BILL NUMBER: AB 103 AMENDED
BILL TEXT
AMENDED IN SENATE JUNE 12, 2011
AMENDED IN SENATE MARCH 24, 2011
AMENDED IN SENATE MARCH 17, 2011
AMENDED IN SENATE MARCH 14, 2011
INTRODUCED BY Committee on Budget (Blumenfield (Chair), Alejo,
Allen, Brownley, Buchanan, Butler, Cedillo, Chesbro, Dickinson,
Feuer, Gordon, Huffman, Mitchell, Monning, and Swanson)
JANUARY 10, 2011
An act to amend Sections 12009, 12201, 12204, 12207,
12242, 12251, 12253, 12254, 12257, 12258, 12260, 12301, 12302, 12303,
12304, 12305, 12307, 12412, 12413, 12421, 12422, 12423, 12427,
12428, 12429, 12431, 12433, 12434, 12491, 12493, 12494, 12601, 12602,
12631, 12632, 12636, 12636.5, 12679, 12681, 12801, 12951, 12977,
12983, 12984, 13108, 17276.1, 17276.20, 23101, 24416.1, 24416.20, and
25128 of, to amend and repeal Sections 17053.33, 17053.34, 17053.45,
17053.46, 17053.47, 17053.70, 17053.74, 17053.75, 17235, 17267.2,
17267.6, 17268, 17276.2, 17276.4, 17276.5, 17276.6, 23612.2, 23622.7,
23622.8, 23633, 23634, 23645, 23646, 24356.6, 24356.7, 24356.8,
24384.5, 24416.2, 24416.4, 24416.5, and 24416.6 of, to amend, repeal,
and add Section 25136 of, to add Sections 17053.31 and 23611 to, to
repeal Section 25128.5 of, and to repeal and add Sections 17276.22
and 24416.22 of, the Revenue and Taxation Code, to amend Sections
1661, 4601, 5902.5, and 9552 of the Vehicle Code, and to amend
Section 14301.11 of the Welfare and Institutions Code, relating to
taxation, making an appropriation therefor, and declaring the urgency
thereof, to take effect immediately, bill related to the budget.
An act to amend Sections 17053.33, 17053.34, 17053.45,
17053.46, 17053.47, 17053.70, 17053.74, 23101, 23612.2, 23622.7,
23622.8, 23633, 23634, 23645 , 23646, and 25128 of, to
amend, repeal, and add Section 25136 of, to add section 6377 to, to
repeal section 25128.5 of, and to repeal and amend Sections 17053.80
and 23623 of, the Revenue and Taxation Code, relating to taxation, to
take effect immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
AB 103, as amended, Committee on Budget. Taxation :
personal income and corporation taxes: managed care plan taxes
.
The Sales and Use Tax Law imposes a tax 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. That
law provides various exemptions from those taxes.
On and after July 1, 2012, this bill would exempt from specified
sales and use taxes, or a portion of those taxes, the sale of, and
the storage, use, or other consumption in this state, of tangible
personal property, as defined, purchased for use by a qualified
person, as defined, primarily in any stage of manufacturing,
processing, refining, fabricating, or recycling of property; in
research and development; to maintain, repair, measure, or test
specified property; and by a contractor for use in a construction
contract with a qualified person, as specified.
The Bradley-Burns Uniform Local Sales and Use Tax Law authorizes
counties and cities to impose local sales and use taxes in conformity
with the Sales and Use Tax Law, and the Transactions and Use Tax Law
authorizes districts, as specified, to impose transactions and use
taxes in conformity with the Sales and Use Tax Law. Exemptions from
state sales and use taxes are incorporated in these laws.
This bill would specify that this exemption does not apply to
local sales and use taxes or transactions and use taxes.
This bill would also specify that this exemption would be
operative only so long as state sales and use taxes are equal to or
greater than 7% or until July 1, 2016, whichever first occurs.
The Personal Income Tax Law and the Corporation Tax Law authorize
various credits against the taxes imposed by those laws, including a
credit for taxable years beginning on or after January 1, 2009, in
the amount of $3,000 for each full-time employee hired by a qualified
employer, until a cutoff date on which a maximum cumulative credit
of $400,000,000 has been reached for all taxable years. Those laws
define "qualified employer" as a taxpayer that employed 20 or fewer
employees as of the last day of the preceding taxable year.
This bill would, under both laws, continue that credit only for
taxable years beginning before January 1, 2011, and for taxable years
beginning on or after January 1, 2011, and before January 1, 2013,
would authorize a credit in the amount of $4,000 for each full-time
employee, as specified, and would revise the definition of "qualified
employer" to mean a taxpayer that employed 50 or fewer employees as
of the last day of the preceding taxable year. This bill would also
provide that the credit, under both laws, would be repealed upon the
cutoff date or December 31, 2013, whichever occurs earlier.
The Personal Income Tax Law and the Corporation Tax Law allow for
various tax credits and deductions in computing the taxes imposed by
those laws, relating to enterprise zones, targeted tax areas, local
agency military base recovery areas, and manufacturing enhancement
areas. Under existing law, specified tax credits for sales and use
taxes paid by certain taxpayers in these areas may be carried over to
succeeding taxable years, until the credit amount is exhausted.
Under both laws, credits are allowed to specified taxpayers for the
hiring and employment of specified employees within enterprise zones,
targeted tax areas, local agency military base recovery areas, and
manufacturing enhancement areas.
This bill would revise the credits allowed for the hiring and
employment of specified employees for taxable years beginning on or
after January 1, 2011, to provide, generally, for a credit of $5,000
for each net increase in specified full-time employees. This bill
would cease to allow carryovers for the credits for sales and use
taxes and for hiring and employment for taxable years beginning
before January 1, 2006, and limit the carryover period to five years
for those portions of credit that were first allowed in taxable years
beginning on or after January 1, 2006.
This bill would require specified taxpayers to submit information
to the Franchise Tax Board under penalty of perjury. By requiring
these taxpayer to submit information under penalty of perjury, this
bill would create a new crime and thereby impose a state-mandated
local program.
The Corporation Tax Law imposes taxes measured by income and, in
the case of a business with income derived from or attributable to
sources both within and without this state, apportions the income
between this state and other states and foreign countries in
accordance with a specified 4-factor formula based on the property,
payroll, and sales within and without this state, except that in the
case of an apportioning trade or business that derives more than 50%
of its gross business receipts from conducting one or more qualified
business activities, as defined, business income is apportioned in
accordance with a specified 3-factor formula. That law, for taxable
years beginning on or after January 1, 2011, allows a taxpayer to
have that income apportioned in accordance with a single sales factor
formula, except as provided, pursuant to an irrevocable annual
election, as specified. That law also provides that sales of tangible
and intangible personal property are in this state in accordance
with specified criteria.
This bill would, for taxable years beginning or after January 1,
2011, revise the rules which determine whether a taxpayer is doing
business within this state, revise the provisions which determine
whether specific sales occur in this state, and require a taxpayer,
except as provided, to apportion their income in accordance with a
single sales factor.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
This bill would constitute a change in state statute that would
result in a taxpayer paying a higher tax within the meaning of
Section 3 of Article XIII A of the California Constitution, and thus
would require for passage the approval of 2/3 of the membership of
each house of the Legislature.
This bill would take effect immediately as a tax levy.
(1) The Personal Income Tax Law and the Corporation Tax Law allow
for various tax credits and deductions in computing the taxes imposed
by those laws, relating to enterprise zones, targeted tax areas,
local agency military base recovery areas, manufacturing enhancement
areas, and net operating losses.
This bill would make these provisions inoperative for taxable
years beginning on or after January 1, 2011, and would repeal these
provisions as of December 1, 2011. This bill would also prevent
carryovers for taxable years beginning on or after January 1, 2011,
for specified provisions. This bill would delete obsolete references
to conform to these changes.
(2) Existing law allows individual and corporate taxpayers to
utilize net operating losses and carryovers and carrybacks of those
losses for purposes of offsetting their individual and corporate tax
liabilities. Existing law, for net operating losses incurred in
taxable years beginning on or after January 1, 2008, provides a
carryover period of 20 years and allows net operating losses
attributable to taxable years beginning on or after January 1, 2011,
to be carrybacks to each of the preceding 2 taxable years, as
provided.
This bill would recalculate elected net operating loss carryovers
available, under specified provisions that have been repealed by this
bill, by applying the net operating loss rules applicable to the
taxable year in which the net operating loss was incurred.
(3) The Corporation Tax Law imposes taxes measured by income and,
in the case of a business with income derived from or attributable to
sources both within and without this state, apportions the income
between this state and other states and foreign countries in
accordance with a specified 4-factor formula based on the property,
payroll, and sales within and without this state, except that in the
case of an apportioning trade or business that derives more than 50%
of its gross business receipts from conducting one or more qualified
business activities, as defined, business income is apportioned in
accordance with a specified 3-factor formula. That law, for taxable
years beginning on or after January 1, 2011, allows a taxpayer to
have that income apportioned in accordance with a single sales factor
formula, except as provided, pursuant to an irrevocable annual
election, as specified. That law also provides that sales of tangible
and intangible personal property are in this state in accordance
with specified criteria.
This bill would, for taxable years beginning or after January 1,
2011, revise the rules which determine whether a taxpayer is doing
business within this state, revise the provisions which determine
whether specific sales occur in this state, and require a taxpayer,
except as provided, to apportion income in accordance with a single
sales factor.
(4) Existing law requires, until July 1, 2011, every return
required to be filed with the State Insurance Commissioner pursuant
to provisions governing taxes on the total operating revenue of
Medi-Cal managed care plans to be signed by the insurer or the
Medi-Cal managed care plan or an executive officer of the insurer or
the plan and to be made under oath or contain a written declaration
that is made under penalty of perjury.
This bill would, instead, require every return required to be
filed with the State Insurance Commissioner pursuant to provisions
governing taxes on the total operating revenue of Medi-Cal managed
care plans to be made under oath or contain a written declaration
that is made under penalty of perjury until January 1, 2014. By
expanding the crime of perjury, this bill would impose a
state-mandated local program.
(5) Existing law generally requires the vehicle license fee to be
paid to the Department of Motor Vehicles at the time required for
renewal or registration of the vehicle. Existing law establishes fees
for original and renewal registration of vehicles to be collected by
the Department of Motor Vehicles. Existing law requires the
department, with a specified exception, to notify the registered
owner of each vehicle of the date that registration renewal fees for
the vehicle are due, at least 60 days prior to that due date, and to
indicate the fact that the required notice was mailed by a notation
in the department's records.
This bill would, commencing on June 8, 2011, and operative until
January 1, 2012, reduce the department's time period for notification
that vehicle registration renewal fees are due to 30 days prior to
the due date, thus requiring the vehicle license fee also to be due
on that date.
(6) Existing law requires that the renewal of registration for a
vehicle that is either currently registered or for which a specified
certification is filed be obtained not more than 75 days prior to the
expiration of the current registration or certification.
This bill would, commencing on June 8, 2011, and operative until
July 1, 2011, instead apply the above-specified requirement only to
the renewal of registration for any vehicle that expires on or before
June 30, 2011, and would require the renewal of registration for a
vehicle that expires on or after July 1, 2011, or for which a
specified certification is filed, to be obtained not more than 15
days prior to the expiration of the current registration or
certification, thus requiring the vehicle license fee also to be due
on that date.
(7) Existing law requires that if an application for a
registration transaction is filed with the Department of Motor
Vehicles during the 30 days immediately preceding the date of
expiration of registration of the vehicle, the application be
accompanied by the full renewal fees for the ensuing registration
year in addition to any other fees that are due and payable.
This bill would, commencing on the date that this bill becomes
operative and remaining operative until July 1, 2011, reduce the time
period to 10 days immediately preceding the date of expiration of
registration of the vehicle, thus requiring the vehicle license fee
also to be due on that date.
(8) Existing law provides that fees are delinquent if an
application for renewal of registration, or an application for
renewal of special license plates, is made after midnight of the
expiration date of the registration or special plates, or 60 days
after the date the registered owner is notified by the Department of
Motor Vehicles, whichever is later.
This bill would, commencing on June 8, 2011, and operative until
January 1, 2012, reduce the time period to 30 days after the date the
registered owner is notified by the department, thus requiring the
vehicle license fee also to be due on that date.
(9) Existing law establishes the Medi-Cal program, administered by
the State Department of Health Care Services, under which health
care services are provided to qualified, low-income persons. The
Medi-Cal program is, in part, governed and funded by federal Medicaid
Program provisions. Under existing law, one of the methods by which
Medi-Cal services are provided is pursuant to contracts with various
types of managed care plans. Existing law imposes various taxes,
including a tax at a specified rate on the gross premiums of an
insurer, as defined, and, until July 1, 2011, on the total operating
revenue, as specified, of a Medi-Cal managed care plan, as defined.
Existing law continuously appropriates the revenues derived from the
tax on Medi-Cal managed care plans for specified purposes.
This bill would extend the imposition of the tax on the total
operating revenue of Medi-Cal managed care plans until January 1,
2014, and make other conforming changes. By extending the imposition
of a tax whose revenues are continuously appropriated, this bill
would make an appropriation.
(10) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
(11) The California Constitution authorizes the Governor to
declare a fiscal emergency and to call the Legislature into special
session for that purpose. Governor Schwarzenegger issued a
proclamation declaring a fiscal emergency, and calling a special
session for this purpose, on December 6, 2010. Governor Brown issued
a proclamation on January 20, 2011, declaring and reaffirming that a
fiscal emergency exists and stating that his proclamation supersedes
the earlier proclamation for purposes of that constitutional
provision.
This bill would state that it addresses the fiscal emergency
declared and reaffirmed by the Governor by proclamation issued on
January 20, 2011, pursuant to the California Constitution.
(12) This bill would declare that it is to take immediate effect
as an urgency statute and a bill providing for appropriations related
to the Budget Bill.
Vote: 2/3. Appropriation: yes no .
Fiscal committee: yes. State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 6377 is added to the
Revenue and Taxation Code , to read:
6377. (a) (1) On and after July 1, 2012, there are exempted from
the taxes imposed by Sections 6051, 6051.3, 6201, and 6201.3, the
gross receipts from the sale of, and the storage, use, or other
consumption in this state of, any of the following:
(A) 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 the property to its completed
form, including packaging, if required.
(B) Tangible personal property purchased for use by a qualified
person to be used primarily in research and development.
(C) Tangible personal property purchased for use by a qualified
person to be used primarily to maintain, repair, measure, or test any
property described in subparagraph (A) or (B).
(D) Tangible personal property purchased by a contractor for use
in the performance of a construction contract for a qualified person
who will use the tangible personal 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 the manufacturing process.
(2) The exemption described in paragraph (1) shall not apply to
the gross receipts from the sale of, or the storage, use, or other
consumption of tangible personal property that is used primarily in
administration, general management, or marketing.
(b) For purposes of this section:
(1) "Acquire" includes any gift, inheritance, transfer incident to
divorce, or any other transfer, whether or not for consideration.
(2) "Fabricating" means to make, build, create, produce, or
assemble components or property to work in a new or different manner.
(3) "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.
(4) "Primarily," for the purpose of subdivision (a), means
tangible personal property used 50 percent or more of the time in an
activity described in subdivision (a).
(5) "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.
(6) "Processing" means the physical application of the materials
and labor necessary to modify or change the characteristics of
property.
(7) "Qualified person" means a person that is either of the
following:
(A) A new trade or business that is primarily engaged in those
lines of business classified in Industry Groups 3111 to 3399,
inclusive, or Industry Group 5112 of the North American Industry
Classification System (NAICS) published by the United States Office
of Management and Budget (OMB), 2007 edition. In determining whether
a trade or business activity qualifies as a new trade or business,
the following rules shall apply:
(i) In any case where a person purchases or otherwise acquires all
or any portion of the assets of an existing trade or business
(irrespective of the form of entity) that is doing business in this
state (within the meaning of Chapter 2 (commencing with Section
23101) of Part 11), the trade or business thereafter conducted by
that person (or any related person) shall not be treated as a new
business if the aggregate fair market value of the acquired assets
(including, real, personal, tangible, and intangible property) used
by that person (or any related person) in the conduct of his or her
trade or business exceeds 20 percent of the aggregate fair market
value of the total assets of the trade or business being conducted by
the person (or any related person). For purposes of this
subparagraph only, the following rules shall apply:
(I) The determination of the relative fair market values of the
acquired assets and the total assets shall be made as of the last day
of the month following the quarterly period in which the person (or
any related person) first uses any of the acquired trade or business
assets in his or her business activity.
(II) Any acquired assets that constituted property described in
Section 1221(a) of the Internal Revenue Code in the hands of the
transferor shall not be treated as assets acquired from an existing
trade or business, unless those assets also constitute property
described in Section 1221(a) of the Internal Revenue Code in the
hands of the acquiring person (or related person).
(ii) In any case where a person (or any related person) is engaged
in one or more trade or business activities in this state, or has
been engaged in one or more trade or business activities in this
state within the preceding 36 months ("prior trade or business
activity"), and thereafter commences an additional trade or business
activity in this state, the additional trade or business activity
shall only be treated as a new business if the additional trade or
business activity is classified under a different Industry Group
(4-digit) of the NAICS published by the United States OMB, 2007
edition, than are any of the person's (or any related person's)
current or prior trade or business activities in this state.
(iii) In any case where a person, including all related persons,
is engaged in trade or business activities wholly outside of this
state and that person first commences doing business in this state
(within the meaning of Chapter 2 (commencing with Section 23101) of
Part 11) on or after June 30, 2012, (other than by purchase or other
acquisition described in clause (i)), the trade or business activity
shall be treated as a new business.
