Bill Text: CA SB90 | 2013-2014 | Regular Session | Chaptered
Bill Title: Economic development: taxation: credits: exemption.
Spectrum: Bipartisan Bill
Status: (Passed) 2013-07-11 - Chaptered by Secretary of State. Chapter 70, Statutes of 2013. [SB90 Detail]
Download: California-2013-SB90-Chaptered.html
BILL NUMBER: SB 90 CHAPTERED
BILL TEXT
CHAPTER 70
FILED WITH SECRETARY OF STATE JULY 11, 2013
APPROVED BY GOVERNOR JULY 11, 2013
PASSED THE SENATE JULY 3, 2013
PASSED THE ASSEMBLY JULY 3, 2013
AMENDED IN ASSEMBLY JULY 2, 2013
AMENDED IN ASSEMBLY JULY 1, 2013
AMENDED IN ASSEMBLY JUNE 26, 2013
INTRODUCED BY Senators Galgiani and Cannella
JANUARY 10, 2013
An act to amend Sections 6377.1, 17053.73, 17059.2, 23626, and
23689 of the Revenue and Taxation Code, as added by Assembly Bill 93
of the 2013-14 Regular Session, relating to economic development, and
declaring the urgency thereof, to take effect immediately.
LEGISLATIVE COUNSEL'S DIGEST
SB 90, Galgiani. Economic development: taxation: credits:
exemption.
Existing sales and use tax laws impose taxes on retailers measured
by the gross receipts from the sale of tangible personal property
sold at retail in this state, or on the storage, use, or other
consumption in this state of tangible personal property purchased
from a retailer for storage, use, or other consumption in this state,
and provides various exemptions from those taxes.
Existing law exempts from those taxes, on and after July 1, 2014,
and before January 1, 2019, the gross receipts from the sale of, and
the storage, use, or other consumption of, qualified tangible
personal property purchased by a qualified person for use primarily
in manufacturing, processing, refining, fabricating, or recycling of
property, as specified; qualified tangible personal property
purchased for use by a contractor for specified purposes, as
provided; and qualified tangible personal property purchased for use
by a qualified person to be used primarily in research and
development, as provided, and until January 1, 2021, the gross
receipts from the sale of, and the storage, use, or other consumption
of, qualified tangible personal property purchased by a qualified
person for those purposes for use within a designated census tract or
a former enterprise zone. Existing law specifies that this exemption
does not apply to local sales and use taxes, transactions and use
taxes, and specified state taxes from which revenues are deposited
into the Local Public Safety Fund, the Education Protection Account,
the Local Revenue Fund, the Fiscal Recovery Fund, or the Local
Revenue Fund 2011.
This bill would extend the application of the exemption from
January 1, 2019, to July 1, 2022, and eliminate the requirement that,
after January 1, 2019, the qualified tangible personal property
purchased by a qualified person for those purposes for use within a
designated census tract or a former enterprise zone.
The Personal Income Tax Law and the Corporation Tax Law allow
various credits against the taxes imposed by those laws, including
hiring credits within the specified economic development areas, and a
hiring credit for taxpayers, other than those allowed a credit with
respect to operating in the specified economic development areas.
This bill would, under both laws for taxable years beginning on or
after January 1, 2014, and before January 1, 2021, revise the
definitions of "qualified full-time employee," "qualified taxpayer,"
and "small business" for the credit against those taxes for portions
of the wages paid by a taxpayer, engaged in a trade or business
within a designated census tract, as defined, or an economic
development area, to certain full-time employees who provide services
for that taxpayer in connection with that trade or business. This
bill would additionally expand the definition of "qualified wages"
for qualified full-time employees within a designated pilot area, as
provided.
Existing law also allows a credit against tax under both laws for
each taxable year beginning on or after January 1, 2014, and before
January 1, 2025, in an amount as provided in a written agreement
between the Governor's Office of Business and Economic Development
and the taxpayer, agreed upon by the California Competes Tax Credit
Committee, and based on specified factors, including the number of
jobs the taxpayer will create or retain in the state and the amount
of investment in the state by the taxpayer. Existing law limits the
aggregate amount of credits allocated to taxpayers to a specified sum
per fiscal year.
This bill would make specifications regarding the fiscal year
allocation under these provisions of credit amounts and the taxable
years for which the allocated amounts may be claimed as a credit
allowed to taxpayers.
This bill would also restate the carryover period of certain tax
credits that were amended by AB 93 of the 2013-14 Regular Session and
the operation of existing law with respect to those carryover
credits.
This bill would make the operation of its modifications and
revisions contingent on the enactment of AB 93 of the 2013-14 Regular
Session, as specified.
This bill would declare that it is to take effect immediately as
an urgency statute.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 6377.1 of the Revenue and Taxation Code, as
added by Section 6 of Assembly Bill 93 of the 2013-14 Regular
Session, is amended to read:
6377.1. (a) Except as provided in subdivision (e), on or after
July 1, 2014, and before July 1, 2022, there are exempted from the
taxes imposed by this part the gross receipts from the sale of, and
the storage, use, or other consumption in this state of, any of the
following:
(1) Qualified tangible personal property purchased for use by a
qualified person to be used primarily in any stage of the
manufacturing, processing, refining, fabricating, or recycling of
tangible personal property, beginning at the point any raw materials
are received by the qualified person and introduced into the process
and ending at the point at which the manufacturing, processing,
refining, fabricating, or recycling has altered tangible personal
property to its completed form, including packaging, if required.
(2) Qualified tangible personal property purchased for use by a
qualified person to be used primarily in research and development.
(3) Qualified tangible personal property purchased for use by a
qualified person to be used primarily to maintain, repair, measure,
or test any qualified tangible personal property described in
paragraph (1) or (2).
(4) Qualified tangible personal property purchased for use by a
contractor purchasing that property for use in the performance of a
construction contract for the qualified person, that will use that
property as an integral part of the manufacturing, processing,
refining, fabricating, or recycling process, or as a research or
storage facility for use in connection with those processes.
(b) For purposes of this section:
(1) "Fabricating" means to make, build, create, produce, or
assemble components or tangible personal property to work in a new or
different manner.
(2) "Manufacturing" means the activity of converting or
conditioning tangible personal property by changing the form,
composition, quality, or character of the property for ultimate sale
at retail or use in the manufacturing of a product to be ultimately
sold at retail. Manufacturing includes any improvements to tangible
personal property that result in a greater service life or greater
functionality than that of the original property.
(3) "Primarily" means 50 percent or more of the time.
(4) "Process" means the period beginning at the point at which any
raw materials are received by the qualified person and introduced
into the manufacturing, processing, refining, fabricating, or
recycling activity of the qualified person and ending at the point at
which the manufacturing, processing, refining, fabricating, or
recycling activity of the qualified person has altered tangible
personal property to its completed form, including packaging, if
required. Raw materials shall be considered to have been introduced
into the process when the raw materials are stored on the same
premises where the qualified person's manufacturing, processing,
refining, fabricating, or recycling activity is conducted. Raw
materials that are stored on premises other than where the qualified
person's manufacturing, processing, refining, fabricating, or
recycling activity is conducted shall not be considered to have been
introduced into the manufacturing, processing, refining, fabricating,
or recycling process.
(5) "Processing" means the physical application of the materials
and labor necessary to modify or change the characteristics of
tangible personal property.
(6) (A) "Qualified person" means a person that is primarily
engaged in those lines of business described in Codes 3111 to 3399,
inclusive, 541711, or 541712 of the North American Industry
Classification System (NAICS) published by the United States Office
of Management and Budget (OMB), 2012 edition.
(B) Notwithstanding subparagraph (A), "qualified person" shall not
include either of the following:
(i) An apportioning trade or business that is required to
apportion its business income pursuant to subdivision (b) of Section
25128.
(ii) A trade or business conducted wholly within this state that
would be required to apportion its business income pursuant to
subdivision (b) of Section 25128 if it were subject to apportionment
pursuant to Section 25101.
(7) (A) "Qualified tangible personal property" includes, but is
not limited to, all of the following:
(i) Machinery and equipment, including component parts and
contrivances such as belts, shafts, moving parts, and operating
structures.
(ii) Equipment or devices used or required to operate, control,
regulate, or maintain the machinery, including, but not limited to,
computers, data-processing equipment, and computer software, together
with all repair and replacement parts with a useful life of one or
more years therefor, whether purchased separately or in conjunction
with a complete machine and regardless of whether the machine or
component parts are assembled by the qualified person or another
party.
(iii) Tangible personal property used in pollution control that
meets standards established by this state or any local or regional
governmental agency within this state.
(iv) Special purpose buildings and foundations used as an integral
part of the manufacturing, processing, refining, fabricating, or
recycling process, or that constitute a research or storage facility
used during those processes. Buildings used solely for warehousing
purposes after completion of those processes are not included.
(B) "Qualified tangible personal property" shall not include any
of the following:
(i) Consumables with a useful life of less than one year.
(ii) Furniture, inventory, and equipment used in the extraction
process, or equipment used to store finished products that have
completed the manufacturing, processing, refining, fabricating, or
recycling process.
(iii) Tangible personal property used primarily in administration,
general management, or marketing.
(8) "Refining" means the process of converting a natural resource
to an intermediate or finished product.
(9) "Research and development" means those activities that are
described in Section 174 of the Internal Revenue Code or in any
regulations thereunder.
(10) "Useful life" for tangible personal property that is treated
as having a useful life of one or more years for state income or
franchise tax purposes shall be deemed to have a useful life of one
or more years for purposes of this section. "Useful life" for
tangible personal property that is treated as having a useful life of
less than one year for state income or franchise tax purposes shall
be deemed to have a useful life of less than one year for purposes of
this section.
