a trade or
business within a LAMBRA and, for the first two taxable years, has a
net increase in jobs (defined as 2,000 paid hours per employee per
year) of one or more employees in the LAMBRA and this state. For
purposes of this paragraph:
(A) The net increase in the number of jobs shall be determined by
subtracting the total number of full-time employees (defined as 2,000
paid hours per employee per year) the taxpayer employed in this
state in the taxable year prior to commencing business operations in
the LAMBRA from the total number of full-time employees the taxpayer
employed in this state during the second taxable year after
commencing business operations in the LAMBRA. For taxpayers who
commence doing business in this state with their LAMBRA business
operation, the number of employees for the taxable year prior to
commencing business operations in the LAMBRA shall be zero. The
deduction shall be allowed only if the taxpayer has a net increase in
jobs in the state, and if one or more full-time employees is
employed within the LAMBRA.
(B) The total number of employees employed in the LAMBRA shall
equal the sum of both of the following:
(i) The total number of hours worked in the LAMBRA for the
taxpayer by employees (not to exceed 2,000 hours per employee) who
are paid an hourly wage divided by 2,000.
(ii) The total number of months worked in the LAMBRA for the
taxpayer by employees who are salaried employees divided by 12.
(C) In the case of a taxpayer who first commences doing business
in the LAMBRA during the taxable year, for purposes of clauses (i)
and (ii), respectively, of subparagraph (B), the divisors "2,000" and
"12" shall be multiplied by a fraction, the numerator of which is
the number of months of the taxable year that the taxpayer was doing
business in the LAMBRA and the denominator of which is 12.
(4) "Net operating loss" means the loss determined under Section
172 of the Internal Revenue Code, as modified by Section 17276.1,
attributable to the taxpayer's business activities within a LAMBRA
prior to the LAMBRA expiration date. The attributable loss shall be
determined in accordance with Chapter 17 (commencing with Section
25101) of Part 11, modified for purposes of this section as follows:
(A) Loss shall be apportioned to a LAMBRA by multiplying total
loss from the business by a fraction, the numerator of which is the
property factor plus the payroll factor, and the denominator of which
is 2.
(B) "The LAMBRA" shall be substituted for "this state."
(5) A net operating loss carryover shall be a deduction only with
respect to the taxpayer's business income attributable to a LAMBRA.
(6) Attributable income is that portion of the taxpayer's
California source business income that is apportioned to the LAMBRA.
For that purpose, the taxpayer's business income attributable to
sources in this state first shall be determined in accordance with
Chapter 17 (commencing with Section 25101) of Part 11. That business
income shall be further apportioned to the LAMBRA in accordance with
Article 2 (commencing with Section 25120) of Chapter 17 of Part 11,
modified for purposes of this subdivision as follows:
(A) Business income shall be apportioned to a LAMBRA by
multiplying total California business income of the taxpayer by a
fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is two. For purposes of
this clause:
(i) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the LAMBRA during the taxable
year, and the denominator of which is the average value of all the
taxpayer's real and tangible personal property owned or rented and
used in this state during the taxable year.
(ii) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the LAMBRA during the
taxable year for compensation, and the denominator of which is the
total compensation paid by the taxpayer in this state during the
taxable year.
(B) If a loss carryover is allowable pursuant to this section for
any taxable year after the LAMBRA designation has expired, the LAMBRA
shall be deemed to remain in existence for purposes of computing the
limitation specified in paragraph (5) and allowing a net operating
loss deduction.
(7) "LAMBRA expiration date" means the date the LAMBRA designation
expires, is no longer binding, or becomes inoperative pursuant to
Section 7110 of the Government Code.
(b) A taxpayer who qualifies as a "qualified taxpayer" under one
or more sections shall, for the taxable year of the net operating
loss and any taxable year to which that net operating loss may be
carried, designate on the original return filed for each year the
section that applies to that taxpayer with respect to that net
operating loss. If the taxpayer is eligible to qualify under more
than one section, the designation is to be made after taking into
account subdivision (c).
(c) If a taxpayer is eligible to qualify under this section and
either Section 17276.2, 17276.4, or 17276.6 as a "qualified taxpayer,"
with respect to a net operating loss in a taxable year, the taxpayer
shall designate which section is to apply to the taxpayer.
(d) Notwithstanding Section 17276, the amount of the loss
determined under this section or Section 17276.2, 17276.4, or 17276.6
shall be the only net operating loss allowed to be carried over from
that taxable year and the designation under subdivision (b) shall be
included in the election under Section 17276.1.
(e) This section shall apply to taxable years beginning on or
after January 1, 1998.
(f) (1) This section shall cease to be operative for taxable years
beginning on or after January 1, 2011.
(2) This section shall be repealed as of December 1, 2011.
SEC. 18. SEC. 105. Section 17276.6
of the Revenue and Taxation Code is amended to read:
17276.6. (a) For each taxable year beginning on or after January
1, 1998, the term "qualified taxpayer" as used in Section 17276.1
includes a person or entity that meets both of the following:
(1) Is engaged in a trade or business within a targeted tax area
designated pursuant to Chapter 12.93 (commencing with Section 7097)
of Division 7 of Title 1 of the Government Code.
(2) Is engaged in those lines of business described in Codes 2000
to 2099, inclusive; 2200 to 3999, inclusive; 4200 to 4299, inclusive;
4500 to 4599, inclusive; and 4700 to 5199, inclusive, of the
Standard Industrial Classification (SIC) Manual published by the
United States Office of Management and Budget, 1987 edition. In the
case of any pass-through entity, the determination of whether a
taxpayer is a qualified taxpayer under this section shall be made at
the entity level.
(b) For purposes of subdivision (a), all of the following shall
apply:
(1) A net operating loss shall not be a net operating loss
carryback to any taxable year and a net operating loss for any
taxable year beginning on or after the date that the area in which
the qualified taxpayer conducts a trade or business is designated as
a targeted tax area shall be a net operating loss carryover to each
of the 15 taxable years following the taxable year of loss.
(2) "Net operating loss" means the loss determined under Section
172 of the Internal Revenue Code, as modified by Section 17276.1,
attributable to the qualified taxpayer's business activities within
the targeted tax area (as defined in Chapter 12.93 (commencing with
Section 7097) of Division 7 of Title 1 of the Government Code) prior
to the targeted tax area expiration date. That attributable loss
shall be determined in accordance with Chapter 17 (commencing with
Section 25101) of Part 11, modified for purposes of this section as
follows:
(A) Loss shall be apportioned to the targeted tax area by
multiplying total loss from the business by a fraction, the numerator
of which is the property factor plus the payroll factor, and the
denominator of which is 2.
(B) "The targeted tax area" shall be substituted for "this state."
(3) A net operating loss carryover shall be a deduction only with
respect to the qualified taxpayer's business income attributable to
the targeted tax area as defined in Chapter 12.93 (commencing with
Section 7097) of Division 7 of Title 1 of the Government Code.
(4) Attributable income shall be that portion of the qualified
taxpayer's California source business income that is apportioned to
the targeted tax area. For that purpose, the qualified taxpayer's
business income attributable to sources in this state first shall be
determined in accordance with Chapter 17 (commencing with Section
25101) of Part 11. That business income shall be further apportioned
to the targeted tax area in accordance with Article 2 (commencing
with Section 25120) of Chapter 17 of Part 11, modified for purposes
of this subdivision as follows:
(A) Business income shall be apportioned to the targeted tax area
by multiplying the total business income of the taxpayer by a
fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is two. For purposes of
this clause:
(i) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the targeted tax area during the
taxable year, and the denominator of which is the average value of
all the taxpayer's real and tangible personal property owned or
rented and used in this state during the taxable year.
(ii) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the targeted tax area during
the taxable year for compensation, and the denominator of which is
the total compensation paid by the taxpayer in this state during the
taxable year.
(B) If a loss carryover is allowable pursuant to this subdivision
for any taxable year after the targeted tax area expiration date, the
targeted tax area designation shall be deemed to remain in existence
for purposes of computing the limitation specified in subparagraph
(B) and allowing a net operating loss deduction.
(5) "Targeted tax area expiration date" means the date the
targeted tax area designation expires, is revoked, is no longer
binding, or becomes inoperative.
(b) A taxpayer who qualifies as a "qualified taxpayer" under one
or more sections shall, for the taxable year of the net operating
loss and any taxable year to which that net operating loss may be
carried, designate on the original return filed for each year the
section that applies to that taxpayer with respect to that net
operating loss. If the taxpayer is eligible to qualify under more
than one section, the designation is to be made after taking into
account subdivision (c).
(c) If a taxpayer is eligible to qualify under this section and
either Section 17276.2, 17276.4, or 17276.5 as a "qualified taxpayer,"
with respect to a net operating loss in a taxable year, the taxpayer
shall designate which section is to apply to the taxpayer.
(d) Notwithstanding Section 17276, the amount of the loss
determined under this section or Section 17276.2, 17276.4, or 17276.5
shall be the only net operating loss allowed to be carried over from
that taxable year and the designation under subdivision (b) shall be
included in the election under Section 17276.1.
(e) This section shall apply to taxable years beginning on or
after January 1, 1998.
(f) (1) This section shall cease to be operative for taxable years
beginning on or after January 1, 2011.
(2) This section shall be repealed as of December 1, 2011.
SEC. 19. SEC. 106. Section 17276.20
of the Revenue and Taxation Code is amended to read:
17276.20. Except as provided in Sections 17276.1 and 17276.7, the
deduction provided by Section 172 of the Internal Revenue Code,
relating to net operating loss deduction, shall be modified as
follows:
(a) (1) Net operating losses attributable to taxable years
beginning before January 1, 1987, shall not be allowed.
(2) A net operating loss shall not be carried forward to any
taxable year beginning before January 1, 1987.
(b) (1) Except as provided in paragraphs (2) and (3), the
provisions of Section 172(b)(2) of the Internal Revenue Code,
relating to amount of carrybacks and carryovers, shall be modified so
that the applicable percentage of the entire amount of the net
operating loss for any taxable year shall be eligible for carryover
to any subsequent taxable year. For purposes of this subdivision, the
applicable percentage shall be:
(A) Fifty percent for any taxable year beginning before January 1,
2000.
(B) Fifty-five percent for any taxable year beginning on or after
January 1, 2000, and before January 1, 2002.
(C) Sixty percent for any taxable year beginning on or after
January 1, 2002, and before January 1, 2004.
(D) One hundred percent for any taxable year beginning on or after
January 1, 2004.
(2) In the case of a taxpayer who has a net operating loss in any
taxable year beginning on or after January 1, 1994, and who operates
a new business during that taxable year, each of the following shall
apply to each loss incurred during the first three taxable years of
operating the new business:
(A) If the net operating loss is equal to or less than the net
loss from the new business, 100 percent of the net operating loss
shall be carried forward as provided in subdivision (d).
(B) If the net operating loss is greater than the net loss from
the new business, the net operating loss shall be carried over as
follows:
(i) With respect to an amount equal to the net loss from the new
business, 100 percent of that amount shall be carried forward as
provided in subdivision (d).
(ii) With respect to the portion of the net operating loss that
exceeds the net loss from the new business, the applicable percentage
of that amount shall be carried forward as provided in subdivision
(d).
(C) For purposes of Section 172(b)(2) of the Internal Revenue
Code, the amount described in clause (ii) of subparagraph (B) shall
be absorbed before the amount described in clause (i) of subparagraph
(B).
(3) In the case of a taxpayer who has a net operating loss in any
taxable year beginning on or after January 1, 1994, and who operates
an eligible small business during that taxable year, each of the
following shall apply:
(A) If the net operating loss is equal to or less than the net
loss from the eligible small business, 100 percent of the net
operating loss shall be carried forward to the taxable years
specified in subdivision (d).
(B) If the net operating loss is greater than the net loss from
the eligible small business, the net operating loss shall be carried
over as follows:
(i) With respect to an amount equal to the net loss from the
eligible small business, 100 percent of that amount shall be carried
forward as provided in subdivision (d).
(ii) With respect to that portion of the net operating loss that
exceeds the net loss from the eligible small business, the applicable
percentage of that amount shall be carried forward as provided in
subdivision (d).
(C) For purposes of Section 172(b)(2) of the Internal Revenue
Code, the amount described in clause (ii) of subparagraph (B) shall
be absorbed before the amount described in clause (i) of subparagraph
(B).
(4) In the case of a taxpayer who has a net operating loss in a
taxable year beginning on or after January 1, 1994, and who operates
a business that qualifies as both a new business and an eligible
small business under this section, that business shall be treated as
a new business for the first three taxable years of the new business.
(5) In the case of a taxpayer who has a net operating loss in a
taxable year beginning on or after January 1, 1994, and who operates
more than one business, and more than one of those businesses
qualifies as either a new business or an eligible small business
under this section, paragraph (2) shall be applied first, except that
if there is any remaining portion of the net operating loss after
application of clause (i) of subparagraph (B) of that paragraph,
paragraph (3) shall be applied to the remaining portion of the net
operating loss as though that remaining portion of the net operating
loss constituted the entire net operating loss.
(6) For purposes of this section, the term "net loss" means the
amount of net loss after application of Sections 465 and 469 of the
Internal Revenue Code.
(c) Section 172(b)(1) of the Internal Revenue Code, relating to
years to which the loss may be carried, is modified as follows:
(1) Net operating loss carrybacks shall not be allowed for any net
operating losses attributable to taxable years beginning before
January 1, 2013.
(2) A net operating loss attributable to taxable years beginning
on or after January 1, 2013, shall be a net operating loss carryback
to each of the two taxable years preceding the taxable year of the
loss in lieu of the number of years provided therein.
(A) For a net operating loss attributable to a taxable year
beginning on or after January 1, 2013, and before January 1, 2014,
the amount of carryback to any taxable year shall not exceed 50
percent of the net operating loss.
(B) For a net operating loss attributable to a taxable year
beginning on or after January 1, 2014, and before January 1, 2015,
the amount of carryback to any taxable year shall not exceed 75
percent of the net operating loss.
(C) For a net operating loss attributable to a taxable year
beginning on or after January 1, 2015, the amount of carryback to any
taxable year shall not exceed 100 percent of the net operating loss.
(3) Notwithstanding paragraph (2), Section 172(b)(1)(B) of the
Internal Revenue Code, relating to special rules for REITs, and
Section 172(b)(1)(E) of the Internal Revenue Code, relating to excess
interest loss, and Section 172(h) of the Internal Revenue Code,
relating to corporate equity reduction interest losses, shall apply
as provided.
(4) A net operating loss carryback shall not be carried back to
any taxable year beginning before January 1, 2011.
(d) (1) (A) For a net operating loss for any taxable year
beginning on or after January 1, 1987, and before January 1, 2000,
Section 172(b)(1)(A)(ii) of the Internal Revenue Code is modified to
substitute "five taxable years" in lieu of "20 taxable years" except
as otherwise provided in paragraphs (2) and (3).
(B) For a net operating loss for any taxable year beginning on or
after January 1, 2000, and before January 1, 2008, Section 172(b)(1)
(A)(ii) of the Internal Revenue Code is modified to substitute "10
taxable years" in lieu of "20 taxable years."
(2) For any taxable year beginning before January 1, 2000, in the
case of a "new business," the "five taxable years" in paragraph (1)
shall be modified to read as follows:
(A) "Eight taxable years" for a net operating loss attributable to
the first taxable year of that new business.
(B) "Seven taxable years" for a net operating loss attributable to
the second taxable year of that new business.
(C) "Six taxable years" for a net operating loss attributable to
the third taxable year of that new business.
(3) For any carryover of a net operating loss for which a
deduction is denied by Section 17276.3, the carryover period
specified in this subdivision shall be extended as follows:
(A) By one year for a net operating loss attributable to taxable
years beginning in 1991.
(B) By two years for a net operating loss attributable to taxable
years beginning prior to January 1, 1991.
(4) The net
operating loss attributable to taxable years beginning on or after
January 1, 1987, and before January 1, 1994, shall be a net operating
loss carryover to each of the 10 taxable years following the year of
the loss if it is incurred by a taxpayer that is under the
jurisdiction of the court in a Title 11 or similar case at any time
during the income year. The loss carryover provided in the preceding
sentence shall not apply to any loss incurred after the date the
taxpayer is no longer under the jurisdiction of the court in a Title
11 or similar case.
(e) For purposes of this section:
(1) "Eligible small business" means any trade or business that has
gross receipts, less returns and allowances, of less than one
million dollars ($1,000,000) during the taxable year.
(2) Except as provided in subdivision (f), "new business" means
any trade or business activity that is first commenced in this state
on or after January 1, 1994.
(3) "Title 11 or similar case" shall have the same meaning as in
Section 368(a)(3) of the Internal Revenue Code.
(4) In the case of any trade or business activity conducted by a
partnership or "S" corporation paragraphs (1) and (2) shall be
applied to the partnership or "S" corporation.
(f) For purposes of this section, in determining whether a trade
or business activity qualifies as a new business under paragraph (2)
of subdivision (e), the following rules shall apply:
(1) In any case where a taxpayer purchases or otherwise acquires
all or any portion of the assets of an existing trade or business
(irrespective of the form of entity) that is doing business in this
state (within the meaning of Section 23101), the trade or business
thereafter conducted by the taxpayer (or any related person) shall
not be treated as a new business if the aggregate fair market value
of the acquired assets (including real, personal, tangible, and
intangible property) used by the taxpayer (or any related person) in
the conduct of its trade or business exceeds 20 percent of the
aggregate fair market value of the total assets of the trade or
business being conducted by the taxpayer (or any related person). For
purposes of this paragraph only, the following rules shall apply:
(A) The determination of the relative fair market values of the
acquired assets and the total assets shall be made as of the last day
of the first taxable year in which the taxpayer (or any related
person) first uses any of the acquired trade or business assets in
its business activity.
(B) Any acquired assets that constituted property described in
Section 1221(1) of the Internal Revenue Code in the hands of the
transferor shall not be treated as assets acquired from an existing
trade or business, unless those assets also constitute property
described in Section 1221(1) of the Internal Revenue Code in the
hands of the acquiring taxpayer (or related person).
(2) In any case where a taxpayer (or any related person) is
engaged in one or more trade or business activities in this state, or
has been engaged in one or more trade or business activities in this
state within the preceding 36 months ("prior trade or business
activity"), and thereafter commences an additional trade or business
activity in this state, the additional trade or business activity
shall only be treated as a new business if the additional trade or
business activity is classified under a different division of the
Standard Industrial Classification (SIC) Manual published by the
United States Office of Management and Budget, 1987 edition, than are
any of the taxpayer's (or any related person's) current or prior
trade or business activities.
(3) In any case where a taxpayer, including all related persons,
is engaged in trade or business activities wholly outside of this
state and the taxpayer first commences doing business in this state
(within the meaning of Section 23101) after December 31, 1993 (other
than by purchase or other acquisition described in paragraph (1)),
the trade or business activity shall be treated as a new business
under paragraph (2) of subdivision (e).
(4) In any case where the legal form under which a trade or
business activity is being conducted is changed, the change in form
shall be disregarded and the determination of whether the trade or
business activity is a new business shall be made by treating the
taxpayer as having purchased or otherwise acquired all or any portion
of the assets of an existing trade or business under the rules of
paragraph (1) of this subdivision.
(5) "Related person" shall mean any person that is related to the
taxpayer under either Section 267 or 318 of the Internal Revenue
Code.
(6) "Acquire" shall include any gift, inheritance, transfer
incident to divorce, or any other transfer, whether or not for
consideration.
(7) (A) For taxable years beginning on or after January 1, 1997,
the term "new business" shall include any taxpayer that is engaged in
biopharmaceutical activities or other biotechnology activities that
are described in Codes 2833 to 2836, inclusive, of the Standard
Industrial Classification (SIC) Manual published by the United States
Office of Management and Budget, 1987 edition, and as further
amended, and that has not received regulatory approval for any
product from the United States Food and Drug Administration.
(B) For purposes of this paragraph:
(i) "Biopharmaceutical activities" means those activities that use
organisms or materials derived from organisms, and their cellular,
subcellular, or molecular components, in order to provide
pharmaceutical products for human or animal therapeutics and
diagnostics. Biopharmaceutical activities make use of living
organisms to make commercial products, as opposed to pharmaceutical
activities that make use of chemical compounds to produce commercial
products.
(ii) "Other biotechnology activities" means activities consisting
of the application of recombinant DNA technology to produce
commercial products, as well as activities regarding pharmaceutical
delivery systems designed to provide a measure of control over the
rate, duration, and site of pharmaceutical delivery.