(iv) In any case where the legal form under which a trade or
business activity is being conducted is changed, the change in form
shall be disregarded and the determination of whether the trade or
business activity is a new business shall be made by treating the
person as having purchased or otherwise acquired all or any portion
of the assets of an existing trade or business under the rules of
clause (i).
(v) A "qualified person" shall not be regarded as a new trade or
business when the qualified person has conducted business activities
in a new trade or business for three or more years.
(B) A trade or business, other than a new trade or business
described in subparagraph (A), that is primarily engaged in those
lines of business classified in Industry Groups 3111 to 3399,
inclusive, or Industry Group 5112, of the NAICS published by the
United States OMB, 2007 edition.
(8) "Qualified person" shall not include a person that is a member
of a combined reporting group that is required to apportion its
income pursuant to subdivision (b) of Section 25128. For purposes of
this paragraph, "a person that is a member of a combined reporting
group" is defined as a person whose tax liability or net income is
determined by a combined report pursuant to Section 25101 or 25110,
or is an entity included in the combined report.
(9) "Refining" means the process of converting a natural resource
to an intermediate or finished product.
(10) "Related person" means any person that is related to another
person under either Section 267 or 318 of the Internal Revenue Code.
(11) "Research and development" means those activities that are
described in Section 174 of the Internal Revenue Code or in any
regulations thereunder.
(12) "Tangible personal property" includes, but is not limited to,
all of the following:
(A) Machinery and equipment, including component parts and
contrivances such as belts, shafts, moving parts, and operating
structures.
(B) All equipment or devices used or required to operate, control,
regulate, or maintain the machinery, including, without limitation,
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 taxpayer or another party.
(C) Property used in pollution control that meets or exceeds
standards established by this state or any local or regional
governmental agency within this state.
(D) Special purpose buildings and foundations used as an integral
part of the manufacturing, processing, refining, or fabricating
process, or that constitute a research or storage facility used
during the manufacturing process. Buildings used solely for
warehousing purposes after completion of the manufacturing process
are not included.
(E) Property used in recycling.
(13) "Tangible personal property" does not include any of the
following:
(A) Consumables with a useful life of less than one year.
(B) Furniture, inventory, equipment used in the extraction
process, or equipment used to store finished products that have
completed the manufacturing process.
(14) "Useful life" for tangible personal property that a qualified
person treats 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 a qualified person treats 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 a copy of the exemption
certificate in its records. The exemption certificate shall contain
the sales price of the tangible personal property that is exempt
pursuant to subdivision (a) and shall be furnished to the board upon
request.
(d) Notwithstanding any other law, 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, the
Bradley-Burns Uniform Local Sales and Use Tax Law (Part 1.5
(commencing with Section 7200)) or the Transactions and Use Tax Law
(Part 1.6 (commencing with Section 7251)).
(e) Notwithstanding subdivision (a), for a qualified person
described in subparagraph (B) of paragraph (7) of subdivision (b), or
for a contractor performing a construction contract as described in
subparagraph (D) of paragraph (1) of subdivision (a) for a qualified
person as described in subparagraph (B) of paragraph (7) of
subdivision (b), the exemption established by this section shall not
apply with respect to 80 percent of the tax levied by Sections 6051,
6051.3, 6201, and 6201.3.
(f) Notwithstanding subdivision (a), the exemption provided by
this section shall not apply to any sale or use of property which,
within one year from the date of purchase, is either removed from
California or converted from an exempt use under subdivision (a) to
some other use not qualifying for the exemption.
(g) If a purchaser certifies in writing to the seller that the
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 pursuant to this section, and
within one year from the date of purchase, the purchaser (1) removes
that property outside California, (2) converts that property for use
in a manner not qualifying for the exemption, or (3) 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
property at the time the property is so removed, converted, or used,
and the sales price of the property to the purchaser shall be deemed
the gross receipts from that retail sale.
(h) At the time necessary information technologies and electronic
data warehousing capabilities of the board are sufficiently
established, the board shall determine an efficient means by which
qualified persons may electronically apply for, and receive, an
exemption certificate that contains information that would assist
retailers in complying with this part with respect to the exemption
described by this section.
(i) This section shall only become operative if the total rate of
the taxes imposed under this part and Section 35 of Article XIII of
the California Constitution is equal to or greater than 7 percent.
(j) This section shall remain in effect only until the earlier of
July 1, 2016, or the date the total rate of taxes imposed under this
part and Section 35 of Article XIII of the California Constitution is
less than 7 percent.
SEC. 2. Section 17053.33 of the Revenue
and Taxation Code is amended to read:
17053.33. (a) For each taxable year beginning on or after January
1, 1998, there shall be allowed as a credit against the "net
tax" (as tax," as defined in Section
17039) 17039, for the taxable year an
amount equal to the sales or use tax paid or incurred during the
taxable year by the qualified taxpayer in connection with the
qualified taxpayer's purchase of qualified property.
(b) For purposes of this section:
(1) "Qualified property" means property that meets all of the
following requirements:
(A) Is any of the following:
(i) Machinery and machinery parts used for fabricating,
processing, assembling, and manufacturing.
(ii) Machinery and machinery parts used for the production of
renewable energy resources.
(iii) Machinery and machinery parts used for either of the
following:
(I) Air pollution control mechanisms.
(II) Water pollution control mechanisms.
(iv) Data processing and communications equipment, such as
computers, computer-automated drafting systems, copy machines,
telephone systems, and faxes.
(v) Motion picture manufacturing equipment central to production
and post production, such as cameras, audio recorders, and digital
image and sound processing equipment.
(B) The total cost of qualified property purchased and placed in
service in any taxable year that may be taken into account by any
qualified taxpayer for purposes of claiming this credit shall not
exceed one million dollars ($1,000,000).
(C) The qualified property is used by the qualified taxpayer
exclusively in a targeted tax area.
(D) The qualified property is purchased and placed in service
before the date the targeted tax area designation expires, is
revoked, is no longer binding, or becomes inoperative.
(2) (A) "Qualified taxpayer" means a person or entity that meets
both of the following:
(i) Is engaged in a trade or business within a targeted tax area
designated pursuant to Chapter 12.93 (commencing with Section 7097)
of Division 7 of Title 1 of the Government Code.
(ii) Is engaged in those lines of business described in Codes 2000
to 2099, inclusive; 2200 to 3999, inclusive; 4200 to 4299,
inclusive; 4500 to 4599, inclusive; and 4700 to 5199, inclusive, of
the Standard Industrial Classification (SIC) Manual published by the
United States Office of Management and Budget, 1987 edition.
(B) In the case of any pass-through entity, the determination of
whether a taxpayer is a qualified taxpayer under this section shall
be made at the entity level and any credit under this section or
Section 23633 shall be allowed to the pass-through entity and passed
through to the partners or shareholders in accordance with applicable
provisions of this part or Part 11 (commencing with Section 23001).
For purposes of this subparagraph, the term "pass-through entity"
means any partnership or S corporation.
(3) "Targeted tax area" means the area designated pursuant to
Chapter 12.93 (commencing with Section 7097) of Division 7 of Title 1
of the Government Code.
(c) If the qualified taxpayer is allowed a credit for qualified
property pursuant to this section, only one credit shall be allowed
to the taxpayer under this part with respect to that qualified
property.
(d) If the qualified taxpayer has purchased property upon which a
use tax has been paid or incurred, the credit provided by this
section shall be allowed only if qualified property of a comparable
quality and price is not timely available for purchase in this state.
(e) (1) In the case where the credit
otherwise allowed under this section exceeds the "net tax" for the
taxable year, that portion of the credit that exceeds the "net tax"
may be carried over and added to the credit, if any, in the following
year, and succeeding years if necessary, until the credit is
exhausted. The credit shall be applied first to the earliest taxable
years possible.
(2) Notwithstanding paragraph (1), for taxable years beginning on
or after January 1, 2011:
(A) In the case of any portion of a credit available for carryover
and attributable to a taxable year beginning before January 1, 2006,
that portion shall not be carried forward.
(B) In the case of credits first allowed in taxable years
beginning on or after January 1, 2006, the carryover period shall be
five years from the year for which the credit was first allowed.
(f) Any qualified taxpayer who elects to be subject to this
section shall not be entitled to increase the basis of the qualified
property as otherwise required by Section 164(a) of the Internal
Revenue Code with respect to sales or use tax paid or incurred in
connection with the qualified taxpayer's purchase of qualified
property.
(g) (1) The amount of the credit otherwise allowed under this
section and Section 17053.34, including any credit carryover from
prior years, that may reduce the "net tax" for the taxable year shall
not exceed the amount of tax that would be imposed on the qualified
taxpayer's business income attributable to the targeted tax area
determined as if that attributable income represented all of the
income of the qualified taxpayer subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the targeted
tax area . area. For that purpose, the
taxpayer's business income attributable to sources in this state
first shall be determined in accordance with Chapter 17 (commencing
with Section 25101) of Part 11. That business income shall be further
apportioned to the targeted tax area in accordance with Article 2
(commencing with Section 25120) of Chapter 17 of Part 11, modified
for purposes of this section in accordance with paragraph (3).
(3) Business income shall be apportioned to the targeted tax area
by multiplying the total California business income of the taxpayer
by a fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is two. For purposes of
this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the targeted tax area during the
taxable year, and the denominator of which is the average value of
all the taxpayer's real and tangible personal property owned or
rented and used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the targeted tax area during
the taxable year for compensation, and the denominator of which is
the total compensation paid by the taxpayer in this state during the
taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "net tax" for the
taxable year, as provided in subdivision (e).
(5) In the event that a credit carryover is allowable under
subdivision (e) for any taxable year after the targeted tax area
designation has expired, has been revoked, is no longer binding, or
has become inoperative, the targeted tax area shall be deemed to
remain in existence for purposes of computing the limitation
specified in this subdivision.
(h) The amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 1998.
(i) For taxable years beginning on or after January 1, 2011, the
credit allowed by this section must be claimed on a timely filed
original return of the qualified taxpayer.
SEC. 3. Section 17053.34 of the Revenue
and Taxation Code is amended to read:
17053.34. (a) (1) For each taxable year
beginning on or after January 1, 1998, there shall be allowed a
credit against the "net tax" (as tax," as
defined in Section 17039) 17039,
to a qualified taxpayer who employs a qualified employee in a
targeted tax area during the taxable year. The
For qualified employees who first commenced employment in a
taxable year beginning on or after January 1, 1998, and before
January 1, 2011, the credit shall be equal to the sum of each
of the following:
(1)
(A) Fifty percent of qualified wages in the first year
of employment.
(2)
(B) Forty percent of qualified wages in the second year
of employment.
(3)
(C) Thirty percent of qualified wages in the third year
of employment.
(4)
(D) Twenty percent of qualified wages in the fourth
year of employment.
(5)
(E) Ten percent of qualified wages in the fifth year of
employment.
(2) For qualified employees who first commence employment in a
taxable year beginning on or after January 1, 2011, the credit shall
be equal to five thousand dollars ($5,000) for each net increase in
qualified full-time employees, as specified in subdivision (c), hired
during the taxable year by a qualified taxpayer.
(b) For purposes of this section:
(1) "Qualified For taxable years beginning
on or after January 1, 1998, and before January 1, 2011, "qualified
wages" means:
(A) That portion of wages paid or incurred by the qualified
taxpayer during the taxable year to qualified employees that does not
exceed 150 percent of the minimum wage.
(B) Wages received during the 60-month period beginning with the
first day the employee commences employment with the qualified
taxpayer. Reemployment in connection with any increase, including a
regularly occurring seasonal increase, in the trade or business
operations of the qualified taxpayer does not constitute commencement
of employment for purposes of this section.
(C) Qualified wages do not include any wages paid or incurred by
the qualified taxpayer on or after the targeted tax area expiration
date. However, wages paid or incurred with respect to qualified
employees who are employed by the qualified taxpayer within the
targeted tax area within the 60-month period prior to the targeted
tax area expiration date shall
continue to qualify for the credit under this section after
the targeted tax area expiration date, in accordance with all
provisions of this section applied as if the targeted tax area
designation were still in existence and binding.
(2) "Acquired" includes any gift, inheritance, transfer incident
to divorce, or any other transfer, whether or not for consideration.
(2)
(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.
(3)
(4) "Targeted tax area expiration date" means the date
the targeted tax area designation expires, is revoked, is no longer
binding, or becomes inoperative.
(4)
(5) (A) "Qualified employee" means an individual who
meets all of the following requirements:
(i) At least 90 percent of his or her services for the qualified
taxpayer during the taxable year are directly related to the conduct
of the qualified taxpayer's trade or business located in a targeted
tax area.
(ii) Performs at least 50 percent of his or her services for the
qualified taxpayer during the taxable year in a targeted tax area.
(iii) Is hired by the qualified taxpayer after the date of
original designation of the area in which services were performed as
a targeted tax area.
(iv) Is For an individual who first
commenced employment in taxable years beginning on or after January
1, 1998, and before January 1, 2011, he or she is any of the
following:
(I) Immediately preceding the qualified employee's commencement of
employment with the qualified taxpayer, was a person eligible for
services under the federal Job Training Partnership Act (29 U.S.C.
Sec. 1501 et seq.), or its successor, who is receiving, or is
eligible to receive, subsidized employment, training, or services
funded by the federal Job Training Partnership Act, or its successor.
(II) Immediately preceding the qualified employee's commencement
of employment with the qualified taxpayer, was a person eligible to
be a voluntary or mandatory registrant under the Greater Avenues for
Independence Act of 1985 (GAIN) provided for pursuant to Article 3.2
(commencing with Section 11320) of Chapter 2 of Part 3 of Division 9
of the Welfare and Institutions Code, or its successor.
(III) Immediately preceding the qualified employee's commencement
of employment with the qualified taxpayer, was an economically
disadvantaged individual 14 years of age or older.
(IV) Immediately preceding the qualified employee's commencement
of employment with the qualified taxpayer, was a dislocated worker
who meets any of the following:
(aa)
(ia) Has been terminated or laid off or who has
received a notice of termination or layoff from employment, is
eligible for or has exhausted entitlement to unemployment insurance
benefits, and is unlikely to return to his or her previous industry
or occupation.
(bb)
(ib) Has been terminated or has received a notice of
termination of employment as a result of any permanent closure or any
substantial layoff at a plant, facility, or enterprise, including an
individual who has not received written notification but whose
employer has made a public announcement of the closure or layoff.
(cc)
(ic) Is long-term unemployed and has limited
opportunities for employment or reemployment in the same or a similar
occupation in the area in which the individual resides, including an
individual 55 years of age or older who may have substantial
barriers to employment by reason of age.
(dd)
(id) Was self-employed (including farmers and ranchers)
and is unemployed as a result of general economic conditions in the
community in which he or she resides or because of natural disasters.
(ee)
(ie) Was a civilian employee of the Department of
Defense employed at a military installation being closed or realigned
under the Defense Base Closure and Realignment Act of 1990.
(ff)
(if) Was an active member of the Armed Forces or
National Guard as of September 30, 1990, and was either involuntarily
separated or separated pursuant to a special benefits program.
(gg)
(ig) Is a seasonal or migrant worker who experiences
chronic seasonal unemployment and underemployment in the agriculture
industry, aggravated by continual advancements in technology and
mechanization.
(hh)
(ih) Has been terminated or laid off, or has received a
notice of termination or layoff, as a consequence of compliance with
the Clean Air Act.
(V) Immediately preceding the qualified employee's commencement of
employment with the qualified taxpayer, was a disabled individual
who is eligible for or enrolled in, or has completed a state
rehabilitation plan or is a service-connected disabled veteran,
veteran of the Vietnam era, or veteran who is recently separated from
military service.
(VI) Immediately preceding the qualified employee's commencement
of employment with the qualified taxpayer, was an ex-offender. An
individual shall be treated as convicted if he or she was placed on
probation by a state court without a finding of guilty.
(VII) Immediately preceding the qualified employee's commencement
of employment with the qualified taxpayer, was a person eligible for
or a recipient of any of the following:
(aa)
(ia) Federal Supplemental Security Income benefits.
(bb)
(ib) Aid to Families with Dependent Children.
(cc)
(ic) Food stamps.
(dd)
(id) State and local general assistance.
(VIII) Immediately preceding the qualified employee's commencement
of employment with the qualified taxpayer, was a member of a
federally recognized Indian tribe, band, or other group of Native
American descent.
(IX) Immediately preceding the qualified employee's commencement
of employment with the qualified taxpayer, was a resident of a
targeted tax area.
(X) Immediately preceding the qualified employee's commencement of
employment with the taxpayer, was a member of a targeted group as
defined in Section 51(d) of the Internal Revenue Code, or its
successor.
(B) Priority for employment shall be provided to an individual who
is enrolled in a qualified program under the federal Job Training
Partnership Act or the Greater Avenues for Independence Act of 1985
or who is eligible as a member of a targeted group under the Work
Opportunity Tax Credit (Section 51 of the Internal Revenue Code), or
its successor.
(v) For a qualified employee who first commences employment in
taxable years beginning on or after January 1, 2011, that individual
is a "qualified full-time employee" if, in addition to any other
requirement imposed by this section, he or she was either:
(I) Paid wages by the qualified taxpayer for services of not less
than an average of 35 hours per week.
(II) A salaried employee and is paid compensation during the
taxable year for full-time employment, within the meaning of Section
515 of the Labor Code, by the qualified taxpayer.
(5)
(6) (A) "Qualified taxpayer" means a person or entity
that meets both of the following:
(i) Is engaged in a trade or business within a targeted tax area
designated pursuant to Chapter 12.93 (commencing with Section 7097)
of Division 7 of Title 1 of the Government Code.