(c) An exemption shall not be allowed under this section unless
the purchaser furnishes the retailer with an exemption certificate,
completed in accordance with any instructions or regulations as the
board may prescribe, and the retailer retains the exemption
certificate in its records and furnishes it to the board upon
request.
(d) (1) Notwithstanding the Bradley-Burns Uniform Local Sales and
Use Tax Law (Part 1.5 (commencing with Section 7200)) and the
Transactions and Use Tax Law (Part 1.6 (commencing with Section
7251)), the exemption established by this section shall not apply
with respect to any tax levied by a county, city, or district
pursuant to, or in accordance with, either of those laws.
(2) Notwithstanding subdivision (a), the exemption established by
this section shall not apply with respect to any tax levied pursuant
to Section 6051.2, 6051.5, 6201.2, or 6201.5, pursuant to Section 35
of Article XIII of the California Constitution, or any tax levied
pursuant to Section 6051 or 6201 that is deposited in the State
Treasury to the credit of the Local Revenue Fund 2011 pursuant to
Section 6051.15 or 6201.15.
(e) (1) The exemption provided by this section shall not apply to
either of the following:
(A) Any tangible personal property purchased during any calendar
year that exceeds two hundred million dollars ($200,000,000) of
purchases of qualified tangible personal property for which an
exemption is claimed by a qualified person under this section. For
purposes of this subparagraph, in the case of a qualified person that
is required to be included in a combined report under Section 25101
or authorized to be included in a combined report under Section
25101.15, the aggregate of all purchases of qualified personal
property for which an exemption is claimed pursuant to this section
by all persons that are required or authorized to be included in a
combined report shall not exceed two hundred million dollars
($200,000,000) in any calendar year.
(B) The sale or storage, use, or other consumption of property
that, within one year from the date of purchase, is removed from
California, converted from an exempt use under subdivision (a) to
some other use not qualifying for exemption, or used in a manner not
qualifying for exemption.
(2) If a purchaser certifies in writing to the seller that the
tangible personal property purchased without payment of the tax will
be used in a manner entitling the seller to regard the gross receipts
from the sale as exempt from the sales tax, and the purchase exceeds
the two-hundred-million-dollar ($200,000,000) limitation described
in subparagraph (A) of paragraph (1), or within one year from the
date of purchase, the purchaser removes that property from
California, converts that property for use in a manner not qualifying
for the exemption, or uses that property in a manner not qualifying
for the exemption, the purchaser shall be liable for payment of sales
tax, with applicable interest, as if the purchaser were a retailer
making a retail sale of the tangible personal property at the time
the tangible personal property is so purchased, removed, converted,
or used, and the cost of the tangible personal property to the
purchaser shall be deemed the gross receipts from that retail sale.
(f) This section shall apply to leases of qualified tangible
personal property classified as "continuing sales" and "continuing
purchases" in accordance with Sections 6006.1 and 6010.1. The
exemption established by this section shall apply to the rentals
payable pursuant to the lease, provided the lessee is a qualified
person and the tangible personal property is used in an activity
described in subdivision (a).
(g) (1) Upon the effective date of this section, the Department of
Finance shall estimate the total dollar amount of exemptions that
will be taken for each calendar year, or any portion thereof, for
which this section provides an exemption.
(2) No later than each March 1 next following a calendar year for
which this section provides an exemption, the board shall provide to
the Joint Legislative Budget Committee a report of the total dollar
amount of exemptions taken under this section for the immediately
preceding calendar year. The report shall compare the total dollar
amount of exemptions taken under this section for that calendar year
with the department's estimate for that same calendar year. If that
total dollar amount taken is less than the estimate for that calendar
year, the report shall identify options for increasing exemptions
taken so as to meet estimated amounts.
(h) This section is repealed on January 1, 2023.
SEC. 2. Section 17053.73 of the Revenue and Taxation Code, as
added by Section 13 of Assembly Bill 93 of the 2013-14 Regular
Session, is amended to read:
17053.73. (a) (1) For each taxable year beginning on or after
January 1, 2014, and before January 1, 2021, there shall be allowed
to a qualified taxpayer that hires a qualified full-time employee and
pays or incurs qualified wages attributable to work performed by the
qualified full-time employee in a designated census tract or
economic development area, and that receives a tentative credit
reservation for that qualified full-time employee, a credit against
the "net tax," as defined in Section 17039, in an amount calculated
under this section.
(2) The amount of the credit allowable under this section for a
taxable year shall be equal to the product of the tentative credit
amount for the taxable year and the applicable percentage for that
taxable year.
(3) (A) If a qualified taxpayer relocates to a designated census
tract or economic development area, the qualified taxpayer shall be
allowed a credit with respect to qualified wages for each qualified
full-time employee employed within the new location only if the
qualified taxpayer provides each employee at the previous location or
locations a written offer of employment at the new location in the
designated census tract or economic development area with comparable
compensation.
(B) For purposes of this paragraph, "relocates to a designated
census tract or economic development area" means an increase in the
number of qualified full-time employees, employed by a qualified
taxpayer, within a designated census tract or tracts or economic
development areas within a 12-month period in which there is a
decrease in the number of full-time employees, employed by the
qualified taxpayer in this state, but outside of designated census
tracts or economic development areas.
(C) This paragraph shall not apply to a small business.
(4) The credit allowed by this section may be claimed only on a
timely filed original return of the qualified taxpayer and only with
respect to a qualified full-time employee for whom the qualified
taxpayer has received a tentative credit reservation.
(b) For purposes of this section:
(1) The "tentative credit amount" for a taxable year shall be
equal to the product of the applicable credit percentage for each
qualified full-time employee and the qualified wages paid by the
qualified taxpayer during the taxable year to that qualified
full-time employee.
(2) The "applicable percentage" for a taxable year shall be equal
to a fraction, the numerator of which is the net increase in the
total number of full-time employees employed in this state during the
taxable year, determined on an annual full-time equivalent basis, as
compared with the total number of full-time employees employed in
this state during the base year, determined on the same basis, and
the denominator of which shall be the total number of qualified
full-time employees employed in this state during the taxable year.
The applicable percentage shall not exceed 100 percent.
(3) The "applicable credit percentage" means the credit percentage
for the calendar year during which a qualified full-time employee
was first employed by the qualified taxpayer. The applicable credit
percentage for all calendar years shall be 35 percent.
(4) "Base year" means the 2013 taxable year, except in the case of
a qualified taxpayer who first hires a qualified full-time employee
in a taxable year beginning on or after January 1, 2015, the base
year means the taxable year immediately preceding the taxable year in
which a qualified full-time employee was first hired by the
qualified taxpayer.
(5) "Acquired" includes any gift, inheritance, transfer incident
to divorce, or any other transfer, whether or not for consideration.
(6) "Annual full-time equivalent" means either of the following:
(A) In the case of a full-time employee paid hourly qualified
wages, "annual full-time equivalent" means the total number of hours
worked for the qualified taxpayer by the employee, not to exceed
2,000 hours per employee, divided by 2,000.
(B) In the case of a salaried full-time employee, "annual
full-time equivalent" means the total number of weeks worked for the
qualified taxpayer by the employee divided by 52.
(7) "Designated census tract" means a census tract within the
state that is determined by the Department of Finance to have a
civilian unemployment rate that is within the top 25 percent of all
census tracts within the state and has a poverty rate within the top
25 percent of all census tracts within the state, as prescribed in
Section 13073.5 of the Government Code.
(8) "Economic development area" means either of the following:
(A) A former enterprise zone. For purposes of this section,
"former enterprise zone" means an enterprise zone designated and in
effect as of December 31, 2011, any enterprise zone designated during
2012, and any revision of an enterprise zone prior to June 30, 2013,
under former Chapter 12.8 (commencing with Section 7070) of Division
7 of Title 1 of the Government Code, as in effect on December 31,
2012, excluding any census tract within an enterprise zone that is
identified by the Department of Finance pursuant to Section 13073.5
of the Government Code as a census tract within the lowest quartile
of census tracts with the lowest civilian unemployment and poverty.
(B) A local agency military base recovery area designated as of
the effective date of the act adding this subparagraph, in accordance
with Section 7114 of the Government Code.
(9) "Minimum wage" means the wage established pursuant to Chapter
1 (commencing with Section 1171) of Part 4 of Division 2 of the Labor
Code.
(10) (A) "Qualified full-time employee" means an individual who
meets all of the following requirements:
(i) Performs at least 50 percent of his or her services for the
qualified taxpayer during the taxable year in a designated census
tract or economic development area.
(ii) Receives starting wages that are at least 150 percent of the
minimum wage.
(iii) Is hired by the qualified taxpayer on or after January 1,
2014.
(iv) Is hired by the qualified taxpayer after the date the
Department of Finance determines that the census tract referred to in
clause (i) is a designated census tract or that the census tracts
within a former enterprise zone are not census tracts with the lowest
civilian unemployment and poverty.
(v) Satisfies either of the following conditions:
(I) Is paid qualified wages by the qualified taxpayer for services
not less than an average of 35 hours per week.
(II) Is a salaried employee and was paid compensation during the
taxable year for full-time employment, within the meaning of Section
515 of the Labor Code, by the qualified taxpayer.