(g) In computing the modifications under Section 172(d)(2) of the
Internal Revenue Code, relating to capital gains and losses of
taxpayers other than corporations, the exclusion provided by Section
18152.5 shall not be allowed.
(h) Notwithstanding any provisions of this section to the
contrary, a deduction shall be allowed to a "qualified taxpayer" as
provided in Sections 17276.1 and 17276.7.
(i) The Franchise Tax Board may prescribe appropriate regulations
to carry out the purposes of this section, including any regulations
necessary to prevent the avoidance of the purposes of this section
through splitups, shell corporations, partnerships, tiered ownership
structures, or otherwise.
(j) The Franchise Tax Board may reclassify any net operating loss
carryover determined under either paragraph (2) or (3) of subdivision
(b) as a net operating loss carryover under paragraph (1) of
subdivision (b) upon a showing that the reclassification is necessary
to prevent evasion of the purposes of this section.
(k) Except as otherwise provided, the amendments made by Chapter
107 of the Statutes of 2000 shall apply to net operating losses for
taxable years beginning on or after January 1, 2000.
(l) The changes made to this section by the act adding this
subdivision shall apply for taxable years beginning on or after
January 1, 2011.
SEC. 20. SEC. 107. Section 17276.22
of the Revenue and Taxation Code is repealed.
SEC. 21. SEC. 108. Section 17276.22
is added to the Revenue and Taxation Code, to read:
17276.22. (a) For any carryover of a net operating loss for which
an election under former Section 17276.2, 17276.4, 17276.5, or
17276.6 was made, the net operating loss carryover amount available
for carryover under former Section 17276.2, 17276.4, 17276.5, or
17276.6 to the first taxable year beginning on or after January 1,
2011, shall be recalculated by applying the net operating loss rules
applicable for the taxable year to which the net operating loss was
incurred, as provided in Section 17276.20 or former Section 17276.
This recalculated amount, if in excess of zero, shall be added to the
amount of any net operating loss attributable to the same taxable
year that is available for carryover to the first taxable year
beginning on or after January 1, 2011, under Section 17276.20 and
shall be treated as if no election under former Section 17276.2,
17276.4, 17276.5, or 17276.6 had been made with respect to that
recalculated amount.
(b) To the extent that the application of subdivision (a) reduces
the net operating loss carryover amount available for taxable years
beginning on or after January 1, 2011, to an amount equal to or less
than zero, no amount of net operating loss attributable to this
recalculated amount shall be available for carryover to a taxable
year beginning on or after January 1, 2011. The application of this
section shall not be interpreted to reduce the amount of a net
operating loss deduction under former Section 17276, 17276.2,
17276.4, 17276.5, or 17276.6 for any taxable year beginning before
January 1, 2011.
SEC. 22. SEC. 109. Section 23101 of
the Revenue and Taxation Code is amended to read:
23101. (a) "Doing business" means actively engaging in any
transaction for the purpose of financial or pecuniary gain or profit.
(b) For taxable years beginning on or after January 1, 2011, a
taxpayer is doing business in this state for a taxable year if any of
the following conditions has been satisfied:
(1) The taxpayer is organized or commercially domiciled in this
state.
(2) Sales, as defined in subdivision (e) or (f) of Section 25120
as applicable for the taxable year, of the taxpayer in this state
exceed the lesser of five hundred thousand dollars ($500,000) or 25
percent of the taxpayer's total sales. For purposes of this
paragraph, sales of the taxpayer include sales by an agent or
independent contractor of the taxpayer. For purposes of this
paragraph, sales in this state shall be determined using the rules
for assigning sales under Sections 25135 and 25136, and the
regulations thereunder, as modified by regulations under Section
25137.
(3) The real property and tangible personal property of the
taxpayer in this state exceed the lesser of fifty thousand dollars
($50,000) or 25 percent of the taxpayer's total real property and
tangible personal property. The value of real and tangible personal
property and the determination of whether property is in this state
shall be determined using the rules contained in Sections 25129 to
25131, inclusive, and the regulations thereunder, as modified by
regulation under Section 25137.
(4) The amount paid in this state by the taxpayer for
compensation, as defined in subdivision (c) of Section 25120, exceeds
the lesser of fifty thousand dollars ($50,000) or 25 percent of the
total compensation paid by the taxpayer. Compensation in this state
shall be determined using the rules for assigning payroll contained
in Section 25133 and the regulations thereunder, as modified by
regulations under Section 25137.
(c) (1) The Franchise Tax Board shall annually revise the amounts
in paragraphs (2), (3), and (4) of subdivision (b) in accordance with
subdivision (h) of Section 17041.
(2) For purposes of the adjustment required by paragraph (1),
subdivision (h) of Section 17041 shall be applied by substituting
"2012" in lieu of "1988."
(d) The sales, property, and payroll of the taxpayer include the
taxpayer's pro rata or distributive share of pass-through entities.
For purposes of this subdivision, "pass-through entities" means a
partnership or an "S" corporation.
SEC. 23. SEC. 110. Section 23611 is
added to the Revenue and Taxation Code, to read:
23611. (a) Notwithstanding any other provision or former
provision of this part to the contrary, a credit available for
carryover under former sections of this part identified in
subdivision (b) shall not be allowed to be carried over to any
taxable year beginning on or after January 1, 2011.
(b) This section shall apply to credit carryovers under the
following former sections of this part:
(1) Former Section 23612.6, as identified in subparagraph (I) of
paragraph (1) of subdivision (d) of Section 23036, as in effect on
the effective date of the act adding this section.
(2) Former Section 23623.5, as identified in subparagraph (M) of
paragraph (1) of subdivision (d) of Section 23036, as in effect on
the effective date of the act adding this section.
(3) Former Section 23625, as identified in subparagraph (N) of
paragraph (1) of subdivision (d) of Section 23036, as in effect on
the effective date of the act adding this section.
SEC. 24. SEC. 111. Section 23612.2
of the Revenue and Taxation Code is amended to read:
23612.2. (a) There shall be allowed as a credit against the "tax"
(as defined by Section 23036) for the taxable year an amount equal
to the sales or use tax paid or incurred during the taxable year by
the taxpayer in connection with the taxpayer's purchase of qualified
property.
(b) For purposes of this section:
(1) "Taxpayer" means a corporation engaged in a trade or business
within an enterprise zone.
(2) "Qualified property" means:
(A) Any of the following:
(i) Machinery and machinery parts used for fabricating,
processing, assembling, and manufacturing.
(ii) Machinery and machinery parts used for the production of
renewable energy resources.
(iii) Machinery and machinery parts used for either of the
following:
(I) Air pollution control mechanisms.
(II) Water pollution control mechanisms.
(iv) Data-processing and communications equipment, including, but
not limited to, computers, computer-automated drafting systems, copy
machines, telephone systems, and faxes.
(v) Motion picture manufacturing equipment central to production
and postproduction, including, but not limited to, cameras, audio
recorders, and digital image and sound processing equipment.
(B) The total cost of qualified property purchased and placed in
service in any taxable year that may be taken into account by any
taxpayer for purposes of claiming this credit shall not exceed twenty
million dollars ($20,000,000).
(C) The qualified property is used by the taxpayer exclusively in
an enterprise zone.
(D) The qualified property is purchased and placed in service
before the date the enterprise zone designation expires, is no longer
binding, or becomes inoperative.
(3) "Enterprise zone" means the area designated as an enterprise
zone pursuant to Chapter 12.8 (commencing with Section 7070) of
Division 7 of Title 1 of the Government Code.
(c) If the taxpayer has purchased property upon which a use tax
has been paid or incurred, the credit provided by this section shall
be allowed only if qualified property of a comparable quality and
price is not timely available for purchase in this state.
(d) In the case where the credit otherwise allowed under this
section exceeds the "tax" for the taxable year, that portion of the
credit which exceeds the "tax" may be carried over and added to the
credit, if any, in the following year, and succeeding years if
necessary, until the credit is exhausted. The credit shall be applied
first to the earliest taxable years possible.
(e) Any taxpayer who elects to be subject to this section shall
not be entitled to increase the basis of the qualified property as
otherwise required by Section 164(a) of the Internal Revenue Code
with respect to sales or use tax paid or incurred in connection with
the taxpayer's purchase of qualified property.
(f) (1) The amount of credit otherwise allowed under this section
and Section 23622.7, including any credit carryover from prior years,
that may reduce the "tax" for the taxable year shall not exceed the
amount of tax which would be imposed on the taxpayer's business
income attributable to the enterprise zone determined as if that
attributable income represented all of the income of the taxpayer
subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the
enterprise zone. For that purpose, the taxpayer's business income
attributable to sources in this state first shall be determined in
accordance with Chapter 17 (commencing with Section 25101). That
business income shall be further apportioned to the enterprise zone
in accordance with Article 2 (commencing with Section 25120) of
Chapter 17, modified for purposes of this section in accordance with
paragraph (3).
(3) Business income shall be apportioned to the enterprise zone by
multiplying the total California business income of the taxpayer by
a fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is two. For purposes of
this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the enterprise zone during the
taxable year, and the denominator of which is the average value of
all the taxpayer's real and tangible personal property owned or
rented and used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the enterprise zone during
the taxable year for compensation, and the denominator of which is
the total compensation paid by the taxpayer in this state during the
taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "tax" for the taxable
year, as provided in subdivision (d).
(g) The amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 1998.
(h) (1) This section shall cease to be operative for taxable years
beginning on or after January 1, 2011.
(2) In the case of any portion of a credit available for carryover
to a taxable year beginning on or after January 1, 2011, under
subdivision (d), as that subdivision read prior to the amendments
made by the act adding this subdivision, neither that subdivision nor
subdivision (f) of Section 23036 shall apply, and those unused
credit amounts shall not be carried over to any taxable year
beginning on or after January 1, 2011.
(i) This section shall be repealed as of December 1, 2011.
SEC. 25. SEC. 112. Section 23622.7
of the Revenue and Taxation Code is amended to read:
23622.7. (a) There shall be allowed a credit against the "tax"
(as defined by Section 23036) to a taxpayer who employs a qualified
employee in an enterprise zone during the taxable year. The credit
shall be equal to the sum of each of the following:
(1) Fifty percent of qualified wages in the first year of
employment.
(2) Forty percent of qualified wages in the second year of
employment.
(3) Thirty percent of qualified wages in the third year of
employment.
(4) Twenty percent of qualified wages in the fourth year of
employment.
(5) Ten percent of qualified wages in the fifth year of
employment.
(b) For purposes of this section:
(1) "Qualified wages" means:
(A) (i) Except as provided in clause (ii), that portion of wages
paid or incurred by the taxpayer during the taxable year to qualified
employees that does not exceed 150 percent of the minimum wage.
(ii) For up to 1,350 qualified employees who are employed by the
taxpayer in the Long Beach Enterprise Zone in aircraft manufacturing
activities described in Codes 3721 to 3728, inclusive, and Code 3812
of the Standard Industrial Classification (SIC) Manual published by
the United States Office of Management and Budget, 1987 edition,
"qualified wages" means that portion of hourly wages that does not
exceed 202 percent of the minimum wage.
(B) Wages received during the 60-month period beginning with the
first day the employee commences employment with the taxpayer.
Reemployment in connection with any increase, including a regularly
occurring seasonal increase, in the trade or business operations of
the taxpayer does not constitute commencement of employment for
purposes of this section.
(C) Qualified wages do not include any wages paid or incurred by
the taxpayer on or after the zone expiration date. However, wages
paid or incurred with respect to qualified employees who are employed
by the taxpayer within the enterprise zone within the 60-month
period prior to the zone expiration date shall continue to qualify
for the credit under this section after the zone expiration date, in
accordance with all provisions of this section applied as if the
enterprise zone designation were still in existence and binding.
(2) "Minimum wage" means the wage established by the Industrial
Welfare Commission as provided for in Chapter 1 (commencing with
Section 1171) of Part 4 of Division 2 of the Labor Code.
(3) "Zone expiration date" means the date the enterprise zone
designation expires, is no longer binding, or becomes inoperative.
(4) (A) "Qualified employee" means an individual who meets all of
the following requirements:
(i) At least 90 percent of whose services for the taxpayer during
the taxable year are directly related to the conduct of the taxpayer'
s trade or business located in an enterprise zone.
(ii) Performs at least 50 percent of his or her services for the
taxpayer during the taxable year in an enterprise zone.
(iii) Is hired by the taxpayer after the date of original
designation of the area in which services were performed as an
enterprise zone.
(iv) Is any of the following:
(I) Immediately preceding the qualified employee's commencement of
employment with the taxpayer, was a person eligible for services
under the federal Job Training Partnership Act (29 U.S.C. Sec. 1501
et seq.), or its successor, who is receiving, or is eligible to
receive, subsidized employment, training, or services funded by the
federal Job Training Partnership Act, or its successor.
(II) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a person eligible to be a
voluntary or mandatory registrant under the Greater Avenues for
Independence Act of 1985 (GAIN) provided for pursuant to Article 3.2
(commencing with Section 11320) of Chapter 2 of Part 3 of Division 9
of the Welfare and Institutions Code, or its successor.
(III) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was an economically disadvantaged
individual 14 years of age or older.
(IV) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a dislocated worker who meets
any of the following:
(aa) Has been terminated or laid off or who has received a notice
of termination or layoff from employment, is eligible for or has
exhausted entitlement to unemployment insurance benefits, and is
unlikely to return to his or her previous industry or occupation.
(bb) Has been terminated or has received a notice of termination
of employment as a result of any permanent closure or any substantial
layoff at a plant, facility, or enterprise, including an individual
who has not received written notification but whose employer has made
a public announcement of the closure or layoff.
(cc) Is long-term unemployed and has limited opportunities for
employment or reemployment in the same or a similar occupation in the
area in which the individual resides, including an individual 55
years of age or older who may have substantial barriers to employment
by reason of age.
(dd) Was self-employed (including farmers and ranchers) and is
unemployed as a result of general economic conditions in the
community in which he or she resides or because of natural disasters.
(ee) Was a civilian employee of the Department of Defense employed
at a military installation being closed or realigned under the
Defense Base Closure and Realignment Act of 1990.
(ff) Was an active member of the armed forces or National Guard as
of September 30, 1990, and was either involuntarily separated or
separated pursuant to a special benefits program.
(gg) Is a seasonal or migrant worker who experiences chronic
seasonal unemployment and underemployment in the agriculture
industry, aggravated by continual advancements in technology and
mechanization.
(hh) Has been terminated or laid off, or has received a notice of
termination or layoff, as a consequence of compliance with the Clean
Air Act.
(V) Immediately preceding the qualified employee's commencement of
employment with the taxpayer, was a disabled individual who is
eligible for or enrolled in, or has completed a state rehabilitation
plan or is a service-connected disabled veteran, veteran of the
Vietnam era, or veteran who is recently separated from military
service.
(VI) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was an ex-offender. An individual
shall be treated as convicted if he or she was placed on probation by
a state court without a finding of guilt.
(VII) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a person eligible for or a
recipient of any of the following:
(aa) Federal Supplemental Security Income benefits.
(bb) Aid to Families with Dependent Children.
(cc) Food stamps.
(dd) State and local general assistance.
(VIII) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a member of a federally
recognized Indian tribe, band, or other group of Native American
descent.
(IX) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a resident of a targeted
employment area (as defined in Section 7072 of the Government Code).
(X) An employee who qualified the taxpayer for the enterprise zone
hiring credit under former Section 23622 or the program area hiring
credit under former Section 23623.
(XI) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a member of a targeted group, as
defined in Section 51(d) of the Internal Revenue Code, or its
successor.
(B) Priority for employment shall be provided to an individual who
is enrolled in a qualified program under the federal Job Training
Partnership Act or the Greater Avenues for Independence Act of 1985
or who is eligible as a member of a targeted group under the Work
Opportunity Tax Credit
(Section 51 of the Internal Revenue Code), or its successor.
(5) "Taxpayer" means a corporation engaged in a trade or business
within an enterprise zone designated pursuant to Chapter 12.8
(commencing with Section 7070) of Division 7 of Title 1 of the
Government Code.
(6) "Seasonal employment" means employment by a taxpayer that has
regular and predictable substantial reductions in trade or business
operations.
(c) The taxpayer shall do both of the following:
(1) Obtain from the Employment Development Department, as
permitted by federal law, the local county or city Job Training
Partnership Act administrative entity, the local county GAIN office
or social services agency, or the local government administering the
enterprise zone, a certification that provides that a qualified
employee meets the eligibility requirements specified in clause (iv)
of subparagraph (A) of paragraph (4) of subdivision (b). The
Employment Development Department may provide preliminary screening
and referral to a certifying agency. The Employment Development
Department shall develop a form for this purpose. The Department of
Housing and Community Development shall develop regulations governing
the issuance of certificates by local governments pursuant to
subdivision (a) of Section 7086 of the Government Code.
(2) Retain a copy of the certification and provide it upon request
to the Franchise Tax Board.
(d) (1) For purposes of this section:
(A) All employees of all corporations which are members of the
same controlled group of corporations shall be treated as employed by
a single taxpayer.
(B) The credit, if any, allowable by this section to each member
shall be determined by reference to its proportionate share of the
expense of the qualified wages giving rise to the credit, and shall
be allocated in that manner.
(C) For purposes of this subdivision, "controlled group of
corporations" means "controlled group of corporations" as defined in
Section 1563(a) of the Internal Revenue Code, except that:
(i) "More than 50 percent" shall be substituted for "at least 80
percent" each place it appears in Section 1563(a)(1) of the Internal
Revenue Code.
(ii) The determination shall be made without regard to subsections
(a)(4) and (e)(3)(C) of Section 1563 of the Internal Revenue Code.
(2) If an employer acquires the major portion of a trade or
business of another employer (hereinafter in this paragraph referred
to as the "predecessor") or the major portion of a separate unit of a
trade or business of a predecessor, then, for purposes of applying
this section (other than subdivision (e)) for any calendar year
ending after that acquisition, the employment relationship between a
qualified employee and an employer shall not be treated as terminated
if the employee continues to be employed in that trade or business.
(e) (1) (A) If the employment, other than seasonal employment, of
any qualified employee with respect to whom qualified wages are taken
into account under subdivision (a) is terminated by the taxpayer at
any time during the first 270 days of that employment, whether or not
consecutive, or before the close of the 270th calendar day after the
day in which that employee completes 90 days of employment with the
taxpayer, the tax imposed by this part for the taxable year in which
that employment is terminated shall be increased by an amount equal
to the credit allowed under subdivision (a) for that taxable year and
all prior taxable years attributable to qualified wages paid or
incurred with respect to that employee.
(B) If the seasonal employment of any qualified employee, with
respect to whom qualified wages are taken into account under
subdivision (a) is not continued by the taxpayer for a period of 270
days of employment during the 60-month period beginning with the day
the qualified employee commences seasonal employment with the
taxpayer, the tax imposed by this part, for the taxable year that
includes the 60th month following the month in which the qualified
employee commences seasonal employment with the taxpayer, shall be
increased by an amount equal to the credit allowed under subdivision
(a) for that taxable year and all prior taxable years attributable to
qualified wages paid or incurred with respect to that qualified
employee.
(2) (A) Subparagraph (A) of paragraph (1) shall not apply to any
of the following:
(i) A termination of employment of a qualified employee who
voluntarily leaves the employment of the taxpayer.
(ii) A termination of employment of a qualified employee who,
before the close of the period referred to in subparagraph (A) of
paragraph (1), becomes disabled and unable to perform the services of
that employment, unless that disability is removed before the close
of that period and the taxpayer fails to offer reemployment to that
employee.
(iii) A termination of employment of a qualified employee, if it
is determined that the termination was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that employee.
(iv) A termination of employment of a qualified employee due to a
substantial reduction in the trade or business operations of the
taxpayer.
(v) A termination of employment of a qualified employee, if that
employee is replaced by other qualified employees so as to create a
net increase in both the number of employees and the hours of
employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of
the following:
(i) A failure to continue the seasonal employment of a qualified
employee who voluntarily fails to return to the seasonal employment
of the taxpayer.
(ii) A failure to continue the seasonal employment of a qualified
employee who, before the close of the period referred to in
subparagraph (B) of paragraph (1), becomes disabled and unable to
perform the services of that seasonal employment, unless that
disability is removed before the close of that period and the
taxpayer fails to offer seasonal employment to that qualified
employee.