(ii) Is engaged in those lines of business described in Codes 2000
to 2099, inclusive; 2200 to 3999, inclusive; 4200 to 4299,
inclusive; 4500 to 4599, inclusive; and 4700 to 5199, inclusive, of
the Standard Industrial Classification (SIC) Manual published by the
United States Office of Management and Budget, 1987 edition.
(B) In the case of any passthrough entity, the determination of
whether a taxpayer is a qualified taxpayer under this section shall
be made at the entity level and any credit under this section or
Section 23634 shall be allowed to the passthrough entity and passed
through to the partners or shareholders in accordance with applicable
provisions of this part or Part 11 (commencing with Section 23001).
For purposes of this subdivision, the term "passthrough entity" means
any partnership or S corporation.
(C) (i) Notwithstanding subparagraph (A), a "qualified taxpayer"
shall not include any person or entity described in subparagraph (A)
that first commences business activity in a targeted tax area during
the taxable year and has, within 24 months before the taxpayer first
commenced business activity in the targeted tax area, had an overall
reduction in the number of employees employed by the taxpayer within
the state outside of the targeted tax area, unless that person or
entity has made a written offer of employment to each of the
employees employed at the location within the state where employment
was reduced for such employees to continue their employment with that
person or entity within the targeted tax area.
(ii) The written offer referred to in this subparagraph shall be
made prior to the termination of employment at the location within
the state that is outside the targeted tax area.
(iii) If any employee described in clause (i) does not receive a
timely written offer, the person or entity shall not be a qualified
taxpayer for that taxable year, even if other employees do receive a
written offer.
(iv) A person or entity shall be required to provide, upon request
of the Franchise Tax Board, written certification, under penalty of
perjury, that the requirements of this subparagraph were met.
(v) 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.
(vi) In determining whether the qualified taxpayer has first
commenced doing business in the targeted tax area during the taxable
year, the provisions of subdivision (f) of Section 17276.20, without
application of paragraph (7) of that subdivision, shall apply.
(6)
(7) "Seasonal employment" means employment
by a qualified taxpayer that has regular and predictable substantial
reductions in trade or business operations.
(8) "Annual full-time equivalent" means either of the following:
(A) In the case of a full-time employee paid hourly wages, "annual
full-time equivalent" means the total number of hours worked for the
taxpayer by the employee (not to exceed 2,000 hours per employee)
divided by 2,000.
(B) In the case of a salaried full-time employee, "annual
full-time equivalent" means the total number of weeks worked for the
taxpayer by the employee divided by 52.
(c) Except as provided in paragraph (2), the net increase in
qualified full-time employees of a qualified taxpayer shall be
determined by:
(1) (A) (i) If the state's average nonfarm employment, as
determined by the Franchise Tax Board based upon information
published by the Employment Development Department as of March 15 of
each calendar year, has not decreased for the calendar years
beginning on the third and the second January 1 immediately preceding
the beginning of the current taxable year, as compared with second
and first calendar years respectively, then the net increase in
qualified full-time employees shall be determined on an annual
full-time equivalent basis based on the amount of the increase of
qualified full-time equivalent employees in excess of the greatest of
the number of qualified full-time equivalent employees employed by
the qualified taxpayer in any of the three immediately preceding
taxable years, as determined under subparagraph (B).
(ii) The amount determined under clause (i) shall include the
fractional amount, if any, of the increase for the taxable year.
(B) The net increase in qualified full-time employees for the
current taxable year shall be determined by subtracting the amount
determined under clause (ii) from the amount determined under clause
(i). If the amount determined under clause (ii) is equal to or
exceeds the amount determined under clause (i), the amount determined
under this subparagraph shall be zero.
(i) (I) The total number of qualified full-time employees employed
in the current taxable year by the qualified taxpayer and by any
trade or business acquired by the qualified taxpayer during the
current taxable year.
(II) The greatest total number of qualified full-time employees
employed in any of the three preceding taxable years by the qualified
taxpayer and by any trade or business acquired by the qualified
taxpayer during the current taxable year.
(ii) The increase in the total number of full-time employees
(determined under the full-time equivalent rules of paragraph (8) of
subdivision (b)) employed by the qualified taxpayer in this state
shall be determined by subtracting the amount determined under
subclause (II) from the amount determined under subclause (I). If the
amount determined under subclause (II) is equal to or exceeds the
amount determined under subclause (I), the amount determined under
this clause shall be zero.
(I) The total number of full-time employees employed in this state
in the current taxable year by the qualified taxpayer and by any
trade or business acquired by the qualified taxpayer during the
current taxable year.
(II) The greatest total number of full-time employees of the
qualified taxpayer employed in this state in any of the three
preceding taxable years by the qualified taxpayer and by any trade or
business acquired by the qualified taxpayer during the current
taxable year.
(2) (A) (i) If there is a decrease in the state's nonfarm
employment, as determined by the Franchise Tax Board based upon
information published by the Employment Development Department as of
March 15 of each calendar year, for the calendar years beginning on
the third and the second January 1 immediately preceding the current
taxable year, the net increase in qualified full-time employees shall
be determined on an annual full-time equivalent basis as the lesser
of the amount determined under subparagraph (C) or the amount
determined under subparagraph (B).
(ii) The amount determined under clause (i) shall include the
fractional amount, if any, of the increase for the taxable year.
(B) The increase in the total number of qualified full-time
employees shall be determined by subtracting the amount determined
under clause (ii) from the amount determined under clause (i). If the
amount determined under clause (ii) is equal to or exceeds the
amount determined under clause (i), the amount determined under this
subparagraph shall be zero.
(i) The total number of qualified full-time employees employed in
the current taxable year by the qualified taxpayer and by any trade
or business acquired by the qualified taxpayer during the current
taxable year.
(ii) The total number of qualified full-time employees employed in
the preceding taxable year by the qualified taxpayer and by any
trade or business acquired by the qualified taxpayer during the
current taxable year.
(C) The increase in the total number of full-time employees
(determined under the full-time equivalent rules of paragraph (8) of
subdivision (b)) employed by the qualified taxpayer in this state
shall be determined by subtracting the amount determined under clause
(ii) from the amount determined under clause (i). If the amount
determined under clause (ii) is equal to or exceeds the amount
determined under clause (i), the amount determined under this
subparagraph shall be zero.
(i) The total number of full-time employees employed in this state
in the current taxable year by the qualified taxpayer and by any
trade or business acquired by the qualified taxpayer during the
current taxable year.
(ii) The total number of full-time employees of the qualified
taxpayer employed in this state in the preceding taxable year by the
qualified taxpayer and by any trade or business acquired by the
qualified taxpayer during the current taxable year.
(3) For qualified taxpayers who first commence doing business in
this state during the taxable year, the number of qualified full-time
employees under subparagraph (B) of paragraph (1) and the number of
full-time employees under subparagraph (C) of paragraph (2) for the
preceding taxable year shall be zero.
(4) For purposes of determining the number of full-time employees
of the qualified taxpayer who are employed in this state under
paragraphs (1) and (2), only those employees who receive wages that
are subject to Division 6 (commencing with Section 13000) of the
Unemployment Insurance Code from the qualified taxpayer comprising
more than 50 percent of that employee's total wages received from the
qualified taxpayer for the taxable year, shall be included.
(5) For purposes of determining the increase in the number of
qualified full-time employees of a qualified taxpayer under this
section and Sections 17053.46, 17053.47, and 17053.74, the increase
shall be determined separately for the targeted tax area, and each
enterprise zone, manufacturing enhancement area, or local agency
military base recovery area with respect to which a taxpayer is a
qualified taxpayer.
(6) Any determination of the Franchise Tax Board under this
subdivision with respect to whether there is an increase, a decrease,
or no change in the state's nonfarm employment for any calendar year
shall be final and may not be reviewed in any administrative or
judicial proceeding, even if the data published by the Employment
Development Department as of March 15 of any calendar year upon which
the Franchise Tax Board relied in making its determination is
substantially revised and would otherwise change which formula is
applicable under this subdivision.
(c)
(d) If the qualified taxpayer is allowed a credit for
qualified wages pursuant to this section, only one credit shall be
allowed to the taxpayer under this part with respect to those
qualified wages.
(d) The
(e) For qualified employees who first
commenced employment in taxable years beginning on or after January
1, 1998, and before January 1, 2011, the qualified taxpayer
shall do both of the following:
(1) Obtain from the Employment Development Department, as
permitted by federal law, the local county or city Job Training
Partnership Act administrative entity, the local county GAIN office
or social services agency, or the local government administering the
targeted tax area, a certification that provides that a qualified
employee meets the eligibility requirements specified in clause (iv)
of subparagraph (A) of paragraph (4) of subdivision (b). The
Employment Development Department may provide preliminary screening
and referral to a certifying agency. The Department of Housing and
Community Development shall develop regulations governing the
issuance of certificates pursuant to subdivision (g) of Section 7097
of the Government Code, and shall develop forms for this purpose.
(2) For qualified employees who first commenced employment in
taxable years beginning on or after January 1, 1998, and before
January 1, 2011, for which, as of the later of July 1, 2011, or the
date the qualified employee first commenced employment, a
certification described in paragraph (1) has not been obtained and a
request for certification described in paragraph (1) has not been
previously submitted, then a request for certification described in
paragraph (1) with respect to that employee shall be submitted to the
certifying entity no later than the date that is the later of 90
days after July 1, 2011, or 30 days after the date the qualified
employee first commenced employment. A credit shall be allowed under
this section with respect to a qualified employee described in the
preceding sentence only if a request for certification was timely
submitted in accordance with this paragraph.
(2)
(3) Retain a copy of the certification and provide it
upon request to the Franchise Tax Board.
(e)
(f) (1) For purposes of this section:
(A) All employees of trades or businesses, which are not
incorporated, that are under common control shall be treated as
employed by a single taxpayer.
(B) The credit, if any, allowable by this section with respect to
each trade or business shall be determined by reference to its
proportionate share of the expense of the qualified wages giving rise
to the credit, and shall be allocated in that manner.
(C) Principles that apply in the case of controlled groups of
corporations, as specified in subdivision (d) of Section 23634, shall
apply with respect to determining employment.
(2) If an employer acquires the major portion of a trade or
business of another employer (hereinafter in this paragraph referred
to as the "predecessor") or the major portion of a separate unit of a
trade or business of a predecessor, then, for purposes of applying
this section (other than subdivision (f) (g)
) for any calendar year ending after that acquisition, the
employment relationship between a qualified employee and an employer
shall not be treated as terminated if the employee continues to be
employed in that trade or business.
(f)
(g) (1) (A) If For qualified
employees who first commenced employment with at qualified taxpayer
in taxable years beginning on or after January 1, 1998, and before
January 1, 2011, if the employment, other than seasonal
employment, of any qualified employee, with respect to whom qualified
wages are taken into account under subdivision (a) is terminated by
the qualified taxpayer at any time during the first 270 days of that
employment (whether or not consecutive) or before the close of the
270th calendar day after the day in which that employee completes 90
days of employment with the qualified taxpayer, the tax imposed by
this part for the taxable year in which that employment is terminated
shall be increased by an amount equal to the credit allowed under
subdivision (a) for that taxable year and all prior taxable years
attributable to qualified wages paid or incurred with respect to that
employee.
(B) If the seasonal employment of any qualified employee, with
respect to whom qualified wages are taken into account under
subdivision (a) is not continued by the qualified taxpayer for a
period of 270 days of employment during the 60-month period beginning
with the day the qualified employee commences seasonal employment
with the qualified taxpayer, the tax imposed by this part, for the
taxable year that includes the 60th month following the month in
which the qualified employee commences seasonal employment with the
qualified taxpayer, shall be increased by an amount equal to the
credit allowed under subdivision (a) for that taxable year and all
prior taxable years attributable to qualified wages paid or incurred
with respect to that qualified employee.
(2) (A) Subparagraph (A) of paragraph (1) shall not apply to any
of the following:
(i) A termination of employment of a qualified employee who
voluntarily leaves the employment of the qualified taxpayer.
(ii) A termination of employment of a qualified employee who,
before the close of the period referred to in subparagraph (A) of
paragraph (1), becomes disabled and unable to perform the services of
that employment, unless that disability is removed before the close
of that period and the qualified taxpayer fails to offer reemployment
to that employee.
(iii) A termination of employment of a qualified employee, if it
is determined that the termination was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that employee.
(iv) A termination of employment of a qualified employee due to a
substantial reduction in the trade or business operations of the
qualified taxpayer.
(v) A termination of employment of a qualified employee, if that
employee is replaced by other qualified employees so as to create a
net increase in both the number of employees and the hours of
employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of
the following:
(i) A failure to continue the seasonal employment of a qualified
employee who voluntarily fails to return to the seasonal employment
of the qualified taxpayer.
(ii) A failure to continue the seasonal employment of a qualified
employee who, before the close of the period referred to in
subparagraph (B) of paragraph (1), becomes disabled and unable to
perform the services of that seasonal employment, unless that
disability is removed before the close of that period and the
qualified taxpayer fails to offer seasonal employment to that
qualified employee.
(iii) A failure to continue the seasonal employment of a qualified
employee, if it is determined that the failure to continue the
seasonal employment was due to the misconduct (as defined in Sections
1256-30 to 1256-43, inclusive, of Title 22 of the California Code of
Regulations) of that
qualified employee.
(iv) A failure to continue seasonal employment of a qualified
employee due to a substantial reduction in the regular seasonal trade
or business operations of the qualified taxpayer.
(v) A failure to continue the seasonal employment of a qualified
employee, if that qualified employee is replaced by other qualified
employees so as to create a net increase in both the number of
seasonal employees and the hours of seasonal employment.
(C) For purposes of paragraph (1), the employment relationship
between the qualified taxpayer and a qualified employee shall not be
treated as terminated by reason of a mere change in the form of
conducting the trade or business of the qualified taxpayer, if the
qualified employee continues to be employed in that trade or business
and the qualified taxpayer retains a substantial interest in that
trade or business.
(3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
(g)
(h) In the case of an estate or trust, both of the
following apply:
(1) The qualified wages for any taxable year shall be apportioned
between the estate or trust and the beneficiaries on the basis of the
income of the estate or trust allocable to each.
(2) Any beneficiary to whom any qualified wages have been
apportioned under paragraph (1) shall be treated, for purposes of
this part, as the employer with respect to those wages.
(h)
(i) For purposes of this section, "targeted tax area"
means an area designated pursuant to Chapter 12.93 (commencing with
Section 7097) of Division 7 of Title 1 of the Government Code.
(i)
(j) (1) In the case where the
credit otherwise allowed under this section exceeds the "net tax" for
the taxable year, that portion of the credit that exceeds the "net
tax" may be carried over and added to the credit, if any, in
succeeding taxable years, until the credit is exhausted. The credit
shall be applied first to the earliest taxable years possible.
(2) Notwithstanding paragraph (1), for taxable years beginning on
or after January 1, 2011:
(A) In the case of any portion of a credit available for carryover
and attributable to a taxable year beginning before January 1, 2006,
that portion shall not be carried forward.
(B) In the case of credits first allowed in taxable years
beginning on or after January 1, 2006, the carryover period shall be
five years from the year for which the credit was first allowed.
(j)
(k) (1) The amount of the credit otherwise allowed
under this section and Section 17053.33, including any credit
carryover from prior years, that may reduce the "net tax" for the
taxable year shall not exceed the amount of tax that would be imposed
on the qualified taxpayer's business income attributable to the
targeted tax area determined as if that attributable income
represented all of the income of the qualified taxpayer subject to
tax under this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the targeted
tax area. For that purpose, the taxpayer's business income
attributable to sources in this state first shall be determined in
accordance with Chapter 17 (commencing with Section 25101) of Part
11. That business income shall be further apportioned to the targeted
tax area in accordance with Article 2 (commencing with Section
25120) of Chapter 17 of Part 11, modified for purposes of this
section in accordance with paragraph (3).
(3) Business income shall be apportioned to the targeted tax area
by multiplying the total California business income of the taxpayer
by a fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is two. For purposes of
this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the targeted tax area during the
taxable year, and the denominator of which is the average value of
all the taxpayer's real and tangible personal property owned or
rented and used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the targeted tax area during
the taxable year for compensation, and the denominator of which is
the total compensation paid by the taxpayer in this state during the
taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "net tax" for the
taxable year, as provided in subdivision (h)
(j) .
(5) In the event that a credit carryover is allowable under
subdivision (h) (j) for any taxable
year after the targeted tax area expiration date, the targeted tax
area shall be deemed to remain in existence for purposes of computing
the limitation specified in this subdivision.
(l) For taxable years beginning on or after January 1, 2011, the
credit allowed by this section must be claimed on a timely filed
original return of the qualified taxpayer.
SEC. 4. Section 17053.45 of the Revenue
and Taxation Code is amended to read:
17053.45. (a) For each taxable year beginning on or after January
1, 1995, there shall be allowed as a credit against the "net
tax" (as tax," as defined by Section
17039) 17039, an amount equal to the
sales or use tax paid or incurred by the taxpayer in connection with
the purchase of qualified property to the extent that the qualified
property does not exceed a value of one million dollars ($1,000,000).
(b) For purposes of this section:
(1) "LAMBRA" means a local agency military base recovery area
designated in accordance with Section 7114 of the Government Code.
(2) "Taxpayer" means a taxpayer that conducts a trade or business
within a LAMBRA and, for the first two taxable years, has a net
increase in jobs (defined as 2,000 paid hours per employee per year)
of one or more employees in the LAMBRA.