(vi) Upon commencement of employment with the qualified taxpayer,
satisfies any of the following conditions:
(I) Was unemployed for the six months immediately preceding
employment with the qualified taxpayer. In the case of an individual
that completed a program of study at a college, university, or other
postsecondary educational institution, received a baccalaureate,
postgraduate, or professional degree, and was unemployed for the six
months immediately preceding employment with the qualified taxpayer,
that individual must have completed that program of study at least 12
months prior to the individual's commencement of employment with the
qualified taxpayer.
(II) Is a veteran who separated from service in the Armed Forces
of the United States within the 12 months preceding commencement of
employment with the qualified taxpayer.
(III) Was a recipient of the credit allowed under Section 32 of
the Internal Revenue Code, relating to earned income, as applicable
for federal purposes, for the previous taxable year.
(IV) Is an ex-offender previously convicted of a felony.
(V) Is a recipient of either CalWORKs, in accordance with Article
2 (commencing with Section 11250) of Chapter 2 of Part 3 of Division
9 of the Welfare and Institutions Code, or general assistance, in
accordance with Section 17000.5 of the Welfare and Institutions Code.
(B) An individual may be considered a qualified full-time employee
only for the period of time commencing with the date the individual
is first employed by the qualified taxpayer and ending 60 months
thereafter.
(11) (A) "Qualified taxpayer" means a person or entity engaged in
a trade or business within a designated census tract or economic
development area that, during the taxable year, pays or incurs
qualified wages.
(B) In the case of any pass-thru 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 23626 shall be allowed to the pass-thru entity and passed
through to the partners and shareholders in accordance with
applicable provisions of this part or Part 11 (commencing with
Section 23001). For purposes of this subdivision, the term "pass-thru
entity" means any partnership or "S" corporation.
(C) "Qualified taxpayers" shall not include any of the following:
(i) Employers that provide temporary help services, as described
in Code 561320 of the North American Industry Classification System
(NAICS) published by the United States Office of Management and
Budget, 2012 edition.
(ii) Employers that provide retail trade services, as described in
Sector 44-45 of the North American Industry Classification System
(NAICS) published by the United States Office of Management and
Budget, 2012 edition.
(iii) Employers that are primarily engaged in providing food
services, as described in Code 711110, 722511, 722513, 722514, or
722515 of the North American Industry Classification System (NAICS)
published by the United States Office of Management and Budget, 2012
edition.
(iv) Employers that are primarily engaged in services as described
in Code 713210, 721120, or 722410 of the North American Industry
Classification System (NAICS) published by the United States Office
of Management and Budget, 2012 edition.
(v) (I) An employer that is a sexually oriented business.
(II) For purposes of this clause:
(aa) "Sexually oriented business" means a nightclub, bar,
restaurant, or similar commercial enterprise that provides for an
audience of two or more individuals live nude entertainment or live
nude performances where the nudity is a function of everyday business
operations and where nudity is a planned and intentional part of the
entertainment or performance.
(ab) "Nude" means clothed in a manner that leaves uncovered or
visible, through less than fully opaque clothing, any portion of the
genitals or, in the case of a female, any portion of the breasts
below the top of the areola of the breasts.
(D) Subparagraph (C) shall not apply to a taxpayer that is a
"small business."
(12) "Qualified wages" means those wages that meet all of the
following requirements:
(A) (i) Except as provided in clause (ii), that portion of wages
paid or incurred by the qualified taxpayer during the taxable year to
each qualified full-time employee that exceeds 150 percent of
minimum wage, but does not exceed 350 percent of minimum wage.
(ii) (I) In the case of a qualified full-time employee employed in
a designated pilot area, that portion of wages paid or incurred by
the qualified taxpayer during the taxable year to each qualified
full-time employee that exceeds ten dollars ($10) per hour or an
equivalent amount for salaried employees, but does not exceed 350
percent of minimum wage. For qualified full-time employees described
in the preceding sentence, clause (ii) of subparagraph (A) of
paragraph (10) is modified by substituting "ten dollars ($10) per
hour or an equivalent amount for salaried employees" for "150 percent
of the minimum wage."
(II) For purposes of this clause:
(aa) "Designated pilot area" means an area designated as a
designated pilot area by the Governor's Office of Business and
Economic Development.
(ab) Areas that may be designated as a designated pilot area are
limited to areas within a designated census tract or an economic
development area with average wages less than the statewide average
wages, based on information from the Labor Market Division of the
Employment Development Department, and areas within a designated
census tract or an economic development area based on high poverty or
high unemployment.
(ac) The total number of designated pilot areas that may be
designated is limited to five, one or more of which must be an area
within five or fewer designated census tracts within a single county
based on high poverty or high unemployment or an area within an
economic development area based on high poverty or high unemployment.
(ad) The designation of a designated pilot area shall be
applicable for a period of four calendar years, commencing with the
first calendar year for which the designation of a designated pilot
area is effective. The applicable period of a designated pilot area
may be extended, in the sole discretion of the Governor's Office of
Business and Economic Development, for an additional period of up to
three calendar years. The applicable period, and any extended period,
shall not extend beyond December 31, 2020.
(III) The designation of an area as a designated pilot area and
the extension of the applicable period of a designated pilot area
shall be at the sole discretion of the Governor's Office of Business
and Economic Development and shall not be subject to administrative
appeal or judicial review.
(B) Wages paid or incurred during the 60-month period beginning
with the first day the qualified full-time employee commences
employment with the qualified taxpayer. In the case of any employee
who is reemployed, including a regularly occurring seasonal increase,
in the trade or business operations of the qualified taxpayer, this
reemployment shall not be treated as constituting commencement of
employment for purposes of this section.
(C) Except as provided in paragraph (3) of subdivision (n),
qualified wages shall not include any wages paid or incurred by the
qualified taxpayer on or after the date that the Department of
Finance's redesignation of designated census tracts is effective, as
provided in paragraph (2) of subdivision (g), so that a census tract
is no longer a designated census tract.
(13) "Seasonal employment" means employment by a qualified
taxpayer that has regular and predictable substantial reductions in
trade or business operations.
(14) (A) "Small business" means a trade or business that has
aggregate gross receipts, less returns and allowances reportable to
this state, of less than two million dollars ($2,000,000) during the
previous taxable year.
(B) (i) For purposes of this paragraph, "gross receipts, less
returns and allowances reportable to this state," means the sum of
the gross receipts from the production of business income, as defined
in subdivision (a) of Section 25120, and the gross receipts from the
production of nonbusiness income, as defined in subdivision (d) of
Section 25120.
(ii) In the case of any trade or business activity conducted by a
partnership or an "S" corporation, the limitations set forth
in subparagraph (A) shall be
applied to the partnership or "S" corporation and to each partner or
shareholder.
(C) (i) "Small business" shall not include a sexually oriented
business.
(ii) For purposes of this subparagraph:
(I) "Sexually oriented business" means a nightclub, bar,
restaurant, or similar commercial enterprise that provides for an
audience of two or more individuals live nude entertainment or live
nude performances where the nudity is a function of everyday business
operations and where nudity is a planned and intentional part of the
entertainment or performance.
(II) "Nude" means clothed in a manner that leaves uncovered or
visible, through less than fully opaque clothing, any portion of the
genitals or, in the case of a female, any portion of the breasts
below the top of the areola of the breasts.
(15) An individual is "unemployed" for any period for which the
individual is all of the following:
(A) Not in receipt of wages subject to withholding under Section
13020 of the Unemployment Insurance Code for that period.
(B) Not a self-employed individual (within the meaning of Section
401(c)(1)(B) of the Internal Revenue Code, relating to self-employed
individual) for that period.
(C) Not a registered full-time student at a high school, college,
university, or other postsecondary educational institution for that
period.
(c) The net increase in full-time employees of a qualified
taxpayer shall be determined as provided by this subdivision:
(1) (A) The net increase in full-time employees shall be
determined on an annual full-time equivalent basis by subtracting
from the amount determined in subparagraph (C) the amount determined
in subparagraph (B).
(B) The total number of full-time employees employed in the base
year by the taxpayer and by any trade or business acquired by the
taxpayer during the current taxable year.
(C) The total number of full-time employees employed in the
current taxable year by the taxpayer and by any trade or business
acquired during the current taxable year.
(2) For taxpayers who first commence doing business in this state
during the taxable year, the number of full-time employees for the
base year shall be zero.
(d) For purposes of this section:
(1) All employees of the trades or businesses that are treated as
related under Section 267, 318, or 707 of the Internal Revenue Code
shall be treated as employed by a single taxpayer.
(2) In determining whether the taxpayer has first commenced doing
business in this state during the taxable year, the provisions of
subdivision (f) of Section 17276.20, without application of paragraph
(7) of that subdivision, shall apply.
(e) (1) To be eligible for the credit allowed by this section, a
qualified taxpayer shall, upon hiring a qualified full-time employee,
request a tentative credit reservation from the Franchise Tax Board
within 30 days of complying with the Employment Development
Department's new hire reporting requirements as provided in Section
1088.5 of the Unemployment Insurance Code, in the form and manner
prescribed by the Franchise Tax Board.
(2) To obtain a tentative credit reservation with respect to a
qualified full-time employee, the qualified taxpayer shall provide
necessary information, as determined by the Franchise Tax Board,
including the name, social security number, the start date of
employment, the rate of pay of the qualified full-time employee, the
qualified taxpayer's gross receipts, less returns and allowances, for
the previous taxable year, and whether the qualified full-time
employee is a resident of a targeted employment area, as defined in
former Section 7072 of the Government Code, as in effect on December
31, 2013.
(3) The qualified taxpayer shall provide the Franchise Tax Board
an annual certification of employment with respect to each qualified
full-time employee hired in a previous taxable year, on or before,
the 15th day of the third month of the taxable year. The
certification shall include necessary information, as determined by
the Franchise Tax Board, including the name, social security number,
start date of employment, and rate of pay for each qualified
full-time employee employed by the qualified taxpayer.