(iii) A failure to continue the seasonal employment of a qualified
employee, if it is determined that the failure to continue the
seasonal employment was due to the misconduct (as defined in Sections
1256-30 to 1256-43, inclusive, of Title 22 of the California Code of
Regulations) of that qualified employee.
(iv) A failure to continue seasonal employment of a qualified
employee due to a substantial reduction in the regular seasonal trade
or business operations of the taxpayer.
(v) A failure to continue the seasonal employment of a qualified
employee, if that qualified employee is replaced by other qualified
employees so as to create a net increase in both the number of
seasonal employees and the hours of seasonal employment.
(C) For purposes of paragraph (1), the employment relationship
between the taxpayer and a qualified employee shall not be treated as
terminated by either of the following:
(i) By a transaction to which Section 381(a) of the Internal
Revenue Code applies, if the qualified employee continues to be
employed by the acquiring corporation.
(ii) By reason of a mere change in the form of conducting the
trade or business of the taxpayer, if the qualified employee
continues to be employed in that trade or business and the taxpayer
retains a substantial interest in that trade or business.
(3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
(f) Rules similar to the rules provided in Section 46(e) and (h)
of the Internal Revenue Code shall apply to both of the following:
(1) An organization to which Section 593 of the Internal Revenue
Code applies.
(2) A regulated investment company or a real estate investment
trust subject to taxation under this part.
(g) For purposes of this section, "enterprise zone" means an area
designated as an enterprise zone pursuant to Chapter 12.8 (commencing
with Section 7070) of Division 7 of Title 1 of the Government Code.
(h) The credit allowable under this section shall be reduced by
the credit allowed under Sections 23623.5, 23625, and 23646 claimed
for the same employee. The credit shall also be reduced by the
federal credit allowed under Section 51 of the Internal Revenue Code.
In addition, any deduction otherwise allowed under this part for
the wages or salaries paid or incurred by the taxpayer upon which the
credit is based shall be reduced by the amount of the credit, prior
to any reduction required by subdivision (i) or (j).
(i) In the case where the credit otherwise allowed under this
section exceeds the "tax" for the taxable year, that portion of the
credit that exceeds the "tax" may be carried over and added to the
credit, if any, in succeeding taxable years, until the credit is
exhausted. The credit shall be applied first to the earliest taxable
years possible.
(j) (1) The amount of the credit otherwise allowed under this
section and Section 23612.2, including any credit carryover from
prior years, that may reduce the "tax" for the taxable year shall not
exceed the amount of tax which would be imposed on the taxpayer's
business income attributable to the enterprise zone determined as if
that attributable income represented all of the income of the
taxpayer subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the
enterprise zone. For that purpose, the taxpayer's business
attributable to sources in this state first shall be determined in
accordance with Chapter 17 (commencing with Section 25101). That
business income shall be further apportioned to the enterprise zone
in accordance with Article 2 (commencing with Section 25120) of
Chapter 17, modified for purposes of this section in accordance with
paragraph (3).
(3) Business income shall be apportioned to the enterprise zone by
multiplying the total California business income of the taxpayer by
a fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is two. For purposes of
this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the enterprise zone during the
income year, and the denominator of which is the average value of all
the taxpayer's real and tangible personal property owned or rented
and used in this state during the income year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the enterprise zone during
the income year for compensation, and the denominator of which is the
total compensation paid by the taxpayer in this state during the
income year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "tax" for the taxable
year, as provided in subdivision (i).
(k) The changes made to this section by the act adding this
subdivision shall apply to taxable years on or after January 1, 1997.
(l) (1) This section shall cease to be operative for taxable years
beginning on or after January 1, 2011.
(2) In the case of any portion of a credit available for carryover
to a taxable year beginning on or after January 1, 2011, under
subdivision (i), as that subdivision read prior to the amendments
made by the act adding this subdivision, neither that subdivision nor
subdivision (f) of Section 23036 shall apply, and those unused
credit amounts shall not be carried over to any taxable year
beginning on or after January 1, 2011.
(m) This section shall be repealed as of December 1, 2011.
SEC. 26. SEC. 113. Section 23622.8
of the Revenue and Taxation Code is amended to read:
23622.8. (a) For each taxable year beginning on or after January
1, 1998, there shall be allowed a credit against the "tax" (as
defined in Section 23036) to a qualified taxpayer for hiring a
qualified disadvantaged individual during the taxable year for
employment in the manufacturing enhancement area. The credit shall be
equal to the sum of each of the following:
(1) Fifty percent of the qualified wages in the first year of
employment.
(2) Forty percent of the qualified wages in the second year of
employment.
(3) Thirty percent of the qualified wages in the third year of
employment.
(4) Twenty percent of the qualified wages in the fourth year of
employment.
(5) Ten percent of the qualified wages in the fifth year of
employment.
(b) For purposes of this section:
(1) "Qualified wages" means:
(A) That portion of wages paid or incurred by the qualified
taxpayer during the taxable year to qualified disadvantaged
individuals that does not exceed 150 percent of the minimum wage.
(B) The total amount of qualified wages which may be taken into
account for purposes of claiming the credit allowed under this
section shall not exceed two million dollars ($2,000,000) per taxable
year.
(C) Wages received during the 60-month period beginning with the
first day the qualified disadvantaged individual commences employment
with the qualified taxpayer. Reemployment in connection with any
increase, including a regularly occurring seasonal increase, in the
trade or business operations of the qualified taxpayer does not
constitute commencement of employment for purposes of this section.
(D) Qualified wages do not include any wages paid or incurred by
the qualified taxpayer on or after the manufacturing enhancement area
expiration date. However, wages paid or incurred with respect to
qualified employees who are employed by the qualified taxpayer within
the manufacturing enhancement area within the 60-month period prior
to the manufacturing enhancement area expiration date shall continue
to qualify for the credit under this section after the manufacturing
enhancement area expiration date, in accordance with all provisions
of this section applied as if the manufacturing enhancement area
designation were still in existence and binding.
(2) "Minimum wage" means the wage established by the Industrial
Welfare Commission as provided for in Chapter 1 (commencing with
Section 1171) of Part 4 of Division 2 of the Labor Code.
(3) "Manufacturing enhancement area" means an area designated
pursuant to Section 7073.8 of the Government Code according to the
procedures of Chapter 12.8 (commencing with Section 7070) of Division
7 of Title 1 of the Government Code.
(4) "Manufacturing enhancement area expiration date" means the
date the manufacturing enhancement area designation expires, is no
longer binding, or becomes inoperative.
(5) "Qualified disadvantaged individual" means an individual who
satisfies all of the following requirements:
(A) (i) At least 90 percent of whose services for the qualified
taxpayer during the taxable year are directly related to the conduct
of the qualified taxpayer's trade or business located in a
manufacturing enhancement area.
(ii) Who performs at least 50 percent of his or her services for
the qualified taxpayer during the taxable year in the manufacturing
enhancement area.
(B) Who is hired by the qualified taxpayer after the designation
of the area as a manufacturing enhancement area in which the
individual's services were primarily performed.
(C) Who is any of the following immediately preceding the
individual's commencement of employment with the qualified taxpayer:
(i) An individual who has been determined eligible for services
under the federal Job Training Partnership Act (29 U.S.C. Sec. 1501
et seq.) or its successor.
(ii) Any voluntary or mandatory registrant under the Greater
Avenues for Independence Act of 1985, or its successor, as provided
pursuant to Article 3.2 (commencing with Section 11320) of Chapter 2
of Part 3 of Division 9 of the Welfare and Institutions Code.
(iii) Any individual who has been certified eligible by the
Employment Development Department under the federal Targeted Jobs Tax
Credit Program, or its successor, whether or not this program is in
effect.
(6) "Qualified taxpayer" means any corporation engaged in a trade
or business within a manufacturing enhancement area designated
pursuant to Section 7073.8 of the Government Code and that meets all
of the following requirements:
(A) Is engaged in those lines of business described in Codes 0211
to 0291, inclusive, Code 0723, or in Codes 2011 to 3999, inclusive,
of the Standard Industrial Classification (SIC) Manual published by
the United States Office of Management and Budget, 1987 edition.
(B) At least 50 percent of the qualified taxpayer's workforce
hired after the designation of the manufacturing enhancement area is
composed of individuals who, at the time of hire, are residents of
the county in which the manufacturing enhancement area is located.
(C) Of this percentage of local hires, at least 30 percent shall
be qualified disadvantaged individuals.
(7) "Seasonal employment" means employment by a qualified taxpayer
that has regular and predictable substantial reductions in trade or
business operations.
(c) (1) For purposes of this section, all of the following apply:
(A) All employees of all corporations that are members of the same
controlled group of corporations shall be treated as employed by a
single qualified taxpayer.
(B) The credit (if any) allowable by this section with respect to
each member shall be determined by reference to its proportionate
share of the expenses of the qualified wages giving rise to the
credit and shall be allocated in that manner.
(C) Principles that apply in the case of controlled groups of
corporations, as specified in subdivision (d) of Section 23622.7,
shall apply with respect to determining employment.
(2) If a qualified taxpayer acquires the major portion of a trade
or business of another employer (hereinafter in this paragraph
referred to as the "predecessor") or the major portion of a separate
unit of a trade or business of a predecessor, then, for purposes of
applying this section (other than subdivision (d)) for any calendar
year ending after that acquisition, the employment relationship
between a qualified disadvantaged individual and a qualified taxpayer
shall not be treated as terminated if the qualified disadvantaged
individual continues to be employed in that trade or business.
(d) (1) (A) If the employment, other than seasonal employment, of
any qualified disadvantaged individual, with respect to whom
qualified wages are taken into account under subdivision (b) is
terminated by the qualified taxpayer at any time during the first 270
days of that employment (whether or not consecutive) or before the
close of the 270th calendar day after the day in which that qualified
disadvantaged individual completes 90 days of employment with the
qualified taxpayer, the tax imposed by this part for the taxable year
in which that employment is terminated shall be increased by an
amount equal to the credit allowed under subdivision (a) for that
taxable year and all prior taxable years attributable to qualified
wages paid or incurred with respect to that qualified disadvantaged
individual.
(B) If the seasonal employment of any qualified disadvantaged
individual, with respect to whom qualified wages are taken into
account under subdivision (a) is not continued by the qualified
taxpayer for a period of 270 days of employment during the 60-month
period beginning with the day the qualified disadvantaged individual
commences seasonal employment with the qualified taxpayer, the tax
imposed by this part, for the income year that includes the 60th
month following the month in which the qualified disadvantaged
individual commences seasonal employment with the qualified taxpayer,
shall be increased by an amount equal to the credit allowed under
subdivision (a) for that taxable year and all prior taxable years
attributable to qualified wages paid or incurred with respect to that
qualified disadvantaged individual.
(2) (A) Subparagraph (A) of paragraph (1) does not apply to any of
the following:
(i) A termination of employment of a qualified disadvantaged
individual who voluntarily leaves the employment of the qualified
taxpayer.
(ii) A termination of employment of a qualified disadvantaged
individual who, before the close of the period referred to in
subparagraph (A) of paragraph (1), becomes disabled to perform the
services of that employment, unless that disability is removed before
the close of that period and the qualified taxpayer fails to offer
reemployment to that individual.
(iii) A termination of employment of a qualified disadvantaged
individual, if it is determined that the termination was due to the
misconduct (as defined in Sections 1256-30 to 1256-43, inclusive, of
Title 22 of the California Code of Regulations) of that individual.
(iv) A termination of employment of a qualified disadvantaged
individual due to a substantial reduction in the trade or business
operations of the qualified taxpayer.
(v) A termination of employment of a qualified disadvantaged
individual, if that individual is replaced by other qualified
disadvantaged individuals so as to create a net increase in both the
number of employees and the hours of employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of
the following:
(i) A failure to continue the seasonal employment of a qualified
disadvantaged individual who voluntarily fails to return to the
seasonal employment of the qualified taxpayer.
(ii) A failure to continue the seasonal employment of a qualified
disadvantaged individual who, before the close of the period referred
to in subparagraph (B) of paragraph (1), becomes disabled and unable
to perform the services of that seasonal employment, unless that
disability is removed before the close of that period and the
qualified taxpayer fails to offer seasonal employment to that
qualified disadvantaged individual.
(iii) A failure to continue the seasonal employment of a qualified
disadvantaged individual, if it is determined that the failure to
continue the seasonal employment was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that qualified disadvantaged
individual.
(iv) A failure to continue seasonal employment of a qualified
disadvantaged individual due to a substantial reduction in the
regular seasonal trade or business operations of the qualified
taxpayer.
(v) A failure to continue the seasonal employment of a qualified
disadvantaged individual, if that qualified disadvantaged individual
is replaced by other qualified disadvantaged individuals so as to
create a net increase in both the number of seasonal employees and
the hours of seasonal employment.
(C) For purposes of paragraph (1), the employment relationship
between the qualified taxpayer and a qualified disadvantaged
individual shall not be treated as terminated by either of the
following:
(i) By a transaction to which Section 381(a) of the Internal
Revenue Code applies, if the qualified disadvantaged individual
continues to be employed by the acquiring corporation.
(ii) By reason of a mere change in the form of conducting the
trade or business of the qualified taxpayer, if the qualified
disadvantaged individual continues to be employed in that trade or
business and the qualified taxpayer retains a substantial interest in
that trade or business.
(3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
(e) The credit shall be reduced by the credit allowed under
Section 23621. The credit shall also be reduced by the federal credit
allowed under Section 51 of the Internal Revenue Code.
In addition, any deduction otherwise allowed under this part for
the wages or salaries paid or incurred by the qualified taxpayer upon
which the credit is based shall be reduced by the amount of the
credit, prior to any reduction required by subdivision (f) or (g).
(f) In the case where the credit otherwise allowed under this
section exceeds the "tax" for the taxable year, that portion of the
credit that exceeds the "tax" may be carried over and added to the
credit, if any, in succeeding years, until the credit is exhausted.
The credit shall be applied first to the earliest taxable years
possible.
(g) (1) The amount of credit otherwise allowed under this section,
including prior year credit carryovers, that may reduce the "tax"
for the taxable year shall not exceed the amount of tax that would be
imposed on the qualified taxpayer's business income attributed to a
manufacturing enhancement area determined as if that attributed
income represented all of the net income of the qualified taxpayer
subject to tax under this part.
(2) Attributable income is that portion of the taxpayer's
California source business income that is apportioned to the
manufacturing enhancement area. For that purpose, the taxpayer's
business income attributable to sources in this state first shall be
determined in accordance with Chapter 17 (commencing with Section
25101). That business income shall be further apportioned to the
manufacturing enhancement area in accordance with Article 2
(commencing with Section 25120) of Chapter 17, modified for purposes
of this section in accordance with paragraph (3).
(3) Income shall be apportioned to a manufacturing enhancement
area by multiplying the total California business income of the
taxpayer by a fraction, the numerator of which is the property factor
plus the payroll factor, and the denominator of which is two. For
the purposes of this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the manufacturing enhancement
area during the taxable year, and the denominator of which is the
average value of all the taxpayer's real and tangible personal
property owned or rented and used in this state during the taxable
year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the manufacturing
enhancement area during the taxable year for compensation, and the
denominator of which is the total compensation paid by the taxpayer
in this state during the taxable year.
(4) The portion of any credit remaining, if any, after
application of this subdivision, shall be carried over to succeeding
taxable years, as if it were an amount exceeding the "tax" for the
taxable year, as provided in subdivision (g).
(h) If the taxpayer is allowed a credit pursuant to this section
for qualified wages paid or incurred, only one credit shall be
allowed to the taxpayer under this part with respect to any wage
consisting in whole or in part of those qualified wages.
(i) The qualified taxpayer shall do both of the following:
(1) Obtain from the Employment Development Department, as
permitted by federal law, the local county or city Job Training
Partnership Act administrative entity, the local county GAIN office
or social services agency, or the local government administering the
manufacturing enhancement area, a certification that provides that a
qualified disadvantaged individual meets the eligibility requirements
specified in paragraph (5) of subdivision (b). The Employment
Development Department may provide preliminary screening and referral
to a certifying agency. The Department of Housing and Community
Development shall develop regulations governing the issuance of
certificates pursuant to subdivision (d) of Section 7086 of the
Government Code and shall develop forms for this purpose.
(2) Retain a copy of the certification and provide it upon request
to the Franchise Tax Board.
(j) (1) This section shall cease to be operative for taxable years
beginning on or after January 1, 2011.
(2) In the case of any portion of a credit available for carryover
to a taxable year beginning on or after January 1, 2011, under
subdivision (f), as that subdivision read prior to the amendments
made by the act adding this subdivision, neither that subdivision nor
subdivision (f) of Section 23036 shall apply, and those unused
credit amounts shall not be carried over to any taxable year
beginning on or after January 1, 2011.
(k) This section shall be repealed as of December 1, 2011.
SEC. 27. SEC. 114. Section 23633 of
the Revenue and Taxation Code is amended to read:
23633. (a) For each taxable year beginning on or after January 1,
1998, there shall be allowed as a credit against the "tax" (as
defined by Section 23036) for the taxable year an amount equal to the
sales or use tax paid or incurred during the taxable year by the
qualified taxpayer in connection with the qualified taxpayer's
purchase of qualified property.
(b) For purposes of this section:
(1) "Qualified property" means property that meets all of the
following requirements:
(A) Is any of the following:
(i) Machinery and machinery parts used for fabricating,
processing, assembling, and manufacturing.
(ii) Machinery and machinery parts used for the production of
renewable energy resources.
(iii) Machinery and machinery parts used for either of the
following:
(I) Air pollution control mechanisms.
(II) Water pollution control mechanisms.
(iv) Data-processing and communications equipment, such as
computers, computer-automated drafting systems, copy machines,
telephone systems, and faxes.
(v) Motion picture manufacturing equipment central to production
and post production, such as cameras, audio recorders, and digital
image and sound processing equipment.
(B) The total cost of qualified property purchased and placed in
service in any taxable year that may be taken into account by any
qualified taxpayer for purposes of claiming this credit shall not
exceed twenty million dollars ($20,000,000).
(C) The qualified property is used by the qualified taxpayer
exclusively in a targeted tax area.
(D) The qualified property is purchased and placed in service
before the date the targeted tax area designation expires, is
revoked, is no longer binding, or becomes inoperative.
(2) (A) "Qualified taxpayer" means a corporation that meets both
of the following:
(i) Is engaged in a trade or business within a targeted tax area
designated pursuant to Chapter 12.93 (commencing with Section 7097)
of Division 7 of Title 1 of the Government Code.
(ii) Is engaged in those lines of business described in Codes 2000
to 2099, inclusive; 2200 to 3999, inclusive; 4200 to 4299,
inclusive; 4500 to 4599, inclusive; and 4700 to 5199, inclusive, of
the Standard Industrial Classification (SIC) Manual published by the
United States Office of Management and Budget, 1987 edition.
(B) In the case of any pass-through entity, the determination of
whether a taxpayer is a qualified taxpayer under this section shall
be made at the entity level and any credit under this section or
Section 17053.33 shall be allowed to the pass-through entity and
passed through to the partners or shareholders in accordance with
applicable provisions of this part or Part 10 (commencing with
Section 17001). For purposes of this subparagraph, the term
"pass-through entity" means any partnership or S corporation.
(3) "Targeted tax area" means the area designated pursuant to
Chapter 12.93 (commencing with Section 7097) of Division 7 of Title 1
of the Government Code.
(c) If the qualified taxpayer is allowed a credit for qualified
property pursuant to this section, only one credit shall be allowed
to the taxpayer under this part with respect to that qualified
property.
(d) If the qualified taxpayer has purchased property upon which a
use tax has been paid or incurred, the credit provided by this
section shall be allowed only if qualified property of a comparable
quality and price is not timely available for purchase in this state.
(e) In the case where the credit otherwise allowed under this
section exceeds the "tax" for the taxable year, that portion of the
credit that exceeds the "tax" may be carried over and added to the
credit, if any, in the following year, and succeeding years if
necessary, until the credit is exhausted. The credit shall be applied
first to the earliest taxable years possible.
(f) Any qualified taxpayer who elects to be subject to this
section shall not be entitled to increase the basis of the qualified
property as otherwise required by Section 164(a) of the Internal
Revenue Code with respect to sales or use tax paid or incurred in
connection with the qualified taxpayer's purchase of qualified
property.