(A) The net increase in the number of jobs shall be determined by
subtracting the total number of full-time employees (defined as 2,000
paid hours per employee per year) the taxpayer employed in this
state in the taxable year prior to commencing business operations in
the LAMBRA from the total number of full-time employees the taxpayer
employed in this state during the second taxable year after
commencing business operations in the LAMBRA. For taxpayers who
commence doing business in this state with their LAMBRA business
operation, the number of employees for the taxable year prior to
commencing business operations in the LAMBRA shall be zero. If the
taxpayer has a net increase in jobs in the state, the credit shall be
allowed only if one or more full-time employees is employed within
the LAMBRA.
(B) The total number of employees employed in the LAMBRA shall
equal the sum of both of the following:
(i) The total number of hours worked in the LAMBRA for the
taxpayer by employees (not to exceed 2,000 hours per employee) who
are paid an hourly wage divided by 2,000.
(ii) The total number of months worked in the LAMBRA for the
taxpayer by employees who are salaried employees divided by 12.
(C) In the case of a taxpayer who first commences doing business
in the LAMBRA during the taxable year, for purposes of clauses (i)
and (ii), respectively, of subparagraph (B), the divisors "2,000" and
"12" shall be multiplied by a fraction, the numerator of which is
the number of months of the taxable year that the taxpayer was doing
business in the LAMBRA and the denominator of which is 12.
(3) "Qualified property" means property that is each of the
following:
(A) Purchased by the taxpayer for exclusive use in a trade or
business conducted within a LAMBRA.
(B) Purchased before the date the LAMBRA designation expires, is
no longer binding, or becomes inoperative.
(C) Any of the following:
(i) High technology equipment, including, but not limited to,
computers and electronic processing equipment.
(ii) Aircraft maintenance equipment, including, but not limited
to, engine stands, hydraulic mules, power carts, test equipment,
handtools, aircraft start carts, and tugs.
(iii) Aircraft components, including, but not limited to, engines,
fuel control units, hydraulic pumps, avionics, starts, wheels, and
tires.
(iv) Section 1245 property, as defined in Section 1245(a)(3) of
the Internal Revenue Code.
(c) The credit provided under subdivision (a) shall be allowed
only for qualified property manufactured in California unless
qualified property of a comparable quality and price is not available
for timely purchase and delivery from a California manufacturer.
(d) In the case where the credit otherwise allowed under this
section exceeds the "net tax" for the taxable year, that portion of
the credit which exceeds the "net tax" may be carried over and added
to the credit, if any, in succeeding years, until the credit is
exhausted. The credit shall be applied first to the earliest taxable
years possible.
(e) Any taxpayer who elects to be subject to this section shall
not be entitled to increase the basis of the property as otherwise
required by Section 164(a) of the Internal Revenue Code with respect
to sales or use tax paid or incurred in connection with the purchase
of qualified property.
(f) (1) (A) The amount of credit otherwise
allowed under this section and Section 17053.46, including any credit
carryover from prior years, that may reduce the "net tax" for the
taxable year shall not exceed the amount of tax that would be imposed
on the taxpayer's business income attributed to a LAMBRA determined
as if that attributable income represented all the income of the
taxpayer subject to tax under this part.
(2)
(B) Attributable income is that portion of the taxpayer'
s California source business income that is apportioned to the
LAMBRA. For that purpose, the taxpayer's business income that is
attributable to sources in this state shall first be determined in
accordance with Chapter 17 (commencing with Section 25101) of Part
11. That business income shall be further apportioned to the LAMBRA
in accordance with Article 2 (commencing with Section 25120) of
Chapter 17 of Part 11, as modified for purposes of this section in
accordance with paragraph (3) subparagraph
(C) .
(3)
(C) Income shall be apportioned to a LAMBRA by
multiplying the total California business income of the taxpayer by a
fraction, the numerator of which is the property factor, plus the
payroll factor, and the denominator of which is two. For purposes of
this paragraph:
(A)
(i) The property factor is a fraction, the numerator of
which is the average value of the taxpayer's real and tangible
personal property owned or rented and used in the LAMBRA during the
taxable year, and the denominator of which is the average value of
all the taxpayer's real and tangible personal property owned or
rented and used in this state during the taxable year.
(B)
(ii) The payroll factor is a fraction, the numerator of
which is the total amount paid by the taxpayer in the LAMBRA during
the taxable year for compensation, and the denominator of which is
the total compensation paid by the taxpayer in this state during the
taxable year.
(4)
(D) (1) The portion of any credit
remaining, if any, after application of this subdivision, shall be
carried over to succeeding taxable years, as if it were an amount
exceeding the "net tax" for the taxable year, as provided in
subdivision (d).
(2) Notwithstanding paragraph (1), for taxable years beginning on
or after January 1, 2011:
(A) In the case of any portion of a credit available for carryover
and attributable to a taxable year beginning before January 1, 2006,
that portion shall not be carried forward.
(B) In the case of credits first allowed in taxable years
beginning on or after January 1, 2006, the carryover period shall be
five years from the year for which the credit was first allowed.
(g) (1) If the qualified property is disposed of or no longer used
by the taxpayer in the LAMBRA, at any time before the close of the
second taxable year after the property is placed in service, the
amount of the credit previously claimed, with respect to that
property, shall be added to the taxpayer's tax liability in the
taxable year of that disposition or nonuse.
(2) At the close of the second taxable year, if the taxpayer has
not increased the number of its employees as determined by paragraph
(2) of subdivision (b), then the amount of the credit previously
claimed shall be added to the taxpayer's net tax for the taxpayer's
second taxable year.
(h) If the taxpayer is allowed a credit for qualified property
pursuant to this section, only one credit shall be allowed to the
taxpayer under this part with respect to that qualified property.
(i) The amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 1998.
(j) For taxable years beginning on or after January 1, 2011, the
credit allowed by this section must be claimed on a timely filed
original return of the taxpayer.
SEC. 5. Section 17053.46 of the Revenue
and Taxation Code is amended to read:
17053.46. (a) (1) For each taxable year
beginning on or after January 1, 1995, there shall be allowed as a
credit against the "net tax" (as "net tax,"
defined in Section 17039) 17039,
to a qualified taxpayer for hiring a qualified disadvantaged
individual or a qualified displaced employee during the taxable year
for employment in the LAMBRA. The For
qualified disadvantaged individuals or qualified displaced employees
who first commenced employment in taxable years beginning on or after
January 1, 1995, and before January 1, 2011, the credit shall
be equal to the sum of each of the following:
(1)
(A) Fifty percent of the qualified wages in the first
year of employment.
(2)
(B) Forty percent of the qualified wages in the second
year of employment.
(3)
(C) Thirty percent of the qualified wages in the third
year of employment.
(4)
(D) Twenty percent of the qualified wages in the fourth
year of employment.
(E) Ten percent of the qualified wages in the fifth
year of employment.
(2) For qualified disadvantaged individuals or qualified displaced
employees who first commence employment in a taxable year beginning
on or after January 1, 2011, the credit shall be equal to five
thousand dollars ($5,000) for each net increase in qualified
full-time employees, as specified in subdivision (c), employed during
the taxable year by the qualified taxpayer.
(b) For purposes of this section:
(1) "Qualified For taxable years beginning
on or after January 1, 1995, and before January 1, 2011, "qualified
wages" means:
(A) That portion of wages paid or incurred by the employer during
the taxable year to qualified disadvantaged individuals or qualified
displaced employees that does not exceed 150 percent of the minimum
wage.
(B) The total amount of qualified wages which may be taken into
account for purposes of claiming the credit allowed under this
section shall not exceed two million dollars ($2,000,000) per taxable
year.
(C) Wages received during the 60-month period beginning with the
first day the individual commences employment with the taxpayer.
Reemployment in connection with any increase, including a regularly
occurring seasonal increase, in the trade or business operations of
the qualified taxpayer does not constitute commencement of employment
for purposes of this section.
(D) Qualified wages do not include any wages paid or incurred by
the qualified taxpayer on or after the LAMBRA expiration date.
However, wages paid or incurred with respect to qualified
disadvantaged individuals or qualified displaced employees who are
employed by the qualified taxpayer within the LAMBRA within the
60-month period prior to the LAMBRA expiration date shall continue to
qualify for the credit under this section after the LAMBRA
expiration date, in accordance with all provisions of this section
applied as if the LAMBRA designation were still in existence and
binding.
(2) "Acquired" includes any gift, inheritance, transfer incident
to divorce, or any other transfer, whether or not for consideration.
(2)
(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.
(3)
(4) "LAMBRA" means a local agency military base
recovery area designated in accordance with Section 7114 of the
Government Code.
(4)
(5) "Qualified disadvantaged individual" means an
individual who satisfies all of the following requirements:
(A) (i) At least 90 percent of whose services for the taxpayer
during the taxable year are directly related to the conduct of the
taxpayer's trade or business located in a LAMBRA.
(ii) Who performs Performs
at least 50 percent of his or her services for the
taxpayer during the taxable year in the LAMBRA.
(B) Who is hired by the employer after the designation of the area
as a LAMBRA in which the individual's services were primarily
performed.
(C) Who For an individual who first
commenced employment in taxable years beginning on or after January
1, 1995, and before January 1, 2011, he or she is any of the
following immediately preceding the individual's commencement of
employment with the taxpayer:
(i) An individual who has been determined eligible for services
under the federal Job Training Partnership Act (29 U.S.C. Sec. 1501
et seq.).
(ii) Any voluntary or mandatory registrant under the Greater
Avenues for Independence Act of 1985 as provided pursuant to Article
3.2 (commencing with Section 11320) of Chapter 2 of Part 3 of
Division 9 of the Welfare and Institutions Code.
(iii) An economically disadvantaged individual age 16 years or
older.
(iv) A dislocated worker who meets any of the following
conditions:
(I) Has been terminated or laid off or who has received a notice
of termination or layoff from employment, is eligible for or has
exhausted entitlement to unemployment insurance benefits, and is
unlikely to return to his or her previous industry or occupation.
(II) Has been terminated or has received a notice of termination
of employment as a result of any permanent closure or any substantial
layoff at a plant, facility, or enterprise, including an individual
who has not received written notification but whose employer has made
a public announcement of the closure or layoff.
(III) Is long-term unemployed and has limited opportunities for
employment or reemployment in the same or a similar occupation in the
area in which the individual resides, including an individual 55
years of age or older who may have substantial barriers to employment
by reason of age.
(IV) Was self-employed (including farmers and ranchers) and is
unemployed as a result of general economic conditions in the
community in which he or she resides or because of natural disasters.
(V) Was a civilian employee of the Department of Defense employed
at a military installation being closed or realigned under the
Defense Base Closure and Realignment Act of 1990.
(VI) Was an active member of the Armed Forces or National Guard as
of September 30, 1990, and was either involuntarily separated or
separated pursuant to a special benefits program.
(VII) Experiences chronic seasonal unemployment and
underemployment in the agriculture industry, aggravated by continual
advancements in technology and mechanization.
(VIII) Has been terminated or laid off or has received a notice of
termination or layoff as a consequence of compliance with the Clean
Air Act.
(v) An individual who is enrolled in or has completed a state
rehabilitation plan or is a service-connected disabled veteran,
veteran of the Vietnam era, or veteran who is recently separated from
military service.
(vi) An ex-offender. An individual shall be treated as convicted
if he or she was placed on probation by a state court without a
finding of guilty.
(vii) A recipient of:
(I) Federal Supplemental Security Income benefits.
(II) Aid to Families with Dependent Children.
(III) Food stamps.
(IV) State and local general assistance.
(viii) Is a member of a federally recognized Indian tribe, band,
or other group of Native American descent.
(D) For a qualified disadvantaged individual who first commences
employment in taxable years beginning on or after January 1, 2011,
that individual is a "qualified full-time employee" if, in addition
to any other requirement imposed by this section, he or she was
either:
(i) Paid wages by the qualified taxpayer for services of not less
than an average of 35 per hours per week.
(ii) A salaried employee and was paid compensation during the
taxable year for full-time employment, within the meaning of Section
515 of the Labor Code, by the qualified employer.
(5)
(6) (A) "Qualified taxpayer" means
a taxpayer or partnership that conducts a trade or business within a
LAMBRA and, for the first two taxable years, has a net increase in
jobs (defined as 2,000 paid hours per employee per year) of one or
more employees in the LAMBRA.
(A)
(B) The net increase in the number of jobs shall be
determined by subtracting the total number of full-time employees
(defined as 2,000 paid hours per employee per year) the taxpayer
employed in this state in the taxable year prior to commencing
business operations in the LAMBRA from the total number of full-time
employees the taxpayer employed in this state during the second
taxable year after commencing business operations in the LAMBRA. For
taxpayers who commence doing business in this state with their LAMBRA
business operation, the number of employees for the taxable year
prior to commencing business operations in the LAMBRA shall be zero.
If the taxpayer has a net increase in jobs in the state, the credit
shall be allowed only if one or more full-time employees is employed
within the LAMBRA.
(B)
(C) The total number of employees employed in the
LAMBRA shall equal the sum of both of the following:
(i) The total number of hours worked in the LAMBRA for the
taxpayer by employees (not to exceed 2,000 hours per employee) who
are paid an hourly wage divided by 2,000.
(ii) The total number of months worked in the LAMBRA for the
taxpayer by employees who are salaried employees divided by 12.
(C)
(D) In the case of a taxpayer who first commences doing
business in the LAMBRA during the taxable year, for purposes of
clauses (i) and (ii), respectively, of subparagraph (B)
(C) , the divisors "2,000" and "12" shall be
multiplied by a fraction, the numerator of which is the number of
months of the taxable year that the taxpayer was doing business in
the LAMBRA and the denominator of which is 12.
(E) (i) Notwithstanding subparagraph (A), a "qualified taxpayer"
shall not include any person or entity described in subparagraph (A)
that first commences business activity in a LAMBRA during the taxable
year and has, within 24 months before the taxpayer first commenced
business activity in the LAMBRA, had an overall reduction in the
number of employees employed by the taxpayer within the state outside
of the LAMBRA, unless that person or entity has made a written offer
of employment to each of the employees employed at the location
within the state where employment was reduced for such employees to
continue their employment with that person or entity within the
LAMBRA.
(ii) In determining whether the taxpayer has first commenced doing
business in the LAMBRA during the taxable year, the provisions of
subdivision (f) of Section 17276.20, without application of paragraph
(7) of that subdivision, shall apply.
(iii) The written offer referred to in this subparagraph shall be
made prior to the termination of employment at the location within
the state that is outside the LAMBRA.
(iv) If any employee described in clause (i) does not receive a
timely written offer, the person or entity shall not be a qualified
taxpayer for that taxable year, even if other employees do receive a
written offer.
(v) A person or entity shall be required to provide, upon request
of the Franchise Tax Board, written certification, under penalty of
perjury, that the requirements of this subparagraph were met.
(vi) 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.
(6)
(7) "Qualified displaced employee" means an individual
who satisfies all of the following requirements:
(A) Any civilian or military employee of a base or former base who
has been displaced as a result of a federal base closure act.
(B) (i) At least 90 percent of whose services for the taxpayer
during the taxable year are directly related to the conduct of the
taxpayer's trade or business located in a LAMBRA.
(ii) Who performs at least 50 percent of his or her services for
the taxpayer during the taxable year in a LAMBRA.
(C) Who is hired by the employer after the designation of the area
in which services were performed as a LAMBRA.
(D) For an individual who first commences employment in taxable
years beginning on or after January 1, 2011, and who meets the
requirements of this paragraph other than the requirements of
subparagraph (A), that individual is a "qualified full-time employee"
if, in addition to any
other requirement imposed by this section, he or she was either:
(i) Paid wages by the qualified taxpayer for services of not less
than an average of 35 per hours per week.
(ii) A salaried employee and was paid compensation during the
taxable year for full-time employment, within the meaning of Section
515 of the Labor Code, by the qualified employer.
(7)
(8) "Seasonal employment" means employment by a
qualified taxpayer that has regular and predictable substantial
reductions in trade or business operations.
(8)
(9) "LAMBRA expiration date" means the date the LAMBRA
designation expires, is no longer binding, or becomes inoperative.
(10) "Annual full-time equivalent" means either of the following:
(A) In the case of a full-time employee paid hourly wages, "annual
full-time equivalent" means the total number of hours worked for the
taxpayer by the employee (not to exceed 2,000 hours per employee)
divided by 2,000.
(B) In the case of a salaried full-time employee, "annual
full-time equivalent" means the total number of weeks worked for the
taxpayer by the employee divided by 52.
(c) Except as provided in paragraph (2), the net increase in
qualified full-time employees of a qualified taxpayer shall be
determined by paragraph (1):
(1) (A) (i) If the state's average nonfarm employment, as
determined by the Franchise Tax Board based upon information
published by the Employment Development Department as of March 15 of
each calendar year, has not decreased for the calendar years
beginning on the third and the second January 1 immediately preceding
the beginning of the current taxable year, as compared with second
and first calendar years respectively, then the net increase in
qualified full-time employees shall be determined on an annual
full-time equivalent basis based on the amount of the increase of
qualified full-time equivalent employees in excess of the greatest of
the number of qualified full-time equivalent employees employed by
the qualified taxpayer in any of the three immediately preceding
taxable years, as determined under subparagraph (B).
(ii) The amount determined under clause (i) shall include the
fractional amount, if any, of the increase for the taxable year.
(B) The net increase in qualified full-time employees for the
current taxable year shall be determined by subtracting the amount
determined under clause (ii) from the amount determined under clause
(i). If the amount determined under clause (ii) is equal to or
exceeds the amount determined under clause (i), the amount determined
under this subparagraph shall be zero.