(4) A tentative credit reservation provided to a taxpayer with
respect to an employee of that taxpayer shall not constitute a
determination by the Franchise Tax Board with respect to any of the
requirements of this section regarding a taxpayer's eligibility for
the credit authorized by this section.
(f) The Franchise Tax Board shall do all of the following:
(1) Approve a tentative credit reservation with respect to a
qualified full-time employee hired during a calendar year.
(2) Determine the aggregate tentative reservation amount and the
aggregate small business tentative reservation amount for a calendar
year.
(3) A tentative credit reservation request from a qualified
taxpayer with respect to a qualified full-time employee who is a
resident of a targeted employment area, as defined in former Section
7072 of the Government Code, as in effect on December 31, 2013, shall
be expeditiously processed by the Franchise Tax Board. The residence
of a qualified full-time employee in a targeted employment area
shall have no other effect on the eligibility of an individual as a
qualified full-time employee or the eligibility of a qualified
taxpayer for the credit authorized by this section.
(4) Notwithstanding Section 19542, provide as a searchable
database on its Internet Web site, for each taxable year beginning on
or after January 1, 2014, and before January 1, 2021, the employer
names, amounts of tax credit claimed, and number of new jobs created
for each taxable year pursuant to this section and Section 23626.
(g) (1) The Department of Finance shall, by January 1, 2014, and
by January 1 of every fifth year thereafter, provide the Franchise
Tax Board with a list of the designated census tracts and a list of
census tracts with the lowest civilian unemployment rate.
(2) The redesignation of designated census tracts and lowest
civilian unemployment census tracts by the Department of Finance as
provided in Section 13073.5 of the Government Code shall be
effective, for purposes of this credit, one year after the date the
Department of Finance redesignates the designated census tracts.
(h) For purposes of this section:
(1) All employees of the trades or businesses that are treated as
related under Section 267, 318, or 707 of the Internal Revenue Code
shall be treated as employed by a single taxpayer.
(2) All employees of trades or businesses that are not
incorporated, and that are under common control, shall be treated as
employed by a single taxpayer.
(3) 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 to that trade or business in
that manner.
(4) Principles that apply in the case of controlled groups of
corporations, as specified in subdivision (h) of Section 23626, shall
apply with respect to determining employment.
(5) 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 (i), for any taxable year ending
after that acquisition, the employment relationship between a
qualified full-time employee and an employer shall not be treated as
terminated if the employee continues to be employed in that trade or
business.
(i) (1) If the employment of any qualified full-time 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 36 months after commencing employment with the
qualified taxpayer, whether or not consecutive, 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.
(2) Paragraph (1) shall not apply to any of the following:
(A) A termination of employment of a qualified full-time employee
who voluntarily leaves the employment of the qualified taxpayer.
(B) A termination of employment of a qualified full-time 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 qualified taxpayer fails to offer reemployment to
that employee.
(C) A termination of employment of a qualified full-time 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.
(D) A termination of employment of a qualified full-time employee
due to a substantial reduction in the trade or business operations of
the qualified taxpayer, including reductions due to seasonal
employment.
(E) A termination of employment of a qualified full-time employee,
if that employee is replaced by other qualified full-time employees
so as to create a net increase in both the number of employees and
the hours of employment.
(F) A termination of employment of a qualified full-time employee,
when that employment is considered seasonal employment and the
qualified employee is rehired on a seasonal basis.
(3) For purposes of paragraph (1), the employment relationship
between the qualified taxpayer and a qualified full-time 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 full-time employee continues to be employed in that
trade or business and the qualified taxpayer retains a substantial
interest in that trade or business.
(4) 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.
(j) 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.
(k) In the case where the credit allowed by this section exceeds
the "net tax," the excess may be carried over to reduce the "net tax"
in the following year, and the succeeding four years if necessary,
until the credit is exhausted.
(l) The Franchise Tax Board may prescribe rules, guidelines, or
procedures necessary or appropriate to carry out the purposes of this
section, including any guidelines regarding the allocation of the
credit allowed under this section. Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code shall not apply to any rule, guideline, or procedure prescribed
by the Franchise Tax Board pursuant to this section.
(m) (1) Upon the effective date of this section, the Department of
Finance shall estimate the total dollar amount of credits that will
be claimed under this section with respect to each fiscal year from
the 2013-14 fiscal year to the 2020- 21 fiscal year, inclusive.
(2) The Franchise Tax Board shall annually provide to the Joint
Legislative Budget Committee, by no later than March 1, a report of
the total dollar amount of the credits claimed under this section
with respect to the relevant fiscal year. The report shall compare
the total dollar amount of credits claimed under this section with
respect to that fiscal year with the department's estimate with
respect to that same fiscal year. If the total dollar amount of
credits claimed for the fiscal year is less than the estimate for
that fiscal year, the report shall identify options for increasing
annual claims of the credit so as to meet estimated amounts.
(n) (1) This section shall remain in effect only until December 1,
2024, and as of that date is repealed.
(2) Notwithstanding paragraph (1) of subdivision (a), this section
shall continue to be operative for taxable years beginning on or
after January 1, 2021, but only with respect to qualified full-time
employees who commenced employment with a qualified taxpayer in a
designated census tract or economic development area in a taxable
year beginning before January 1, 2021.
(3) This section shall remain operative for any qualified taxpayer
with respect to any qualified full-time employee after the
designated census tract is no longer designated or an economic
development area ceases to be an economic development area, as
defined in this section, for the remaining period, if any, of the
60-month period after the original date of hiring of an otherwise
qualified full-time employee and any wages paid or incurred with
respect to those qualified full-time employees after the designated
census tract is no longer designated or an economic development area
ceases to be an economic development area, as defined in this
section, shall be treated as qualified wages under this section,
provided the employee satisfies any other requirements of paragraphs
(10) and (12) of subdivision (b), as if the designated census tract
was still designated and binding or the economic development area was
still in existence.
SEC. 3. Section 17059.2 of the Revenue and Taxation Code, as added
by Section 18 of Assembly Bill 93 of the 2013-14 Regular Session, is
amended to read:
17059.2. (a) (1) For each taxable year beginning on and after
January 1, 2014, and before January 1, 2025, there shall be allowed
as a credit against the "net tax," as defined in Section 17039, an
amount as determined by the committee pursuant to paragraph (2) and
approved pursuant to Section 18410.2.
(2) The credit under this section shall be allocated by GO-Biz
with respect to the 2013-14 fiscal year through and including the
2017-18 fiscal year. The amount of credit allocated to a taxpayer
with respect to a fiscal year pursuant to this section shall be as
set forth in a written agreement between GO-Biz and the taxpayer and
shall be based on the following factors:
(A) The number of jobs the taxpayer will create or retain in this
state.
(B) The compensation paid or proposed to be paid by the taxpayer
to its employees, including wages and fringe benefits.
(C) The amount of investment in this state by the taxpayer.
(D) The extent of unemployment or poverty in the area according to
the United States Census in which the taxpayer's project or business
is proposed or located.
(E) The incentives available to the taxpayer in this state,
including incentives from the state, local government, and other
entities.
(F) The incentives available to the taxpayer in other states.
(G) The duration of the proposed project and the duration the
taxpayer commits to remain in this state.
(H) The overall economic impact in this state of the taxpayer's
project or business.
(I) The strategic importance of the taxpayer's project or business
to the state, region, or locality.
(J) The opportunity for future growth and expansion in this state
by the taxpayer's business.
(K) The extent to which the anticipated benefit to the state
exceeds the projected benefit to the taxpayer from the tax credit.
(3) The written agreement entered into pursuant to paragraph (2)
shall include:
(A) Terms and conditions that include the taxable year or years
for which the credit allocated shall be allowed, a minimum
compensation level, and a minimum job retention period.
(B) Provisions indicating whether the credit is to be allocated in
full upon approval or in increments based on mutually agreed upon
milestones when satisfactorily met by the taxpayer.
(C) Provisions that allow the committee to recapture the credit,
in whole or in part, if the taxpayer fails to fulfill the terms and
conditions of the written agreement.
(b) For purposes of this section:
(1) "Committee" means the California Competes Tax Credit Committee
established pursuant to Section 18410.2.
(2) "GO-Biz" means the Governor's Office of Business and Economic
Development.
(c) For purposes of this section, GO-Biz shall do the following:
(1) Give priority to a taxpayer whose project or business is
located or proposed to be located in an area of high unemployment or
poverty.
(2) Negotiate with a taxpayer the terms and conditions of proposed
written agreements that provide the credit allowed pursuant to this
section to a taxpayer.
(3) Provide the negotiated written agreement to the committee for
its approval pursuant to Section 18410.2.
(4) Inform the Franchise Tax Board of the terms and conditions of
the written agreement upon approval of the written agreement by the
committee.
(5) Inform the Franchise Tax Board of any recapture, in whole or
in part, of a previously allocated credit upon approval of the
recapture by the committee.
(6) Post on its Internet Web site all of the following:
(A) The name of each taxpayer allocated a credit pursuant to this
section.
(B) The estimated amount of the investment by each taxpayer.
(C) The estimated number of jobs created or retained.
(D) The amount of the credit allocated to the taxpayer.
(E) The amount of the credit recaptured from the taxpayer, if
applicable.
(d) For purposes of this section, the Franchise Tax Board shall do
all of the following:
(1) (A) Except as provided in subparagraph (B), review the books
and records of all taxpayers allocated a credit pursuant to this
section to ensure compliance with the terms and conditions of the
written agreement between the taxpayer and GO-Biz.