(g) (1) The amount of credit otherwise allowed under this section
and Section 23634, including any credit carryover from prior years,
that may reduce the "tax" for the taxable year shall not exceed the
amount of tax that would be imposed on the qualified taxpayer's
business income attributable to the targeted tax area determined as
if that attributable income represented all of the income of the
qualified taxpayer subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the targeted
tax area. For that purpose, the taxpayer's business income
attributable to sources in this state first shall be determined in
accordance with Chapter 17 (commencing with Section 25101). That
business income shall be further apportioned to the targeted tax area
in accordance with Article 2 (commencing with Section 25120) of
Chapter 17, modified for purposes of this section in accordance with
paragraph (3).
(3) Business income shall be apportioned to the targeted tax area
by multiplying the total California business income of the taxpayer
by a fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is two. For purposes of
this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the targeted tax area during the
taxable year and the denominator of which is the average value of
all the taxpayer's real and tangible personal property owned or
rented and used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the targeted tax area during
the taxable year for compensation, and the denominator of which is
the total compensation paid by the taxpayer in this state during the
taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "tax" for the taxable
year, as provided in subdivision (e).
(5) In the event that a credit carryover is allowable under
subdivision (e) for any taxable year after the targeted tax area
designation has expired, has been revoked, is no longer binding, or
has become inoperative, the targeted tax area shall be deemed to
remain in existence for purposes of computing the limitation
specified in this subdivision.
(h) The changes made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 1998.
(i) (1) This section shall cease to be operative for taxable years
beginning on or after January 1, 2011.
(2) In the case of any portion of a credit available for carryover
to a taxable year beginning on or after January 1, 2011, under
subdivision (e), as that subdivision read prior to the amendments
made by the act adding this subdivision, neither that subdivision nor
subdivision (f) of Section 23036 shall apply, and those unused
credit amounts shall not be carried over to any taxable year
beginning on or after January 1, 2011.
(j) This section shall be repealed as of December 1, 2011.
SEC. 28. SEC. 115. Section 23634 of
the Revenue and Taxation Code is amended to read:
23634. (a) For each taxable year beginning on or after January 1,
1998, there shall be allowed a credit against the "tax" (as defined
by Section 23036) to a qualified taxpayer who employs a qualified
employee in a targeted tax area during the taxable year. The credit
shall be equal to the sum of each of the following:
(1) Fifty percent of qualified wages in the first year of
employment.
(2) Forty percent of qualified wages in the second year of
employment.
(3) Thirty percent of qualified wages in the third year of
employment.
(4) Twenty percent of qualified wages in the fourth year of
employment.
(5) Ten percent of qualified wages in the fifth year of
employment.
(b) For purposes of this section:
(1) "Qualified wages" means:
(A) That portion of wages paid or incurred by the qualified
taxpayer during the taxable year to qualified employees that does not
exceed 150 percent of the minimum wage.
(B) Wages received during the 60-month period beginning with the
first day the employee commences employment with the qualified
taxpayer. Reemployment in connection with any increase, including a
regularly occurring seasonal increase, in the trade or business
operations of the qualified taxpayer does not constitute commencement
of employment for purposes of this section.
(C) Qualified wages do not include any wages paid or incurred by
the qualified taxpayer on or after the targeted tax area expiration
date. However, wages paid or incurred with respect to qualified
employees who are employed by the qualified taxpayer within the
targeted tax area within the 60-month period prior to the targeted
tax area expiration date shall continue to qualify for the credit
under this section after the targeted tax area expiration date, in
accordance with all provisions of this section applied as if the
targeted tax area designation were still in existence and binding.
(2) "Minimum wage" means the wage established by the Industrial
Welfare Commission as provided for in Chapter 1 (commencing with
Section 1171) of Part 4 of Division 2 of the Labor Code.
(3) "Targeted tax area expiration date" means the date the
targeted tax area designation expires, is revoked, is no longer
binding, or becomes inoperative.
(4) (A) "Qualified employee" means an individual who meets all of
the following requirements:
(i) At least 90 percent of his or her services for the qualified
taxpayer during the taxable year are directly related to the conduct
of the qualified taxpayer's trade or business located in a targeted
tax area.
(ii) Performs at least 50 percent of his or her services for the
qualified taxpayer during the taxable year in a targeted tax area.
(iii) Is hired by the qualified taxpayer after the date of
original designation of the area in which services were performed as
a targeted tax area.
(iv) Is any of the following:
(I) Immediately preceding the qualified employee's commencement of
employment with the qualified taxpayer, was a person eligible for
services under the federal Job Training Partnership Act (29 U.S.C.
Sec. 1501 et seq.), or its successor, who is receiving, or is
eligible to receive, subsidized employment, training, or services
funded by the federal Job Training Partnership Act, or its successor.
(II) Immediately preceding the qualified employee's commencement
of employment with the qualified taxpayer, was a person eligible to
be a voluntary or mandatory registrant under the Greater Avenues for
Independence Act of 1985 (GAIN) provided for pursuant to Article 3.2
(commencing with Section 11320) of Chapter 2 of Part 3 of Division 9
of the Welfare and Institutions Code, or its successor.
(III) Immediately preceding the qualified employee's commencement
of employment with the qualified taxpayer, was an economically
disadvantaged individual 14 years of age or older.
(IV) Immediately preceding the qualified employee's commencement
of employment with the qualified taxpayer, was a dislocated worker
who meets any of the following:
(aa) Has been terminated or laid off or who has received a notice
of termination or layoff from employment, is eligible for or has
exhausted entitlement to unemployment insurance benefits, and is
unlikely to return to his or her previous industry or occupation.
(bb) Has been terminated or has received a notice of termination
of employment as a result of any permanent closure or any substantial
layoff at a plant, facility, or enterprise, including an individual
who has not received written notification but whose employer has made
a public announcement of the closure or layoff.
(cc) Is long-term unemployed and has limited opportunities for
employment or reemployment in the same or a similar occupation in the
area in which the individual resides, including an individual 55
years of age or older who may have substantial barriers to employment
by reason of age.
(dd) Was self-employed (including farmers and ranchers) and is
unemployed as a result of general economic conditions in the
community in which he or she resides or because of natural disasters.
(ee) Was a civilian employee of the Department of Defense employed
at a military installation being closed or realigned under the
Defense Base Closure and Realignment Act of 1990.
(ff) Was an active member of the Armed Forces or National Guard as
of September 30, 1990, and was either involuntarily separated or
separated pursuant to a special benefits program.
(gg) Is a seasonal or migrant worker who experiences chronic
seasonal unemployment and underemployment in the agriculture
industry, aggravated by continual advancements in technology and
mechanization.
(hh) Has been terminated or laid off, or has received a notice of
termination or layoff, as a consequence of compliance with the Clean
Air Act.
(V) Immediately preceding the qualified employee's commencement of
employment with the qualified taxpayer, was a disabled individual
who is eligible for or enrolled in, or has completed a state
rehabilitation plan or is a service-connected disabled veteran,
veteran of the Vietnam era, or veteran who is recently separated from
military service.
(VI) Immediately preceding the qualified employee's commencement
of employment with the qualified taxpayer, was an ex-offender. An
individual shall be treated as convicted if he or she was placed on
probation by a state court without a finding of guilt.
(VII) Immediately preceding the qualified employee's commencement
of employment with the qualified taxpayer, was a person eligible for
or a recipient of any of the following:
(aa) Federal Supplemental Security Income benefits.
(bb) Aid to Families with Dependent Children.
(cc) Food stamps.
(dd) State and local general assistance.
(VIII) Immediately preceding the qualified employee's commencement
of employment with the qualified taxpayer, was a member of a
federally recognized Indian tribe, band, or other group of Native
American descent.
(IX) Immediately preceding the qualified employee's commencement
of employment with the qualified taxpayer, was a resident of a
targeted tax area.
(X) Immediately preceding the qualified employee's commencement of
employment with the taxpayer, was a member of a targeted group, as
defined in Section 51(d) of the Internal Revenue Code, or its
successor.
(B) Priority for employment shall be provided to an individual who
is enrolled in a qualified program under the federal Job Training
Partnership Act or the Greater Avenues for Independence Act of 1985
or who is eligible as a member of a targeted group under the Work
Opportunity Tax Credit (Section 51 of the Internal Revenue Code), or
its successor.
(5) (A) "Qualified taxpayer" means a person or entity that meets
both of the following:
(i) Is engaged in a trade or business within a targeted tax area
designated pursuant to Chapter 12.93 (commencing with Section 7097)
of Division 7 of Title 1 of the Government Code.
(ii) Is engaged in those lines of business described in Codes 2000
to 2099, inclusive; 2200 to 3999, inclusive; 4200 to 4299,
inclusive; 4500 to 4599, inclusive; and 4700 to 5199, inclusive, of
the Standard Industrial Classification (SIC) Manual published by the
United States Office of Management and Budget, 1987 edition.
(B) In the case of any passthrough entity, the determination of
whether a taxpayer is a qualified taxpayer under this section shall
be made at the entity level and any credit under this section or
Section 17053.34 shall be allowed to the passthrough entity and
passed through to the partners or shareholders in accordance with
applicable provisions of this part or Part 10 (commencing with
Section 17001). For purposes of this subparagraph, the term
"passthrough entity" means any partnership or S corporation.
(6) "Seasonal employment" means employment by a qualified taxpayer
that has regular and predictable substantial reductions in trade or
business operations.
(c) If the qualified taxpayer is allowed a credit for qualified
wages pursuant to this section, only one credit shall be allowed to
the taxpayer under this part with respect to those qualified wages.
(d) The qualified taxpayer shall do both of the following:
(1) Obtain from the Employment Development Department, as
permitted by federal law, the local county or city Job Training
Partnership Act administrative entity, the local county GAIN office
or social services agency, or the local government administering the
targeted tax area, a certification that provides that a qualified
employee meets the eligibility requirements specified in clause (iv)
of subparagraph (A) of paragraph (4) of subdivision (b). The
Employment Development Department may provide preliminary screening
and referral to a certifying agency. The Department of Housing and
Community Development shall develop regulations for the issuance of
certificates pursuant to Section 7097 of the Government Code, and
shall develop forms for this purpose.
(2) Retain a copy of the certification and provide it upon request
to the Franchise Tax Board.
(e) (1) For purposes of this section:
(A) All employees of all corporations that are members of the same
controlled group of corporations shall be treated as employed by a
single taxpayer.
(B) The credit, if any, allowable by this section to each member
shall be determined by reference to its proportionate share of the
expense of the qualified wages giving rise to the credit, and shall
be allocated in that manner.
(C) For purposes of this subdivision, "controlled group of
corporations" means "controlled group of corporations" as defined in
Section 1563(a) of the Internal Revenue Code, except that:
(i) "More than 50 percent" shall be substituted for "at least 80
percent" each place it appears in Section 1563(a)(1) of the Internal
Revenue Code.
(ii) The determination shall be made without regard to subsections
(a)(4) and (e)(3)(C) of Section 1563 of the Internal Revenue Code.
(2) If an employer acquires the major portion of a trade or
business of another employer (hereinafter in this paragraph referred
to as the "predecessor") or the major portion of a separate unit of a
trade or business of a predecessor, then, for purposes of applying
this section (other than subdivision (f)) for any calendar year
ending after that acquisition, the employment relationship between a
qualified employee and an employer shall not be treated as terminated
if the employee continues to be employed in that trade or business.
(f) (1) (A) If the employment, other than seasonal employment, of
any qualified employee with respect to whom qualified wages are taken
into account under subdivision (a) is terminated by the qualified
taxpayer at any time during the first 270 days of that employment
(whether or not consecutive) or before the close of the 270th
calendar day after the day in which that employee completes 90 days
of employment with the qualified taxpayer, the tax imposed by this
part for the taxable year in which that employment is terminated
shall be increased by an amount equal to the credit allowed under
subdivision (a) for that taxable year and all prior taxable years
attributable to qualified wages paid or incurred with respect to that
employee.
(B) If the seasonal employment of any qualified employee, with
respect to whom qualified wages are taken into account under
subdivision (a) is not continued by the qualified taxpayer for a
period of 270 days of employment during the 60-month period beginning
with the day the qualified employee commences seasonal employment
with the qualified taxpayer, the tax imposed by this part, for the
taxable year that includes the 60th month following the month in
which the qualified employee commences seasonal employment with the
qualified taxpayer, shall be increased by an amount equal to the
credit allowed under subdivision (a) for that taxable year and all
prior taxable years attributable to qualified wages paid or incurred
with respect to that qualified employee.
(2) (A) Subparagraph (A) of paragraph (1) shall not apply to any
of the following:
(i) A termination of employment of a qualified employee who
voluntarily leaves the employment of the qualified taxpayer.
(ii) A termination of employment of a qualified employee who,
before the close of the period referred to in subparagraph (A) of
paragraph (1), becomes disabled and unable to perform the services of
that employment, unless that disability is removed before the close
of that period and the qualified taxpayer fails to offer reemployment
to that employee.
(iii) A termination of employment of a qualified employee, if it
is determined that the termination was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that employee.
(iv) A termination of employment of a qualified employee due to a
substantial reduction in the trade or business operations of the
taxpayer.
(v) A termination of employment of a qualified employee, if that
employee is replaced by other qualified employees so as to create a
net increase in both the number of employees and the hours of
employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of
the following:
(i) A failure to continue the seasonal employment of a qualified
employee who voluntarily fails to return to the seasonal employment
of the qualified taxpayer.
(ii) A failure to continue the seasonal employment of a qualified
employee who, before the close of the period referred to in
subparagraph (B) of paragraph (1), becomes disabled and unable to
perform the services of that seasonal employment, unless that
disability is removed before the close of that period and the
qualified taxpayer fails to offer seasonal employment to that
qualified employee.
(iii) A failure to continue the seasonal employment of a qualified
employee, if it is determined that the failure to continue the
seasonal employment was due to the misconduct (as defined in Sections
1256-30 to 1256-43, inclusive, of Title 22 of the California Code of
Regulations) of that qualified employee.
(iv) A failure to continue seasonal employment of a qualified
employee due to a substantial reduction in the regular seasonal trade
or business operations of the qualified taxpayer.
(v) A failure to continue the seasonal employment of a qualified
employee, if that qualified employee is replaced by other qualified
employees so as to create a net increase in both the number of
seasonal employees and the hours of seasonal employment.
(C) For purposes of paragraph (1), the employment relationship
between the qualified taxpayer and a qualified employee shall not be
treated as terminated by either of the following:
(i) By a transaction to which Section 381(a) of the Internal
Revenue Code applies, if the qualified employee continues to be
employed by the acquiring corporation.
(ii) By reason of a mere change in the form of conducting the
trade or business of the qualified taxpayer, if the qualified
employee continues to be employed in that trade or business and the
qualified taxpayer retains a substantial interest in that trade or
business.
(3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
(g) Rules similar to the rules provided in Sections 46(e) and (h)
of the Internal Revenue Code shall apply to both of the following:
(1) An organization to which Section 593 of the Internal Revenue
Code applies.
(2) A regulated investment company or a real estate investment
trust subject to taxation under this part.
(h) For purposes of this section, "targeted tax area" means an
area designated pursuant to Chapter 12.93 (commencing with Section
7097) of Division 7 of Title 1 of the Government Code.
(i) In the case where the credit otherwise allowed under this
section exceeds the "tax" for the taxable year, that portion of the
credit that exceeds the "tax" may be carried over
and added to the credit, if any, in
succeeding taxable years, until the credit is exhausted. The credit
shall be applied first to the earliest taxable years possible.
(j) (1) The amount of the credit otherwise allowed under this
section and Section 23633, including any credit carryover from prior
years, that may reduce the "tax" for the taxable year shall not
exceed the amount of tax that would be imposed on the qualified
taxpayer's business income attributable to the targeted tax area
determined as if that attributable income represented all of the
income of the qualified taxpayer subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the targeted
tax area. For that purpose, the taxpayer's business income
attributable to sources in this state first shall be determined in
accordance with Chapter 17 (commencing with Section 25101). That
business income shall be further apportioned to the targeted tax area
in accordance with Article 2 (commencing with Section 25120) of
Chapter 17, modified for purposes of this section in accordance with
paragraph (3).
(3) Business income shall be apportioned to the targeted tax area
by multiplying the total California business income of the taxpayer
by a fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is two. For purposes of
this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the targeted tax area during the
taxable year, and the denominator of which is the average value of
all the taxpayer's real and tangible personal property owned or
rented and used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the targeted tax area during
the taxable year for compensation, and the denominator of which is
the total compensation paid by the taxpayer in this state during the
taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "tax" for the taxable
year, as provided in subdivision (h).
(5) In the event that a credit carryover is allowable under
subdivision (h) for any taxable year after the targeted tax area
designation has expired or been revoked, the targeted tax area shall
be deemed to remain in existence for purposes of computing the
limitation specified in this subdivision.
(k) (1) This section shall cease to be operative for taxable years
beginning on or after January 1, 2011.
(2) In the case of any portion of a credit available for carryover
to a taxable year beginning on or after January 1, 2011, under
subdivision (i), as that subdivision read prior to the amendments
made by the act adding this subdivision, neither that subdivision nor
subdivision (f) of Section 23036 shall apply, and those unused
credit amounts shall not be carried over to any taxable year
beginning on or after January 1, 2011.
(l) This section shall be repealed as of December 1, 2011.
SEC. 29. SEC. 116. Section 23645 of
the Revenue and Taxation Code is amended to read:
23645. (a) For each taxable year beginning on or after January 1,
1995, there shall be allowed as a credit against the "tax" (as
defined by Section 23036) for the taxable year an amount equal to the
sales or use tax paid or incurred by the taxpayer in connection with
the purchase of qualified property to the extent that the qualified
property does not exceed a value of twenty million dollars
($20,000,000).
(b) For purposes of this section:
(1) "LAMBRA" means a local agency military base recovery area
designated in accordance with Section 7114 of the Government Code.
(2) "Taxpayer" means a corporation that conducts a trade or
business within a LAMBRA and, for the first two taxable years, has a
net increase in jobs (defined as 2,000 paid hours per employee per
year) of one or more employees in the LAMBRA.
(A) The net increase in the number of jobs shall be determined by
subtracting the total number of full-time employees (defined as 2,000
paid hours per employee per year) the taxpayer employed in this
state in the taxable year prior to commencing business operations in
the LAMBRA from the total number of full-time employees the taxpayer
employed in this state during the second taxable year after
commencing business operations in the LAMBRA. For taxpayers who
commence doing business in this state with their LAMBRA business
operation, the number of employees for the taxable year prior to
commencing business operations in the LAMBRA shall be zero. If the
taxpayer has a net increase in jobs in the state, the credit shall be
allowed only if one or more full-time employees is employed within
the LAMBRA.
(B) The total number of employees employed in the LAMBRA shall
equal the sum of both of the following:
(i) The total number of hours worked in the LAMBRA for the
taxpayer by employees (not to exceed 2,000 hours per employee) who
are paid an hourly wage divided by 2,000.
(ii) The total number of months worked in the LAMBRA for the
taxpayer by employees that are salaried employees divided by 12.
(C) In the case of a taxpayer who first commences doing business
in the LAMBRA during the taxable year, for purposes of clauses (i)
and (ii), respectively, of subparagraph (B) the divisors "2,000" and
"12" shall be multiplied by a fraction, the numerator of which is the
number of months of the taxable year that the taxpayer was doing
business in the LAMBRA and the denominator of which is 12.
(3) "Qualified property" means property that is each of the
following:
(A) Purchased by the taxpayer for exclusive use in a trade or
business conducted within a LAMBRA.
(B) Purchased before the date the LAMBRA designation expires, is
no longer binding, or becomes inoperative.
(C) Any of the following:
(i) High technology equipment, including, but not limited to,
computers and electronic processing equipment.
(ii) Aircraft maintenance equipment, including, but not limited
to, engine stands, hydraulic mules, power carts, test equipment,
handtools, aircraft start carts, and tugs.
(iii) Aircraft components, including, but not limited to, engines,
fuel control units, hydraulic pumps, avionics, starts, wheels, and
tires.
(iv) Section 1245 property, as defined in Section 1245(a)(3) of
the Internal Revenue Code.
(c) The credit provided under subdivision (a) shall only be
allowed for qualified property manufactured in California unless
qualified property of a comparable quality and price is not available
for timely purchase and delivery from a California manufacturer.
(d) In the case where the credit otherwise allowed under this
section exceeds the "tax" for the taxable year, that portion of the
credit which exceeds the "tax" may be carried over and added to the
credit, if any, in succeeding years, until the credit is exhausted.
The credit shall be applied first to the earliest taxable years
possible.