(i) (I) The total number of qualified full-time employees employed
in the current taxable year by the qualified taxpayer and by any
trade or business acquired by the qualified taxpayer during the
current taxable year.
(II) The greatest total number of qualified full-time employees
employed in any of the three preceding taxable years by the qualified
taxpayer and by any trade or business acquired by the qualified
taxpayer during the current taxable year.
(ii) The increase in the total number of full-time employees
(determined under the full-time equivalent rules of paragraph (10) of
subdivision (b)) employed by the qualified taxpayer in this state
shall be determined by subtracting the amount determined under
subclause (II) from the amount determined under subclause (I). If the
amount determined under subclause (II) is equal to or exceeds the
amount determined under subclause (I), the amount determined under
this clause shall be zero.
(I) The total number of full-time employees employed in this state
in the current taxable year by the qualified taxpayer and by any
trade or business acquired by the qualified taxpayer during the
current taxable year.
(II) The greatest total number of full-time employees of the
qualified taxpayer employed in this state in any of the three
preceding taxable years by the qualified taxpayer and by any trade or
business acquired by the qualified taxpayer during the current
taxable year.
(2) (A) (i) If there is a decrease in the state's nonfarm
employment, as determined by the Franchise Tax Board based upon
information published by the Employment Development Department as of
March 15 of each calendar year, for the calendar years beginning on
the third and the second January 1 immediately preceding the current
taxable year, the net increase in qualified full-time employees shall
be determined on an annual full-time equivalent basis as the lesser
of the amount determined under subparagraph (C) or the amount
determined under subparagraph (B).
(ii) The amount determined under clause (i) shall include the
fractional amount, if any, of the increase for the taxable year.
(B) The increase in the total number of qualified full-time
employees shall be determined by subtracting the amount determined
under clause (ii) from the amount determined under clause (i). If the
amount determined under clause (ii) is equal to or exceeds the
amount determined under clause (i), the amount determined under this
subparagraph shall be zero.
(i) The total number of qualified full-time employees employed in
the current taxable year by the qualified taxpayer and by any trade
or business acquired by the qualified taxpayer during the current
taxable year.
(ii) The total number of qualified full-time employees employed in
the preceding taxable year by the qualified taxpayer and by any
trade or business acquired by the qualified taxpayer during the
current taxable year.
(C) The increase in the total number of full-time employees
(determined under the full-time equivalent rules of paragraph (10) of
subdivision (b)) employed by the qualified taxpayer in this state
shall be determined by subtracting the amount determined under clause
(ii) from the amount determined under clause (i). If the amount
determined under clause (ii) is equal to or exceeds the amount
determined under clause (i), the amount determined under this
subparagraph shall be zero.
(i) The total number of full-time employees employed in this state
in the current taxable year by the qualified taxpayer and by any
trade or business acquired by the qualified taxpayer during the
current taxable year.
(ii) The total number of full-time employees of the qualified
taxpayer employed in this state in the preceding taxable year by the
qualified taxpayer and by any trade or business acquired by the
qualified taxpayer during the current taxable year.
(3) For qualified taxpayers who first commence doing business in
this state during the taxable year, the number of qualified full-time
employees under subparagraph (B) of paragraph (1) and the number of
full-time employees under subparagraph (C) of paragraph (2) for the
preceding taxable year shall be zero.
(4) For purposes of determining the number of full-time employees
of the qualified taxpayer who are employed in this state under
paragraphs (1) and (2), only those employees who receive wages that
are subject to Division 6 (commencing with Section 13000) of the
Unemployment Insurance Code from the qualified taxpayer comprising
more than 50 percent of that employee's total wages received from the
qualified taxpayer for the taxable year, shall be included.
(5) For purposes of determining the increase in the number of
qualified full-time employees of a qualified taxpayer under this
section and Sections 17053.34, 17053.47, and 17053.74, the increase
shall be determined separately for the targeted tax area, and each
enterprise zone, manufacturing enhancement area, or local agency
military base recovery area with respect to which a taxpayer is a
qualified taxpayer.
(6) Any determination of the Franchise Tax Board under this
subdivision with respect to whether there is an increase, a decrease,
or no change in the state's nonfarm employment for any calendar year
shall be final and may not be reviewed in any administrative or
judicial proceeding, even if the data published by the Employment
Development Department as of March 15 of any calendar year upon which
the Franchise Tax Board relied in making its determination is
substantially revised and would otherwise change which formula is
applicable under this subdivision.
(c)
(d) For qualified disadvantaged individuals or
qualified displaced employees hired on or after January 1, 2001,
and before January 1, 2011, the taxpayer shall do
both of the following:
(1) Obtain from the Employment Development Department, as
permitted by federal law, the local county or city Job Training
Partnership Act administrative entity, the local county GAIN office
or social services agency, or the local government administering the
LAMBRA, a certification that provides that a qualified disadvantaged
individual or qualified displaced employee meets the eligibility
requirements specified in subparagraph (C) of paragraph (4) of
subdivision (b) or subparagraph (A) of paragraph (6) of subdivision
(b). The Employment Development Department may provide preliminary
screening and referral to a certifying agency. The Department of
Housing and Community Development shall develop regulations governing
the issuance of certificates pursuant to Section 7114.2 of the
Government Code and shall develop forms for this purpose.
(2) For any qualified disadvantaged individual or qualified
displaced employee who first commenced employment in taxable years
beginning on or after January 1, 2001, and before January 1, 2011,
for which, as of the later of July 1, 2011, or the date the qualified
disadvantaged individual or qualified displaced employee first
commenced employment, a certification described in paragraph (1) has
not been obtained and a request for certification described in
paragraph (1) has not been previously submitted, then a request for
certification described in paragraph (1) with respect to that
employee shall be submitted to the certifying entity no later than
the date that is the later of 90 days after July 1, 2011, or 30 days
after the date the qualified disadvantaged individual or qualified
displaced employee first commenced employment. A credit shall be
allowed under this section with respect to a qualified disadvantaged
individual or qualified displaced employee described in the preceding
sentence only if a request for certification was timely submitted in
accordance with this paragraph.
(2)
(3) Retain a copy of the certification and provide it
upon request to the Franchise Tax Board.
(d)
(e) (1) For purposes of this section, both of
the following apply:
(A) All employees of trades or businesses that are under common
control shall be treated as employed by a single employer.
(B) The credit (if any) allowable by this section with respect to
each trade or business shall be determined by reference to its
proportionate share of the qualified wages giving rise to the credit.
The regulations prescribed under this paragraph shall be based on
principles similar to the principles that apply in the case of
controlled groups of corporations as specified in subdivision (e) of
Section 23622.
(2) If an employer acquires the major portion of a trade or
business of another employer (hereinafter in this paragraph referred
to as the "predecessor") or the major portion of a separate unit of a
trade or business of a predecessor, then, for purposes of applying
this section (other than subdivision (d)) for any calendar year
ending after that acquisition, the employment relationship between an
employee and an employer shall not be treated as terminated if the
employee continues to be employed in that trade or business.
(e)
(f) (1) (A) If For qualified
disadvantaged individuals or qualified displaced employees who first
commenced employment in taxable years beginning on or
after January 1, 1995, and before January 1, 2011, if the
employment, other than seasonal employment, of any employee, with
respect to whom qualified wages are taken into account under
subdivision (a) is terminated by the taxpayer at any time during the
first 270 days of that employment (whether or not consecutive) or
before the close of the 270th calendar day after the day in which
that employee completes 90 days of employment with the taxpayer, the
tax imposed by this part for the taxable year in which that
employment is terminated shall be increased by an amount (determined
under those regulations) equal to the credit allowed under
subdivision (a) for that taxable year and all prior taxable years
attributable to qualified wages paid or incurred with respect to that
employee.
(B) If the seasonal employment of any qualified disadvantaged
individual, with respect to whom qualified wages are taken into
account under subdivision (a) is not continued by the qualified
taxpayer for a period of 270 days of employment during the 60-month
period beginning with the day the qualified disadvantaged individual
commences seasonal employment with the qualified taxpayer, the tax
imposed by this part, for the taxable year that includes the 60th
month following the month in which the qualified disadvantaged
individual commences seasonal employment with the qualified taxpayer,
shall be increased by an amount equal to the credit allowed under
subdivision (a) for that taxable year and all prior taxable years
attributable to qualified wages paid or incurred with respect to that
qualified disadvantaged individual.
(2) (A) Subparagraph (A) of paragraph (1) shall not apply to any
of the following:
(i) A termination of employment of an employee who voluntarily
leaves the employment of the taxpayer.
(ii) A termination of employment of an individual who, before the
close of the period referred to in subparagraph (A) of paragraph (1),
becomes disabled to perform the services of that employment, unless
that disability is removed before the close of that period and the
taxpayer fails to offer reemployment to that individual.
(iii) A termination of employment of an individual, if it is
determined that the termination was due to the misconduct (as defined
in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that individual.
(iv) A termination of employment of an individual due to a
substantial reduction in the trade or business operations of the
taxpayer.
(v) A termination of employment of an individual, if that
individual is replaced by other qualified employees so as to create a
net increase in both the number of employees and the hours of
employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of
the following:
(i) A failure to continue the seasonal employment of a qualified
disadvantaged individual who voluntarily fails to return to the
seasonal employment of the qualified taxpayer.
(ii) A failure to continue the seasonal employment of a qualified
disadvantaged individual who, before the close of the period referred
to in subparagraph (B) of paragraph (1), becomes disabled and unable
to perform the services of that seasonal employment, unless that
disability is removed before the close of that period and the
qualified taxpayer fails to offer seasonal employment to that
individual.
(iii) A failure to continue the seasonal employment of a qualified
disadvantaged individual, if it is determined that the failure to
continue the seasonal employment was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that qualified disadvantaged
individual.
(iv) A failure to continue seasonal employment of a qualified
disadvantaged individual due to a substantial reduction in the
regular seasonal trade or business operations of the qualified
taxpayer.
(v) A failure to continue the seasonal employment of a qualified
disadvantaged individual, if that individual is replaced by other
qualified displaced employees so as to create a net increase in both
the number of seasonal employees and the hours of seasonal
employment.
(C) For purposes of paragraph (1), the employment relationship
between the taxpayer and an employee shall not be treated as
terminated by reason of a mere change in the form of conducting the
trade or business of the taxpayer, if the employee continues to be
employed in that trade or business and the taxpayer retains a
substantial interest in that trade or business.
(3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
(4) At the close of the second taxable year, if the taxpayer has
not increased the number of its employees as determined by paragraph
(5) of subdivision (b), then the amount of the credit previously
claimed shall be added to the taxpayer's net tax for the taxpayer's
second taxable year.
(f)
(g) In the case of an estate or trust, both of the
following apply:
(1) The qualified wages for any taxable year shall be apportioned
between the estate or trust and the beneficiaries on the basis of the
income of the estate or trust allocable to each.
(2) Any beneficiary to whom any qualified wages have been
apportioned under paragraph (1) shall be treated (for purposes of
this part) as the employer with respect to those wages.
(g)
(h) The credit shall be reduced by the credit allowed
under Section 17053.7. The credit shall also be reduced by the
federal credit allowed under Section 51 of the Internal Revenue Code.
In addition, any deduction otherwise allowed under this part for
the wages or salaries paid or incurred by the taxpayer upon which the
credit is based shall be reduced by the amount of the credit, prior
to any reduction required by subdivision (h) or (i).
(h)
(i) (1) In the case where the
credit otherwise allowed under this section exceeds the "net tax" for
the taxable year, that portion of the credit that exceeds the "net
tax" may be carried over and added to the credit, if any, in
succeeding years, until the credit is exhausted. The credit shall be
applied first to the earliest taxable years possible.
(2) Notwithstanding paragraph (1), for taxable years beginning on
or after January 1, 2011:
(A) In the case of any portion of a credit available for carryover
and attributable to a taxable year beginning before January 1, 2006,
that portion shall not be carried forward.
(B) In the case of credits first allowed in taxable years
beginning on or after January 1, 2006, the carryover period shall be
five years from the year for which the credit was first allowed.
(i)
(j) (1) The amount of credit otherwise allowed under
this section and Section 17053.45, including prior year credit
carryovers, that may reduce the "net tax" for the taxable year shall
not exceed the amount of tax that would be imposed on the taxpayer's
business income attributed to a LAMBRA determined as if that
attributed income represented all of the net income of the taxpayer
subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the LAMBRA.
For that purpose, the taxpayer's business income that is attributable
to sources in this state first shall be determined in accordance
with Chapter 17 (commencing with Section 25101) of Part 11. That
business income shall be further apportioned to the LAMBRA in
accordance with Article 2 (commencing with Section 25120) of Chapter
17 of Part 11, modified for purposes of this section in accordance
with paragraph (3).
(3) Income shall be apportioned to a LAMBRA by multiplying the
total California business income of the taxpayer by a fraction, the
numerator of which is the property factor plus the payroll factor,
and the denominator of which is two. For purposes of this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the LAMBRA during the taxable
year, and the denominator of which is the average value of all the
taxpayer's real and tangible personal property owned or rented and
used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the LAMBRA during the
taxable year for compensation, and the denominator of which is the
total compensation paid by the taxpayer in this state during the
taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "net tax" for the
taxable year, as provided in subdivision (h)
(i) .
(j)
(k) If the taxpayer is allowed a credit pursuant to
this section for qualified wages paid or incurred, only one credit
shall be allowed to the taxpayer under this part with respect to any
wage consisting in whole or in part of those qualified wages.
(l) For taxable years beginning on or after January 1, 2011, the
credit allowed by this section must be claimed on a timely filed
original return of the qualified taxpayer.
SEC. 6. Section 17053.47 of the Revenue
and Taxation Code is amended to read:
17053.47. (a) (1) For each taxable year
beginning on or after January 1, 1998, there shall be allowed a
credit against the "net tax" (as tax," as
defined in Section 17039) 17039,
to a qualified taxpayer for hiring a qualified disadvantaged
individual during the taxable year for employment in the
manufacturing enhancement area. The For
qualified disadvantaged individuals who first commenced employment in
taxable years beginning on or after January 1, 1998, and before
January 1, 2011, the credit shall be equal to the sum of each
of the following:
(1)
(A) Fifty percent of the qualified wages in the first
year of employment.
(2)
(B) Forty percent of the qualified wages in the second
year of employment.
(3)
(C) Thirty percent of the qualified wages in the third
year of employment.
(4)
(D) Twenty percent of the qualified wages in the fourth
year of employment.
(5)
(E) Ten percent of the qualified wages in the fifth
year of employment.
(2) For qualified disadvantaged individuals who first commence
employment in taxable years beginning on or after January 1, 2011,
the credit shall be equal to five thousand dollars ($5,000) for each
net increase in qualified employees, as specified in subdivision (c),
employed during the taxable year by a qualified taxpayer.
(b) For purposes of this section:
(1) "Qualified For taxable
years beginning on or after January 1, 1998, and before January 1,
2011, "qualified wages" means:
(A) That portion of wages paid or incurred by the qualified
taxpayer during the taxable year to qualified disadvantaged
individuals that does not exceed 150 percent of the minimum wage.
(B) The total amount of qualified wages which may be taken into
account for purposes of claiming the credit allowed under this
section shall not exceed two million dollars ($2,000,000) per taxable
year.
(C) Wages received during the 60-month period beginning with the
first day the qualified disadvantaged individual commences employment
with the qualified taxpayer. Reemployment in connection with any
increase, including a regularly occurring seasonal increase, in the
trade or business operations of the taxpayer does not constitute
commencement of employment for purposes of this section.
(D) Qualified wages do not include any wages paid or incurred by
the qualified taxpayer on or after the manufacturing enhancement area
expiration date. However, wages paid or incurred with respect to
qualified employees who are employed by the qualified taxpayer within
the manufacturing enhancement area within the 60-month period prior
to the manufacturing enhancement area expiration date shall continue
to qualify for the credit under this section after the manufacturing
enhancement area expiration date, in accordance with all provisions
of this section applied as if the manufacturing enhancement area
designation were still in existence and binding.
(2) "Acquired" includes any gift, inheritance, transfer incident
to divorce, or any other transfer, whether or not for consideration.
(2)
(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.
(3)
(4) "Manufacturing enhancement area" means an area
designated pursuant to Section 7073.8 of the Government Code
according to the procedures of Chapter 12.8 (commencing with Section
7070) of Division 7 of Title 1 of the Government Code.
(4)
(5) "Manufacturing enhancement area expiration date"
means the date the manufacturing enhancement area designation
expires, is no longer
binding, or becomes inoperative.
(5)
(6) "Qualified disadvantaged individual" means an
individual who satisfies all of the following requirements:
(A) (i) At least 90 percent of whose services for the qualified
taxpayer during the taxable year are directly related to the conduct
of the qualified taxpayer's trade or business located in a
manufacturing enhancement area.
(ii) Who performs at least 50 percent of his or her services for
the qualified taxpayer during the taxable year in the manufacturing
enhancement area.
(B)
(iii) Who is hired by the qualified taxpayer after the
designation of the area as a manufacturing enhancement area in which
the individual's services were primarily performed.
(C) Who
(B) For an individual who first
commenced employment with the qualified taxpayer in taxable years
beginning before January 1, 1998, or before January 1, 2011, he or
she is any of the following immediately preceding the
individual's commencement of employment with the qualified taxpayer:
(i) An individual who has been determined eligible for services
under the federal Job Training Partnership Act (29 U.S.C. Sec. 1501
et seq.), or its successor.
(ii) Any voluntary or mandatory registrant under the Greater
Avenues for Independence Act of 1985, or its successor, as provided
pursuant to Article 3.2 (commencing with Section 11320) of Chapter 2
of Part 3 of Division 9 of the Welfare and Institutions Code.