(B) In the case of a taxpayer that is a "small business," as
defined in Section 17053.73, review the books and records of the
taxpayer allocated a credit pursuant to this section to ensure
compliance with the terms and conditions of the written agreement
between the taxpayer and GO-Biz when, in the sole discretion of the
Franchise Tax Board, a review of those books and records is
appropriate or necessary in the best interests of the state.
(2) Notwithstanding Section 19542:
(A) Notify GO-Biz of a possible breach of the written agreement by
a taxpayer and provide detailed information regarding the basis for
that determination.
(B) Provide information to GO-Biz with respect to whether a
taxpayer is a "small business," as defined in Section 17053.73.
(e) In the case where the credit allowed under this section
exceeds the "net tax," as defined in Section 17039, for a taxable
year, the excess credit may be carried over to reduce the "net tax"
in the following taxable year, and succeeding five taxable years, if
necessary, until the credit has been exhausted.
(f) Any recapture, in whole or in part, of a credit approved by
the committee pursuant to Section 18410.2 shall be treated as a
mathematical error appearing on the return. Any amount of tax
resulting from that recapture shall be assessed by the Franchise Tax
Board in the same manner as provided by Section 19051. The amount of
tax resulting from the recapture shall be added to the tax otherwise
due by the taxpayer for the taxable year in which the committee's
recapture determination occurred.
(g) (1) The aggregate amount of credit that may be allocated in
any fiscal year pursuant to this section and Section 23689 shall be
an amount equal to the sum of subparagraphs (A), (B), and (C), less
the amount specified in subparagraph (D):
(A) Thirty million dollars ($30,000,000) for the 2013-14 fiscal
year, one hundred fifty million dollars ($150,000,000) for the
2014-15 fiscal year, and two hundred million dollars ($200,000,000)
for each fiscal year from 2015-16 to 2017-18, inclusive.
(B) The unallocated credit amount, if any, from the preceding
fiscal year.
(C) The amount of any previously allocated credits that have been
recaptured.
(D) The amount estimated by the Director of Finance, in
consultation with the Franchise Tax Board and the State Board of
Equalization, to be necessary to limit the aggregation of the
estimated amount of exemptions claimed pursuant to Section 6377.1 and
of the amounts estimated to be claimed pursuant to this section and
Sections 17053.73, 23626, and 23689 to no more than seven hundred
fifty million dollars ($750,000,000) for either the current fiscal
year or the next fiscal year.
(i) The Director of Finance shall notify the Chairperson of the
Joint Legislative Budget Committee of the estimated annual allocation
authorized by this paragraph. Any allocation pursuant to these
provisions shall be made no sooner than 30 days after written
notification has been provided to the Chairperson of the Joint
Legislative Budget Committee and the chairpersons of the committees
of each house of the Legislature that consider appropriation, or not
sooner than whatever lesser time the Chairperson of the Joint
Legislative Budget Committee, or his or her designee, may determine.
(ii) In no event shall the amount estimated in this subparagraph
be less than zero dollars ($0).
(2) Each fiscal year, 25 percent of the aggregate amount of the
credit that may be allocated pursuant to this section and Section
23689 shall be reserved for small business, as defined in Section
17053.73 or 23626.
(3) Each fiscal year, no more than 20 percent of the aggregate
amount of the credit that may be allocated pursuant to this section
shall be allocated to any one taxpayer.
(h) GO-Biz may prescribe rules and regulations as necessary to
carry out the purposes of this section. Any rule or regulation
prescribed pursuant to this section may be by adoption of an
emergency regulation in accordance with Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code.
(i) A written agreement between GO-Biz and a taxpayer with respect
to the credit authorized by this section shall comply with existing
law on the date the agreement is executed.
(j) (1) Upon the effective date of this section, the Department of
Finance shall estimate the total dollar amount of credits that will
be claimed under this section with respect to each fiscal year from
the 2013-14 fiscal year to the 2024-25 fiscal year, inclusive.
(2) The Franchise Tax Board shall annually provide to the Joint
Legislative Budget Committee, by no later than March 1, a report of
the total dollar amount of the credits claimed under this section
with respect to the relevant fiscal year. The report shall compare
the total dollar amount of credits claimed under this section with
respect to that fiscal year with the department's estimate with
respect to that same fiscal year. If the total dollar amount of
credits claimed for the fiscal year is less than the estimate for
that fiscal year, the report shall identify options for increasing
annual claims of the credit so as to meet estimated amounts.
(k) This section is repealed on December 1, 2025.
SEC. 4. Section 23626 of the Revenue and Taxation Code, as added
by Section 33 of Assembly Bill 93 of the 2013-14 Regular Session, is
amended to read:
23626. (a) (1) For each taxable year beginning on or after
January 1, 2014, and before January 1, 2021, there shall be allowed
to a qualified taxpayer that hires a qualified full-time employee and
pays or incurs qualified wages attributable to work performed by the
qualified full-time employee in a designated census tract or
economic development area, and that receives a tentative credit
reservation for that qualified full-time employee, a credit against
the "tax," as defined by Section 23036, in an amount calculated under
this section.
(2) The amount of the credit allowable under this section for a
taxable year shall be equal to the product of the tentative credit
amount for the taxable year and the applicable percentage for the
taxable year.
(3) (A) If a qualified taxpayer relocates to a designated census
tract or economic development area, the qualified taxpayer shall be
allowed a credit with respect to qualified wages for each qualified
full-time employee who is employed within the new location only if
the qualified taxpayer provides each employee at the previous
location or locations a written offer of employment at the new
location in the designated census tract or economic development area
with comparable compensation.
(B) For purposes of this paragraph, "relocates to a designated
census tract or economic development area" means an increase in the
number of qualified full-time employees, employed by a qualified
taxpayer, within a designated census tract or tracts or economic
development areas within a 12-month period in which there is a
decrease in the number of full-time employees, employed by the
qualified taxpayer in this state, but outside of designated census
tracts or economic development areas.
(C) This paragraph shall not apply to a small business.
(4) The credit allowed by this section may only be claimed on a
timely filed original return of the qualified taxpayer and only with
respect to a qualified full-time employee for whom the qualified
taxpayer has received a tentative credit reservation.
(b) For purposes of this section:
(1) The "tentative credit amount" for a taxable year shall be
equal to the product of the applicable credit percentage for each
qualified full-time employee and the qualified wages paid by the
qualified taxpayer during the taxable year to that qualified
full-time employee.
(2) The "applicable percentage" for a taxable year shall be equal
to a fraction, the numerator of which is the net increase in the
total number of full-time employees employed in this state during the
taxable year, determined on an annual full-time equivalent basis, as
compared with the total number of full-time employees employed in
this state during the base year, determined on the same basis, and
the denominator of which shall be the total number of qualified
full-time employees employed in this state during the taxable year.
The applicable percentage shall not exceed 100 percent.
(3) The "applicable credit percentage" means the credit percentage
for the calendar year during which a qualified full-time employee
was first employed by the
qualified taxpayer. The applicable credit percentage for all calendar
years shall be 35 percent.
(4) "Base year" means the 2013 taxable year, or in the case of a
qualified taxpayer who first hires a qualified full-time employee in
a taxable year beginning on or after January 2015, the taxable year
immediately preceding the taxable year in which the qualified
full-time employee was hired.
(5) "Acquired" includes any gift, inheritance, transfer incident
to divorce, or any other transfer, whether or not for consideration.
(6) "Annual full-time equivalent" means either of the following:
(A) In the case of a full-time employee paid hourly qualified
wages, "annual full-time equivalent" means the total number of hours
worked for the qualified taxpayer by the employee (not to exceed
2,000 hours per employee) divided by 2,000.
(B) In the case of a salaried full-time employee, "annual
full-time equivalent" means the total number of weeks worked for the
qualified taxpayer by the employee divided by 52.
(7) "Designated census tract" means a census tract within the
state that is determined by the Department of Finance to have a
civilian unemployment rate that is within the top 25 percent of all
census tracts within the state and has a poverty rate within the top
25 percent of all census tracts within the state, as prescribed in
Section 13073.5 of the Government Code.
(8) "Economic development area" means either of the following:
(A) A former enterprise zone. For purposes of this section,
"former enterprise zone" means an enterprise zone designated and in
effect as of December 31, 2011, any enterprise zone designated during
2012, and any revision of an enterprise zone prior to June 30, 2013,
under former Chapter 12.8 (commencing with Section 7070) of Division
7 of Title 1 of the Government Code, as in effect on December 31,
2012, excluding any census tract within an enterprise zone that is
identified by the Department of Finance pursuant to Section 13073.5
of the Government Code as a census tract within the lowest quartile
of census tracts with the lowest civilian unemployment and poverty.
(B) A local agency military base recovery area designated as of
the effective date of the act adding this subparagraph, in accordance
with Section 7114 of the Government Code.
(9) "Minimum wage" means the wage established pursuant to Chapter
1 (commencing with Section 1171) of Part 4 of Division 2 of the Labor
Code.
(10) (A) "Qualified full-time employee" means an individual who
meets all of the following requirements:
(i) Performs at least 50 percent of his or her services for the
qualified taxpayer during the taxable year in a designated census
tract or economic development area.
(ii) Receives starting wages that are at least 150 percent of the
minimum wage.
(iii) Is hired by the qualified taxpayer on or after January 1,
2014.
