BILL NUMBER: AB 1134	INTRODUCED
	BILL TEXT


INTRODUCED BY   Assembly Member Dymally

                        FEBRUARY 23, 2007

   An act to add Chapter 12.9 (commencing with Section 7091) to
Division 7 of Title 1 of the Government Code, to amend Section 128260
of the Health and Safety Code, and to amend Sections 17039 and 23036
of, and to add Sections 17052.16, 17053.16, 17053.17, 23612.3,
23612.5, and 23612.6 to, the Revenue and Taxation Code, relating to
medical enterprise zones.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 1134, as introduced, Dymally. Medical enterprise zones: student
loans: tax credits.
   (1) Existing law authorizes the governing bodies of cities or
counties to propose the designation of areas within their respective
jurisdictions as enterprise zones based upon specified findings that
those areas are depressed areas and in need of private sector
investment. The Trade and Commerce Agency is authorized to designate
not more than 25 enterprise zones within the state based on its
determination that the zones propose the most effective, innovative,
and comprehensive regulatory, tax, program, and other incentives in
attracting private sector investment in the zones proposed.
   This bill would require the California Healthcare Workforce Policy
Commission of the Office of Statewide Health Planning and
Development to designate 10 medical enterprise zones that are
medically underserved areas, as defined.
   (2) Existing law establishes the Health Education and Academic
Loan Act. Under the act a medical student or person in a primary care
residency training program is eligible for loan assistance if they
enter into certain conditions, an applicant will receive priority if
they agree to provide primary care services for a minimum of 3 years
in a medically underserved designated shortage area, as defined.
   This bill would amend the definition of a medically underserved
designated shortage area to include an area designated a medical
enterprise zone by the Health Manpower Commission.
   (3) The Personal Income Tax Law and the Corporation Tax Law
authorize various credits against the taxes imposed by those laws.
   This bill would authorize a credit against those taxes for each
taxable year beginning on or after January 1, 2008, in an amount
equal to 100% of the amount paid or incurred during the taxable year
for sales and use taxes paid or incurred by the taxpayer in
connection with the purchase of medical equipment, up to a value of
$1,000,000, that is used exclusively in a medical enterprise zone.
   The bill would also authorize a credit against those taxes for
each taxable year beginning on or after January 1, 2008, in an amount
equal to various specified percentages of the amount paid or
incurred during the taxable year for hiring a health care
professional whose services were performed in a medical enterprise
zone.
   The bill would additionally authorize a credit against those taxes
for each taxable year beginning on or after January 1, 2008, in an
amount equal to ____% of the qualified amount, as defined, for the
support of a qualified primary care residency training program.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Chapter 12.9 (commencing with Section 7091) is added to
Division 7 of Title 1 of the Government Code, to read:
      CHAPTER 12.9.  MEDICAL ENTERPRISE ZONES


   7091.  The Legislature finds and declares that the health, safety,
and welfare of the people of California depend upon the development,
stability, and expansion of private business, industry, primary
health care, and commerce, and that there are certain areas within
the state that are economically depressed and medically underserved
due to a lack of investment in the private sector. Therefore, it is
declared to be the purpose of this act to stimulate business, primary
health care, and industrial growth in the depressed areas of the
state by relaxing regulatory controls that impede private investment.