(iii) Any individual who has been certified eligible by the
Employment Development Department under the federal Targeted Jobs Tax
Credit Program, or its successor, whether or not this program is in
effect.
(C) For a qualified disadvantaged individual who first commences
employment in taxable years beginning on or after January 1, 2011,
that individual is a "qualified full-time employee" if, in addition
to any other requirement imposed by this section, he or she was
either:
(i) Paid wages by the qualified employer for services of not less
than an average of 35 hours per week.
(ii) A salaried employee and was paid compensation during the
taxable year for full-time employment, within the meaning of Section
515 of the Labor Code, by the qualified employer.
(6)
(7) (A) "Qualified taxpayer"
means any taxpayer engaged in a trade or business within a
manufacturing enhancement area designated pursuant to Section 7073.8
of the Government Code and who meets all of the following
requirements:
(A)
(i) Is engaged in those lines of business described in
Codes 0211 to 0291, inclusive, Code 0723, or in Codes 2011 to 3999,
inclusive, of the Standard Industrial Classification (SIC) Manual
published by the United States Office of Management and Budget, 1987
edition.
(B)
(ii) At least 50 percent of the qualified taxpayer's
workforce hired after the designation of the manufacturing
enhancement area is composed of individuals who, at the time of hire,
are residents of the county in which the manufacturing enhancement
area is located.
(C)
(iii) Of this percentage of local hires, at least 30
percent shall be qualified disadvantaged individuals.
(B) (i) Notwithstanding subparagraph (A), a "qualified taxpayer"
shall not include any person or entity described in subparagraph (A)
that first commences business activity in a manufacturing enhancement
area during the taxable year and has, within 24 months before the
taxpayer first commenced business activity in the manufacturing
enhancement area, had an overall reduction in the number of employees
employed by the taxpayer within the state outside of the
manufacturing enhancement area, unless that person or entity has made
a written offer of employment to each of the employees employed at
the location within the state where employment was reduced for such
employees to continue their employment with that person or entity
within the manufacturing enhancement area.
(ii) In determining whether the taxpayer has first commenced doing
business in the manufacturing enhancement area during the taxable
year, the provisions of subdivision (f) of Section 17276.20, without
application of paragraph (7) of that subdivision, shall apply.
(iii) The written offer referred to in this subparagraph shall be
made prior to the termination of employment at the location within
the state that is outside the manufacturing enhancement area.
(iv) If any employee described in clause (i) does not timely
receive a written offer, the person or entity shall not be a
qualified taxpayer for that taxable year, even if other employees do
receive a written offer.
(v) A person or entity may be required to provide, upon request of
the Franchise Tax Board, written certification, under penalty of
perjury, that the requirements of this subparagraph were met.
(vi) 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.
(7)
(8) "Seasonal employment" means employment by a
qualified taxpayer that has regular and predictable substantial
reductions in trade or business operations.
(9) "Annual full-time equivalent" means either of the following:
(A) In the case of a full-time employee paid hourly wages, "annual
full-time equivalent" means the total number of hours worked for the
taxpayer by the employee (not to exceed 2,000 hours per employee)
divided by 2,000.
(B) In the case of a salaried full-time employee, "annual
full-time equivalent" means the total number of weeks worked for the
taxpayer by the employee divided by 52.
(c) Except as provided in paragraph (2), the net increase in
qualified full-time employees of a qualified taxpayer shall be
determined by paragraph (1):
(1) (A) (i) If the state's average nonfarm employment, as
determined by the Franchise Tax Board based upon information
published by the Employment Development Department as of March 15 of
each calendar year, has not decreased for the calendar years
beginning on the third and the second January 1 immediately preceding
the beginning of the current taxable year, as compared with the
second and first calendar years respectively, then the net increase
in qualified full-time employees shall be determined on an annual
full-time equivalent basis based on the amount of the increase of
qualified full-time equivalent employees in excess of the greatest of
the number of qualified full-time equivalent employees employed by
the qualified taxpayer in any of the three immediately preceding
taxable years, as determined under subparagraph (B).
(ii) The amount determined under clause (i) shall include the
fractional amount, if any, of the increase for the taxable year.
(B) The net increase in qualified full-time employees for the
current taxable year shall be determined by subtracting the amount
determined under clause (ii) from the amount determined under clause
(i). If the amount determined under clause (ii) is equal to or
exceeds the amount determined under clause (i), the amount determined
under this subparagraph shall be zero.
(i) (I) The total number of qualified full-time employees employed
in the current taxable year by the qualified taxpayer and by any
trade or business acquired by the qualified taxpayer during the
current taxable year.
(II) The greatest total number of qualified full-time employees
employed in any of the three preceding taxable years by the qualified
taxpayer and by any trade or business acquired by the qualified
taxpayer during the current taxable year.
(ii) The increase in the total number of full-time employees
(determined under the full-time equivalent rules of paragraph (9) of
subdivision (b)) employed by the qualified taxpayer in this state
shall be determined by subtracting the amount determined under
subclause (II) from the amount determined under subclause (I). If the
amount determined under subclause (II) is equal to or exceeds the
amount determined under subclause (I), the amount determined under
this clause shall be zero.
(I) The total number of full-time employees employed in this state
in the current taxable year by the qualified taxpayer and by any
trade or business acquired by the qualified taxpayer during the
current taxable year.
(II) The greatest total number of full-time employees of the
qualified taxpayer employed in this state in any of the three
preceding taxable years by the qualified taxpayer and by any trade or
business acquired by the qualified taxpayer during the current
taxable year.
(2) (A) (i) If there is a decrease in the state's nonfarm
employment, as determined by the Franchise Tax Board based upon
information published by the Employment Development Department as of
March 15 of each calendar year, for the calendar years beginning on
the third and the second January 1 immediately preceding the current
taxable year, the net increase in qualified full-time employees shall
be determined on an annual full-time equivalent basis as the lesser
of the amount determined under subparagraph (C) or the amount
determined under subparagraph (B).
(ii) The amount determined under clause (i) shall include the
fractional amount, if any, of the increase for the taxable year.
(B) The increase in the total number of qualified full-time
employees shall be determined by subtracting the amount determined
under clause (ii) from the amount determined under clause (i). If the
amount determined under clause (ii) is equal to or exceeds the
amount determined under clause (i), the amount determined under this
subparagraph shall be zero.
(i) The total number of qualified full-time employees employed in
the current taxable year by the qualified taxpayer and by any trade
or business acquired by the qualified taxpayer during the current
taxable year.
(ii) The total number of qualified full-time employees employed in
the preceding taxable year by the qualified taxpayer and by any
trade or business acquired by the qualified taxpayer during the
current taxable year.
(C) The increase in the total number of full-time employees
(determined under the full-time equivalent rules of paragraph (9) of
subdivision (b)) employed by the qualified taxpayer in this state
shall be determined by subtracting the amount determined under clause
(ii) from the amount determined under clause (i). If the amount
determined under clause (ii) is equal to or exceeds the amount
determined under clause (i), the amount determined under this
subparagraph shall be zero.
(i) The total number of full-time employees employed in this state
in the current taxable year by the qualified taxpayer and by any
trade or business acquired by the qualified taxpayer during the
current taxable year.
(ii) The total number of full-time employees of the qualified
taxpayer employed in this state in the preceding taxable year by the
qualified taxpayer and by any trade or business acquired by the
qualified taxpayer during the current taxable year.
(3) For qualified taxpayers who first commence doing business in
this state during the taxable year, the number of qualified full-time
employees under subparagraph (B) of paragraph (1) and the number of
full-time employees under subparagraph (C) of paragraph (2) for the
preceding taxable year shall be zero.
(4) For purposes of determining the number of full-time employees
of the qualified taxpayer who are employed in this state under
paragraphs (1) and (2), only those employees who receive wages that
are subject to Division 6 (commencing with Section 13000) of the
Unemployment Insurance Code from the qualified taxpayer comprising
more than 50 percent of that employee's total wages received from the
qualified taxpayer for the taxable year, shall be included.
(5) For purposes of determining the increase in the number of
qualified full-time employees of a qualified taxpayer under this
section and Sections 17053.34, 17053.46, and 17053.74, the increase
shall be determined separately for the targeted tax area, and each
enterprise zone, manufacturing enhancement area, or local agency
military base recovery area with respect to which a taxpayer is a
qualified taxpayer.
(6) Any determination of the Franchise Tax Board under this
subdivision with respect to whether there is an increase, a decrease,
or no change in the state's nonfarm employment for any calendar year
shall be final and may not be reviewed in any administrative or
judicial proceeding, even if the data published by the Employment
Development Department as of March 15 of any calendar year upon which
the Franchise Tax Board relied in making its determination is
substantially revised and would otherwise change which formula is
applicable under this subdivision.
(c)
(d) (1) For purposes of this section, all of the
following apply:
(A) All employees of trades or businesses that are under common
control shall be treated as employed by a single qualified taxpayer.
(B) The credit (if any) allowable by this section with respect to
each trade or business shall be determined by reference to its
proportionate share of the expense of the qualified wages giving rise
to the credit and shall be allocated in that manner.
(C) Principles that apply in the case of controlled groups of
corporations, as specified in subdivision (d) of Section 23622.7,
shall apply with respect to determining employment.
(2) If a qualified taxpayer acquires the major portion of a trade
or business of another employer (hereinafter in this paragraph
referred to as the "predecessor") or the major portion of a separate
unit of a trade or business of a predecessor, then, for purposes of
applying this section (other than subdivision (d)
(e) ) for any calendar year ending after that acquisition,
the employment relationship between a qualified disadvantaged
individual and a qualified taxpayer shall not be treated as
terminated if the qualified disadvantaged individual continues to be
employed in that trade or business.
(d)
(e) (1) (A) If For qualified
disadvantaged individuals who first commenced employment with at
qualified taxpayer in taxable years beginning on or after
January 1, 1998, and before January 1, 2011, if the employment,
other than seasonal employment, of any qualified disadvantaged
individual, with respect to whom qualified wages are taken into
account under subdivision (b) is terminated by the qualified taxpayer
at any time during the first 270 days of that employment (whether or
not consecutive) or before the close of the 270th calendar day after
the day in which that qualified disadvantaged individual completes
90 days of employment with the qualified taxpayer, the tax imposed by
this part for the taxable year in which that employment is
terminated shall be increased by an amount equal to the credit
allowed under subdivision (a) for that taxable year and all prior
taxable years attributable to qualified wages paid or incurred with
respect to that qualified disadvantaged individual.
(B) If the seasonal employment of any qualified disadvantaged
individual, with respect to whom qualified wages are taken into
account under subdivision (a) is not continued by the qualified
taxpayer for a period of 270 days of employment during the 60-month
period beginning with the day the qualified disadvantaged individual
commences seasonal employment with the qualified taxpayer, the tax
imposed by this part, for the taxable year that includes the 60th
month following the month in which the qualified disadvantaged
individual commences seasonal employment with the qualified taxpayer,
shall be increased by an amount equal to the credit allowed under
subdivision (a) for that taxable year and all prior taxable years
attributable to qualified wages paid or incurred with respect to that
qualified disadvantaged individual.
(2) (A) Subparagraph (A) of paragraph (1) does not apply to any of
the following:
(i) A termination of employment of a qualified disadvantaged
individual who voluntarily leaves the employment of the qualified
taxpayer.
(ii) A termination of employment of a qualified disadvantaged
individual who, before the close of the period referred to in
subparagraph (A) of paragraph (1), becomes disabled to perform the
services of that employment, unless that disability is removed before
the close of that period and the taxpayer fails to offer
reemployment to that individual.
(iii) A termination of employment of a qualified disadvantaged
individual, if it is determined that the termination was due to the
misconduct (as defined in Sections 1256-30 to 1256-43, inclusive, of
Title 22 of the California Code of Regulations) of that individual.
(iv) A termination of employment of a qualified disadvantaged
individual due to a substantial reduction in the trade or business
operations of the qualified taxpayer.
(v) A termination of employment of a qualified disadvantaged
individual, if that individual is replaced by other qualified
disadvantaged individuals so as to create a net increase in both the
number of employees and the hours of employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of
the following:
(i) A failure to continue the seasonal employment of a qualified
disadvantaged individual who voluntarily fails to return to the
seasonal employment of the qualified taxpayer.
(ii) A failure to continue the seasonal employment of a qualified
disadvantaged individual who, before the close of the period referred
to in subparagraph (B) of paragraph (1), becomes disabled and unable
to perform the services of that seasonal employment, unless that
disability is removed before the close of that period and the
qualified taxpayer fails to offer seasonal employment to that
qualified disadvantaged individual.
(iii) A failure to continue the seasonal employment of a qualified
disadvantaged individual, if it is determined that the failure to
continue the seasonal employment was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that qualified disadvantaged
individual.
(iv) A failure to continue seasonal employment of a qualified
disadvantaged individual due to a substantial reduction in the
regular seasonal trade or business operations of the qualified
taxpayer.
(v) A failure to continue the seasonal employment of a qualified
disadvantaged individual, if that qualified disadvantaged individual
is replaced by other qualified disadvantaged individuals so as to
create a net increase in both the number of seasonal employees and
the hours of seasonal employment.
(C) For purposes of paragraph (1), the employment relationship
between the qualified taxpayer and a qualified disadvantaged
individual shall not be treated as terminated by reason of a mere
change in the form of conducting the trade or business of the
qualified taxpayer, if the qualified disadvantaged individual
continues to be employed in that trade or business and the qualified
taxpayer retains a substantial interest in that trade or business.
(3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
(e)
(f) In the case of an estate or trust, both of the
following apply:
(1) The qualified wages for any taxable year shall be apportioned
between the estate or trust and the beneficiaries on the basis of the
income of the estate or trust allocable to each.
(2) Any beneficiary to whom any qualified wages have been
apportioned under paragraph (1) shall be treated (for purposes of
this part) as the employer with respect to those wages.
(f)
(g) The credit shall be reduced by the credit allowed
under Section 17053.7. The credit shall also be reduced by the
federal credit allowed under Section 51 of the Internal Revenue Code.
In addition, any deduction otherwise allowed under this part for
the wages or salaries paid or incurred by the qualified taxpayer upon
which the credit is based shall be reduced by the amount of the
credit, prior to any reduction required by subdivision (g)
(h) or (h) (i) .
(g)
(h) (1) In the case where the
credit otherwise allowed under this section exceeds the "net tax" for
the taxable year, that portion of the credit that exceeds the "net
tax" may be carried over and added to the credit, if any, in
succeeding years, until the credit is exhausted. The credit shall be
applied first to the earliest taxable years possible.
(2) Notwithstanding paragraph (1), for taxable years
beginning on or after January 1, 2011:
(A) In the case of any portion of a credit available for
carryover and attributable to a taxable year beginning before January
1, 2006, that portion shall not be carried forward.
(B) In the case of credits first allowed in taxable years
beginning on or after January 1, 2006, the carryover period shall be
five years from the year for which the credit was first allowed.
(h)
(i) (1) The amount of credit otherwise allowed under
this section, including prior year credit carryovers, that may reduce
the "net tax" for the taxable year shall not exceed the amount of
tax that would be imposed on the qualified taxpayer's business income
attributed to a manufacturing enhancement area determined as if that
attributed income represented all of the net income of the qualified
taxpayer subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the
manufacturing enhancement area. For that purpose, the taxpayer's
business income that is attributable to sources in this state first
shall be determined in accordance with Chapter 17 (commencing with
Section 25101) of Part 11. That business income shall be further
apportioned to the manufacturing enhancement area in accordance with
Article 2 (commencing with Section 25120) of Chapter 17 of Part 11,
modified for purposes of this section in accordance with paragraph
(3).
(3) Income shall be apportioned to a manufacturing enhancement
area by multiplying the total California business income of the
taxpayer by a fraction, the numerator of which is the property factor
plus the payroll factor, and the denominator of which is two. For
purposes of this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the manufacturing enhancement
area during the taxable year, and the denominator of which is the
average value of all the taxpayer's real and tangible personal
property owned or rented and used in this state during the taxable
year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the manufacturing
enhancement area during the taxable year for compensation, and the
denominator of which is the total compensation paid by the taxpayer
in this state during the taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "net tax" for the
taxable year, as provided in subdivision (g)
(h) .
(i)
(j) If the taxpayer is allowed a credit pursuant to
this section for qualified wages paid or incurred, only one credit
shall be allowed to the taxpayer under this part with respect to any
wage consisting in whole or in part of those qualified wages.
(j) The
(k) For qualified disadvantaged
individuals who first commenced employment in taxable years beginning
on or after January 1, 1998, and before January 1, 2011, the
qualified taxpayer shall do both of the following:
(1) Obtain from the Employment Development Department, as
permitted by federal law, the local county or city Job Training
Partnership Act administrative entity, the local county GAIN office
or social services agency, or the local government administering the
manufacturing enhancement area, a certification that provides that a
qualified disadvantaged individual meets the eligibility requirements
specified in paragraph (5) of subdivision (b). The Employment
Development Department may provide preliminary screening and referral
to a certifying agency. The Department of Housing and Community
Development shall develop regulations governing the issuance of
certificates pursuant to subdivision (d) of Section 7086 of the
Government Code and shall develop forms for this purpose.