(iv) Is hired by the qualified taxpayer after the date the
Department of Finance determines that the census tract referred to in
clause (i) is a designated census tract or that the census tracts
within a former enterprise zone are not census tracts with the lowest
civilian unemployment and poverty.
(v) Satisfies either of the following conditions:
(I) Is paid qualified wages by the qualified taxpayer for services
not less than an average of 35 hours per week.
(II) Is a salaried employee and was paid compensation during the
taxable year for full-time employment, within the meaning of Section
515 of the Labor Code, by the qualified taxpayer.
(vi) Upon commencement of employment with the qualified taxpayer,
satisfies any of the following conditions:
(I) Was unemployed for the six months immediately preceding
employment with the qualified taxpayer. In the case of an individual
who completed a program of study at a college, university, or other
postsecondary educational institution, received a baccalaureate,
postgraduate, or professional degree, and was unemployed for the six
months immediately preceding employment with the qualified taxpayer,
that individual must have completed that program of study at least 12
months prior to the individual's commencement of employment with the
qualified taxpayer.
(II) Is a veteran who separated from service in the Armed Forces
of the United States within the 12 months preceding commencement of
employment with the qualified taxpayer.
(III) Was a recipient of the credit allowed under Section 32 of
the Internal Revenue Code, relating to earned income, as applicable
for federal purposes, for the previous taxable year.
(IV) Is an ex-offender previously convicted of a felony.
(V) Is a recipient of either CalWORKs, in accordance with Article
2 (commencing with Section 11250) of Chapter 2 of Part 3 of Division
9 of the Welfare and Institutions Code, or general assistance, in
accordance with Section 17000.5 of the Welfare and Institutions Code.
(B) An individual may only be considered a qualified full-time
employee for the period of time commencing with the date the
individual is first employed by the qualified taxpayer and ending 60
months thereafter.
(11) (A) "Qualified taxpayer" means a corporation engaged in a
trade or business within designated census tract or economic
development area that, during the taxable year, pays or incurs
qualified wages.
(B) In the case of any pass-thru 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 17053.73 shall be allowed to the pass-thru entity and passed
through to the partners and shareholders in accordance with
applicable provisions of this part or Part 10 (commencing with
Section 17001). For purposes of this subdivision, the term "pass-thru
entity" means any partnership or "S" corporation.
(C) "Qualified taxpayer" shall not include any of the following:
(i) Employers that provide temporary help services, as described
in Code 561320 of the North American Industry Classification System
(NAICS) published by the United States Office of Management and
Budget, 2012 edition.
(ii) Employers that provide retail trade services, as described in
Sector 44-45 of the North American Industry Classification System
(NAICS) published by the United States Office of Management and
Budget, 2012 edition.
(iii) Employers that are primarily engaged in providing food
services, as described in Code 711110, 722511, 722513, 722514, or
722515 of the North American Industry Classification System (NAICS)
published by the United States Office of Management and Budget, 2012
edition.
(iv) Employers that are primarily engaged in services as described
in Code 713210, 721120, or 722410 of the North American Industry
Classification System (NAICS) published by the United States Office
of Management and Budget, 2012 edition.
(v) (I) An employer that is a sexually oriented business.
(II) For purposes of this clause:
(aa) "Sexually oriented business" means a nightclub, bar,
restaurant, or similar commercial enterprise that provides for an
audience of two or more individuals live nude entertainment or live
nude performances where the nudity is a function of everyday business
operations and where nudity is a planned and intentional part of the
entertainment or performance.
(ab) "Nude" means clothed in a manner that leaves uncovered or
visible, through less than fully opaque clothing, any portion of the
genitals or, in the case of a female, any portion of the breasts
below the top of the areola of the breasts.
(D) Subparagraph (C) shall not apply to a taxpayer that is a
"small business."
(12) "Qualified wages" means those wages that meet all of the
following requirements:
(A) (i) Except as provided in clause (ii), that portion of wages
paid or incurred by the qualified taxpayer during the taxable year to
each qualified full-time employee that exceeds 150 percent of
minimum wage, but does not exceed 350 percent of the minimum wage.
(ii) (I) In the case of a qualified full-time employee employed in
a designated pilot area, that portion of wages paid or incurred by
the qualified taxpayer during the taxable year to each qualified
full-time employee that exceeds ten dollars ($10) per hour or an
equivalent amount for salaried employees, but does not exceed 350
percent of the minimum wage. For qualified full-time employees
described in the preceding sentence, clause (ii) of subparagraph (A)
of paragraph (10) is modified by substituting "ten dollars ($10) per
hour or an equivalent amount for salaried employees" for "150 percent
of the minimum wage."
(II) For purposes of this clause:
(aa) "Designated pilot area" means an area designated as a
designated pilot area by the Governor's Office of Business and
Economic Development.
(ab) Areas that may be designated as a designated pilot area are
limited to areas within a designated census tract or an economic
development area with average wages less than the statewide average
wages, based on information from the Labor Market Division of the
Employment Development Department, and areas within a designated
census tract or an economic development area based on high poverty or
high unemployment.
(ac) The total number of designated pilot areas that may be
designated is limited to five, one or more of which must be an area
within five or fewer designated census tracts within a single county
based on high poverty or high unemployment or an area within an
economic development area based on high poverty or high unemployment.
(ad) The designation of a designated pilot area shall be
applicable for a period of four calendar years, commencing with the
first calendar year for which the designation of a designated pilot
area is effective. The applicable period of a designated pilot area
may be extended, in the sole discretion of the Governor's Office of
Business and Economic Development, for an additional period of up to
three calendar years. The applicable period, and any extended period,
shall not extend beyond December 31, 2020.
(III) The designation of an area as a designated pilot area and
the extension of the applicable period of a designated pilot area
shall be at the sole discretion of the Governor's Office of Business
and Economic Development and shall not be subject to administrative
appeal or judicial review.
(B) Wages paid or incurred during the 60-month period beginning
with the first day the qualified full-time employee commences
employment with the qualified taxpayer. In the case of any employee
who is reemployed, including regularly occurring seasonal increase,
in the trade or business operations of the qualified taxpayer, this
reemployment shall not be treated as constituting commencement of
employment for purposes of this section.
(C) Except as provided in paragraph (3) of subdivision (m),
qualified wages shall not include any wages paid or incurred by the
qualified taxpayer on or after the date that the Department of
Finance's redesignation of designated census tracts is effective, as
provided in paragraph (2) of subdivision (g), so that a census tract
is no longer determined to be a designated census tract.
(13) "Seasonal employment" means employment by a qualified
taxpayer that has regular and predictable substantial reductions in
trade or business operations.
(14) (A) "Small business" means a trade or business that has
aggregate gross receipts, less returns and allowances reportable to
this state, of less than two million dollars ($2,000,000) during the
previous taxable year.
(B) (i) For purposes of this paragraph, "gross receipts, less
returns and allowances reportable to this state," means the sum of
the gross receipts from the production of business income, as defined
in subdivision (a) of Section 25120, and the gross receipts from the
production of nonbusiness income, as defined in subdivision (d) of
Section 25120.
(ii) In the case of any trade or business activity conducted by a
partnership or an "S" corporation, the limitations set forth in
subparagraph (A) shall be applied to the partnership or "S"
corporation and to each partner or shareholder.
(iii) For taxpayers that are required to be included in a combined
report under Section 25101 or authorized to be included in a
combined report under Section 25101.15, the dollar amount specified
in subparagraph (A) shall apply to the aggregate gross receipts of
all taxpayers that are required to be or authorized to be included in
a combined report.
(C) (i) "Small business" shall not include a sexually oriented
business.
(ii) For purposes of this subparagraph:
(I) "Sexually oriented business" means a nightclub, bar,
restaurant, or similar commercial enterprise that provides for an
audience of two or more individuals live nude entertainment or live
nude performances where the nudity is a function of everyday business
operations and where nudity is a planned and intentional part of the
entertainment or performance.
(II) "Nude" means clothed in a manner that leaves uncovered or
visible, through less than fully opaque clothing, any portion of the
genitals or, in the case of a female, any portion of the breasts
below the top of the areola of the breasts.
(15) An individual is "unemployed" for any period for which the
individual is all of the following:
(A) Not in receipt of wages subject to withholding under Section
13020 of the Unemployment Insurance Code for that period.
(B) Not a self-employed individual (within the meaning of Section
401(c)(1)(B) of the Internal Revenue Code, relating to self-employed
individual) for that period.
(C) Not a registered full-time student at a high school, college,
university, or other postsecondary educational institution for that
period.
(c) The net increase in full-time employees of a qualified
taxpayer shall be determined as provided by this subdivision:
(1) (A) The net increase in full-time employees shall be
determined on an annual full-time equivalent basis by subtracting
from the amount determined in subparagraph (C) the amount determined
in subparagraph (B).
(B) The total number of full-time employees employed in the base
year by the taxpayer and by any trade or business acquired by the
taxpayer during the current taxable year.
(C) The total number of full-time employees employed in the
current taxable year by the taxpayer and by any trade or business
acquired during the current taxable year.
(2) For taxpayers who first commence doing business in this state
during the taxable year, the number of full-time employees for the
base year shall be zero.
(d) For purposes of this section:
(1) All employees of the trades or businesses that are treated as
related under Section 267, 318, or 707 of the Internal Revenue Code
shall be treated as employed by a single taxpayer.
(2) In determining whether the taxpayer has first commenced doing
business in this state during the taxable year, the provisions of
subdivision (g) of Section 24416.20, without application of paragraph
(7) of that subdivision, shall apply.