(e) Any taxpayer who elects to be subject to this section shall
not be entitled to increase the basis of the property as otherwise
required by Section 164(a) of the Internal Revenue Code with respect
to sales or use tax paid or incurred in connection with the purchase
of qualified property.
(f) (1) The amount of the credit otherwise allowed under this
section and Section 23646, including any credit carryovers from prior
years, that may reduce the "tax" for the taxable year shall not
exceed the amount of tax that would be imposed on the taxpayer's
business income attributed to a LAMBRA determined as if that
attributable income represented all the income of the taxpayer
subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the LAMBRA.
For that purpose, the taxpayer's business income that is attributable
to sources in this state shall first be determined in accordance
with Chapter 17 (commencing with Section 25101). That business income
shall be further apportioned to the LAMBRA in accordance with
Article 2 (commencing with Section 25120) of Chapter 17, modified for
purposes of this section in accordance with paragraph (3).
(3) Income shall be apportioned to a LAMBRA by multiplying the
total California business income of the taxpayer by a fraction, the
numerator of which is the property factor, plus the payroll factor,
and the denominator of which is two. For purposes of this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the LAMBRA during the taxable
year, and the denominator of which is the average value of all the
taxpayer's real and tangible personal property owned or rented and
used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the LAMBRA during the
taxable year for compensation, and the denominator of which is the
total compensation paid by the taxpayer in this state during the
taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "tax" for the taxable
year, as provided in subdivision (d).
(g) (1) If the qualified property is disposed of or no longer used
by the taxpayer in the LAMBRA, at any time before the close of the
second taxable year after the property is placed in service, the
amount of the credit previously claimed, with respect to that
property, shall be added to the taxpayer's tax liability in the
taxable year of that disposition or nonuse.
(2) At the close of the second taxable year, if the taxpayer has
not increased the number of its employees as determined by paragraph
(2) of subdivision (b), then the amount of the credit previously
claimed shall be added to the taxpayer's tax for the taxpayer's
second taxable year.
(h) If the taxpayer is allowed a credit for qualified property
pursuant to this section, only one credit shall be allowed to the
taxpayer under this part with respect to that qualified property.
(i) The amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 1998.
(j) (1) This section shall cease to be operative for taxable years
beginning on or after January 1, 2011.
(2) In the case of any portion of a credit available for carryover
to a taxable year beginning on or after January 1, 2011, under
subdivision (d), as that subdivision read prior to the amendments
made by the act adding this subdivision, neither that subdivision nor
subdivision (f) of Section 23036 shall apply, and those unused
credit amounts shall not be carried over to any taxable year
beginning on or after January 1, 2011.
(k) This section shall be repealed as of December 1, 2011.
SEC. 30. SEC. 117. Section 23646 of
the Revenue and Taxation Code is amended to read:
23646. (a) For each taxable year beginning on or after January 1,
1995, there shall be allowed as a credit against the "tax" (as
defined in Section 23036) to a qualified taxpayer for hiring a
qualified disadvantaged individual or a qualified displaced employee
during the taxable year for employment in the LAMBRA. The credit
shall be equal to the sum of each of the following:
(1) Fifty percent of the qualified wages in the first year of
employment.
(2) Forty percent of the qualified wages in the second year of
employment.
(3) Thirty percent of the qualified wages in the third year of
employment.
(4) Twenty percent of the qualified wages in the fourth year of
employment.
(5) Ten percent of the qualified wages in the fifth year of
employment.
(b) For purposes of this section:
(1) "Qualified wages" means:
(A) That portion of wages paid or incurred by the employer during
the taxable year to qualified disadvantaged individuals or qualified
displaced employees that does not exceed 150 percent of the minimum
wage.
(B) The total amount of qualified wages which may be taken into
account for purposes of claiming the credit allowed under this
section shall not exceed two million dollars ($2,000,000) per taxable
year.
(C) Wages received during the 60-month period beginning with the
first day the individual commences employment with the taxpayer.
Reemployment in connection with any increase, including a regularly
occurring seasonal increase, in the trade or business operation of
the qualified taxpayer does not constitute commencement of employment
for purposes of this section.
(D) Qualified wages do not include any wages paid or incurred by
the qualified taxpayer on or after the LAMBRA expiration date.
However, wages paid or incurred with respect to qualified
disadvantaged individuals or qualified displaced employees who are
employed by the qualified taxpayer within the LAMBRA within the
60-month period prior to the LAMBRA expiration date shall continue to
qualify for the credit under this section after the LAMBRA
expiration date, in accordance with all provisions of this section
applied as if the LAMBRA designation were still in existence and
binding.
(2) "Minimum wage" means the wage established by the Industrial
Welfare Commission as provided for in Chapter 1 (commencing with
Section 1171) of Part 4 of Division 2 of the Labor Code.
(3) "LAMBRA" means a local agency military base recovery area
designated in accordance with the provisions of Section 7114 of the
Government Code.
(4) "Qualified disadvantaged individual" means an individual who
satisfies all of the following requirements:
(A) (i) At least 90 percent of whose services for the taxpayer
during the taxable year are directly related to the conduct of the
taxpayer's trade or business located in a LAMBRA.
(ii) Who performs at least 50 percent of his or her services for
the taxpayer during the taxable year in the LAMBRA.
(B) Who is hired by the employer after the designation of the area
as a LAMBRA in which the individual's services were primarily
performed.
(C) Who is any of the following immediately preceding the
individual's commencement of employment with the taxpayer:
(i) An individual who has been determined eligible for services
under the federal Job Training Partnership Act (29 U.S.C. Sec. 1501
et seq.), or its successor.
(ii) Any voluntary or mandatory registrant under the Greater
Avenues for Independence Act of 1985 provided for pursuant to Article
3.2 (commencing with Section 11320) of Chapter 2 of Part 3 of
Division 9 of the Welfare and Institutions Code.
(iii) An economically disadvantaged individual age 16 years or
older.
(iv) A dislocated worker who meets any of the following
conditions:
(I) Has been terminated or laid off or who has received a notice
of termination or layoff from employment, is eligible for or has
exhausted entitlement to unemployment insurance benefits, and is
unlikely to return to his or her previous industry or occupation.
(II) Has been terminated or has received a notice of termination
of employment as a result of any permanent closure or any substantial
layoff at a plant, facility, or enterprise, including an individual
who has not received written notification but whose employer has made
a public announcement of the closure or layoff.
(III) Is long-term unemployed and has limited opportunities for
employment or reemployment in the same or a similar occupation in the
area in which the individual resides, including an individual 55
years of age or older who may have substantial barriers to employment
by reason of age.
(IV) Was self-employed (including farmers and ranchers) and is
unemployed as a result of general economic conditions in the
community in which he or she resides or because of natural disasters.
(V) Was a civilian employee of the Department of Defense employed
at a military installation being closed or realigned under the
Defense Base Closure and Realignment Act of 1990.
(VI) Was an active member of the Armed Forces or National Guard as
of September 30, 1990, and was either involuntarily separated or
separated pursuant to a special benefits program.
(VII) Experiences chronic seasonal unemployment and
underemployment in the agriculture industry, aggravated by continual
advancements in technology and mechanization.
(VIII) Has been terminated or laid off or has received a notice of
termination or layoff as a consequence of compliance with the Clean
Air Act.
(v) An individual who is enrolled in or has completed a state
rehabilitation plan or is a service-connected disabled veteran,
veteran of the Vietnam era, or veteran who is recently separated from
military service.
(vi) An ex-offender. An individual shall be treated as convicted
if he or she was placed on probation by a state court without a
finding of guilty.
(vii) A recipient of:
(I) Federal Supplemental Security Income benefits.
(II) Aid to Families with Dependent Children.
(III) Food stamps.
(IV) State and local general assistance.
(viii) Is a member of a federally recognized Indian tribe, band,
or other group of Native American descent.
(5) "Qualified taxpayer" means a corporation that conducts a trade
or business within a LAMBRA and, for the first two taxable years,
has a net increase in jobs (defined as 2,000 paid hours per employee
per year) of one or more employees as determined below in the LAMBRA.
(A) The net increase in the number of jobs shall be determined by
subtracting the total number of full-time employees (defined as 2,000
paid hours per employee per year) the taxpayer employed in this
state in the taxable year prior to commencing business operations in
the LAMBRA from the total number of full-time employees the taxpayer
employed in this state during the second taxable year after
commencing business operations in the LAMBRA. For taxpayers who
commence doing business in this state with their LAMBRA business
operation, the number of employees for the taxable year prior to
commencing business operations in the LAMBRA shall be zero. If the
taxpayer has a net increase in jobs in the state, the credit shall be
allowed only if one or more full-time employees is employed within
the LAMBRA.
(B) The total number of employees employed in the LAMBRA shall
equal the sum of both of the following:
(i) The total number of hours worked in the LAMBRA for the
taxpayer by employees (not to exceed 2,000 hours per employee) who
are paid an hourly wage divided by 2,000.
(ii) The total number of months worked in the LAMBRA for the
taxpayer by employees who are salaried employees divided by 12.
(C) In the case of a qualified taxpayer that first commences doing
business in the LAMBRA during the taxable year, for purposes of
clauses (i) and (ii), respectively, of subparagraph (B) the divisors
"2,000" and "12" shall be multiplied by a fraction, the numerator of
which is the number of months of the taxable year that the taxpayer
was doing business in the LAMBRA and the denominator of which is 12.
(6) "Qualified displaced employee" means an individual who
satisfies all of the following requirements:
(A) Any civilian or military employee of a base or former base
that has been displaced as a result of a federal base closure act.
(B) (i) At least 90 percent of whose services for the taxpayer
during the taxable year are directly related to the conduct of the
taxpayer's trade or business located in a LAMBRA.
(ii) Who performs at least 50 percent of his or her services for
the taxpayer during the taxable year in a LAMBRA.
(C) Who is hired by the employer after the designation of the area
in which services were performed as a LAMBRA.
(7) "Seasonal employment" means employment by a qualified taxpayer
that has regular and predictable substantial reductions in trade or
business operations.
(8) "LAMBRA expiration date" means the date the LAMBRA designation
expires, is no longer binding, or becomes inoperative.
(c) For qualified disadvantaged individuals or qualified displaced
employees hired on or after January 1, 2001, the taxpayer shall do
both of the following:
(1) Obtain from the Employment Development Department, as
permitted by federal law, the administrative entity of the local
county or city for the federal Job Training Partnership Act, or its
successor, the local county GAIN office or social services agency, or
the local government administering the LAMBRA, a certification that
provides that a qualified disadvantaged individual or qualified
displaced employee meets the eligibility requirements specified in
subparagraph (C) of paragraph (4) of subdivision (b) or subparagraph
(A) of paragraph (6) of subdivision (b). The Employment Development
Department may provide preliminary screening and referral to a
certifying agency. The Department of Housing and Community
Development shall develop regulations governing the issuance of
certificates pursuant to Section 7114.2 of the Government Code and
shall develop forms for this purpose.
(2) Retain a copy of the certification and provide it upon request
to the Franchise Tax Board.
(d) (1) For purposes of this section, both of the following apply:
(A) All employees of all corporations that are members of the same
controlled group of corporations shall be treated as employed by a
single employer.
(B) The credit (if any) allowable by this section to each member
shall be determined by reference to its proportionate share of the
qualified wages giving rise to the credit.
(2) For purposes of this subdivision, "controlled group of
corporations" has the meaning given to that term by Section 1563(a)
of the Internal Revenue Code, except that both of the following
apply:
(A) "More than 50 percent" shall be substituted for "at least 80
percent" each place it appears in Section 1563(a)(1) of the Internal
Revenue Code.
(B) The determination shall be made without regard to Section 1563
(a)(4) and Section 1563(e)(3)(C) of the Internal Revenue Code.
(3) If an employer acquires the major portion of a trade or
business of another employer (hereinafter in this paragraph referred
to as the "predecessor") or the major portion of a separate unit of a
trade or business of a predecessor, then, for purposes of applying
this section (other than subdivision (e)) for any calendar year
ending after that acquisition, the employment relationship between an
employee and an employer shall not be treated as terminated if the
employee continues to be employed in that trade or business.
(e) (1) (A) If the employment of any employee, other than seasonal
employment, with respect to whom qualified wages are taken into
account under subdivision (a) is terminated by the taxpayer at any
time during the first 270 days of that employment (whether or not
consecutive) or before the close of the 270th calendar day after the
day in which that employee completes 90 days of employment with the
taxpayer, the tax imposed by this part for the taxable year in which
that employment is terminated shall be increased by an amount equal
to the credit allowed under subdivision (a) for that taxable year and
all prior income years attributable to qualified wages paid or
incurred with respect to that employee.
(B) If the seasonal employment of any qualified disadvantaged
individual, with respect to whom qualified wages are taken into
account under subdivision (a) is not continued by the qualified
taxpayer for a period of 270 days of employment during the 60-month
period beginning with the day the qualified disadvantaged individual
commences seasonal employment with the qualified taxpayer, the tax
imposed by this part, for the taxable year that includes the 60th
month following the month in which the qualified disadvantaged
individual commences seasonal employment with the qualified taxpayer,
shall be increased by an amount equal to the credit allowed under
subdivision (a) for that taxable year and all prior taxable years
attributable to qualified wages paid or incurred with respect to that
qualified disadvantaged individual.
(2) (A) Subparagraph (A) of paragraph (1) shall not apply to any
of the following:
(i) A termination of employment of an employee who voluntarily
leaves the employment of the taxpayer.
(ii) A termination of employment of an individual who, before the
close of the period referred to in paragraph (1), becomes disabled to
perform the services of that employment, unless that disability is
removed before the close of that period and the taxpayer fails to
offer reemployment to that individual.
(iii) A termination of employment of an individual, if it is
determined that the termination was due to the misconduct (as defined
in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that individual.
(iv) A termination of employment of an individual due to a
substantial reduction in the trade or business operations of the
taxpayer.
(v) A termination of employment of an individual, if that
individual is replaced by other qualified employees so as to create a
net increase in both the number of employees and the hours of
employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of
the following:
(i) A failure to continue the seasonal employment of a qualified
disadvantaged individual who voluntarily fails to return to the
seasonal employment of the qualified taxpayer.
(ii) A failure to continue the seasonal employment of a qualified
disadvantaged individual who, before the close of the period referred
to in subparagraph (B) of paragraph (1), becomes disabled and unable
to perform the services of that seasonal employment, unless that
disability is removed before the close of that period and the
qualified taxpayer fails to offer seasonal employment to that
qualified disadvantaged individual.
(iii) A failure to continue the seasonal employment of a qualified
disadvantaged individual, if it is determined that the failure to
continue the seasonal employment was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that individual.
(iv) A failure to continue seasonal employment of a qualified
disadvantaged individual due to a substantial reduction in the
regular seasonal trade or business operations of the qualified
taxpayer.
(v) A failure to continue the seasonal employment of a qualified
disadvantaged individual, if that individual is replaced by other
qualified disadvantaged individuals so as to create a net increase in
both the number of seasonal employees and the hours of seasonal
employment.
(C) For purposes of paragraph (1), the employment relationship
between the taxpayer and an employee shall not be treated as
terminated by either of the following:
(i) A transaction to which Section 381(a) of the Internal Revenue
Code applies, if the employee continues to be employed by the
acquiring corporation.
(ii) A mere change in the form of conducting the trade or business
of the taxpayer, if the employee continues to be employed in that
trade or business and the taxpayer retains a substantial interest in
that trade or business.
(3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
(4) At the close of the second taxable year, if the taxpayer has
not increased the number of its employees as determined by paragraph
(5) of subdivision (b), then the amount of the credit previously
claimed shall be added to the taxpayer's tax for the taxpayer's
second taxable year.
(f) In the case of an organization to which Section 593 of the
Internal Revenue Code applies, and a regulated investment company or
a real estate investment trust subject to taxation under this part,
rules similar to the rules provided in Section 46(e) and Section 46
(h) of the Internal Revenue Code shall apply.
(g) The credit shall be reduced by the credit allowed under
Section 23621. The credit shall also be reduced by the federal credit
allowed under Section 51 of the Internal Revenue Code.
In addition, any deduction otherwise allowed under this part for
the wages or salaries paid or incurred by the taxpayer upon which the
credit is based shall be reduced by the amount of the credit, prior
to any reduction required by subdivision (h) or (i).
(h) In the case where the credit otherwise allowed under this
section exceeds the "tax" for the taxable year, that portion of the
credit that exceeds the "tax" may be carried over and added to the
credit, if any, in succeeding years, until the credit is exhausted.
The credit shall be applied first to the earliest taxable years
possible.
(i) (1) The amount of credit otherwise allowed under this section
and Section 23645, including any prior year carryovers, that may
reduce the "tax" for the taxable year shall not exceed the amount of
tax that would be imposed on the taxpayer's business income
attributed to a LAMBRA determined as if that attributed income
represented all of the income of the taxpayer subject to tax under
this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the LAMBRA.
For that purpose, the taxpayer's business income that is attributable
to sources in this state first shall be determined in accordance
with Chapter 17 (commencing with Section 25101). That business income
shall be further apportioned to the LAMBRA in accordance with
Article 2 (commencing with Section 25120) of Chapter 17, modified for
purposes of this section in accordance with paragraph (3).
(3) Income shall be apportioned to a LAMBRA by multiplying the
total California business income of the taxpayer by a fraction, the
numerator of which is the property factor plus the payroll factor,
and the denominator of which is two. For purposes of this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the LAMBRA during the taxable
year, and the denominator of which is the average value of all the
taxpayer's real and tangible personal property owned or rented and
used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the LAMBRA during the
taxable year for compensation, and the denominator of which is the
total compensation paid by the taxpayer in this state during the
taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "tax" for the taxable
year, as provided in subdivision (h).
(j) If the taxpayer is allowed a credit pursuant to this section
for qualified wages paid or incurred, only one credit shall be
allowed to the taxpayer under this part with respect to any wage
consisting in whole or in part of those qualified wages.
(k) (1) This section shall cease to be operative for taxable years
beginning on or after January 1, 2011.
(2) In the case of any portion of a credit available for carryover
to a taxable year beginning on or after January 1, 2011, under
subdivision (h), as that subdivision read prior to the amendments
made by the act adding this subdivision, neither that subdivision nor
subdivision (f) of Section 23036 shall apply, and those unused
credit amounts shall not be carried over to any taxable year
beginning on or after January 1, 2011.
(l) This section shall be repealed as of December 1, 2011.
SEC. 31. SEC. 118. Section 24356.6
of the Revenue and Taxation Code is amended to read:
24356.6. (a) For each taxable year beginning on or after January
1, 1998, a qualified taxpayer may elect to treat 40 percent of the
cost of any Section 24356.6 property as an expense that is not
chargeable to a capital account. Any cost so treated shall be allowed
as a deduction for the taxable year in which the qualified taxpayer
places the Section 24356.6 property in service.
(b) (1) An election under this section for any taxable year shall
do both of the following:
(A) Specify the items of Section 24356.6 property to which the
election applies and the percentage of the cost of each of those
items that are to be taken into account under subdivision (a).
(B) Be made on the qualified taxpayer's original return of the tax
imposed by this part for the taxable year.
(2) Any election made under this section, and any specification
contained in that election, may not be revoked except with the
consent of the Franchise Tax Board.
(c) (1) For purposes of this section, "Section 24356.6 property"
means any recovery property that is:
(A) Section 1245 property (as defined in Section 1245 (a)(3) of
the Internal Revenue Code).
(B) Purchased and placed in service by the qualified taxpayer for
exclusive use in a trade or business conducted within a targeted tax
area designated pursuant to Chapter 12.93 (commencing with Section
7097) of Division 7 of Title 1 of the Government Code.
(C) Purchased and placed in service before the date the targeted
tax area designation expires, is revoked, is no longer binding, or
becomes inoperative.
(2) For purposes of paragraph (1), "purchase" means any
acquisition of property, but only if all of the following apply:
(A) The property is not acquired from a person whose relationship
to the person acquiring it would result in the disallowance of losses
under Section 267 or 707(b) of the Internal Revenue Code. However,
in applying Sections 267(b) and 267(c) for purposes of this section,
Section 267(c)(4) shall be treated as providing that the family of an
individual shall include only the individual's spouse, ancestors,
and lineal descendants.
(B) The property is not acquired by one member of an affiliated
group from another member of the same affiliated group.
(C) The basis of the property in the hands of the person acquiring
it is not determined in whole or in part by reference to the
adjusted basis of that property in the hands of the person from who
it is acquired.