   The Legislature further finds and declares that nothing in this
chapter shall be construed to infringe upon regulations relating to
civil rights, equal employment rights, equal opportunity rights, or
fair housing rights of any person.
   The Legislature further finds and declares that no medical
enterprise zone shall be designated in which any boundary thereof is
drawn in such a manner as to include larger stable businesses, areas
with a sufficient supply of health care professionals, or heavily
residential areas to the detriment of areas that are truly
economically depressed and medically underserved.
   7092.  For purposes of this article:
   (a)  "Governing body" means a county board of supervisors or a
city council, as appropriate.
   (b)  "Eligible area" means a geographic area meeting the criteria
described in Section 7093.
   (c)  "Health professional shortage area" means an area designated
to be a primary care health professional shortage area by the federal
Department of Health and Human Services pursuant to Part 5
(commencing with Section 5.1) of Title 42 of the Code of Federal
Regulations.
   (d)  "Medical enterprise zone" means any area within a city,
county, or city and county that is designated as such by the Health
Manpower Policy Commission in accordance with Section 7093.
   (e)  "Commission" means the California Healthcare Workforce Policy
Commission of the Office of Statewide Health Planning and
Development.
   7093.  (a) The governing body of a city or county may, either by
ordinance or resolution, propose an eligible area plus one commercial
or industrial area or both within its respective jurisdiction as the
geographic area for a medical enterprise zone. A county may propose
an area within the unincorporated area as the geographic area for a
medical enterprise zone, but shall not propose an area within an
incorporated area unless this area is designated as a health
professional shortage area. This proposed geographic area shall be
based upon findings by the governing body that the area is a
depressed area or a health professional shortage area, and that the
designation as a medical enterprise zone is necessary in order to
assist in attracting private sector investment in the area. The city
or county shall establish definitive boundaries for the area to be
included in the application for designation and, if designated by the
agency or the commission, the designation shall be binding for a
period of 15 years.
   (b) Following the application for designation of a medical
enterprise zone by a city or county, the governing body shall apply
to the commission for designation. The commission shall adopt
regulations and guidelines concerning the necessary contents of each
application for designation. The commission shall refer to criteria
and regulations specified by the federal Department of Health and
Human Services contained in Part 5 (commencing with Section 5.1) of
Title 42 of the Code of Federal Regulations regarding designation of
health professional shortage areas.
   (c) Any city, county, or city and county with an eligible area
within its jurisdiction may complete a preliminary application. A
maximum of 20 applications may be chosen each year to complete a
final application.
   (d) (1) From the applications received, the commission shall
designate 10 medical enterprise zones by December 1, 2008.
   (2) The commission shall develop, maintain, and provide a complete
description of the areas included within each medical enterprise
zone to the Employment Development Department, the Minority Health
Professions Education Foundation, and any other individual or state
agency that requests it.
   (3) Taxpayers providing primary care services in medical
enterprise zones shall present to the commission information about
his or her programs three years following the establishment of the
taxpayer's business within a medical enterprise zone and every three
years thereafter. This information shall include, but is not limited
to, the following:
   (A) Change in the utilization of emergency room facilities in
neighborhoods served by the taxpayer's services.
   (B) Change in the utilization of primary care medical facilities
in neighborhoods served by the taxpayer's service.
   (C) The cost of providing primary health care services to families
in neighborhoods served by the taxpayer's services.
   (4) The commission shall evaluate the information required by
paragraph (3) and shall consider it in subsequent recommendations on
applications for medical enterprise zone status. The individual
taxpayer's business shall be considered a success if in the
neighborhoods served by the taxpayer's primary care services any of
the following conditions occur:
   (A) There is a decrease in the use of emergency room services.
   (B) There is an increase in the utilization of primary care
services.
   (C) There is clear evidence that families have received expanded
health services without an increase in per capita health costs.
   (e) In designating enterprise zones, the commission shall select
from the applications submitted those proposed medical enterprise
zones which, based on those applications, meet, to the extent
possible, the following criteria:
   (1) Those proposed medical enterprise zones which, upon a
comparison of all of the applications submitted, indicate that they
propose the most effective, innovative, and comprehensive regulatory,
tax, program, and other incentives in attracting primary health care
professional investment in the zone proposed.
   (2) For purposes of this paragraph, regulatory incentives include,
but are not limited to, all of the following:
   (A) The suspension or relaxation of locally originated or modified
building codes, zoning laws, general development plans, or rent
controls.
   (B) The elimination or reduction of fees for applications,
permits, and local government services.
   (C) The establishment of a streamlined permit process.
   (3) Tax incentives include, but are not limited to, the
elimination or reduction of construction taxes or business license
taxes.
   (4) The program and other incentives may include, but are not
limited to, all of the following:
   (A) The provision or expansion of infrastructure; the targeting of
federal block grant moneys, including small cities, education, and
health and welfare block grants.
   (B) The targeting of economic development grants and loan moneys,
including grant and loan moneys provided by the federal Urban
Development Action Grant program and the federal Economic Development
Administration.
   (C) The targeting of state and federal job disadvantaged and
vocational education grant moneys, including moneys provided by the
federal Job Partnership.
   (D) The targeting of moneys provided by the Training Act of 1982.
   (E) The targeting of federal and state transportation moneys.
   (F) The targeting of federal or state low-income housing and
rental assistance moneys.
   (5) In the process of designating new zones, the commission shall
take into consideration the location of existing zones and make every
effort to locate new zones in a manner that will not adversely
affect any existing zones.
   (f) In evaluating applications for designation, the commission
shall ensure that applications are not disqualified solely because of
technical deficiencies and shall provide applicants with an
opportunity to correct the deficiencies. Applications shall be
disqualified if the deficiencies are not corrected within two weeks.
   7094.  (a) The commission shall design, develop, and make
available the applications and the criteria for selection of
enterprise zones, and shall adopt all regulations necessary to carry
out this article.
   (b) The applications, selection criteria, and all necessary
regulations for designation shall be adopted and made available not
later than 250 days following the effective date of this article.
   (c) The commission may commence the designation of areas for the
program on the effective date of the regulations described in
subdivision (a) and shall complete those designations as
expeditiously as practicable, but in no event later than four years
from the effective date of this article.
   (d) The commission shall adopt regulations concerning the
designation procedures and application process as emergency
regulations in accordance with Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2. For the purpose of the
Administrative Procedure Act, the adoption of the regulations shall
be deemed to be an emergency and necessary for the immediate
preservation of the public peace, health and safety, or general
welfare, notwithstanding subdivision (e) of Section 11346.1.
Notwithstanding subdivision (e) of Section 11346.1, the regulations
shall not remain in effect more than 180 days unless the agency
complies with all provisions of Chapter 3.5 as required by
subdivision (e) of Section 11346.1.
   7095.  (a) A health facility located in a medical enterprise zone
shall notify the commission and the Legislature at least 180 days
prior to the date it intends to withdraw wholly or substantially from
operating a facility or program, like a primary care residency
training program, including a medical enterprise zone.
   (b) (1) Upon receipt of the notice, the commission shall request
and review additional information, as deemed necessary, to determine
the conditions in the medical enterprise zone and to determine
whether health care may not become readily available in the medical
enterprise zone if the facility or program is closed or substantially
withdrawn. The commission shall submit a summary of its review to
the Legislature within 60 days of receipt of notice from the health
facility.
   (2) The appropriate policy committee of the Assembly or Senate
shall conduct a public hearing on the proposed closure or withdrawal.
The hearing shall be held within 60 days of the summary being
submitted to the Legislature. If the summary is submitted when the
Legislature is in recess, the hearing shall occur within 30 days of
the Members convening.
  SEC. 2.  Section 128260 of the Health and Safety Code is amended to
read:
   128260.  As used in this article, unless the context otherwise
requires, the following definitions shall apply:
   (a) "Commission" means the California Healthcare Workforce Policy
Commission.
   (b) "Director" means the Director of Statewide Health Planning and
Development.
   (c) "Medically underserved designated shortage area" means any of
the following:
   (1) An area designated by the commission as a critical health
workforce shortage area.
   (2) A medically underserved area, as designated by the United
States Department of Health and Human Services.
   (3) A critical workforce shortage area, as defined by the United
States Department of Health and Human Services. 
   (4) An area designated as a medical enterprise zone pursuant to
Section 7093 of the Government Code. 
   (d) "Primary care physician" means a physician who has the
responsibility for providing initial and primary care to patients,
for maintaining the continuity of patient care, and for initiating
referral for care by other specialists. A primary care physician
shall be a board-certified or board-eligible general internist,
general pediatrician, general obstetrician-gynecologist, or family
physician.
  SEC. 3.  Section 17039 of the Revenue and Taxation Code is amended
to read:
   17039.  (a) Notwithstanding any provision in this part to the
contrary, for the purposes of computing tax credits, the term "net
tax" means the tax imposed under either Section 17041 or 17048 plus
the tax imposed under Section 17504 (relating to lump-sum
distributions) less the credits allowed by Section 17054 (relating to
personal exemption credits) and any amount imposed under paragraph
(1) of subdivision (d) and paragraph (1) of subdivision (e) of
Section 17560. Notwithstanding the preceding sentence, the "net tax"
shall not be less than the tax imposed under Section 17504 (relating
to the separate tax on lump-sum distributions), if any. Credits shall
be allowed against "net tax" in the following order:
   (1) Credits that do not contain carryover or refundable
provisions, except those described in paragraphs (4) and (5).
   (2) Credits that contain carryover provisions but do not contain
refundable provisions, except for those that are allowed to reduce
"net tax" below the tentative minimum tax, as defined by Section
17062.
   (3) Credits that contain both carryover and refundable provisions.