(e) (1) To be eligible for the credit allowed by this section, a
qualified taxpayer shall, upon hiring a qualified full-time employee,
request a tentative credit reservation from the Franchise Tax Board
within 30 days of complying with the Employment Development
Department's new hire reporting requirement as provided in Section
1088.5 of the Unemployment Insurance Code, in the form and manner
prescribed by the Franchise Tax Board.
(2) To obtain a tentative credit reservation with respect to a
qualified full-time employee, the qualified taxpayer shall provide
necessary information, as determined by the Franchise Tax Board,
including the name, the social security number, the start date of
employment, the rate of pay of the qualified full-time employee, the
qualified taxpayer's gross receipts, less returns and allowances, for
the previous taxable year, and whether the qualified full-time
employee is a resident of a targeted employment area, as defined in
former Section 7072 of the Government Code, as in effect on December
31, 2013.
(3) The qualified taxpayer shall provide the Franchise Tax Board
an annual certification of employment with respect to each qualified
full-time employee hire in a previous taxable year, on or before the
15th day of the third month of the taxable year. The certification
shall include necessary information, as determined by the Franchise
Tax Board, including the name, social security number, start date of
employment, and rate of pay for each qualified full-time employee
employed by the qualified taxpayer.
(4) A tentative credit reservation provided to a taxpayer with
respect to an employee of that taxpayer shall not constitute a
determination by the Franchise Tax Board with respect to any of the
requirements of this section regarding a taxpayer's eligibility for
the credit authorized by this section.
(f) The Franchise Tax Board shall do all of the following:
(1) Approve a tentative credit reservation with respect to a
qualified full-time employee hired during a calendar year.
(2) Determine the aggregate tentative reservation amount and the
aggregate small business tentative reservation amount for a calendar
year.
(3) A tentative credit reservation request from a qualified
taxpayer with respect to a qualified full-time employee who is a
resident of a targeted employment area, as defined in former Section
7072 of the Government Code, as in effect on December 31, 2013, shall
be expeditiously processed by the Franchise Tax Board. The residence
of a qualified full-time employee in a targeted employment area
shall have no other effect on the eligibility of an individual as a
qualified full-time employee or the eligibility of a qualified
taxpayer for the credit authorized by this section.
(4) Notwithstanding Section 19542, provide as a searchable
database on its Internet Web site, for each taxable year beginning on
or after January 1, 2014, and before January 1, 2021, the employer
names, amounts of tax credit claimed, and number of new jobs created
for each taxable year pursuant to this section and Section 17053.73.
(g) (1) The Department of Finance shall, by January 1, 2014, and
by January 1 of every fifth year thereafter, provide the Franchise
Tax Board with a list of the designated census tracts and a list of
census tracts with the lowest civilian unemployment rate.
(2) The redesignation of designated census tracts and lowest
civilian unemployment census tracts by the Department of Finance as
provided in Section 13073.5 of the Government Code shall be
effective, for purposes of this credit, one year after the date that
the Department of Finance redesignates the designated census tracts.
(h) (1) For purposes of this section:
(A) All employees of the trades or businesses that are treated as
related under Section 267, 318, or 707 of the Internal Revenue Code
shall be treated as employed by a single qualified taxpayer.
(B) 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.
(C) 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.
(D) If a qualified taxpayer acquires the major portion of a trade
or business of another taxpayer, 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 for any taxable year ending after that
acquisition, the employment relationship between a qualified
full-time employee and a qualified taxpayer shall not be treated as
terminated if the employee continues to be employed in that trade or
business.
(2) For purposes of this subdivision, "controlled group of
corporations" means a controlled group of corporations as defined in
Section 1563(a) of the Internal Revenue Code, except that:
(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 subsections
(a)(4) and (e)(3)(C) of Section 1563 of the Internal Revenue Code.
(3) Rules similar to the rules provided in Sections 46(e) and 46
(h) of the Internal Revenue Code, as in effect on November 4, 1990,
shall apply to both of the following:
(A) An organization to which Section 593 of the Internal Revenue
Code applies.
(B) A regulated investment company or a real estate investment
trust subject to taxation under this part.
(i) (1) If the employment of any qualified full-time 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 36 months after commencing employment with the
qualified taxpayer, whether or not consecutive, 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.
(2) Paragraph (1) shall not apply to any of the following:
(A) A termination of employment of a qualified full-time employee
who voluntarily leaves the employment of the qualified taxpayer.
(B) A termination of employment of a qualified full-time 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 qualified taxpayer fails to offer reemployment to
that employee.
(C) A termination of employment of a qualified full-time 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.
(D) A termination of employment of a qualified full-time employee
due to a substantial reduction in the trade or business operations of
the qualified taxpayer, including reductions due to seasonal
employment.
(E) A termination of employment of a qualified full-time employee,
if that employee is replaced by other qualified full-time employees
so as to create a net increase in both the number of employees and
the hours of employment.
(F) A termination of employment of a qualified full-time employee,
when that employment is considered seasonal employment and the
qualified employee is rehired on a seasonal basis.
(3) For purposes of paragraph (1), the employment relationship
between the qualified taxpayer and a qualified full-time 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 full-time employee continues to be employed in that
trade or business and the qualified taxpayer retains a substantial
interest in that trade or business.
(4) 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.
(j) In the case where the credit allowed by this section exceeds
the "tax," the excess may be carried over to reduce the "tax" in the
following year, and the succeeding four years if necessary, until
exhausted.
(k) The Franchise Tax Board may prescribe rules, guidelines, or
procedures necessary or appropriate to carry out the purposes of this
section, including any guidelines regarding the allocation of the
credit allowed under this section. Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code shall not apply to any rule, guideline, or procedure prescribed
by the Franchise Tax Board pursuant to this section.
(l) (1) Upon the effective date of this section, the Department of
Finance shall estimate the total dollar amount of credits that will
be claimed under this section with respect to each fiscal year from
the 2013-14 fiscal year to the 2020 -21 fiscal year, inclusive.
(2) The Franchise Tax Board shall annually provide to the Joint
Legislative Budget Committee, by no later than March 1, a report of
the total dollar amount of the credits claimed under this section
with respect to the relevant fiscal year. The report shall compare
the total dollar amount of credits claimed under this section with
respect to that fiscal year with the department's estimate with
respect to that same fiscal year. If the total dollar amount of
credits claimed for the fiscal year is less than the estimate for
that fiscal year, the report shall identify options for increasing
annual claims of the credit so as to meet estimated amounts.
(m) (1) This section shall remain in effect only until December 1,
2024, and as of that date is repealed.
(2) Notwithstanding paragraph (1) of subdivision (a), this section
shall continue to be operative for taxable years beginning on or
after January 1, 2021, but only with respect to qualified full-time
employees who commenced employment with a qualified taxpayer in a
designated census tract or economic development area in a taxable
year beginning before January 1, 2021.
(3) This section shall remain operative for any qualified taxpayer
with respect to any qualified full-time employee after the
designated census tract is no longer designated or an economic
development area ceases to be an economic development area, as
defined in this section, for the remaining period, if any, of the
60-month period after the original date of hiring of an otherwise
qualified full-time employee and any wages paid or incurred with
respect to those qualified full-time employees after the designated
census tract is no longer designated or an economic development area
ceases to be an economic development area, as defined in this
section, shall be treated as qualified wages under this section,
provided the employee satisfies any other requirements of paragraphs
(10) and (12) of subdivision (b), as if the designated census tract
was still designated and binding or the economic development area was
still in existence.
SEC. 5. Section 23689 of the Revenue and Taxation Code, as added
by Section 38 of Assembly Bill 93 of the 2013-14 Regular Session, is
amended to read:
23689. (a) (1) For each taxable year beginning on and after
January 1, 2014, and before January 1, 2025, there shall be allowed
as a credit against the
"tax," as defined in Section 23036, an amount as determined by the
committee pursuant to paragraph (2) and approved pursuant to Section
18410.2.
(2) The credit under this section shall be allocated by GO-Biz
with respect to the 2013-14 fiscal year through and including the
2017-18 fiscal year. The amount of credit allocated to a taxpayer
with respect to a fiscal year pursuant to this section shall be as
set forth in a written agreement between GO-Biz and the taxpayer and
shall be based on the following factors:
(A) The number of jobs the taxpayer will create or retain in this
state.
(B) The compensation paid or proposed to be paid by the taxpayer
to its employees, including wages and fringe benefits.
(C) The amount of investment in this state by the taxpayer.
(D) The extent of unemployment or poverty in the area according to
the United States Census in which the taxpayer's project or business
is proposed or located.
(E) The incentives available to the taxpayer in the state,
including incentives from the state, local government and other
entities.
(F) The incentives available to the taxpayer in other states.
(G) The duration of the proposed project and the duration the
taxpayer commits to remain in this state.
(H) The overall economic impact in this state of the taxpayer's
project or business.
(I) The strategic importance of the taxpayer's project or business
to the state, region, or locality.
(J) The opportunity for future growth and expansion in this state
by the taxpayer's business.
(K) The extent to which the anticipated benefit to the state
exceeds the projected benefit to the taxpayer from the tax credit.
(3) The written agreement entered into pursuant to paragraph (2)
shall include:
(A) Terms and conditions that include the taxable year or years
for which the credit allocated shall be allowed, a minimum
compensation level, and a minimum job retention period.
(B) Provisions indicating whether the credit is to be allocated in
full upon approval or in increments based on mutually agreed upon
milestones when satisfactorily met by the taxpayer.
(C) Provisions that allow the committee to recapture the credit,
in whole or in part, if the taxpayer fails to fulfill the terms and
conditions of the written agreement.