(3) For purposes of this section, the cost of property does not
include that portion of the basis of that property that is determined
by reference to the basis of other property held at any time by the
person acquiring that property.
(4) This section shall not apply to any property for which the
qualified taxpayer may not make an election under Section 179 of the
Internal Revenue Code because of the application of the provisions of
Section 179(d) of the Internal Revenue Code.
(5) For purposes of subdivision (b), both of the following apply:
(A) All members of an affiliated group shall be treated as one
qualified taxpayer.
(B) The qualified taxpayer shall apportion the dollar limitation
contained in subdivision (f) among the members of the affiliated
group in whatever manner the board shall prescribe.
(6) For purposes of paragraphs (2) and (5), "affiliated group"
means "affiliated group" as defined in Section 1504 of the Internal
Revenue Code, except that, for these purposes, the phrase "more than
50 percent" shall be substituted for the phrase "at least 80 percent"
each place it appears in Section 1504(a) of the Internal Revenue
Code.
(d) (1) For purposes of this section, "qualified taxpayer" means a
corporation that meets both of the following:
(A) Is engaged in conducting a trade or business within a targeted
tax area designated pursuant to Chapter 12.93 (commencing with
Section 7097) of Division 7 of Title 1 of the Government Code.
(B) Is engaged in those lines of business described in Codes 2000
to 2099, inclusive; 2200 to 3999, inclusive; 4200 to 4299, inclusive;
4500 to 4599, inclusive, and 4700 to 5199, inclusive, of the
Standard Industrial Classification (SIC) Manual published by the
United States Office of Management and Budget, 1987 edition.
(2) In the case of any pass-through entity, the determination of
whether a taxpayer is a qualified taxpayer under this section shall
be made at the entity level and any deduction under this section or
Section 17267.6 shall be allowed to the pass-through entity and
passed through to the partners or shareholders in accordance with
applicable provisions of this part or Part 10 (commencing with
Section 17001). For purposes of this subparagraph, the term
"pass-through entity" means any partnership or S corporation.
(e) Any qualified taxpayer who elects to be subject to this
section shall not be entitled to claim additional depreciation
pursuant to Section 24356 with respect to any property that
constitutes Section 24356.6 property. However, the qualified taxpayer
may claim depreciation by any method permitted by Section 24349
commencing with the taxable year following the taxable year in which
Section 24356.6 property is placed in service.
(f) The aggregate cost of all Section 24356.6 property that may be
taken into account under subdivision (a) for any taxable year shall
not exceed the following applicable amount for the taxable year of
the designation of the relevant targeted tax area and taxable years
thereafter:
The applicable
amount is:
Taxable year of designation.... $100,000
1st taxable year thereafter.... 100,000
2nd taxable year thereafter.... 75,000
3rd taxable year thereafter.... 75,000
Each taxable year thereafter... 50,000
(g) Any amounts deducted under subdivision (a) with respect to
Section 24356.6 property that ceases to be used in the qualified
taxpayer's trade or business within a targeted tax area at any time
before the close of the second taxable year after the property is
placed in service shall be included in income in the taxable year in
which the property ceases to be so used.
(h) (1) This section shall cease to be operative for taxable years
beginning on or after January 1, 2011.
(2) This section shall be repealed as of December 1, 2011.
SEC. 32. SEC. 119. Section 24356.7
of the Revenue and Taxation Code is amended to read:
24356.7. (a) A taxpayer may elect to treat 40 percent of the cost
of any Section 24356.7 property as an expense that is not chargeable
to a capital account. Any cost so treated shall be allowed as a
deduction for the taxable year in which the taxpayer places the
Section 24356.7 property in service.
(b) (1) An election under this section for any taxable year shall
do both of the following:
(A) Specify the items of Section 24356.7 property to which the
election applies and the percentage of the cost of each of those
items that are to be taken into account under subdivision (a).
(B) Be made on the taxpayer's original return of the tax imposed
by this part for the taxable year.
(2) Any election made under this section, and any specification
contained in that election, may not be revoked except with the
consent of the Franchise Tax Board.
(c) (1) For purposes of this section, "Section 24356.7 property"
means any recovery property that is:
(A) Section 1245 property (as defined in Section 1245(a)(3) of the
Internal Revenue Code).
(B) Purchased and placed in service by the taxpayer for exclusive
use in a trade or business conducted within an enterprise zone
designated pursuant to Chapter 12.8 (commencing with Section 7070) of
Division 7 of Title 1 of the Government Code.
(C) Purchased and placed in service before the date the enterprise
zone designation expires, is no longer binding, or becomes
inoperative.
(2) For purposes of paragraph (1), "purchase" means any
acquisition of property, but only if all of the following apply:
(A) The property is not acquired from a person whose relationship
to the person acquiring it would result in the disallowance of losses
under Sections 24427 through 24429. However, in applying Sections
24428 and 24429 for purposes of this section, subdivision (d) of
Section 24429 shall be treated as providing that the family of an
individual shall include only his or her spouse, ancestors, and
lineal descendants.
(B) The property is not acquired by one member of an affiliated
group from another member of the same affiliated group.
(C) The basis of the property in the hands of the person acquiring
it is not determined in whole or in part by reference to the
adjusted basis of that property in the hands of the person from whom
it is acquired.
(3) For purposes of this section, the cost of property does not
include that portion of the basis of that property that is determined
by reference to the basis of other property held at any time by the
person acquiring that property.
(4) This section shall not apply to any property for which the
taxpayer could not make a federal election under Section 179 of the
Internal Revenue Code because of the application of the provisions of
Section 179(d) of the Internal Revenue Code.
(5) For purposes of subdivision (b) of this section, both of the
following apply:
(A) All members of an affiliated group shall be treated as one
taxpayer.
(B) The taxpayer shall apportion the dollar limitation contained
in subdivision (f) among the members of the affiliated group in
whatever manner the board shall prescribe.
(6) For purposes of paragraphs (2) and (5), "affiliated group"
means "affiliated group" as defined in Section 1504 of the Internal
Revenue Code, except that, for these purposes, the phrase "more than
50 percent" shall be substituted for the phrase "at least 80 percent"
each place it appears in Section 1504(a) of the Internal Revenue
Code.
(d) For purposes of this section, "taxpayer" means a bank or
corporation that conducts a trade or business within an enterprise
zone designated pursuant to Chapter 12.8 (commencing with Section
7070) of Division 7 of Title 1 of the Government Code.
(e) Any taxpayer who elects to be subject to this section shall
not be entitled to claim additional depreciation pursuant to Section
24356 with respect to any property that constitutes Section 24356.7
property. However, the taxpayer may claim depreciation by any method
permitted by Section 24349 commencing with the taxable year following
the taxable year in which Section 24356.7 property is placed in
service.
(f) The aggregate cost of all Section 24356.7 property that may be
taken into account under subdivision (a) for any taxable years shall
not exceed the following applicable amount for the taxable year of
the designation of the relevant enterprise zone and taxable years
thereafter:
The applicable
amount is:
Taxable year of designation..... $100,000
1st taxable year thereafter..... 100,000
2nd taxable year thereafter..... 75,000
3rd taxable year thereafter..... 75,000
Each taxable year thereafter.... 50,000
(g) Any amounts deducted under subdivision (a) with respect to
Section 24356.7 property that ceases to be used in the taxpayer's
trade or business within an enterprise zone at any time before the
close of the second taxable year after the property is placed in
service shall be included in income in the taxable year in which the
property ceases to be so used.
(h) (1) This section shall cease to be operative for taxable years
beginning on or after January 1, 2011.
(2) This section shall be repealed as of December 1, 2011.
SEC. 33. SEC. 120. Section 24356.8
of the Revenue and Taxation Code is amended to read:
24356.8. (a) For each taxable year beginning on or after January
1, 1995, a taxpayer may elect to treat 40 percent of the cost of any
Section 24356.8 property as an expense that is not chargeable to the
capital account. Any cost so treated shall be allowed as a deduction
for the taxable year in which the taxpayer places the Section 24356.8
property in service.
(b) (1) An election under this section for any taxable year shall
meet both of the following requirements:
(A) Specify the items of Section 24356.8 property to which the
election applies and the portion of the cost of each of those items
that is to be taken into account under subdivision (a).
(B) Be made on the taxpayer's return of the tax imposed by this
part for the taxable year.
(2) Any election made under this section, and any specification
contained in that election, may not be revoked except with the
consent of the Franchise Tax Board.
(c) (1) For purposes of this section, "Section 24356.8 property"
means any recovery property that is:
(A) Section 1245 property (as defined in Section 1245(a)(3) of the
Internal Revenue Code).
(B) Purchased by the taxpayer for exclusive use in a trade or
business conducted within a LAMBRA.
(C) Purchased before the date the LAMBRA designation expires, is
no longer binding, or becomes inoperative.
(2) For purposes of paragraph (1), "purchase" means any
acquisition of property, but only if all of the following apply:
(A) The property is not acquired from a person whose relationship
to the person acquiring it would result in the disallowance of losses
under Section 267 or 707(b) of the Internal Revenue Code (but, in
applying Sections 267(b) and 267(c) of the Internal Revenue Code for
purposes of this section, Section 267(c)(4) of the Internal Revenue
Code shall be treated as providing that the family of an individual
shall include only his or her spouse, ancestors, and lineal
descendants).
(B) The property is not acquired by one component member of an
affiliated group from another component member of the same affiliated
group.
(C) The basis of the property in the hands of the person acquiring
it is not determined in whole or in part by reference to the
adjusted basis of that property in the hands of the person from whom
acquired.
(3) For purposes of this section, the cost of property does not
include so much of the basis of that property as is determined by
reference to the basis of other property held at any time by the
person acquiring that property.
(4) This section shall not apply to any property for which the
taxpayer may not make an election for the taxable year under Section
179 of the Internal Revenue Code because of the provisions of Section
179(d) of the Internal Revenue Code.
(5) For purposes of subdivision (b), both of the following apply:
(A) All members of an affiliated group shall be treated as one
taxpayer.
(B) The taxpayer shall apportion the dollar limitation contained
in subdivision (f) among the component members of the affiliated
group in whatever manner the board shall by regulations prescribe.
(6) For purposes of paragraphs (2) and (5), "affiliated group" has
the meaning assigned to it by Section 1504 of the Internal Revenue
Code, except that, for these purposes, the phrase "more than 50
percent" shall be substituted for the phrase "at least 80 percent"
each place it appears in Section 1504(a) of the Internal Revenue
Code.
(7) This section shall not apply to any property described in
Section 168(f) of the Internal Revenue Code.
(8) In the case of an S corporation, the dollar limitation
contained in subdivision (f) shall be applied at the entity level and
at the shareholder level.
(d) For purposes of this section:
(1) "LAMBRA" means a local agency military base recovery area
designated in accordance with the provisions of Section 7114 of the
Government Code.
(2) "Taxpayer" means a corporation that conducts a trade or
business within a LAMBRA and, for the first two taxable years, has a
net increase in jobs (defined as 2,000 paid hours per employee per
year) of one or more employees in the LAMBRA.
(A) The net increase in the number of jobs shall be determined by
subtracting the total number of full-time employees (defined as 2,000
paid hours per employee per year) the taxpayer employed in this
state in the taxable year prior to commencing business operations in
the LAMBRA from the total number of full-time employees the taxpayer
employed in this state during the second taxable year after
commencing business operations in the LAMBRA. For taxpayers who
commence doing business in this state with their LAMBRA business
operation, the number of employees for the taxable year prior to
commencing business operations in the LAMBRA shall be zero. If the
taxpayer has a net increase in jobs in the state, the credit shall be
allowed only if one or more full-time employees is employed within
the LAMBRA.
(B) The total number of employees employed in the LAMBRA shall
equal the sum of both of the following:
(i) The total number of hours worked in the LAMBRA for the
taxpayer by employees (not to exceed 2,000 hours per employee) who
are paid an hourly wage divided by 2,000.
(ii) The total number of months worked in the LAMBRA for the
taxpayer by employees who are salaried employees divided by 12.
(C) In the case of a taxpayer that first commences doing business
in the LAMBRA during the taxable year, for purposes of clauses (i)
and (ii), respectively, of subparagraph (B), the divisors "2,000" and
"12" shall be multiplied by a fraction, the numerator of which is
the number of months of the taxable year that the taxpayer was doing
business in the LAMBRA and the denominator of which is 12.
(e) Any taxpayer who elects to be subject to this section shall
not be entitled to claim additional depreciation pursuant to Section
24356 with respect to any property that constitutes Section 24356.8
property.
(f) The aggregate cost of all Section 24356.8 property that may be
taken into account under subdivision (a) for any taxable year shall
not exceed the following applicable amounts for the taxable year of
the designation of the relevant LAMBRA and taxable years thereafter:
The
applicable
amount is:
Taxable year of designation..... $100,000
1st taxable year thereafter..... 100,000
2nd taxable year thereafter..... 75,000
3rd taxable year thereafter..... 75,000
Each taxable year thereafter.... 50,000
(g) This section shall apply only to property that is used
exclusively in a trade or business conducted within a LAMBRA.
(h) (1) Any amounts deducted under subdivision (a) with respect to
property that ceases to be used in the trade or business within a
LAMBRA at any time before the close of the second taxable year after
the property was placed in service shall be included in income for
that year.
(2) At the close of the second taxable year, if the taxpayer has
not increased the number of its employees as determined by paragraph
(2) of subdivision (d), then the amount of the deduction previously
claimed shall be added to the taxpayer's net income for the taxpayer'
s second taxable year.
(i) Any taxpayer who elects to be subject to this section shall
not be entitled to claim for the same property the deduction under
Section 179 of the Internal Revenue Code, relating to an election to
expense certain depreciable business assets.
(j) (1) This section shall cease to be operative for taxable years
beginning on or after January 1, 2011.
(2) This section shall be repealed as of December 1, 2011.
SEC. 34. SEC. 121. Section 24384.5
of the Revenue and Taxation Code is amended to read:
24384.5. (a) There shall be allowed as a deduction the amount of
net interest received by the taxpayer in payment of indebtedness of a
person or entity engaged in a trade or business located in an
enterprise zone.
(b) No deduction shall be allowed under this section unless at the
time the indebtedness is incurred each of the following requirements
are met:
(1) The trade or business is located solely within an enterprise
zone.
(2) The indebtedness is incurred solely in connection with
activity within the enterprise zone.
(3) The taxpayer has no equity or other ownership interest in the
debtor.
(c) "Enterprise zone" means an area designated as an enterprise
zone pursuant to Chapter 12.8 (commencing with Section 7070) of
Division 7 of Title 1 of the Government Code.
(d) (1) This section shall cease to be operative for taxable years
beginning on or after January 1, 2011.
(2) This section shall be repealed as of December 1, 2011.
SEC. 35. SEC. 122. Section 24416.1
of the Revenue and Taxation Code is amended to read:
24416.1. (a) A qualified taxpayer, as defined in Section 24416.7,
may elect to take the deduction provided by Section 172 of the
Internal Revenue Code, relating to the net operating loss deduction,
as modified by Section 24416.20, in computing net income under
Section 24341, with the following exceptions to Section 24416.20:
(1) Subdivision (a) of Section 24416.20, relating to years in
which allowable losses are sustained, shall not be applicable.
(2) Subdivision (b) of Section 24416.20, relating to the
50-percent reduction of losses, shall not be applicable.
(3) The provisions of subparagraphs (B) and (C) of Section 172
(b) (1) of the Internal Revenue Code shall not apply. To the extent
applicable to California law, net operating losses attributable to
entities with losses described by Section 172(b)(1)(J) shall be
applied in accordance with Section 172(b)(1)(A) and (B) of the
Internal Revenue Code.
(b) Corporations whose income is subject to the provisions of
Section 25101 or 25101.15 shall make the computations required by
Section 25108.
(c) The election to compute the net operating loss under this
section shall be made in a statement attached to the original return,
timely filed for the year in which the net operating loss is
incurred and shall be irrevocable. In addition to the exceptions
specified in subdivision (a), Section 24416.7 shall be applicable.
(d) The changes made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 2011.
SEC. 36. SEC. 123. Section 24416.2
of the Revenue and Taxation Code is amended to read:
24416.2. (a) The term "qualified taxpayer" as used in Section
24416.1 includes a corporation engaged in the conduct of a trade or
business within an enterprise zone designated pursuant to Chapter
12.8 (commencing with Section 7070) of Division 7 of Title 1 of the
Government Code. For purposes of this subdivision, all of the
following shall apply:
(1) A net operating loss shall not be a net operating loss
carryback for any taxable year and a net operating loss for any
taxable year beginning on or after the date that the area in which
the taxpayer conducts a trade or business is designated as an
enterprise zone shall be a net operating loss carryover to each of
the 15 taxable years following the taxable year of loss.
(2) For purposes of this subdivision:
(A) "Net operating loss" means the loss determined under Section
172 of the Internal Revenue Code, as modified by Section 24416.1,
attributable to the taxpayer's business activities within the
enterprise zone (as defined in Chapter 12.8 (commencing with Section
7070) of Division 7 of Title 1 of the Government Code) prior to the
enterprise zone expiration date. That attributable loss shall be
determined in accordance with Chapter 17 (commencing with Section
25101), modified for purposes of this subdivision as follows:
(i) Loss shall be apportioned to the enterprise zone by
multiplying total loss from the business by a fraction, the numerator
of which is the property factor plus the payroll factor, and the
denominator of which is two.
(ii) "The enterprise zone" shall be substituted for "this state."
(B) A net operating loss carryover shall be a deduction only with
respect to the taxpayer's business income attributable to the
enterprise zone as defined in Chapter 12.8 (commencing with Section
7070) of Division 7 of Title 1 of the Government Code.
(C) Attributable income is that portion of the taxpayer's
California source business income that is apportioned to the
enterprise zone. For that purpose, the taxpayer's business income
attributable to sources in this state first shall be determined in
accordance with Chapter 17 (commencing with Section 25101). That
business income shall be further apportioned to the enterprise zone
in accordance with Article 2 (commencing with Section 25120) of
Chapter 17, modified for purposes of this subdivision as follows:
(i) Business income shall be apportioned to the enterprise zone by
multiplying the total California business income of the taxpayer by
a fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is two. For purposes of
this clause:
(I) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the enterprise zone during the
taxable year, and the denominator of which is the average value of
all the taxpayer's real and tangible personal property owned or
rented and used in this state during the taxable year.
(II) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the enterprise zone during
the taxable year for compensation, and the denominator of which is
the total compensation paid by the taxpayer in this state during the
taxable year.
(ii) If a loss carryover is allowable pursuant to this section for
any taxable year after the enterprise zone designation has expired,
the enterprise zone shall be deemed to remain in existence for
purposes of computing the limitation set forth in subparagraph (B)
and allowing a net operating loss deduction.
(D) "Enterprise zone expiration date" means the date the
enterprise zone designation expires, is no longer binding, or becomes
inoperative.
(3) The changes made to this subdivision by the act adding this
paragraph shall apply to taxable years beginning on or after January
1, 1998.
(b) A taxpayer who qualifies as a "qualified taxpayer" under one
or more sections shall, for the taxable year of the net operating
loss and any taxable year to which that net operating loss may be
carried, designate on the original return filed for each year the
section which applies to that taxpayer with respect to that net
operating loss. If the taxpayer is eligible to qualify under more
than one section, the designation is to be made after taking into
account subdivision (c).
(c) If a taxpayer is eligible to qualify under this section and
either Section 24416.4, 24416.5, or 24416.6 as a "qualified taxpayer,"
with respect to a net operating loss in a taxable year, the taxpayer
shall designate which section is to apply to the taxpayer.
(d) Notwithstanding Section 24416, the amount of the loss
determined under this section, or Section 24416.4, 24416.5, or
24416.6 shall be the only net operating loss allowed to be carried
over from that taxable year and the designation under subdivision (b)
shall be included in the election under Section 24416.1.
(e) (1) This section shall cease to be operative for taxable years
beginning on or after January 1, 2011.
(2) This section shall be repealed as of December 1, 2011.
SEC. 37. SEC. 124. Section 24416.4
of the Revenue and Taxation Code is amended to read:
24416.4. (a) The term "qualified taxpayer" as used in Section
24416.1 includes a corporation engaged in the conduct of a trade or
business within the Los Angeles Revitalization Zone designated
pursuant to the former Section 7102 of the Government Code. For
purposes of this subdivision, all of the following shall apply:
(1) A net operating loss shall not be a net operating loss
carryback for any taxable year and, except as provided in
subparagraph (B), a net operating loss for any taxable year beginning
on or after the date the area in which the taxpayer conducts a trade
or business is designated the Los Angeles Revitalization Zone shall
be a net operating loss carryover to each following taxable year that
ends before the Los Angeles Revitalization Zone expiration date or
to each of the 15 taxable years following the taxable year of loss,
if longer.