   (4) The minimum tax credit allowed by Section 17063 (relating to
the alternative minimum tax).
   (5) Credits that are allowed to reduce "net tax" below the
tentative minimum tax, as defined by Section 17062.
   (6) Credits for taxes paid to other states allowed by Chapter 12
(commencing with Section 18001).
   (7) Credits that contain refundable provisions but do not contain
carryover provisions.
   The order within each paragraph shall be determined by the
Franchise Tax Board.
   (b) Notwithstanding the provisions of Sections 17061 (relating to
refunds pursuant to the Unemployment Insurance Code) and 19002
(relating to tax withholding), the credits provided in those sections
shall be allowed in the order provided in paragraph (6) of
subdivision (a).
   (c) (1) Notwithstanding any other provision of this part, no tax
credit shall reduce the tax imposed under Section 17041 or 17048 plus
the tax imposed under Section 17504 (relating to the separate tax on
lump-sum distributions) below the tentative minimum tax, as defined
by Section 17062, except the following credits:
   (A) The credit allowed by Section 17052.2 (relating to teacher
retention tax credit).
   (B) The credit allowed by former Section 17052.4 (relating to
solar energy).
   (C) The credit allowed by former Section 17052.5 (relating to
solar energy, repealed on January 1, 1987).
   (D) The credit allowed by former Section 17052.5 (relating to
solar energy, repealed on December 1, 1994).
   (E) The credit allowed by Section 17052.12 (relating to research
expenses).
   (F) The credit allowed by former Section 17052.13 (relating to
sales and use tax credit).
   (G) The credit allowed by former Section 17052.15 (relating to Los
Angeles Revitalization Zone sales tax credit). 
   (H) The credit allowed by Section 17052.16 (relating to medical
enterprise zone sales and use tax credit).  
   (H) 
    (I)  The credit allowed by Section 17052.25 (relating to
the adoption costs credit). 
   (I) 
    (J)  The credit allowed by Section 17053.5 (relating to
the renter's credit). 
   (J) 
    (K)  The credit allowed by former Section 17053.8
(relating to enterprise zone hiring credit). 
   (K) 
    (L)  The credit allowed by former Section 17053.10
(relating to Los Angeles Revitalization Zone hiring credit). 

   (L) 
    (M)  The credit allowed by former Section 17053.11
(relating to program area hiring credit). 
   (M) 
    (N)  For each taxable year beginning on or after January
1, 1994, the credit allowed by former Section 17053.17 (relating to
Los Angeles Revitalization Zone hiring credit). 
   (N) 
    (O)  The credit allowed by Section 17053.33 (relating to
targeted tax area sales or use tax credit). 
   (O) 
    (P)  The credit allowed by Section 17053.34 (relating to
targeted tax area hiring credit). 
   (P) 
    (Q)  The credit allowed by Section 17053.49 (relating to
qualified property). 
   (Q) 
    (R)  The credit allowed by Section 17053.70 (relating to
enterprise zone sales or use tax credit). 
   (R) 
    (S)  The credit allowed by Section 17053.74 (relating to
enterprise zone hiring credit). 
   (S) 
    (T)  The credit allowed by Section 17054 (relating to
credits for personal exemption). 
   (T) 
    (U)  The credit allowed by Section 17054.5 (relating to
the credits for a qualified joint custody head of household and a
qualified taxpayer with a dependent parent). 
   (U) 
    (V)  The credit allowed by Section 17054.7 (relating to
the credit for a senior head of household). 
   (V) 
    (W)  The credit allowed by former Section 17057
(relating to clinical testing expenses). 
   (W) 
    (X)  The credit allowed by Section 17058 (relating to
low-income housing). 
   (X) 
    (Y)  The credit allowed by Section 17061 (relating to
refunds pursuant to the Unemployment Insurance Code). 
   (Y) 
    (Z)  Credits for taxes paid to other states allowed by
Chapter 12 (commencing with Section 18001). 
   (Z) 
    (AA)  The credit allowed by Section 19002 (relating to
tax withholding).
   (2) Any credit that is partially or totally denied under paragraph
(1) shall be allowed to be carried over and applied to the net tax
in succeeding taxable years, if the provisions relating to that
credit include a provision to allow a carryover when that credit
exceeds the net tax.
   (d) Unless otherwise provided, any remaining carryover of a credit
allowed by a section that has been repealed or made inoperative
shall continue to be allowed to be carried over under the provisions
of that section as it read immediately prior to being repealed or
becoming inoperative.
   (e) (1) Unless otherwise provided, if two or more taxpayers (other
than husband and wife) share in costs that would be eligible for a
tax credit allowed under this part, each taxpayer shall be eligible
to receive the tax credit in proportion to his or her respective
share of the costs paid or incurred.
   (2) In the case of a partnership, the credit shall be allocated
among the partners pursuant to a written partnership agreement in
accordance with Section 704 of the Internal Revenue Code, relating to
partner's distributive share.
   (3) In the case of a husband and wife who file separate returns,
the credit may be taken by either or equally divided between them.
   (f) Unless otherwise provided, in the case of a partnership, any
credit allowed by this part shall be computed at the partnership
level, and any limitation on the expenses qualifying for the credit
or limitation upon the amount of the credit shall be applied to the
partnership and to each partner.
   (g) (1) With respect to any taxpayer that directly or indirectly
owns an interest in a business entity that is disregarded for tax
purposes pursuant to Section 23038 and any regulations thereunder,
the amount of any credit or credit carryforward allowable for any
taxable year attributable to the disregarded business entity shall be
limited in accordance with paragraphs (2) and (3).
   (2) The amount of any credit otherwise allowed under this part,
including any credit carryover from prior years, that may be applied
to reduce the taxpayer's "net tax," as defined in subdivision (a),
for the taxable year shall be limited to an amount equal to the
excess of the taxpayer's regular tax (as defined in Section 17062),
determined by including income attributable to the disregarded
business entity that generated the credit or credit carryover, over
the taxpayer's regular tax (as defined in Section 17062), determined
by excluding the income attributable to that disregarded business
entity. No credit shall be allowed if the taxpayer's regular tax (as
defined in Section 17062), determined by including the income
attributable to the disregarded business entity, is less than the
taxpayer's regular tax (as defined in Section 17062), determined by
excluding the income attributable to the disregarded business entity.