(b) For purposes of this section:
(1) "Committee" means the California Competes Tax Credit Committee
established pursuant to Section 18410.2.
(2) "GO-Biz" means the Governor's Office of Business and Economic
Development.
(c) For purposes of this section, GO-Biz shall do the following:
(1) Give priority to a taxpayer whose project or business is
located or proposed to be located in an area of high unemployment or
poverty.
(2) Negotiate with a taxpayer the terms and conditions of proposed
written agreements that provide the credit allowed pursuant to this
section to a taxpayer.
(3) Provide the negotiated written agreement to the committee for
its approval pursuant to Section 18410.2.
(4) Inform the Franchise Tax Board of the terms and conditions of
the written agreement upon approval of the written agreement by the
committee.
(5) Inform the Franchise Tax Board of any recapture, in whole or
in part, of a previously allocated credit upon approval of the
recapture by the committee.
(6) Post on its Internet Web site all of the following:
(A) The name of each taxpayer allocated a credit pursuant to this
section.
(B) The estimated amount of the investment by each taxpayer.
(C) The estimated number of jobs created or retained.
(D) The amount of the credit allocated to the taxpayer.
(E) The amount of the credit recaptured from the taxpayer, if
applicable.
(d) For purposes of this section, the Franchise Tax Board shall do
all of the following:
(1) (A) Except as provided in subparagraph (B), review the books
and records of all taxpayers allocated a credit pursuant to this
section to ensure compliance with the terms and conditions of the
written agreement between the taxpayer and GO-Biz.
(B) In the case of a taxpayer that is a "small business," as
defined in Section 23626, review the books and records of the
taxpayer allocated a credit pursuant to this section to ensure
compliance with the terms and conditions of the written agreement
between the taxpayers and GO-Biz when, in the sole discretion of the
Franchise Tax Board, a review of those books and records is
appropriate or necessary in the best interests of the state.
(2) Notwithstanding Section 19542:
(A) Notify GO-Biz of a possible breach of the written agreement by
a taxpayer and provide detailed information regarding the basis for
that determination.
(B) Provide information to GO-Biz with respect to whether a
taxpayer is a "small business," as defined in Section 23626.
(e) In the case where the credit allowed under this section
exceeds the "tax," as defined in Section 23036, for a taxable year,
the excess credit may be carried over to reduce the "tax" in the
following taxable year, and succeeding five taxable years, if
necessary, until the credit has been exhausted.
(f) Any recapture, in whole or in part, of a credit approved by
the committee pursuant to Section 18410.2 shall be treated as a
mathematical error appearing on the return. Any amount of tax
resulting from that recapture shall be assessed by the Franchise Tax
Board in the same manner as provided by Section 19051. The amount of
tax resulting from the recapture shall be added to the tax otherwise
due by the taxpayer for the taxable year in which the committee's
recapture determination occurred.
(g) (1) The aggregate amount of credit that may be allocated in
any fiscal year pursuant to this section and Section 17059.2 shall be
an amount equal to the sum of subparagraphs (A), (B), and (C), less
the amount specified in subparagraph (D):
(A) Thirty million dollars ($30,000,000) for the 2013-14 fiscal
year, one hundred fifty million dollars ($150,000,000) for the
2014-15 fiscal year, and two hundred million dollars ($200,000,000)
for each fiscal year from 2015-16 to 2017-18, inclusive.
(B) The unallocated credit amount, if any, from the preceding
fiscal year.
(C) The amount of any previously allocated credits that have been
recaptured.
(D) The amount estimated by the Director of Finance, in
consultation with the Franchise Tax Board and the State Board of
Equalization, to be necessary to limit the aggregation of the
estimated amount of exemptions claimed pursuant to Section 6377.1 and
of the amounts estimated to be claimed pursuant to this section and
Sections 17053.73, 17059.2, and 23626 to no more than seven hundred
fifty million dollars ($750,000,000) for either the current fiscal
year or the next fiscal year.
(i) The Director of Finance shall notify the Chairperson of the
Joint Legislative Budget Committee of the estimated annual allocation
authorized by this paragraph. Any allocation pursuant to these
provisions shall be made no sooner than 30 days after written
notification has been provided to the Chairperson of the Joint
Legislative Budget Committee and the chairpersons of the committees
of each house of the Legislature that consider appropriation, or not
sooner than whatever lesser time the Chairperson of the Joint
Legislative Budget Committee, or his or her designee, may determine.
(ii) In no event shall the amount estimated in this subparagraph
be less than zero dollars ($0).
(2) Each fiscal year, 25 percent of the aggregate amount of the
credit that may be allocated pursuant to this section and Section
17059.2 shall be reserved for "small business," as defined in Section
17053.73 or 23626.
(3) Each fiscal year, no more than 20 percent of the aggregate
amount of the credit that shall be allocated pursuant to this section
may be allocated to any one taxpayer.
(h) GO-Biz may prescribe rules and regulations as necessary to
carry out the purposes of this section. Any rule or regulation
prescribed pursuant to this section may be by adoption of an
emergency regulation in accordance with Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code.
(i) (1) A written agreement between GO-Biz and a taxpayer with
respect to the credit authorized by this section shall not restrict,
broaden, or otherwise alter the ability of the taxpayer to assign
that credit or any portion thereof in accordance with Section 23663.
(2) A written agreement between GO-Biz and a taxpayer with respect
to the credit authorized by this section must comply with existing
law on the date the agreement is executed.
(j) (1) Upon the effective date of this section, the Department of
Finance shall estimate the total dollar amount of credits that will
be claimed under this section with respect to each fiscal year from
the 2013-14 fiscal year to the 2024-25 fiscal year, inclusive.
(2) The Franchise Tax Board shall annually provide to the Joint
Legislative Budget Committee, by no later than March 1, a report of
the total dollar amount of the credits claimed under this section
with respect to the relevant fiscal year. The report shall compare
the total dollar amount of credits claimed under this section with
respect to that fiscal year with the department's estimate with
respect to that same fiscal year. If the total dollar amount of
credits claimed for the fiscal year is less than the estimate for
that fiscal year, the report shall identify options for increasing
annual claims of the credit so as to meet estimated amounts.
(k) This section is repealed on December 1, 2025.
SEC. 6. (a) (1) For purposes of applying Sections 17053.33,
17053.34, 17053.45, 17053.46, 17053.47, 17053.70, 17053.74, 23612.2,
23622.7, 23622.8, 23633, 23634, 23645, and 23646 of the Revenue and
Taxation Code, as amended by Assembly Bill 93 of the 2013-14 Regular
Session, the revision of the carryover period of the credit under
each of those sections to a period of 10 years applies to credits
under those sections and carryovers of credits under those sections
that are available for carryover to the taxable year beginning on or
after January 1, 2014. The carryover period for hiring credits earned
under Section 17053.34, 17053.46, 17053.47, 17053.74, 23622.7,
23622.8, 23634, and 23646 of the Revenue and Taxation Code in taxable
years beginning on or after January 1, 2014, is also 10 taxable
years, beginning with the taxable year after the taxable year the
credit is earned.
(2) Notwithstanding the repeal of Sections 17053.33, 17053.34,
17053.45, 17053.46, 17053.47, 17053.70, 17053.74, 23612.2, 23622.7,
23622.8, 23633, 23634, 23645, and 23646 of the Revenue and Taxation
Code by amendments made by Assembly Bill 93 of the 2013-14 Regular
Session, pursuant to subdivision (d) of Section 17039 of the Revenue
and Taxation Code and subdivision (f) of Section 23036 of the Revenue
and Taxation Code, any remaining carryover from a credit under those
sections is allowed to be carried over under the provisions of those
sections as they read immediately prior to the repeal.
(b) The Legislature finds and declares that, for purposes of
proper implementation of the amendments made by Assembly Bill 93 of
the 2013-14 Regular Session to Sections 17053.33, 17053.34, 17053.45,
17053.46, 17053.47, 17053.70, 17053.74, 23612.2, 23622.7, 23622.8,
23633, 23634, 23645, and 23646 of the Revenue and Taxation Code, this
section does both of the following:
(1) Clarifies the changes made by Assembly Bill 93 of the 2013-14
Regular Session with respect to the carryover periods of each of
those provisions of the Revenue and Taxation Code.
(2) Reiterates the application of existing law regarding the
continuing availability of carryover credits after repeal of each of
those provisions of the Revenue and Taxation Code.
SEC. 7. Section 1 of this bill that amends Section 6377.1 of the
Revenue and Taxation Code, as added by Assembly Bill 93 of the
2013-14 Regular Session, Section 2 of this bill that amends Section
17053.73 of the Revenue and Taxation Code, as added by Assembly Bill
93 of the 2013-14 Regular Session, Section 3 of this bill that amends
Section 17059.2 of the Revenue and Taxation Code, as added by
Assembly Bill 93 of the 2013-14 Regular Session, Section 4 of this
bill that amends Section 23626 of the Revenue and Taxation Code, as
added by Assembly Bill 93 of the 2013-14 Regular Session, and Section
5 of this bill that amends Section 23689 of the Revenue and Taxation
Code, as added by Assembly Bill 93 of the 2013-14 Regular Session,
shall become operative only if Assembly Bill 93 of the 2013-14
Regular Session is chaptered and becomes operative. The effect and
operation of Sections 1, 2, 3, 4, and 5 of this bill are subject to
Section 47 of Assembly Bill 93 of the 2013-14 Regular Session.
SEC. 8. 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 ensure the public good by providing certainty
regarding the incentives available for attracting and retaining jobs
in economically distressed areas of the state, it is necessary that
this act take effect immediately.