(2) In the case of a financial institution to which Section 585,
586, or 593 of the Internal Revenue Code applies, a net operating
loss for any taxable year beginning on or after January 1, 1984,
shall be a net operating loss carryover to each of the five years
following the taxable year of the loss. Subdivision (b) of Section
24416.1 shall not apply.
(3) "Net operating loss" means the loss determined under Section
172 of the Internal Revenue Code, as modified by Section 24416.1,
attributable to the taxpayer's business activities within the Los
Angeles Revitalization Zone (as defined in the former Section 7102 of
the Government Code) prior to the Los Angeles Revitalization Zone
expiration date. The attributable loss shall be determined in
accordance with Chapter 17 (commencing with Section 25101) of Part
11, modified as follows:
(A) The loss shall be apportioned to the Los Angeles
Revitalization Zone by multiplying the loss from the business by a
fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is 2.
(B) "The Los Angeles Revitalization Zone" shall be substituted for
"this state."
(4) A net operating loss carryover shall be a deduction only with
respect to the taxpayer's business income attributable to the Los
Angeles Revitalization Zone (as defined in the former Section 7102 of
the Government Code) determined in accordance with subdivision (c).
(5) If a loss carryover is allowable pursuant to this section for
any taxable year after the Los Angeles Revitalization Zone
designation has expired, the Los Angeles Revitalization Zone shall be
deemed to remain in existence for purposes of computing the
limitation set forth in paragraph (2) and allowing a net operating
loss deduction.
(6) Attributable income shall be that portion of the taxpayer's
California source business income which is apportioned to the Los
Angeles Revitalization Zone. For that purpose, the taxpayer's
business income attributable to sources in this state first shall be
determined in accordance with Chapter 17 (commencing with Section
25101). That business income shall be further apportioned to the Los
Angeles Revitalization Zone in accordance with Article 2 (commencing
with Section 25120) of Chapter 17, modified as follows:
(A) Business income shall be apportioned to the Los Angeles
Revitalization Zone by multiplying total California business income
of the taxpayer by a fraction, the numerator of which is the property
factor plus the payroll factor, and the denominator of which is 2.
(B) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the Los Angeles Revitalization
Zone during the taxable year and the denominator of which is the
average value of all the taxpayer's real and tangible personal
property owned or rented and used in this state during the taxable
year.
(C) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the Los Angeles
Revitalization Zone during the taxable year for compensation, and the
denominator of which is the total compensation paid by the taxpayer
in this state during the taxable year.
(7) "Los Angeles Revitalization Zone expiration date" means the
date the Los Angeles Revitalization Zone designation expires, is
repealed, or becomes inoperative pursuant to the former Section 7102,
7103, or 7104 of the Government Code.
(b) This section shall be inoperative on the first day of the
taxable year beginning on or after the determination date, and each
taxable year thereafter, with respect to the taxpayer's business
activities within a geographic area that is excluded from the map
pursuant to the former Section 7102 of the Government Code, or an
excluded area determined pursuant to the former Section 7104 of the
Government Code. The determination date is the earlier of the first
effective date of a determination under the former Section 7102 of
the Government Code occurring after December 1, 1994, or the first
effective date of an exclusion of an area from the amended Los
Angeles Revitalization Zone under the former Section 7104 of the
Government Code. However, if the taxpayer has any unused loss amount
as of the date this section becomes inoperative, that unused loss
amount may continue to be carried forward as provided in this
section.
(c) A taxpayer who qualifies as a "qualified taxpayer" under one
or more sections shall, for the taxable year of the net operating
loss and any taxable year to which that net operating loss may be
carried, designate on the original return filed for each year the
section that applies to that taxpayer with respect to that net
operating loss. If the taxpayer is eligible to qualify under more
than one section, the designation is to be made after taking into
account subdivision (d).
(d) If a taxpayer is eligible to qualify under this section and
either Section 24416.2, 24416.5, or 24416.6 as a "qualified taxpayer,"
with respect to a net operating loss in a taxable year, the taxpayer
shall designate which section is to apply to the taxpayer.
(e) Notwithstanding Section 24416, the amount of the loss
determined under this section or Section 24416.2, 24416.5, or 24416.6
shall be the only net operating loss allowed to be carried over from
that taxable year and the designation under subdivision (c) shall be
included in the election under Section 24416.1.
(f) This section shall cease to be operative on December 1, 1998.
(g) (1) The changes made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 2011.
(2) This section shall be repealed as of December 1, 2011.
SEC. 38. SEC. 125. Section 24416.5
of the Revenue and Taxation Code is amended to read:
24416.5. (a) For each taxable year beginning on or after January
1, 1995, the term "qualified taxpayer" as used in Section 24416.1
includes a taxpayer engaged in the conduct of a trade or business
within a LAMBRA. For purposes of this subdivision, all of the
following shall apply:
(1) A net operating loss shall not be a net operating loss
carryback for any taxable year and, except as provided in
subparagraph (B), a net operating loss for any taxable year beginning
on or after the date the area in which the taxpayer conducts a trade
or business is designated a LAMBRA shall be a net operating loss
carryover to each following taxable year that ends before the LAMBRA
expiration date or to each of the 15 taxable years following the
taxable year of loss, if longer.
(2) In the case of a financial institution to which Section 585,
586, or 593 of the Internal Revenue Code applies, a net operating
loss for any taxable year beginning on or after January 1, 1984,
shall be a net operating loss carryover to each of the five years
following the taxable year of the loss. Subdivision (b) of Section
24416.1 shall not apply.
(3) "LAMBRA" means a local agency military base recovery area
designated in accordance with Section 7114 of the Government Code.
(4) "Taxpayer" means a bank or corporation that conducts a trade
or business within a LAMBRA and, for the first two taxable years, has
a net increase in jobs (defined as 2,000 paid hours per employee per
year) of one or more employees in the LAMBRA and this state. For
purposes of this paragraph, all of the following shall apply:
(A) The net increase in the number of jobs shall be determined by
subtracting the total number of full-time employees (defined as 2,000
paid hours per employee per year) the taxpayer employed in this
state in the taxable year prior to commencing business operations in
the LAMBRA from the total number of full-time employees the taxpayer
employed in this state during the second taxable year after
commencing business operations in the LAMBRA. For taxpayers who
commence doing business in this state with their LAMBRA business
operation, the number of employees for the taxable year prior to
commencing business operations in the LAMBRA shall be zero. The
deduction shall be allowed only if the taxpayer has a net increase in
jobs in the state, and if one or more full-time employees are
employed within the LAMBRA.
(B) The total number of employees employed in the LAMBRA shall
equal the sum of both of the following:
(i) The total number of hours worked in the LAMBRA for the
taxpayer by employees (not to exceed 2,000 hours per employee) who
are paid an hourly wage divided by 2,000.
(ii) The total number of months worked in the LAMBRA for the
taxpayer by employees who are salaried employees divided by 12.
(C) In the case of a taxpayer that first commences doing business
in the LAMBRA during the taxable year, for purposes of clauses (i)
and (ii), respectively, of subparagraph (B) the divisors "2,000" and
"12" shall be multiplied by a fraction, the numerator of which is the
number of months of the taxable year that the taxpayer was doing
business in the LAMBRA and the denominator of which is 12.
(5) "Net operating loss" means the loss determined under Section
172 of the Internal Revenue Code, as modified by Section 24416.1,
attributable to the taxpayer's business activities within a LAMBRA
prior to the LAMBRA expiration date. The attributable loss shall be
determined in accordance with Chapter 17 (commencing with Section
25101), modified for purposes of this section as follows:
(A) Loss shall be apportioned to a LAMBRA by multiplying total
loss from the business by a fraction, the numerator of which is the
property factor plus the payroll factor, and the denominator of which
is 2.
(B) "The LAMBRA" shall be substituted for "this state."
(6) A net operating loss carryover shall be a deduction only with
respect to the taxpayer's business income attributable to a LAMBRA.
(7) Attributable income is that portion of the taxpayer's
California source business income that is apportioned to the LAMBRA.
For that purpose, the taxpayer's business income attributable to
sources in this state first shall be determined in accordance with
Chapter 17 (commencing with Section 25101). That business income
shall be further apportioned to the LAMBRA in accordance with Article
2 (commencing with Section 25120) of Chapter 17, modified as
follows:
(A) Business income shall be apportioned to a LAMBRA by
multiplying total California business income of the taxpayer by a
fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is two. For purposes of
this clause:
(i) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the LAMBRA during the taxable
year, and the denominator of which is the average value of all the
taxpayer's real and tangible personal property owned or rented and
used in this state during the taxable year.
(ii) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the LAMBRA during the
taxable year for compensation, and the denominator of which is the
total compensation paid by the taxpayer in this state during the
taxable year.
(B) If a loss carryover is allowable pursuant to this section for
any taxable year after the LAMBRA designation has expired, the LAMBRA
shall be deemed to remain in existence for purposes of computing the
limitation specified in subparagraph (D) and allowing a net
operating loss deduction.
(8) "LAMBRA expiration date" means the date the LAMBRA designation
expires, is no longer binding, or becomes inoperative pursuant to
Section 7110 of the Government Code.
(b) A taxpayer who qualifies as a "qualified taxpayer" under one
or more sections shall, for the taxable year of the net operating
loss and any taxable year to which that net operating loss may be
carried, designate on the original return filed for each year the
section that applies to that taxpayer with respect to that net
operating loss. If the taxpayer is eligible to qualify under more
than one section, the designation is to be made after taking into
account subdivision (c).
(c) If a taxpayer is eligible to qualify under this section and
either Section 24416.2, 24416.4, or 24416.6 as a "qualified taxpayer,"
with respect to a net operating loss in a taxable year, the taxpayer
shall designate which section is to apply to the taxpayer.
(d) Notwithstanding Section 24416, the amount of the loss
determined under this section or Section 24416.2, 24416.4, or 24416.6
shall be the only net operating loss allowed to be carried over from
that taxable year and the designation under subdivision (b) shall be
included in the election under Section 24416.1.
(e) This section shall apply to taxable years beginning on and
after January 1, 1998.
(f) (1) This section shall cease to be operative for taxable years
beginning on or after January 1, 2011.
(2) This section shall be repealed as of December 1, 2011.
SEC. 39. SEC. 126. Section 24416.6
of the Revenue and Taxation Code is amended to read:
24416.6. (a) For each taxable year beginning on or after January
1, 1998, the term "qualified taxpayer" as used in Section 24416.1
includes a corporation that meets both of the following:
(1) Is engaged in the conduct of a trade or business within a
targeted tax area designated pursuant to Chapter 12.93 (commencing
with Section 7097) of Division 7 of Title 1 of the Government Code.
(2) Is engaged in those lines of business described in Codes 2000
to 2099, inclusive; 2200 to 3999, inclusive; 4200 to 4299, inclusive;
4500 to 4599, inclusive; and 4700 to 5199, inclusive, of the
Standard Industrial Classification (SIC) Manual published by the
United States Office of Management and Budget, 1987 edition. In the
case of any pass-through entity, the determination of whether a
taxpayer is a qualified taxpayer shall be made at the entity level.
(b) For purposes of subdivision (a), all of the following shall
apply:
(1) A net operating loss shall not be a net operating loss
carryback for any taxable year and a net operating loss for any
taxable year beginning on or after the date that the area in which
the qualified taxpayer conducts a trade or business is designated as
a targeted tax area shall be a net operating loss carryover to each
of the 15 taxable years following the taxable year of loss.
(2) "Net operating loss" means the loss determined under Section
172 of the Internal Revenue Code, as modified by Section 24416.1,
attributable to the qualified taxpayer's business activities within
the targeted tax area (as defined in Chapter 12.93 (commencing with
Section 7097) of Division 7 of Title 1 of the Government Code) prior
to the targeted tax area expiration date. That attributable loss
shall be determined in accordance with Chapter 17 (commencing with
Section 25101), modified for purposes of this section as follows:
(A) Loss shall be apportioned to the targeted tax area by
multiplying total loss from the business by a fraction, the numerator
of which is the property factor plus the payroll factor, and the
denominator of which is 2.
(B) "The targeted tax area" shall be substituted for "this state."
(3) A net operating loss carryover shall be a deduction only with
respect to the qualified taxpayer's business income attributable to
the targeted tax area as defined in Chapter 12.93 (commencing with
Section 7097) of Division 7 of Title 1 of the Government Code.
(4) Attributable income is that portion of the taxpayer's
California source business income that is apportioned to the targeted
tax area. For that purpose, the taxpayer's business income
attributable to sources in this state first shall be determined in
accordance with Chapter 17 (commencing with Section 25101). That
business income shall be further apportioned to the targeted tax area
in accordance with Article 2 (commencing with Section 25120) of
Chapter 17, modified for purposes of this subdivision as follows:
(A) Business income shall be apportioned to the targeted tax area
by multiplying the total California business income of the taxpayer
by a fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is two. For purposes of
this clause:
(i) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the targeted tax area during the
taxable year, and the denominator of which is the average value of
all the taxpayer's real and tangible personal property owned or
rented and used in this state during the taxable year.
(ii) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the targeted tax area during
the taxable year for compensation, and the denominator of which is
the total compensation paid by the taxpayer in this state during the
taxable year.
(B) If a loss carryover is allowable pursuant to this subdivision
for any taxable year after the targeted tax area expiration date, the
targeted tax area designation shall be deemed to remain in existence
for purposes of computing the limitation specified in subparagraph
(B) and allowing a net operating loss deduction.
(5) "Targeted tax area expiration date" means the date the
targeted tax area designation expires, is revoked, is no longer
binding, or becomes inoperative.
(c) A taxpayer who qualifies as a "qualified taxpayer" under one
or more sections shall, for the taxable year of the net operating
loss and any taxable year to which that net operating loss may be
carried, designate on the original return filed for each year the
section that applies to that taxpayer with respect to that net
operating loss. If the taxpayer is eligible to qualify under more
than one section, the designation is to be made after taking into
account subdivision (e).
(d) If a taxpayer is eligible to qualify under this section and
either Section 24416.2, 24416.4, or 24416.5 as a "qualified taxpayer,"
with respect to a net operating loss in a taxable year, the taxpayer
shall designate which section is to apply to the taxpayer.
(e) Notwithstanding Section 24416, the amount of the loss
determined under this section or Section 24416.2, 24416.4, or 24416.5
shall be the only net operating loss allowed to be carried over from
that taxable year and the designation under subdivision (c) shall be
included in the election under Section 24416.1.
(f) This section shall apply to taxable years beginning on or
after January 1, 1998.
(g) (1) This section shall cease to be operative for taxable years
beginning on or after January 1, 2011.
(2) This section shall be repealed as of December 1, 2011.
SEC. 40. SEC. 127. Section 24416.20
of the Revenue and Taxation Code is amended to read:
24416.20. Except as provided in Sections 24416.1 and 24416.7, a
net operating loss deduction shall be allowed in computing net income
under Section 24341 and shall be determined in accordance with
Section 172 of the Internal Revenue Code, except as otherwise
provided.
(a) (1) Net operating losses attributable to taxable years
beginning before January 1, 1987, shall not be allowed.
(2) A net operating loss shall not be carried forward to any
taxable year beginning before January 1, 1987.
(b) (1) Except as provided in paragraphs (2) and (3), the
provisions of Section 172(b)(2) of the Internal Revenue Code,
relating to amount of carrybacks and carryovers, shall be modified
so that the applicable
percentage of the entire amount of the net operating loss for any
taxable year shall be eligible for carryover to any subsequent
taxable year. For purposes of this subdivision, the applicable
percentage shall be:
(A) Fifty percent for any taxable year beginning before January 1,
2000.
(B) Fifty-five percent for any taxable year beginning on or after
January 1, 2000, and before January 1, 2002.
(C) Sixty percent for any taxable year beginning on or after
January 1, 2002, and before January 1, 2004.
(D) One hundred percent for any taxable year beginning on or after
January 1, 2004.
(2) In the case of a taxpayer who has a net operating loss in any
taxable year beginning on or after January 1, 1994, and who operates
a new business during that taxable year, each of the following shall
apply to each loss incurred during the first three taxable years of
operating the new business:
(A) If the net operating loss is equal to or less than the net
loss from the new business, 100 percent of the net operating loss
shall be carried forward as provided in subdivision (e).
(B) If the net operating loss is greater than the net loss from
the new business, the net operating loss shall be carried over as
follows:
(i) With respect to an amount equal to the net loss from the new
business, 100 percent of that amount shall be carried forward as
provided in subdivision (e).
(ii) With respect to the portion of the net operating loss that
exceeds the net loss from the new business, the applicable percentage
of that amount shall be carried forward as provided in subdivision
(d).
(C) For purposes of Section 172(b)(2) of the Internal Revenue
Code, the amount described in clause (ii) of subparagraph (B) shall
be absorbed before the amount described in clause (i) of subparagraph
(B).
(3) In the case of a taxpayer who has a net operating loss in any
taxable year beginning on or after January 1, 1994, and who operates
an eligible small business during that taxable year, each of the
following shall apply:
(A) If the net operating loss is equal to or less than the net
loss from the eligible small business, 100 percent of the net
operating loss shall be carried forward to the taxable years
specified in paragraph (1) of subdivision (e).
(B) If the net operating loss is greater than the net loss from
the eligible small business, the net operating loss shall be carried
over as follows:
(i) With respect to an amount equal to the net loss from the
eligible small business, 100 percent of that amount shall be carried
forward as provided in subdivision (e).
(ii) With respect to that portion of the net operating loss that
exceeds the net loss from the eligible small business, the applicable
percentage of that amount shall be carried forward as provided in
subdivision (e).
(C) For purposes of Section 172(b)(2) of the Internal Revenue
Code, the amount described in clause (ii) of subparagraph (B) shall
be absorbed before the amount described in clause (i) of subparagraph
(B).
(4) In the case of a taxpayer who has a net operating loss in a
taxable year beginning on or after January 1, 1994, and who operates
a business that qualifies as both a new business and an eligible
small business under this section, that business shall be treated as
a new business for the first three taxable years of the new business.
(5) In the case of a taxpayer who has a net operating loss in a
taxable year beginning on or after January 1, 1994, and who operates
more than one business, and more than one of those businesses
qualifies as either a new business or an eligible small business
under this section, paragraph (2) shall be applied first, except that
if there is any remaining portion of the net operating loss after
application of clause (i) of subparagraph (B) of paragraph (2),
paragraph (3) shall be applied to the remaining portion of the net
operating loss as though that remaining portion of the net operating
loss constituted the entire net operating loss.
(6) For purposes of this section, "net loss" means the amount of
net loss after application of Sections 465 and 469 of the Internal
Revenue Code.
(c) For any taxable year in which the taxpayer has in effect a
water's-edge election under Section 25110, the deduction of a net
operating loss carryover shall be denied to the extent that the net
operating loss carryover was determined by taking into account the
income and factors of an affiliated corporation in a combined report
whose income and apportionment factors would not have been taken into
account if a water's-edge election under Section 25110 had been in
effect for the taxable year in which the loss was incurred.
(d) Section 172(b)(1) of the Internal Revenue Code, relating to
years to which the loss may be carried, is modified as follows:
(1) Net operating loss carrybacks shall not be allowed for any net
operating losses attributable to taxable years beginning before
January 1, 2013.
(2) A net operating loss attributable to taxable years beginning
on or after January 1, 2013, shall be a net operating loss carryback
to each of the two taxable years preceding the taxable year of the
loss in lieu of the number of years provided therein.
(A) For a net operating loss attributable to a taxable year
beginning on or after January 1, 2013, and before January 1, 2014,
the amount of carryback to any taxable year shall not exceed 50
percent of the net operating loss.
(B) For a net operating loss attributable to a taxable year
beginning on or after January 1, 2014, and before January 1, 2015,
the amount of carryback to any taxable year shall not exceed 75
percent of the net operating loss.
(C) For a net operating loss attributable to a taxable year
beginning on or after January 1, 2015, the amount of carryback to any
taxable year shall not exceed 100 percent of the net operating loss.
(3) Notwithstanding paragraph (2), Section 172(b)(1)(B) of the
Internal Revenue Code, relating to special rules for REITs, and
Section 172(b)(1)(E) of the Internal Revenue Code, relating to excess
interest loss, and Section 172(h) of the Internal Revenue Code,
relating to corporate equity reduction interest losses, shall apply
as provided.