   (3) If the amount of a credit allowed pursuant to the section
establishing the credit exceeds the amount allowable under this
subdivision in any taxable year, the excess amount may be carried
over to subsequent taxable years pursuant to subdivisions (c) and
(d).
   (h) (1) Unless otherwise specifically provided, in the case of a
taxpayer that is a partner or shareholder of an eligible pass-through
entity described in paragraph (2), any credit passed through to the
taxpayer in the taxpayer's first taxable year beginning on or after
the date the credit is no longer operative may be claimed by the
taxpayer in that taxable year, notwithstanding the repeal of the
statute authorizing the credit prior to the close of that taxable
year.
   (2) For purposes of this subdivision, "eligible pass-through
entity" means any partnership or  S   "S" 
corporation that files its return on a fiscal year basis pursuant to
Section 18566, and that is entitled to a credit pursuant to this part
for the taxable year that begins during the last year the credit is
operative.
   (3) This subdivision shall apply to credits that become
inoperative on or after the operative date of the act adding this
subdivision.
  SEC. 4.  Section 17052.16 is added to the Revenue and Taxation
Code, to read:
   17052.16.  (a) For each taxable year beginning on or after January
1, 2008, there shall be allowed a credit against the "net tax," as
defined by Section 17039, an amount, not to exceed the limitation in
subdivision (f), that is equal to the sales or use tax paid or
incurred by the taxpayer in connection with the purchase of qualified
property.
   (b) For purposes of this section:
   (1) "Taxpayer" means a person or entity engaged in a trade or
business that provides primary care services, as defined in
subdivision (d) of Section 2201 of the Business and Professions Code,
any physician and surgeon licensed pursuant to Section 1900 of the
Business and Professions Code, or a primary care midlevel health
practitioner, as defined in subdivision (b) of Section 1339.5 of the
Health and Safety Code, within a medical enterprise zone.
   (2) "Qualified property" means medical equipment up to a value of
one hundred thousand dollars ($100,000), that is used exclusively in
a medical enterprise zone.
   (3)  "Medical equipment" includes, but is not limited to,
audiometers, EKGs, colposcopes, flexible sigmoidoscopes, pulmonary
function machines, microscopes, small refrigerators and incubators,
surgical instruments used for minor surgery, biopsies, and sutures,
X-ray viewing boxes, chemical analyzers, centrifuges, hematocut
centrifuges, sphygmomanometers, otoscopes, ophthalmoscopes, adult
scales, baby scales, exam room furniture, waiting room furniture,
filing cabinets, computers and printers, computer tables, dictating
equipment, and typewriters.
   (4) "Medical enterprise zone" means an area for which designation
as a medical enterprise zone is in effect under Section 7093 of the
Government Code.
   (c) (1) In the case where a credit is allowed for qualified
property under more than one section in this part, the taxpayer shall
make an election, on the return filed for each year, as to which
section applies to that taxpayer.
   (2) Any election made under this section, and any specification
contained in that election, may not be revoked except with the
consent of the Franchise Tax Board.
   (d) In the case where the credit allowed under this section
exceeds the limitation imposed by subdivision (f) for the taxable
year, that portion of the credit that exceeds the limitation imposed
by subdivision (f) may be carried over and added to this credit in
succeeding taxable years for the number of taxable years in which the
designation of a medical enterprise zone is operative, until the
credit is used. The credit shall be applied first to the earliest
taxable years possible.
   (e) Any taxpayer who elects to be subject to this section shall
not be entitled to increase the basis of the property as otherwise
required by Section 164(a) of the Internal Revenue Code with respect
to the sales and use tax paid or incurred in connection with the
purchase of qualified property.
   (f) The amount of the credit provided by this section, including
any credit carryover from prior years, in any taxable year shall not
exceed the amount of tax that would be imposed on the income
attributable to business activities of the taxpayer within the
medical enterprise zone as if that attributable income represented
all of the income of the taxpayer subject to tax under this part. In
the event that a credit carryover is allowable under subdivision (d)
for any taxable year after the medical enterprise zone designation
has expired, the medical enterprise zone shall be deemed to remain in
existence for purposes of computing this limitation. The amount of
that attributable income shall be determined in accordance with the
provisions of Article 2 (commencing with Section 25120) of Chapter 17
of Part 11, modified as follows:
   (1) Income shall be apportioned to the medical enterprise zone by
multiplying total income from the business by a fraction, the
numerator of which is the property factor plus the payroll factor,
and the denominator of which is two.
   (2) Medical enterprise zone shall be substituted for "this state."

   (g) If the qualified property is disposed of or no longer used by
the taxpayer in a medical enterprise zone, at any time before the
close of the second taxable year after the property is placed in
service, the amount of the credit previously claimed shall be added
to the taxpayer's tax liability in the taxable year of that
disposition or nonuse.
  SEC. 5.  Section 17053.16 is added to the Revenue and Taxation
Code, to read:
   17053.16.  (a) For each taxable year beginning on or after January
1, 2008, there shall be allowed as credit against the "net tax," as
defined in Section 17039, to a qualified taxpayer for hiring a health
care professional during the taxable year. The credit shall be equal
to the sum of each of the following:
   (1) Fifty percent for qualified wages in the first year of
employment.
   (2) Forty percent for qualified wages in the second year of
employment.
   (3) Thirty percent for qualified wages in the third year of
employment.
   (4) Twenty percent for qualified wages in the fourth year of
employment.
   (5) Ten percent for qualified wages in the fifth year of
employment.
                         (b) For purposes of this section:
   (1) "Qualified wages" means the wages paid or incurred by the
employer during the taxable year to health care professionals.
"Qualified wages" means that portion of hourly wages which does not
exceed 150 percent of the minimum wage.
   (2) "Qualified years one through five wages" means, with respect
to any individual, qualified wages received during the 60-month
period beginning with the day the individual commences employment
within a medical enterprise zone.
   (3) "Minimum wage" means the wage established by the Industrial
Welfare Commission as provided for in Chapter 1 (commencing with
Section 1171) of Part 4 of Division 2 of the Labor Code.
   (4) "Qualified taxpayer" means a person or entity engaged in a
trade or business that provides primary care services as defined in
subdivision (d) of Section 2201 of the Business and Professions Code,
any physician and surgeon licensed pursuant to Section 1900 of the
Business and Professions Code, or a primary care midlevel health care
practitioner, as defined in subdivision (b) of Section 1339.5 of the
Health and Safety Code, within a medical enterprise zone.
   (5) "Health care professional" means an individual:
   (A) Who is a qualified employee within the meaning of paragraph
(6).
   (B) Who is hired by the employer after the designation of the area
in which services were performed as a medical enterprise zone.
   (C) Who relocated to a medical enterprise zone.
   (D) Who is any of the following:
   (i) A primary care physician as defined in Section 14254 of the
Welfare and Institutions Code.
   (ii) A nurse as defined in Section 2725 of the Business and
Professions Code.
   (iii) A physician assistant who is licensed by the Physician
Assistant Examining Committee, and who meets the requirements of
Chapter 7.7 (commencing with Section 3500) of Division 2 of the
Business and Professions Code.
   (iv) A nurse practitioner licensed under Chapter 6 (commencing
with Section 2700) of Division 2 of the Business and Professions Code
and who meets the standards for a nurse practitioner established by
the Board of Registered Nursing.
   (6) "Qualified employee" means an individual:
   (A) At least 90 percent of whose services for the taxpayer during
the taxable year are directly related to the conduct of the taxpayer'
s trade or business located in a medical enterprise zone.
   (B) Who performs at least 50 percent of his or her services for
the taxpayer during the taxable year in a medical enterprise zone.
   (7) "Medical enterprise zone" means an area for which designation
as a medical enterprise zone is in effect under Section 7093 of the
Government Code.
   (8) (A) All employees of trades or businesses that are not
incorporated and that are under common control shall be treated as
employed by a single employer.
   (B) The credit, if any, allowable by this section with respect to
each trade or business shall be determined by reference to its
proportionate share of the qualified wages giving rise to the credit.