(2) For any qualified disadvantaged individual who first commenced
employment in taxable years beginning before January 1, 2011, for
which, as of the later of July 1, 2011, or the date the qualified
disadvantaged individual first commenced employment, a certification
described in paragraph (1) has not
been obtained and a request for certification described in
paragraph (1) has not been previously submitted, then a request for
certification described in paragraph (1) with respect to that
employee shall be submitted to the certifying entity no later than
the date that is the later of 90 days after July 1, 2011, or 30 days
after the date the qualified disadvantaged individual first commenced
employment. A credit shall be allowed under this section with
respect to a qualified disadvantaged individual described in the
preceding sentence only if a request for certification was timely
submitted in accordance with this paragraph.
(2)
(3) Retain a copy of the certification and provide it
upon request to the Franchise Tax Board.
(l) For taxable years beginning on or after January 1, 2011, the
credit allowed by this section must be claimed on a timely filed
original return of the qualified taxpayer.
SEC. 7. Section 17053.70 of the Revenue
and Taxation Code is amended to read:
17053.70. (a) There shall be allowed as a credit against the "net
tax" (as tax," as defined in Section
17039) 17039, for the taxable year an
amount equal to the sales or use tax paid or incurred during the
taxable year by the taxpayer in connection with the taxpayer's
purchase of qualified property.
(b) For purposes of this section:
(1) "Taxpayer" means a person or entity engaged in a trade or
business within an enterprise zone.
(2) "Qualified property" means:
(A) Any of the following:
(i) Machinery and machinery parts used for fabricating,
processing, assembling, and manufacturing.
(ii) Machinery and machinery parts used for the production of
renewable energy resources.
(iii) Machinery and machinery parts used for either of the
following:
(I) Air pollution control mechanisms.
(II) Water pollution control mechanisms.
(iv) Data processing and communications equipment, including, but
not limited, to computers, computer-automated drafting systems, copy
machines, telephone systems, and faxes.
(v) Motion picture manufacturing equipment central to production
and postproduction, including, but not limited to, cameras, audio
recorders, and digital image and sound processing equipment.
(B) The total cost of qualified property purchased and placed in
service in any taxable year that may be taken into account by any
taxpayer for purposes of claiming this credit shall not exceed one
million dollars ($1,000,000).
(C) The qualified property is used by the taxpayer exclusively in
an enterprise zone.
(D) The qualified property is purchased and placed in service
before the date the enterprise zone designation expires, is no longer
binding, or becomes inoperative.
(3) "Enterprise zone" means the area designated as an enterprise
zone pursuant to Chapter 12.8 (commencing with Section 7070) of
Division 7 of Title 1 of the Government Code.
(c) If the taxpayer has purchased property upon which a use tax
has been paid or incurred, the credit provided by this section shall
be allowed only if qualified property of a comparable quality and
price is not timely available for purchase in this state.
(d) (1) In the case where the credit
otherwise allowed under this section exceeds the "net tax" for the
taxable year, that portion of the credit that exceeds the "net tax"
may be carried over and added to the credit, if any, in succeeding
taxable years, until the credit is exhausted. The credit shall be
applied first to the earliest taxable years possible.
(2) Notwithstanding paragraph (1), for taxable years beginning on
or after January 1, 2011:
(A) In the case of any portion of a credit available for carryover
and attributable to a taxable year beginning before January 1, 2006,
that portion shall not be carried forward.
(B) In the case of credits first allowed in taxable years
beginning on or after January 1, 2006, the carryover period shall be
five years from the year for which the credit was first allowed.
(e) Any taxpayer who elects to be subject to this section shall
not be entitled to increase the basis of the qualified property as
otherwise required by Section 164(a) of the Internal Revenue Code
with respect to sales or use tax paid or incurred in connection with
the taxpayer's purchase of qualified property.
(f) (1) The amount of the credit otherwise allowed under this
section and Section 17053.74, including any credit carryover from
prior years, that may reduce the "net tax" for the taxable year shall
not exceed the amount of tax that would be imposed on the taxpayer's
business income attributable to the enterprise zone determined as if
that attributable income represented all of the income of the
taxpayer subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the
enterprise zone. For that purpose, the taxpayer's business income
attributable to sources in this state first shall be determined in
accordance with Chapter 17 (commencing with Section 25101) of Part
11. That business income shall be further apportioned to the
enterprise zone in accordance with Article 2 (commencing with Section
25120) of Chapter 17 of Part 11, modified for purposes of this
section in accordance with paragraph (3).
(3) Business income shall be apportioned to the enterprise zone by
multiplying the total California business income of the taxpayer by
a fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is two. For purposes of
this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the enterprise zone during the
taxable year, and the denominator of which is the average value of
all the taxpayer's real and tangible personal property owned or
rented and used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the enterprise zone during
the taxable year for compensation, and the denominator of which is
the total compensation paid by the taxpayer in this state during the
taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "net tax" for the
taxable year, as provided in subdivision (d).
(g) The amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 1998.
(h) For taxable years beginning on or after January 1, 2011, the
credit allowed by this section must be claimed on a timely filed
original return of the taxpayer.
SEC. 8. Section 17053.74 of the Revenue
and Taxation Code is amended to read:
17053.74. (a) (1) There shall be allowed a
credit against the "net tax" (as tax," as
defined in Section 17039) 17039,
to a taxpayer who employs a qualified employee in an enterprise zone
during the taxable year who first commenced employment with the
qualified employee in taxable years beginning before January 1, 2011
. The credit shall be equal to the sum of each of the
following:
(1)
(A) Fifty percent of qualified wages in the first year
of employment.
(2)
(B) Forty percent of qualified wages in the second year
of employment.
(3)
(C) Thirty percent of qualified wages in the third year
of employment.
(4)
(D) Twenty percent of qualified wages in the fourth
year of employment.
(5)
(E) Ten percent of qualified wages in the fifth year of
employment.
(2) There shall be allowed a credit against the "net tax," as
defined in Section 17039, to a taxpayer who employs a qualified
employee in an enterprise zone during the taxable year who first
commenced employment with the qualified taxpayer in taxable years
beginning on or after January 1, 2011. The credit shall be equal to
five thousand dollars ($5,000) for each net increase in qualified
full-time employees, as specified in subdivision (c), employed during
the taxable year by a qualified taxpayer.
(b) For purposes of this section:
(1) "Qualified For taxable years beginning
before January 1, 2011, "qualified wages" means:
(A) (i) Except as provided in clause (ii), that portion of wages
paid or incurred by the taxpayer during the taxable year to qualified
employees that does not exceed 150 percent of the minimum wage.
(ii) For up to 1,350 qualified employees who are employed by the
taxpayer in the Long Beach Enterprise Zone in aircraft manufacturing
activities described in Codes 3721 to 3728, inclusive, and Code 3812
of the Standard Industrial Classification (SIC) Manual published by
the United States Office of Management and Budget, 1987 edition,
"qualified wages" means that portion of hourly wages that does not
exceed 202 percent of the minimum wage.
(B) Wages received during the 60-month period beginning with the
first day the employee commences employment with the taxpayer.
Reemployment in connection with any increase, including a regularly
occurring seasonal increase, in the trade or business operations of
the taxpayer does not constitute commencement of employment for
purposes of this section.
(C) Qualified wages do not include any wages paid or incurred by
the taxpayer on or after the zone expiration date. However, wages
paid or incurred with respect to qualified employees who are employed
by the taxpayer within the enterprise zone within the 60-month
period prior to the zone expiration date shall continue to qualify
for the credit under this section after the zone expiration date, in
accordance with all provisions of this section applied as if the
enterprise zone designation were still in existence and binding.
(2) "Acquired" includes any gift, inheritance, transfer incident
to divorce, or any other transfer, whether or not for consideration.
(2)
(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.
(3)
(4) "Zone expiration date" means the date the
enterprise zone designation expires, is no longer binding, or becomes
inoperative.
(4)
(5) (A) "Qualified employee" means an individual who
meets all of the following requirements:
(i) At least 90 percent of whose services for the taxpayer during
the taxable year are directly related to the conduct of the taxpayer'
s trade or business located in an enterprise zone.
(ii) Performs at least 50 percent of his or her services for the
taxpayer during the taxable year in an enterprise zone.
(iii) Is hired by the taxpayer after the date of original
designation of the area in which services were performed as an
enterprise zone.
(iv) Is For an individual who first
commenced employment with the taxpayer in taxable years beginning
before January 1, 2011, he or she is any of the following:
(I) Immediately preceding the qualified employee's commencement of
employment with the taxpayer, was a person eligible for services
under the federal Job Training Partnership Act (29 U.S.C. Sec. 1501
et seq.), or its successor, who is receiving, or is eligible to
receive, subsidized employment, training, or services funded by the
federal Job Training Partnership Act, or its successor.
(II) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a person eligible to be a
voluntary or mandatory registrant under the Greater Avenues for
Independence Act of 1985 (GAIN) provided for pursuant to Article 3.2
(commencing with Section 11320) of Chapter 2 of Part 3 of Division 9
of the Welfare and Institutions Code, or its successor.
(III) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was an economically disadvantaged
individual 14 years of age or older.
(IV) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a dislocated worker who meets
any of the following:
(aa)
(ia) Has been terminated or laid off or who has
received a notice of termination or layoff from employment, is
eligible for or has exhausted entitlement to unemployment insurance
benefits, and is unlikely to return to his or her previous industry
or occupation.
(bb)
(ib) Has been terminated or has received a notice of
termination of employment as a result of any permanent closure or any
substantial layoff at a plant, facility, or enterprise, including an
individual who has not received written notification but whose
employer has made a public announcement of the closure or layoff.
(cc)
(ic) Is long-term unemployed and has limited
opportunities for employment or reemployment in the same or a similar
occupation in the area in which the individual resides, including an
individual 55 years of age or older who may have substantial
barriers to employment by reason of age.
(dd)
(id) Was self-employed (including farmers and ranchers)
and is unemployed as a result of general economic conditions in the
community in which he or she resides or because of natural disasters.
(ee)
(ie) Was a civilian employee of the Department of
Defense employed at a military installation being closed or realigned
under the Defense Base Closure and Realignment Act of 1990.
(ff)
(if) Was an active member of the armed forces or
National Guard as of September 30, 1990, and was either involuntarily
separated or separated pursuant to a special benefits program.
(gg)
(ig) Is a seasonal or migrant worker who experiences
chronic seasonal unemployment and underemployment in the agriculture
industry, aggravated by continual advancements in technology and
mechanization.
(hh)
(ih) Has been terminated or laid off, or has received a
notice of termination or layoff, as a consequence of compliance with
the Clean Air Act.
(V) Immediately preceding the qualified employee's commencement of
employment with the taxpayer, was a disabled individual who is
eligible for or enrolled in, or has completed a state rehabilitation
plan or is a service-connected disabled veteran, veteran of the
Vietnam era, or veteran who is recently separated from military
service.
(VI) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was an ex-offender. An individual
shall be treated as convicted if he or she was placed on probation by
a state court without a finding of guilt.
(VII) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a person eligible for or a
recipient of any of the following:
(aa)
(ia) Federal Supplemental Security Income benefits.
(bb)
(ib) Aid to Families with Dependent Children.
(cc)
(ic) Food stamps.
(dd)
(id) State and local general assistance.
(VIII) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a member of a federally
recognized Indian tribe, band, or other group of Native American
descent.
(IX) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a resident of a targeted
employment area, as defined in Section 7072 of the Government Code.
(X) An employee who qualified the taxpayer for the enterprise zone
hiring credit under former Section 17053.8 or the program area
hiring credit under former Section 17053.11.
(XI) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a member of a targeted group, as
defined in Section 51(d) of the Internal Revenue Code, or its
successor.
(B) Priority for employment shall be provided to an individual who
is enrolled in a qualified program under the federal Job Training
Partnership Act or the Greater Avenues for Independence Act of 1985
or who is eligible as a member of a targeted group under the Work
Opportunity Tax Credit (Section 51 of the Internal Revenue Code), or
its successor.
(v) For a qualified employee who first commence employment with a
taxpayer in taxable years beginning on or after January 1, 2011, that
individual is a "qualified full-time employee" if, in addition to
other requirement imposed by this section, he or she was either:
(I) Paid wages by the qualified employer for services of not less
than an average of 35 hours per week.
(II) A salaried employee and was paid compensation during the
taxable year for full-time employment, within the meaning of Section
515 of the Labor Code, by the qualified employer.
(5)
(6) (A) "Taxpayer" means a person
or entity engaged in a trade or business within an enterprise zone
designated pursuant to Chapter 12.8 (commencing with Section 7070) of
the Government Code.
(B) (i) Notwithstanding subparagraph (A), a "taxpayer" shall not
include any person or entity described in subparagraph (A) that first
commences business activity in an enterprise zone during the taxable
year and has, within 24 months before the taxpayer first commenced
business activity in the enterprise zone, had an overall reduction in
the number of employees employed by the taxpayer within the state
outside of the enterprise zone, unless that person or entity has made
a written offer of employment to each of the employees employed at
the location within the state where employment was reduced for such
employees to continue their employment with that person or entity
within the enterprise zone.
(ii) In determining whether the taxpayer has first commenced doing
business in the enterprise zone during the taxable year, the
provisions of subdivision (f) of Section 17276.20, without
application of paragraph (7) of that subdivision, shall apply.
(iii) The written offer referred to in this subparagraph shall be
made prior to the termination of employment at the location within
the state that is outside the enterprise zone.
(iv) If any employee described in clause (i) does not timely
receive a written offer, the person or entity shall not be a
qualified taxpayer for that taxable year, even if other employees do
receive a written offer.
(v) A person or entity shall be required to provide, upon request
of the Franchise Tax Board, written certification, under penalty of
perjury, that the requirements of this subparagraph were met.
(vi) All employees of the trades or businesses that are treated as
related under Section 267, 318, and 707 of the Internal Revenue Code
shall be treated or employed by a single taxpayer.
(6)
(7) "Seasonal employment" means employment by a
taxpayer that has regular and predictable substantial reductions in
trade or business operations.
(8) "Annual full-time equivalent" means either of the following:
(A) In the case of a full-time employee paid hourly wages, "annual
full-time equivalent" means the total number of hours worked for the
taxpayer by the employee (not to exceed 2,000 hours per employee)
divided by 2,000.
(B) In the case of a salaried full-time employee, "annual
full-time equivalent" means the total number of weeks worked for the
taxpayer by the employee divided by 52.
(c) Except as provided in paragraph (2), the net increase in
qualified full-time employees of a qualified taxpayer shall be
determined by paragraph (1):
(1) (A) (i) If the state's average nonfarm employment, as
determined by the Franchise Tax Board based upon information
published by the Employment Development Department as of March 15 of
each calendar year, has not decreased for the calendar years
beginning on the third and the second January 1 immediately preceding
the beginning of the current taxable year, as compared with the
second and the first calendar years respectively, then the net
increase in qualified full-time employees shall be determined on an
annual full-time equivalent basis based on the amount of the increase
of qualified full-time equivalent employees in excess of the
greatest of the number of qualified full-time equivalent employees
employed by the qualified taxpayer in any of the three immediately
preceding taxable years, as determined under subparagraph (B).
(ii) The amount determined under clause (i) shall include the
fractional amount, if any, of the increase for the taxable year.
(B) The net increase in qualified full-time employees for the
current taxable year shall be determined by subtracting the amount
determined under clause (ii) from the amount determined under clause
(i). If the amount determined under clause (ii) is equal to or
exceeds the amount determined under clause (i), the amount determined
under this subparagraph shall be zero.
(i) (I) The total number of qualified full-time employees employed
in the current taxable year by the qualified taxpayer and by any
trade or business acquired by the qualified taxpayer during the
current taxable year.
(II) The greatest total number of qualified full-time employees
employed in any of the three preceding taxable years by the qualified
taxpayer and by any trade or business acquired by the qualified
taxpayer during the current taxable year.
(ii) The increase in the total number of full-time employees
(determined under the full-time equivalent rules of paragraph (8) of
subdivision (b)) employed by the qualified taxpayer in this state
shall be determined by subtracting the amount determined under
subclause (II) from the amount determined under subclause (I). If the
amount determined under subclause (II) is equal to or exceeds the
amount determined under subclause (I), the amount determined under
this clause shall be zero.
(I) The total number of full-time employees employed in this state
in the current taxable year by the qualified taxpayer and by any
trade or business acquired by the qualified taxpayer during the
current taxable year.
(II) The greatest total number of full-time employees of the
qualified taxpayer employed in this state in any of the three
preceding taxable years by the qualified taxpayer and by any trade or
business acquired by the qualified taxpayer during the current
taxable year.
(2) (A) (i) If there is a decrease in the state's nonfarm
employment, as determined by the Franchise Tax Board based upon
information published by the Employment Development Department as of
March 15 of each calendar year, for the calendar years beginning on
the third and the second January 1 immediately preceding the current
taxable year, the net increase in qualified full-time employees shall
be determined on an annual full-time equivalent basis as the lesser
of the amount determined under subparagraph (C) or the amount
determined under subparagraph (B).
(ii) The amount determined under clause (i) shall include the
fractional amount, if any, of the increase for the taxable year.
(B) The increase in the total number of qualified full-time
employees shall be determined by subtracting the amount determined
under clause (ii) from the amount determined under clause (i). If the
amount determined under clause (ii) is equal to or exceeds the
amount determined under clause (i), the amount determined under this
subparagraph shall be zero.
(i) The total number of qualified full-time employees employed in
the current taxable year by the qualified taxpayer and by any trade
or business acquired by the qualified taxpayer during the current
taxable year.
(ii) The total number of qualified full-time employees employed in
the preceding taxable year by the qualified taxpayer and by any
trade or business acquired by the qualified taxpayer during the
current taxable year.