(4) A net operating loss carryback shall not be carried back to
any taxable year beginning before January 1, 2011.
(e) (1) (A) For a net operating loss for any taxable year
beginning on or after January 1, 1987, and before January 1, 2000,
Section 172(b)(1)(A)(ii) of the Internal Revenue Code is modified to
substitute "five taxable years" in lieu of "20 years" except as
otherwise provided in paragraphs (2), (3), and (4).
(B) For a net operating loss for any income year beginning on or
after January 1, 2000, and before January 1, 2008, Section 172(b)(1)
(A)(ii) of the Internal Revenue Code is modified to substitute "10
taxable years" in lieu of "20 taxable years."
(2) For any income year beginning before January 1, 2000, in the
case of a "new business," the "five taxable years" referred to in
paragraph (1) shall be modified to read as follows:
(A) "Eight taxable years" for a net operating loss attributable to
the first taxable year of that new business.
(B) "Seven taxable years" for a net operating loss attributable to
the second taxable year of that new business.
(C) "Six taxable years" for a net operating loss attributable to
the third taxable year of that new business.
(3) For any carryover of a net operating loss for which a
deduction is denied by Section 24416.3, the carryover period
specified in this subdivision shall be extended as follows:
(A) By one year for a net operating loss attributable to taxable
years beginning in 1991.
(B) By two years for a net operating loss attributable to taxable
years beginning prior to January 1, 1991.
(4) The net operating loss attributable to taxable years beginning
on or after January 1, 1987, and before January 1, 1994, shall be a
net operating loss carryover to each of the 10 taxable years
following the year of the loss if it is incurred by a corporation
that was either of the following:
(A) Under the jurisdiction of the court in a Title 11 or similar
case at any time prior to January 1, 1994. The loss carryover
provided in the preceding sentence shall not apply to any loss
incurred in an income year after the taxable year during which the
corporation is no longer under the jurisdiction of the court in a
Title 11 or similar case.
(B) In receipt of assets acquired in a transaction that qualifies
as a tax-free reorganization under Section 368(a)(1)(G) of the
Internal Revenue Code.
(f) For purposes of this section:
(1) "Eligible small business" means any trade or business that has
gross receipts, less returns and allowances, of less than one
million dollars ($1,000,000) during the income year.
(2) Except as provided in subdivision (g), "new business" means
any trade or business activity that is first commenced in this state
on or after January 1, 1994.
(3) "Title 11 or similar case" shall have the same meaning as in
Section 368(a)(3) of the Internal Revenue Code.
(4) In the case of any trade or business activity conducted by a
partnership or an "S" corporation, paragraphs (1) and (2) shall be
applied to the partnership or "S" corporation.
(g) For purposes of this section, in determining whether a trade
or business activity qualifies as a new business under paragraph (2)
of subdivision (e), the following rules shall apply:
(1) In any case where a taxpayer purchases or otherwise acquires
all or any portion of the assets of an existing trade or business
(irrespective of the form of entity) that is doing business in this
state (within the meaning of Section 23101), the trade or business
thereafter conducted by the taxpayer (or any related person) shall
not be treated as a new business if the aggregate fair market value
of the acquired assets (including real, personal, tangible, and
intangible property) used by the taxpayer (or any related person) in
the conduct of its trade or business exceeds 20 percent of the
aggregate fair market value of the total assets of the trade or
business being conducted by the taxpayer (or any related person). For
purposes of this paragraph only, the following rules shall apply:
(A) The determination of the relative fair market values of the
acquired assets and the total assets shall be made as of the last day
of the first taxable year in which the taxpayer (or any related
person) first uses any of the acquired trade or business assets in
its business activity.
(B) Any acquired assets that constituted property described in
Section 1221(1) of the Internal Revenue Code in the hands of the
transferor shall not be treated as assets acquired from an existing
trade or business, unless those assets also constitute property
described in Section 1221(1) of the Internal Revenue Code in the
hands of the acquiring taxpayer (or related person).
(2) In any case where a taxpayer (or any related person) is
engaged in one or more trade or business activities in this state, or
has been engaged in one or more trade or business activities in this
state within the preceding 36 months ("prior trade or business
activity"), and thereafter commences an additional trade or business
activity in this state, the additional trade or business activity
shall only be treated as a new business if the additional trade or
business activity is classified under a different division of the
Standard Industrial Classification (SIC) Manual published by the
United States Office of Management and Budget, 1987 edition, than are
any of the taxpayer's (or any related person's) current or prior
trade or business activities.
(3) In any case where a taxpayer, including all related persons,
is engaged in trade or business activities wholly outside of this
state and the taxpayer first commences doing business in this state
(within the meaning of Section 23101) after December 31, 1993 (other
than by purchase or other acquisition described in paragraph (1)),
the trade or business activity shall be treated as a new business
under paragraph (2) of subdivision (e).
(4) In any case where the legal form under which a trade or
business activity is being conducted is changed, the change in form
shall be disregarded and the determination of whether the trade or
business activity is a new business shall be made by treating the
taxpayer as having purchased or otherwise acquired all or any portion
of the assets of an existing trade or business under the rules of
paragraph (1) of this subdivision.
(5) "Related person" shall mean any person that is related to the
taxpayer under either Section 267 or 318 of the Internal Revenue
Code.
(6) "Acquire" shall include any transfer, whether or not for
consideration.
(7) (A) For taxable years beginning on or after January 1, 1997,
the term "new business" shall include any taxpayer that is engaged in
biopharmaceutical activities or other biotechnology activities that
are described in Codes 2833 to 2836, inclusive, of the Standard
Industrial Classification (SIC) Manual published by the United States
Office of Management and Budget, 1987 edition, and as further
amended, and that has not received regulatory approval for any
product from the United States Food and Drug Administration.
(B) For purposes of this paragraph:
(i) "Biopharmaceutical activities" means those activities that use
organisms or materials derived from organisms, and their cellular,
subcellular, or molecular components, in order to provide
pharmaceutical products for human or animal therapeutics and
diagnostics. Biopharmaceutical activities make use of living
organisms to make commercial products, as opposed to pharmaceutical
activities that make use of chemical compounds to produce commercial
products.
(ii) "Other biotechnology activities" means activities consisting
of the application of recombinant DNA technology to produce
commercial products, as well as activities regarding pharmaceutical
delivery systems designed to provide a measure of control over the
rate, duration, and site of pharmaceutical delivery.
(h) For purposes of corporations whose net income is determined
under Chapter 17 (commencing with Section 25101), Section 25108 shall
apply to each of the following:
(1) The amount of net operating loss incurred in any taxable year
that may be carried forward to another taxable year.
(2) The amount of any loss carry forward that may be deducted in
any taxable year.
(i) The provisions of Section 172(b)(1)(D) of the Internal Revenue
Code, relating to bad debt losses of commercial banks, shall not be
applicable.
(j) The Franchise Tax Board may prescribe appropriate regulations
to carry out the purposes of this section, including any regulations
necessary to prevent the avoidance of the purposes of this section
through splitups, shell corporations, partnerships, tiered ownership
structures, or otherwise.
(k) The Franchise Tax Board may reclassify any net operating loss
carryover determined under either paragraph (2) or (3) of subdivision
(b) as a net operating loss carryover under paragraph (1) of
subdivision (b) upon a showing that the reclassification is necessary
to prevent evasion of the purposes of this section.
(l) Except as otherwise provided, the amendments made by Chapter
107 of the Statutes of 2000 shall apply to net operating losses for
taxable years beginning on or after January 1, 2000.
(m) The changes made to this section by the act adding this
subdivision shall apply for taxable years beginning on or after
January 1, 2011.
SEC. 41. SEC. 128. Section 24416.22
of the Revenue and Taxation Code is repealed.
SEC. 42. SEC. 129. Section 24416.22
is added to the Revenue and Taxation Code, to read:
24416.22. (a) For any carryover of a net operating loss for which
an election under former Section 24416.2, 24416.4, 24416.5, or
24416.6 was made, the net operating loss carryover amount available
for carryover under former Section 24416.2, 24416.4, 24416.5, or
24416.6 to the first taxable year beginning on or after January 1,
2011, shall be recalculated by applying the net operating loss rules
applicable for the taxable year to which the net operating loss was
incurred, as provided in Section 24416.20 or former Section 24416.
This recalculated amount, if in excess of zero, shall be added to the
amount of any net operating loss attributable to the same taxable
year that is available for carryover to the first taxable year
beginning on or after January 1, 2011, under Section 24416.20 and
shall be treated as if no election under former Section 24416.2,
24416.4, 24416.5, or 24416.6 had been made with respect to that
recalculated amount.
(b) To the extent that the application of subdivision (a) reduces
the net operating loss carryover amount available for taxable years
beginning on or after January 1, 2011, to an amount equal to or less
than zero, no amount of net operating loss attributable to this
recalculated amount shall be available for carryover to a taxable
year beginning on or after January 1, 2011. The application of this
section shall not be interpreted to reduce the amount of a net
operating loss deduction under former Section 24416.2, 24416.4,
24416.5, or 24416.6 for any taxable year beginning before January 1,
2011.
SEC. 43. SEC. 130. Section 25128 of
the Revenue and Taxation Code is amended to read:
25128. (a) (1) Notwithstanding Section 38006, for taxable years
beginning before January 1, 2011, all business income shall be
apportioned to this state by multiplying the business income by a
fraction, the numerator of which is the property factor plus the
payroll factor plus twice the sales factor, and the denominator of
which is four, except as provided in subdivision (b) or (c).
(2) Notwithstanding Section 38006, for taxable years beginning on
or after January 1, 2011, all business income of an apportioning
trade or business, other than an apportioning trade or business
described in subdivision (b), shall be apportioned to this state by
multiplying the business income by the sales factor.
(b) If an apportioning trade or business derives more than 50
percent of its "gross business receipts" from conducting one or more
qualified business activities, all business income of the
apportioning trade or business shall be apportioned to this state by
multiplying business income by a fraction, the numerator of which is
the property factor plus the payroll factor plus the sales factor,
and the denominator of which is three.
(c) For purposes of this section, a "qualified business activity"
means the following:
(1) An agricultural business activity.
(2) An extractive business activity.
(3) A savings and loan activity.
(4) A banking or financial business activity.
(d) For purposes of this section:
(1) "Gross business receipts" means gross receipts described in
subdivision (e) or (f) of Section 25120 (other than gross receipts
from sales or other transactions within an apportioning trade or
business between members of a group of corporations whose income and
apportionment factors are required to be included in a combined
report under Section 25101, limited, if applicable, by Section
25110), whether or not the receipts are excluded from the sales
factor by operation of Section 25137.
(2) "Agricultural business activity" means activities relating to
any stock, dairy, poultry, fruit, furbearing animal, or truck farm,
plantation, ranch, nursery, or range. "Agricultural business activity"
also includes activities relating to cultivating the soil or raising
or harvesting any agricultural or horticultural commodity,
including, but not limited to, the raising, shearing, feeding, caring
for, training, or management of animals on a farm as well as the
handling, drying, packing, grading, or storing on a farm any
agricultural or horticultural commodity in its unmanufactured state,
but only if the owner, tenant, or operator of the farm regularly
produces more than one-half of the commodity so treated.
(3) "Extractive business activity" means activities relating to
the production, refining, or processing of oil, natural gas, or
mineral ore.
(4) "Savings and loan activity" means any activities performed by
savings and loan associations or savings banks which have been
chartered by federal or state law.
(5) "Banking or financial business activity" means activities
attributable to dealings in money or moneyed capital in substantial
competition with the business of national banks.
(6) "Apportioning trade or business" means a distinct trade or
business whose business income is required to be apportioned under
Sections 25101 and 25120, limited, if applicable, by Section 25110,
using the same denominator for each of the applicable payroll,
property, and sales factors.
(7) Paragraph (4) of subdivision (c) shall apply only if the
Franchise Tax Board adopts the Proposed Multistate Tax Commission
Formula for the Uniform Apportionment of Net Income from Financial
Institutions, or its substantial equivalent, and shall become
operative upon the same operative date as the adopted formula.
(8) In any case where the income and apportionment factors of two
or more savings associations or corporations are required to be
included in a combined report under Section 25101, limited, if
applicable, by Section 25110, both of the following shall apply:
(A) The application of the more than 50 percent test of
subdivision (b) shall be made with respect to the "gross business
receipts" of the entire apportioning trade or business of the group.
(B) The entire business income of the group shall be apportioned
in accordance with either subdivision (a) or (b), as applicable.
SEC. 44. SEC. 131. Section 25128.5
of the Revenue and Taxation Code is repealed.
SEC. 45. SEC. 132. Section 25136 of
the Revenue and Taxation Code is amended to read:
25136. (a) For taxable years beginning before January 1, 2011,
sales, other than sales of tangible personal property, are in this
state if:
(1) The income-producing activity is performed in this state; or
(2) The income-producing activity is performed both in and outside
this state and a greater proportion of the income-producing activity
is performed in this state than in any other state, based on costs
of performance.
(b) This section shall not apply to taxable years beginning on or
after January 1, 2011, and as of December 31, 2011, is repealed.
SEC. 46. SEC. 133. Section 25136 is
added to the Revenue and Taxation Code, to read:
25136. (a) Notwithstanding Section 38006, for taxable years
beginning on or after January 1, 2011, sales, other than sales of
tangible personal property, are in this state if:
(1) Sales from services are in this state to the extent the
purchaser of the service received the benefit of the services in this
state.
(2) Sales from intangible property are in this state to the extent
the property is used in this state. In the case of marketable
securities, sales are in this state if the customer is in this state.
(3) Sales from the sale, lease, rental, or licensing of real
property are in this state if the real property is located in this
state.
(4) Sales from the rental, lease, or licensing of tangible
personal property are in this state if the property is located in
this state.
(b) The Franchise Tax Board may prescribe regulations as necessary
or appropriate to carry out the purposes of this section.
SEC. 134. Section 1661 of the Vehicle
Code is amended to read:
1661. (a) (1) Except for vehicles
registered pursuant to Article 5 (commencing with Section 9700) of
Chapter 6 of Division 3, the department shall notify the registered
owner of each vehicle of the date that the registration renewal fees
of for the vehicle are due, at least 60
days prior to that due date. The department shall indicate the
fact that the required notice was mailed shall be
indicated by a notation in the department's records.
(2) Notwithstanding paragraph (1), commencing on June 8, 2011, the
department shall notify the registered owner of each vehicle, except
a vehicle registered pursuant to Article 5 (commencing with Section
9700) of Chapter 6 of Division 3, that the registration renewal fees
for the vehicle are due, at least 30 days prior to that due date.
This paragraph shall become inoperative on January 1, 2012.
(b) The department shall include in any final notice of delinquent
registration provided to the registered owner of a vehicle whose
registration has not been properly renewed as required under this
code, information relating to the potential removal and impoundment
of that vehicle under subdivision (o) of Section 22651.
SEC. 135. Section 4601 of the Vehicle
Code is amended to read:
4601. (a) Except as otherwise provided in this code,
every a vehicle registration and registration
card expires at midnight on the expiration date designated by the
director pursuant to Section 1651.5, and shall be renewed prior to
the expiration of the registration year. The department may, upon
payment of the proper fees, renew the registration of vehicles.
(b) Notwithstanding any other provision of law, renewal of
registration for any vehicle that is either currently registered or
for which a certification pursuant to Section 4604 has been filed may
be obtained not more than 75 days prior to the expiration of the
current registration or certification.
(c) Notwithstanding subdivision (b) or any other law, commencing
on June 8, 2011, the renewal of registration for a vehicle that
expires on or before June 30, 2011, may be obtained not more than 75
days prior to the expiration of the current registration or
certification and the renewal of registration for a vehicle that
expires on or after July 1, 2011, or for which a certification,
pursuant to Section 4604 has been filed, may be obtained not more
than 15 days prior to the expiration of the current registration or
certification. This subdivision shall become inoperative on July 1,
2011.
SEC. 136. Section 5902.5 of the Vehicle
Code is amended to read:
5902.5. Whenever any (a)
If an application for a registration transaction is filed
with the department during the 30 days immediately preceding the
date of expiration of registration of the vehicle, the application
shall be accompanied by the full renewal fees for the ensuing
registration year in addition
to any other fees that are due and payable.
(b) Notwithstanding subdivision (a), commencing on the date that
this subdivision becomes operative, if an application for a
registration transaction is filed with the department during the 10
days immediately preceding the date of expiration of registration of
the vehicle, the application shall be accompanied by the full renewal
fees for the ensuing registration year in addition to any other fees
that are due and payable. This subdivision shall become inoperative
on July 1, 2011.
SEC. 137. Section 9552 of the Vehicle
Code is amended to read:
9552. (a) Whenever any If a vehicle
is operated upon any a highway of this
state without the fees first having been paid as required by this
code, and those fees have not been paid within 20 days of its first
operation, those fees are delinquent, except as provided in
subdivision (b).
(b) (1) Fees are delinquent
whenever if an application for renewal of
registration, or any an application for
renewal of special license plates, is made after midnight of the
expiration date of the registration or special plates, or 60 days
after the date the registered owner is notified by the department
pursuant to Section 1661, whichever is later.
(2) Notwithstanding paragraph (1), commencing on June 8, 2011,
fees are delinquent if an application for renewal of registration, or
an application for renewal of special license plates, is made after
midnight of the expiration date of the registration or special
plates, or 30 days after the date the registered owner is notified by
the department pursuant to Section 1661, whichever is later. This
paragraph shall become inoperative on January 1, 2012.
(c) Whenever any If a person has
received as transferee a properly endorsed certificate of ownership
and the transfer fee has not been paid as required by this code
within 10 days, the fee is delinquent.
(d) Whenever any If a person becomes
an automobile dismantler, dealer, manufacturer, manufacturer branch,
distributor, distributor branch, or transporter without first having
paid the license and special plate fees as required by this code,
the fees are delinquent.
SEC. 138. Section 14301.11 of the
Welfare and Institutions Code is amended to read:
14301.11. (a) The department shall use funds attributable to the
tax on Medi-Cal managed care plans imposed by Section 12201 of the
Revenue and Taxation Code for the purpose specified in paragraph (1)
of subdivision (b) of Section 12201 of the Revenue and Taxation Code.
(b) This section shall become inoperative on July 1, 2011
January 1, 2014 , and, as of January 1,
2012 July 1, 2014 , is repealed, unless a later
enacted statute, that becomes operative on or before
January 1, 2012 July 1, 2014 , deletes or extends
the dates on which it becomes inoperative and is repealed.
SEC. 139. No reimbursement is required by this act
pursuant to Section 6 of Article XIII B of the California
Constitution because the only costs that may be incurred by a local
agency or school district will be incurred because this act creates a
new crime or infraction, eliminates a crime or infraction, or
changes the penalty for a crime or infraction, within the meaning of
Section 17556 of the Government Code, or changes the definition of a
crime within the meaning of Section 6 of Article XIII B of the
California Constitution.
SEC. 47. SEC. 140. This act
addresses the fiscal emergency declared and reaffirmed by the
Governor by proclamation on January 20, 2011, pursuant to subdivision
(f) of Section 10 of Article IV of the California Constitution.
SEC. 48. This act provides for a tax levy
within the meaning of Article IV of the Constitution and shall go
into immediate effect.
SEC. 141. The Director of Finance shall
immediately notify the Joint Legislative Budget Committee, the
Executive Officer of the Franchise Tax Board, the Executive Director
of the State Board of Equalization, and the Director of Motor
Vehicles when and if a ballot measure is approved, at a statewide
election held during the 2011 calendar year, that extends the vehicle
license fee rate increase that would otherwise become inoperative on
July 1, 2011, imposed pursuant to Part 5 (commencing with Section
10701) of Division 2 of the Revenue and Taxation Code and applicable
to vehicle registrations on or before June 30, 2011, to a date
subsequent to that date.
SEC. 142. This act is a bill providing for
appropriations related to the Budget Bill within the meaning of
subdivision (e) of Section 12 of Article IV of the California
Constitution, has been identified as related to the budget in the
Budget Bill, and shall take effect immediately.
SEC. 143. This act is an urgency statute necessary
for the immediate preservation of the public peace, health, or
safety within the meaning of Article IV of the Constitution and shall
go into immediate effect. The facts constituting the necessity are:
In order to make changes necessary for implementation of the
Budget Act of 2011, it is necessary that this act take effect
immediately.