   The regulations prescribed under this paragraph shall be based on
principles similar to the principles that apply in the case of
controlled groups of corporations as specified in paragraph (8) of
subdivision (b) of Section 23622.5.
   (9) 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, except subdivision (c), for any calendar year ending
after that acquisition, the employment relationship between an
employee and an employer shall not be treated as terminated if the
employee continues to be employed in that trade or business.
   (c) (1) If the employment of any employee, with respect to whom
qualified wages are taken into account under subdivision (a) is
terminated by the taxpayer at any time during the first 270 days of
that employment, whether or not consecutive, or before the close of
the 270th calendar day after the day in which that employee completes
90 days of employment with the taxpayer, the tax imposed by this
part for the taxable year in which that employment is terminated
shall be increased by an amount determined under those regulations
equal to the credit allowed under subdivision (a) for that taxable
year and all prior taxable years attributable to qualified wages paid
or incurred with respect to that employee.
   (2) (A) Paragraph (1) shall not apply to any of the following:
   (i) A termination of employment of an employee who voluntarily
leaves the employment of the taxpayer.
   (ii) A termination of employment of an individual who, before the
close of the period referred to in paragraph (1), becomes disabled to
perform the services of that employment, unless that disability is
removed before the close of that period and the taxpayer fails to
offer reemployment to that individual.
   (iii) A termination of employment of an individual, if it is
determined under the applicable employment compensation provisions
that the termination was due to the misconduct of that individual.
   (iv) A termination of employment of an individual due to a
substantial reduction in the trade or business operations of the
taxpayer.
   (v) A termination of employment of an individual, if that
individual is replaced by other qualified employees so as to create a
net increase in both the number of employees and the hours of
employment.
   (B) For purposes of paragraph (1), the employment relationship
between the taxpayer and an employee shall not be treated as
terminated by reason of a mere change in the form of conducting the
trade or business of the taxpayer, if the employee continues to be
employed in that trade or business and the taxpayer retains a
substantial interest in that trade or business.
   (3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
   (d) In the case of an estate or trust:
   (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.
   (e) The credit shall be reduced by the credit allowed under
Sections 17053.7, 17053.8, 17053.10, 17053.11, 17053.17, and
17053.46. The credit shall also be reduced by the federal credit
allowed under Section 51 of the Internal Revenue Code.
   In addition, any deduction otherwise allowed under this part for
the wages or salaries paid or incurred by the taxpayer upon which the
credit is based shall be reduced by the amount of the credit.
   (f) In the case where the credit allowed under this section
exceeds the limitation imposed by subdivision (g) for the taxable
year, that portion of the credit that exceeds the limitation imposed
by subdivision (g) may be carried over and added to this credit in
succeeding taxable years while the designation of the medical
enterprise zone is operative or 15 taxable years, if longer, until
the credit is used. The credit shall be applied first to the earliest
taxable years possible.
   (g) The amount of the credit provided by this section, including
any credit carryover from prior years, in any taxable year shall not
exceed the amount of tax that would be imposed on the income
attributable to business activities of the taxpayer within the
medical enterprise zone as if that attributable income represented
all of the income of the taxpayer subject to tax under this part. In
the event that a credit carryover is allowable under subdivision (f)
for any taxable year after the medical enterprise zone designation
has expired, the medical enterprise zone shall be deemed to remain in
existence for purposes of computing this limitation. The amount of
that attributable income shall be determined in accordance with the
provisions of Article 2 (commencing with Section 25120) of Chapter 17
of Part 11, modified as follows:
   (1) Income shall be apportioned to the medical enterprise zone by
multiplying total income from the business by a fraction, the
numerator of which is the property factor plus the payroll factor,
and the denominator of which is two.
   (2) Medical enterprise zone shall be substituted for "this state."

  SEC. 6.  Section 17053.17 is added to the Revenue and Taxation
Code, to read:
   17053.17.  (a) For each taxable year beginning on or after January
1, 2008, there shall be allowed as a credit against the "net tax,"
as defined in Section 17039, to a qualified taxpayer ____ percent of
the qualified amount for the support of a qualified primary care
residency training program.
   (b) For purposes of this section:
   (1) "Medical enterprise zone" means an area for which designation
as a medical enterprise zone is in effect under Section 7093 of the
Government Code.
   (2) "Qualified amount" means the costs paid or incurred by a
qualified taxpayer for the support of a qualified primary care
residency training program.
   (3) "Qualified primary care residency training program" means a
primary care residency training program located and operating in a
medical enterprise zone.
   (4) "Qualified taxpayer" means a person or entity that is lawfully
engaged in providing, arranging, paying for, or reimbursing the cost
of personal health care services under insurance policies or
contracts, medical and hospital service arrangements, or membership
contracts, in consideration of premiums or other periodic charges
payable to it.
   (c) 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 succeeding years, until the credit is exhausted.
  SEC. 7.  Section 23036 of the Revenue and Taxation Code is amended
to read:
   23036.  (a) (1) The term "tax" includes any of the following:
   (A) The tax imposed under Chapter 2 (commencing with Section
23101).
   (B) The tax imposed under Chapter 3 (commencing with Section
23501).
   (C) The tax on unrelated business taxable income, imposed under
Section 23731.
   (D) The tax on S corporations imposed under Section 23802.
   (2) The term "tax" does not include any amount imposed under
paragraph (1) of subdivision (e) of Section 24667 or paragraph (2) of
subdivision (f) of Section 24667.
   (b) For purposes of Article 5 (commencing with Section 18661) of
Chapter 2, Article 3 (commencing with Section 19031) of Chapter 4,
Article 6 (commencing with Section 19101) of Chapter 4, and Chapter 7
(commencing with Section 19501) of Part 10.2, and for purposes of
Sections 18601, 19001, and 19005, the term "tax" also includes all of
the following:
   (1) The tax on limited partnerships, imposed under Section 17935,
the tax on limited liability companies, imposed under Section 17941,
and the tax on registered limited liability partnerships and foreign
limited liability partnerships imposed under Section 17948.
   (2) The alternative minimum tax imposed under Chapter 2.5
(commencing with Section 23400).
   (3) The tax on built-in gains of  S   "S"
 corporations, imposed under Section 23809.
   (4) The tax on excess passive investment income of S corporations,
imposed under Section 23811.
   (c) Notwithstanding any other provision of this part, credits are
allowed against the "tax" in the following order:
   (1) Credits that do not contain carryover provisions.
   (2) Credits that, when the credit exceeds the "tax," allow the
excess to be carried over to offset the "tax" in succeeding taxable
years, except for those credits that are allowed to reduce the "tax"
below the tentative minimum tax, as defined by Section 23455. The
order of credits within this paragraph shall be determined by the
Franchise Tax Board.
   (3) The minimum tax credit allowed by Section 23453.
   (4) Credits that are allowed to reduce the "tax" below the
tentative minimum tax, as defined by Section 23455.
   (5) Credits for taxes withheld under Section 18662.
   (d) Notwithstanding any other provision of this part, each of the
following applies:
   (1) No credit may reduce the "tax" below the tentative minimum tax
(as defined by paragraph (1) of subdivision (a) of Section 23455),
except the following credits:
   (A) The credit allowed by former Section 23601 (relating to solar
energy).
   (B) The credit allowed by former Section 23601.4 (relating to
solar energy).
   (C) The credit allowed by former Section 23601.5 (relating to
solar energy).
   (D) The credit allowed by Section 23609 (relating to research
expenditures).
   (E) The credit allowed by former Section 23609.5 (relating to
clinical testing expenses).
   (F) The credit allowed by Section 23610.5 (relating to low-income
housing).
   (G) The credit allowed by former Section 23612 (relating to sales
and use tax credit).
   (H) The credit allowed by Section 23612.2 (relating to enterprise
zone sales or use tax credit). 
   (I) The credit allowed by Section 23612.3 (relating to medical
enterprise zone sales and use tax credit).  
   (I) 
    (J)  The credit allowed by former Section 23612.6
(relating to Los Angeles Revitalization Zone sales tax credit).

   (J) 
    (K)  The credit allowed by former Section 23622
(relating to enterprise zone hiring credit). 
   (K) 
    (L)  The credit allowed by Section 23622.7 (relating to
enterprise zone hiring credit). 
   (L)
    (M)  The credit allowed by former Section 23623
(relating to program area hiring credit). 
   (M) 
    (N)  The credit allowed by former Section 23623.5
(relating to Los Angeles Revitalization Zone hiring credit). 

   (N) 
   (O)  The credit allowed by former Section 23625 (relating
to Los Angeles Revitalization Zone hiring credit). 
   (O) 
    (P)  The credit allowed by Section 23633 (relating to
targeted tax area sales or use tax credit). 
   (P) 
    (Q)  The credit allowed by Section 23634 (relating to
targeted tax area hiring credit). 
   (Q) 
    (R)  The credit allowed by Section 23649 (relating to
qualified property).
   (2) No credit against the tax may reduce the minimum franchise tax
imposed under Chapter 2 (commencing with Section 23101).
   (e) Any credit which is partially or totally denied under
subdivision (d) is allowed to be carried over to reduce the "tax" in
the following year, and succeeding years if necessary, if the
provisions relating to that credit include a provision to allow a
carryover of the unused portion of that credit.
   (f) Unless otherwise provided, any remaining carryover from a
credit that has been repealed or made inoperative is allowed to be
carried over under the provisions of that section as it read
immediately prior to being repealed or becoming inoperative.
   (g) Unless otherwise provided, if two or more taxpayers share in
costs that would be eligible for a tax credit allowed under this
part, each taxpayer is eligible to receive the tax credit in
proportion to his or her respective share of the costs paid or
incurred.
   (h) Unless otherwise provided, in the case of an  S
  "S"  corporation, any credit allowed by this part
is computed at the  S   "S"  corporation
level, and any limitation on the expenses qualifying for the credit
or limitation upon the amount of the credit applies to the  S
  "S"  corporation and to each shareholder.
   (i) (1) With respect to any taxpayer that directly or indirectly
owns an interest in a business entity that is disregarded for tax
purposes pursuant to Section 23038 and any regulations thereunder,
the amount of any credit or credit carryforward allowable for any
taxable year attributable to the disregarded business entity is
limited in accordance with paragraphs (2) and (3).
   (2) The amount of any credit otherwise allowed under this part,
including any credit carryover from prior years, that may be applied
to reduce the taxpayer's "tax," as defined in subdivision (a), for
the taxable year is limited to an amount equal to the excess of the
taxpayer's regular tax (as defined in Section 23455), determined by
including income attributable to the disregarded business entity that
generated the credit or credit carryover, over the taxpayer's
regular tax (as defined in Section 23455), determined by excluding
the income attributable to that disregarded business entity. No
credit is allowed if the taxpayer's regular tax (as defined in
Section 23455), determined by including the income attributable to
the disregarded business entity is less than the taxpayer's regular
tax (as defined in Section 23455), determined by excluding the income
attributable to the disregarded business entity.
   (3) If the amount of a credit allowed pursuant to the section
establishing the credit exceeds the amount allowable under this
subdivision in any taxable year, the excess amount may be carried
over to subsequent taxable years pursuant to subdivisions (d), (e),
and (f).
   (j) (1) Unless otherwise specifically provided, in the case of a
taxpayer that is a partner or shareholder of an eligible pass-through
entity described in paragraph (2), any credit passed through to the
taxpayer in the taxpayer's first taxable year beginning on or after
the date the credit is no longer operative may be claimed by the
taxpayer in that taxable year, notwithstanding the repeal of the
statute authorizing the credit prior to the close of that taxable
year.
   (2) For purposes of this subdivision, "eligible pass-through
entity" means any partnership or  S   "S" 
corporation that files its return on a fiscal year basis pursuant to
Section 18566, and that is entitled to a credit pursuant to this part
for the taxable year that begins during the last year a credit is
operative.
   (3) This subdivision applies to credits that become inoperative on
or after the operative date of the act adding this subdivision.
  SEC. 8.  Section 23612.3 is added to the Revenue and Taxation Code,
to read:
   23612.3.  (a) For each taxable year beginning on or after January
1, 2008, there shall be allowed a credit against the "tax," as
defined by Section 23036, an amount, not to exceed the limitation in
subdivision (f), that is equal to the sales or use tax paid or
incurred by the taxpayer in connection with the purchase of qualified
property.
   (b) For purposes of this section:
   (1) "Taxpayer" means an entity engaged in a trade or business that
provides primary care services as defined in subdivision (d) of
Section 2201 of the Business and Professions Code, within a medical
enterprise zone.
   (2) "Qualified property" means medical equipment, up to a value of
twenty million dollars ($20,000,000), that is used exclusively in a
medical enterprise zone.
   (3) "Medical equipment" includes, but is not limited to,
audiometers, EKGs, colposcopes, flexible sigmoidoscopes, pulmonary
function machines, microscopes, small refrigerators and incubators,
surgical instruments used for minor surgery, biopsies, and sutures,
X-ray viewing boxes, chemical analyzers, centrifuges, hematocut
centrifuges, sphygmomanometers, otoscopes, ophthalmoscopes, adult
scales, baby scales, exam room furniture, waiting room furniture,
filing cabinets, computers and printers, computer tables, dictating
equipment, and typewriters.
   (4) "Medical enterprise zone" means an area for which designation
as a medical enterprise zone is in effect under Section 7073 of the
Government Code.
   (c) (1) In the case where a credit is allowed for qualified
property under more than one section in this part, the taxpayer shall
make an election, on the return filed for each year, as to which
section applies to that taxpayer.
   (2) Any election made under this section and any specification
contained in that election, may not be revoked except with the
consent of the Franchise Tax Board.
   (d) In the case where the credit allowed under this section
exceeds the limitation imposed by subdivision (f) for the taxable
year, that portion of the credit that exceeds the limitation imposed
by subdivision (f) may be carried over and added to this credit in
succeeding taxable years for the number of taxable years in which the
designation of a medical enterprise zone is operative, until the
credit is used. The credit shall be applied first to the earliest
taxable years possible.
   (e) Any taxpayer who elects to be subject to this section shall
not be entitled to increase the basis of the property as otherwise
required by Section 164(a) of the Internal Revenue Code with respect
of the sales and use tax paid or incurred in connection with the
purchase of qualified property.
   (f) The amount of the credit provided by this section, including
any credit carryover from prior years, in any taxable year shall not
exceed the amount of tax that would be imposed on the income
attributable to business activities of the taxpayer within the
medical enterprise zone as if that attributable income represented
all of the income of the taxpayer subject to tax under this part. In
the event that a credit carryover is allowable under subdivision (d)
for any taxable year after the medical enterprise zone designation
has expired, the medical enterprise zone shall be deemed to remain in
existence for purposes of computing this limitation. The amount of
that attributable income shall be determined in accordance with the
provisions of Article 2 (commencing with Section 25120) of Chapter 17
of Part 11, modified as follows:
   (1) Income shall be apportioned to the medical enterprise zone by
multiplying total income from the business by a fraction, the
numerator of which is the property factor plus the payroll factor,
and the denominator of which is two.
   (2) Medical enterprise zone shall be substituted for "this state."

   (g) If the qualified property is disposed of or no longer used by
the taxpayer in a medical enterprise zone, at any time before the
close of the second taxable year after the property is placed in
service, the amount of the credit previously claimed shall be added
to the taxpayer's tax liability in the taxable year of that
disposition or nonuse.
  SEC. 9.  Section 23612.5 is added to the Revenue and Taxation Code,
to read:
   23612.5.  (a) For each income year beginning on or after January
1, 2008, there shall be allowed as a credit against the "tax," as
defined by Section 23036, to a qualified taxpayer for hiring a health
care professional during the income year. The credit shall be equal
to the sum of each of the following:
   (1) Fifty percent for qualified wages in the first year of
employment.
   (2) Forty percent for qualified wages in the second year of
employment.
   (3) Thirty percent for qualified wages in the third year of
employment.
   (4) Twenty percent for qualified wages in the fourth year of
employment.
   (5) Ten percent for qualified wages in the fifth year of
employment.
   (b) For purposes of this section:
   (1) "Qualified wages" means the wages paid or incurred by the
employer during the taxable year to health care professionals.
"Qualified wages" means that portion of hourly wages which does not
exceed 150 percent of the minimum wage.
   (2) "Qualified years one through five wages" means, with respect
to any individual, qualified wages received during the 60-month
period beginning with the day the individual commences employment
within a medical enterprise zone.
   (3) "Minimum wage" means the wage established by the Industrial
Welfare Commission as provided for in Chapter 1 (commencing with
Section 1171) of Part 4 of Division 2 of the Labor Code.
   (4) "Qualified taxpayer" means a person or entity engaged in a
trade or business that provides primary care services as defined in
subdivision (d) of Section 2201 of the Business and Professions Code,
any physician and surgeon licensed pursuant to Section 1900 of the
Business and Professions Code, or a primary care midlevel health care
practitioner, as defined in subdivision (b) of Section 1339.5 of the
Health and Safety Code, within a medical enterprise zone.
   (5) "Health care professional" means an individual who is any of
the following:
   (A) A qualified employee within the meaning of paragraph (6).
   (B) Hired by the employer after the designation of the area in
which services were performed as a medical enterprise zone.
   (C) Relocated to a medical enterprise zone.
   (D) Is any of the following:
   (i) A primary care physician as defined in Section 14254 of the
Welfare and Institutions Code.
   (ii) A nurse as defined in Section 2725 of the Business and
Professions Code.
   (iii) A physician assistant who is licensed by the Physician
Assistant Examining Committee, and who meets the requirements of
Chapter 7.7 (commencing with Section 3500) of Division 2 of the
Business and Professions Code.
   (iv) A nurse practitioner licensed under Chapter 6 (commencing
with Section 2700) of Division 2 of the Business and Professions Code
and who meets the standards for a nurse practitioner established by
the Board of Registered Nursing.
   (6) "Qualified employee" means an individual:
   (A) At least 90 percent of whose services for the taxpayer during
the taxable year are directly related to the conduct of the taxpayer'
s trade or business located in a medical enterprise zone.
   (B) Who performs at least 50 percent of his or her services for
the taxpayer during the taxable year in a medical enterprise zone.
   (7) "Medical enterprise zone" means an area for which designation
as a medical enterprise zone is in effect under Section 7093 of the
Government Code.
   (8) (A) All employees of trades or businesses that are not
incorporated and that are under common control shall be treated as
employed by a single employer.
   (B) The credit, if any, allowable by this section with respect to
each trade or business shall be determined by reference to its
proportionate share of the qualified wages giving rise to the credit.

   The regulations prescribed under this paragraph shall be based on
principles similar to the principles that apply in the case of
controlled groups of corporations as specified in paragraph (8) of
subdivision (b) of Section 23622.5.
   (9) 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, except subdivision (c), for any calendar year ending
after that acquisition, the employment relationship between an
employee and an employer shall not be treated
                           as terminated if the employee continues to
be employed in that trade or business.
   (c) (1) If the employment of any employee, with respect to whom
qualified wages are taken into account under subdivision (a) is
terminated by the taxpayer at any time during the first 270 days of
that employment, whether or not consecutive, or before the close of
the 270th calendar day after the day in which that employee completes
90 days of employment with the taxpayer, the tax imposed by this
part for the taxable year in which that employment is terminated
shall be increased by an amount determined under those regulations
equal to the credit allowed under subdivision (a) for that taxable
year and all prior taxable years attributable to qualified wages paid
or incurred with respect to that employee.
   (2) (A) Paragraph (1) shall not apply to any of the following:
   (i) A termination of employment of an employee who voluntarily
leaves the employment of the taxpayer.
   (ii) A termination of employment of an individual who, before the
close of the period referred to in paragraph (1), becomes disabled to
perform the services of that employment, unless that disability is
removed before the close of that period and the taxpayer fails to
offer reemployment to that individual.
   (iii) A termination of employment of an individual, if it is
determined under the applicable employment compensation provisions
that the termination was due to the misconduct of that individual.
   (iv) A termination of employment of an individual due to a
substantial reduction in the trade or business operations of the
taxpayer.
   (v) A termination of employment of an individual, if that
individual is replaced by other qualified employees so as to create a
net increase in both the number of employees and the hours of
employment.
   (B) For purposes of paragraph (1), the employment relationship
between the taxpayer and an employee shall not be treated as
terminated by reason of a mere change in the form of conducting the
trade or business of the taxpayer, if the employee continues to be
employed in that trade or business and the taxpayer retains a
substantial interest in that trade or business.
   (3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
   (d) In the case of an estate or trust:
   (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.
   (e) The credit shall be reduced by the credit allowed under
Sections 17053.7, 17053.8, 17053.10, 17053.11, 17053.17, and
17053.46. The credit shall also be reduced by the federal credit
allowed under Section 51 of the Internal Revenue Code.
   In addition, any deduction otherwise allowed under this part for
the wages or salaries paid or incurred by the taxpayer upon which the
credit is based shall be reduced by the amount of the credit.
   (f) In the case where the credit allowed under this section
exceeds the limitation imposed by subdivision (g) for the taxable
year, that portion of the credit that exceeds the limitation imposed
by subdivision (g) may be carried over and added to this credit in
succeeding taxable years while the designation of the medical
enterprise zone is operative or 15 taxable years, if longer, until
the credit is used. The credit shall be applied first to the earliest
taxable years possible.
   (g) The amount of the credit provided by this section, including
any credit carryover from prior years, in any taxable year shall not
exceed the amount of tax that would be imposed on the income
attributable to business activities of the taxpayer within the
medical enterprise zone as if that attributable income represented
all of the income of the taxpayer subject to tax under this part. In
the event that a credit carryover is allowable under subdivision (f)
for any taxable year after the medical enterprise zone designation
has expired, the medical enterprise zone shall be deemed to remain in
existence for purposes of computing this limitation. The amount of
that attributable income shall be determined in accordance with the
provisions of Article 2 (commencing with Section 25120) of Chapter 17
of Part 11, modified as follows:
   (1) Income shall be apportioned to the medical enterprise zone by
multiplying total income from the business by a fraction, the
numerator of which is the property factor plus the payroll factor,
and the denominator of which is two.
   (2) Medical enterprise zone shall be substituted for "this state."

  SEC. 10.  Section 23612.6 is added to the Revenue and Taxation
Code, to read:
   23612.6.  (a) For each taxable year beginning on or after January
1, 2008, there shall be allowed as a credit against the "tax," as
defined in Section 23036, to a qualified taxpayer ____ percent of the
qualified amount for the support of a qualified primary care
residency training program.
   (b) For purposes of this section:
   (1) "Medical enterprise zone" means an area for which designation
as a medical enterprise zone is in effect under Section 7093 of the
Government Code.
   (2) "Qualified amount" means the costs paid or incurred by a
qualified taxpayer for the support of a qualified primary care
residency training program.
   (3) "Qualified primary care residency training program" means a
primary care residency training program located and operating in a
medical enterprise zone.
   (4) "Qualified taxpayer" means a person or entity that is lawfully
engaged in providing, arranging, paying for, or reimbursing the cost
of personal health care services under insurance policies or
contracts, medical and hospital service arrangements, or membership
contracts, in consideration of premiums or other periodic charges
payable to it.
   (c) In the case where the credit allowed by this section exceeds
the "tax," the excess may be carried over to reduce the "tax" in
succeeding years, until the credit is exhausted.