(C) The increase in the total number of full-time employees
(determined under the full-time equivalent rules of paragraph (8) of
subdivision (b)) employed by the qualified taxpayer in this state
shall be determined by subtracting the amount determined under clause
(ii) from the amount determined under clause (i). If the amount
determined under clause (ii) is equal to or exceeds the amount
determined under clause (i), the amount determined under this
subparagraph shall be zero.
(i) The total number of full-time employees employed in this state
in the current taxable year by the qualified taxpayer and by any
trade or business acquired by the qualified taxpayer during the
current taxable year.
(ii) The total number of full-time employees of the qualified
taxpayer employed in this state in the preceding taxable year by the
qualified taxpayer and by any trade or business acquired by the
qualified taxpayer during the current taxable year.
(3) For qualified taxpayers who first commence doing business in
this state during the taxable year, the number of qualified full-time
employees under subparagraph (B) of paragraph (1) and
the number of full-time
employees under subparagraph (C) of paragraph (2) for the preceding
taxable year shall be zero.
(4) For purposes of determining the number of full-time employees
of the qualified taxpayer who are employed in this state under
paragraphs (1) and (2), only those employees who receive wages that
are subject to Division 6 (commencing with Section 13000) of the
Unemployment Insurance Code from the qualified taxpayer comprising
more than 50 percent of that employee's total wages received from the
qualified taxpayer for the taxable year, shall be included.
(5) For purposes of determining the increase in the number of
qualified full-time employees of a qualified taxpayer under this
section and Sections 17053.34, 17053.46, and 17053.47, the increase
shall be determined separately for the targeted tax area, and each
enterprise zone, manufacturing enhancement area, or local agency
military base recovery area with respect to which a taxpayer is a
qualified taxpayer.
(6) Any determination of the Franchise Tax Board under this
subdivision with respect to whether there is an increase, a decrease,
or no change in the state's nonfarm employment for any calendar year
shall be final and may not be reviewed in any administrative or
judicial proceeding, even if the data published by the Employment
Development Department as of March 15 of any calendar year upon which
the Franchise Tax Board relied in making its determination is
substantially revised and would otherwise change which formula is
applicable under this subdivision.
(c) The
(d) For qualified employees who first
commenced employment with the taxpayer in taxable years beginning
before January 1, 2011, the taxpayer shall do both of the
following:
(1) Obtain from the Employment Development Department, as
permitted by federal law, the local county or city Job Training
Partnership Act administrative entity, the local county GAIN office
or social services agency, or the local government administering the
enterprise zone, a certification which provides that a qualified
employee meets the eligibility requirements specified in clause (iv)
of subparagraph (A) of paragraph (4) of subdivision (b). The
Employment Development Department may provide preliminary screening
and referral to a certifying agency. The Employment Development
Department shall develop a form for this purpose. The Department of
Housing and Community Development shall develop regulations governing
the issuance of certificates by local governments pursuant to
subdivision (a) of Section 7086 of the Government Code.
(2) For any qualified employee who first commenced employment in
taxable years beginning before January 1, 2011, for which, as of the
later of July 1, 2011, or the date the qualified employee first
commenced employment, a certification described in paragraph (1) has
not been obtained and a request for certification described in
paragraph (1) has not been previously submitted, then a request for
certification described in paragraph (1) with respect to that
employee shall be submitted to the certifying entity no later than
the date that is the later of 90 days after July 1, 2011, or 30 days
after the date the qualified employee first commenced employment. A
credit shall be allowed under this section with respect to a
qualified employee described in the preceding sentence only if a
request for certification was timely submitted in accordance with
this paragraph.
(2)
(3) Retain a copy of the certification and provide it
upon request to the Franchise Tax Board.
(d)
(e) (1) For purposes of this section:
(A) All employees of trades or businesses, which are not
incorporated, that are under common control shall be treated as
employed by a single taxpayer.
(B) The credit, if any, allowable by this section with respect to
each trade or business shall be determined by reference to its
proportionate share of the expense of the qualified wages giving rise
to the credit, and shall be allocated in that manner.
(C) Principles that apply in the case of controlled groups of
corporations, as specified in subdivision (d) of Section 23622.7,
shall apply with respect to determining employment.
(2) If an employer acquires the major portion of a trade or
business of another employer (hereinafter in this paragraph referred
to as the "predecessor") or the major portion of a separate unit of a
trade or business of a predecessor, then, for purposes of applying
this section (other than subdivision (e) (f)
) for any calendar year ending after that acquisition, the
employment relationship between a qualified employee and an employer
shall not be treated as terminated if the employee continues to be
employed in that trade or business.
(e)
(f) (1) (A) If For qualified
employees who first commenced employment with the qualified taxpayer
in taxable years beginning before January 1, 2011, if the
employment, other than seasonal employment, of any qualified
employee, with respect to whom qualified wages are taken into account
under subdivision (a) is terminated by the taxpayer at any time
during the first 270 days of that employment (whether or not
consecutive) or before the close of the 270th calendar day after the
day in which that employee completes 90 days of employment with the
taxpayer, the tax imposed by this part for the taxable year in which
that employment is terminated shall be increased by an amount equal
to the credit allowed under subdivision (a) for that taxable year and
all prior taxable years attributable to qualified wages paid or
incurred with respect to that employee.
(B) If the seasonal employment of any qualified employee, with
respect to whom qualified wages are taken into account under
subdivision (a) is not continued by the taxpayer for a period of 270
days of employment during the 60-month period beginning with the day
the qualified employee commences seasonal employment with the
taxpayer, the tax imposed by this part, for the taxable year that
includes the 60th month following the month in which the qualified
employee commences seasonal employment with the taxpayer, shall be
increased by an amount equal to the credit allowed under subdivision
(a) for that taxable year and all prior taxable years attributable to
qualified wages paid or incurred with respect to that qualified
employee.
(2) (A) Subparagraph (A) of paragraph (1) shall not apply to any
of the following:
(i) A termination of employment of a qualified employee who
voluntarily leaves the employment of the taxpayer.
(ii) A termination of employment of a qualified employee who,
before the close of the period referred to in paragraph (1), becomes
disabled and unable to perform the services of that employment,
unless that disability is removed before the close of that period and
the taxpayer fails to offer reemployment to that employee.
(iii) A termination of employment of a qualified employee, if it
is determined that the termination was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that employee.
(iv) A termination of employment of a qualified employee due to a
substantial reduction in the trade or business operations of the
taxpayer.
(v) A termination of employment of a qualified employee, if that
employee is replaced by other qualified employees so as to create a
net increase in both the number of employees and the hours of
employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of
the following:
(i) A failure to continue the seasonal employment of a qualified
employee who voluntarily fails to return to the seasonal employment
of the taxpayer.
(ii) A failure to continue the seasonal employment of a qualified
employee who, before the close of the period referred to in
subparagraph (B) of paragraph (1), becomes disabled and unable to
perform the services of that seasonal employment, unless that
disability is removed before the close of that period and the
taxpayer fails to offer seasonal employment to that qualified
employee.
(iii) A failure to continue the seasonal employment of a qualified
employee, if it is determined that the failure to continue the
seasonal employment was due to the misconduct (as defined in Sections
1256-30 to 1256-43, inclusive, of Title 22 of the California Code of
Regulations) of that qualified employee.
(iv) A failure to continue seasonal employment of a qualified
employee due to a substantial reduction in the regular seasonal trade
or business operations of the taxpayer.
(v) A failure to continue the seasonal employment of a qualified
employee, if that qualified employee is replaced by other qualified
employees so as to create a net increase in both the number of
seasonal employees and the hours of seasonal employment.
(C) For purposes of paragraph (1), the employment relationship
between the taxpayer and a qualified employee shall not be treated as
terminated by reason of a mere change in the form of conducting the
trade or business of the taxpayer, if the qualified employee
continues to be employed in that trade or business and the taxpayer
retains a substantial interest in that trade or business.
(3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
(f)
(g) In the case of an estate or trust, both of the
following apply:
(1) The qualified wages for any taxable year shall be apportioned
between the estate or trust and the beneficiaries on the basis of the
income of the estate or trust allocable to each.
(2) Any beneficiary to whom any qualified wages have been
apportioned under paragraph (1) shall be treated, for purposes of
this part, as the employer with respect to those wages.
(g)
(h) For purposes of this section, "enterprise zone"
means an area designated as an enterprise zone pursuant to Chapter
12.8 (commencing with Section 7070) of Division 7 of Title 1 of the
Government Code.
(h)
(i) The credit allowable under this section shall be
reduced by the credit allowed under Sections 17053.10, 17053.17 and
17053.46 claimed for the same employee. The credit shall also be
reduced by the federal credit allowed under Section 51 of the
Internal Revenue Code.
In addition, any deduction otherwise allowed under this part for
the wages or salaries paid or incurred by the taxpayer upon which the
credit is based shall be reduced by the amount of the credit, prior
to any reduction required by subdivision (i)
(j) or (j) (k) .
(i)
(j) (1) In the case where the
credit otherwise allowed under this section exceeds the "net tax" for
the taxable year, that portion of the credit that exceeds the "net
tax" may be carried over and added to the credit, if any, in
succeeding taxable years, until the credit is exhausted. The credit
shall be applied first to the earliest taxable years possible.
(2) Notwithstanding paragraph (1), for taxable years beginning on
or after January 1, 2011:
(A) In the case of any portion of a credit available for carryover
and attributable to a taxable year beginning before January 1, 2006,
that portion shall not be carried forward.
(B) In the case of credits first allowed in taxable years
beginning on or after January 1, 2006, the carryover period shall be
five years from the year for which the credit was first allowed.
(j)
(k) (1) The amount of the credit otherwise allowed
under this section and Section 17053.70, including any credit
carryover from prior years, that may reduce the "net tax" for the
taxable year shall not exceed the amount of tax which would be
imposed on the taxpayer's business income attributable to the
enterprise zone determined as if that attributable income represented
all of the income of the taxpayer subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the
enterprise zone. For that purpose, the taxpayer's business income
attributable to sources in this state first shall be determined in
accordance with Chapter 17 (commencing with Section 25101) of Part
11. That business income shall be further apportioned to the
enterprise zone in accordance with Article 2 (commencing with Section
25120) of Chapter 17 of Part 11, modified for purposes of this
section in accordance with paragraph (3).
(3) Business income shall be apportioned to the enterprise zone by
multiplying the total California business income of the taxpayer by
a fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is two. For purposes of
this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the enterprise zone during the
taxable year, and the denominator of which is the average value of
all the taxpayer's real and tangible personal property owned or
rented and used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the enterprise zone during
the taxable year for compensation, and the denominator of which is
the total compensation paid by the taxpayer in this state during the
taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "net tax" for the
taxable year, as provided in subdivision (i)
(j) .
(k)
(l) The changes made to this section by the act adding
this subdivision shall apply to taxable years beginning on or after
January 1, 1997.
(m) For taxable years beginning on or after January 1, 2011, the
credit allowed by this section must be claimed on a timely filed
original return of the taxpayer.
SEC. 9. Section 17053.80 of the Revenue
and Taxation Code , as added by Section 3 of Chapter 10
of the Third Extraordinary Session of the Statutes of
2009, is repealed.
17053.80. (a) For each taxable year beginning on or after January
1, 2009, there shall be allowed as a credit against the "net tax,"
as defined in Section 17039, three thousand dollars ($3,000) for each
net increase in qualified full-time employees, as specified in
subdivision (c), hired during the taxable year by a qualified
employer.
(b) For purposes of this section:
(1) "Acquired" includes any gift, inheritance, transfer incident
to divorce, or any other transfer, whether or not for consideration.
(2) "Qualified full-time employee" means:
(A) A qualified employee who was paid qualified wages by the
qualified employer for services of not less than an average of 35
hours per week.
(B) A qualified employee who was a salaried employee and was paid
compensation during the taxable year for full-time employment, within
the meaning of Section 515 of the Labor Code, by the qualified
employer.
(3) A "qualified employee" shall not include any of the following:
(A) An employee certified as a qualified employee in an enterprise
zone designated in accordance with Chapter 12.8 (commencing with
Section 7070) of Division 7 of Title 1 of the Government Code.
(B) An employee certified as a qualified disadvantaged individual
in a manufacturing enhancement area designated in accordance with
Section 7073.8 of the Government Code.
(C) An employee certified as a qualified employee in a targeted
tax area designated in accordance with Section 7097 of the Government
Code.
(D) An employee certified as a qualified disadvantaged individual
or a qualified displaced employee in a local agency military base
recovery area (LAMBRA) designated in accordance with Chapter 12.97
(commencing with Section 7105) of Division 7 of Title 1 of the
Government Code.
(E) An employee whose wages are included in calculating any other
credit allowed under this part.
(4) "Qualified employer" means a taxpayer that, as of the last day
of the preceding taxable year, employed a total of 20 or fewer
employees.
(5) "Qualified wages" means wages subject to Division 6
(commencing with Section 13000) of the Unemployment Insurance Code.
(6) "Annual full-time equivalent" means either of the following:
(A) In the case of a full-time employee paid hourly qualified
wages, "annual full-time equivalent" means the total number of hours
worked for the taxpayer by the employee (not to exceed 2,000 hours
per employee) divided by 2,000.
(B) In the case of a salaried full-time employee, "annual
full-time equivalent" means the total number of weeks worked for the
taxpayer by the employee divided by 52.
(c) The net increase in qualified full-time employees of a
qualified employer shall be determined as provided by this
subdivision:
(1) (A) The net increase in qualified full-time employees shall be
determined on an annual full-time equivalent basis by subtracting
from the amount determined in subparagraph (C) the amount determined
in subparagraph (B).
(B) The total number of qualified full-time employees employed in
the preceding taxable year by the taxpayer and by any trade or
business acquired by the taxpayer during the current taxable year.
(C) The total number of full-time employees employed in the
current taxable year by the taxpayer and by any trade or business
acquired during the current taxable year.
(2) For taxpayers who first commence doing business in this state
during the taxable year, the number of full-time employees for the
immediately preceding prior taxable year shall be zero.
(d) In the case where the credit allowed by this section exceeds
the "net tax," the excess may be carried over to reduce the "net tax"
in the following year, and succeeding seven years if necessary,
until the credit is exhausted.
(e) Any deduction otherwise allowed under this part for qualified
wages shall not be reduced by the amount of the credit allowed under
this section.
(f) For purposes of this section:
(1) All employees of the trades or businesses that are treated as
related under either Section 267, 318, or 707 of the Internal Revenue
Code shall be treated as employed by a single taxpayer.
(2) In determining whether the taxpayer has first commenced doing
business in this state during the taxable year, the provisions of
subdivision (f) of Section 17276, without application of paragraph
(7) of that subdivision, shall apply.
(g) (1) (A) Credit under this section and Section 23623 shall be
allowed only for credits claimed on timely filed original returns
received by the Franchise Tax Board on or before the cut-off date
established by the Franchise Tax Board.
(B) For purposes of this paragraph, the cut-off date shall be the
last day of the calendar quarter within which the Franchise Tax Board
estimates it will have received timely filed original returns
claiming credits under this section and Section 23623 that
cumulatively total four hundred million dollars ($400,000,000) for
all taxable years.
(2) The date a return is received shall be determined by the
Franchise Tax Board.
(3) (A) The determinations of the Franchise Tax Board with respect
to the cut-off date, the date a return is received, and whether a
return has been timely filed for purposes of this subdivision may not
be reviewed in any administrative or judicial proceeding
(B) Any disallowance of a credit claimed due to a determination
under this subdivision, including the application of the limitation
specified in paragraph (1), shall be treated as a mathematical error
appearing on the return. Any amount of tax resulting from such
disallowance may be assessed by the Franchise Tax Board in the same
manner as provided by Section 19051.
(4) The Franchise Tax Board shall periodically provide notice on
its Web site with respect to the amount of credit under this section
and Section 23623 claimed on timely filed original returns received
by the Franchise Tax Board.
(h) (1) The Franchise Tax Board may prescribe rules, guidelines or
procedures necessary or appropriate to carry out the purposes of
this section, including any guidelines regarding the limitation on
total credits allowable under this section and Section 23623 and
guidelines necessary to avoid the application of paragraph (2) of
subdivision (f) through split-ups, shell corporations, partnerships,
tiered ownership structures, or otherwise.
(2) Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code does not apply to any
standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the Franchise Tax Board pursuant
to this section.
(i) This section shall remain in effect only until December 1 of
the calendar year after the year of the cut-off date, and as of that
December 1 is repealed.
SEC. 10. Section 17053.80 of the
Revenue and Taxation Code , as added by Section 3 of
Chapter 17 of the Third Extraordinary Session of the
Statutes of 2009, is amended to read:
17053.80. (a) (1) For each taxable year
beginning on or after January 1, 2009, and before January 1,
2011, there shall be allowed as a credit against the "net tax,"
as defined in Section 17039, three thousand dollars ($3,000) for
each net increase in qualified full-time employees, as specified in
subdivision (c), hired during the taxable year by a qualified
employer.
(2) For each taxable year beginning on or after January 1, 2011,
and before January 1, 2013, there shall be allowed as a credit
against the "net tax," as defined in Section 17039, four thousand
dollars ($4,000) for each net increase in qualified full-time
employees, as specified in subdivision (c), hired during the taxable
year by a qualified employer.
(b) For purposes of this section:
(1) "Acquired" includes any gift, inheritance, transfer incident
to divorce, or any other transfer, whether or not for consideration.
(2) "Qualified full-time employee" means:
(A) A qualified employee who was paid qualified wages during
the taxable year by the qualified employer for services of not
less than an average of 35 hours per week.
(B) A qualified employee who was a salaried employee and was paid
compensation during the taxable year for full-time employment, within
the meaning of Section 515 of the Labor Code, by the qualified
employer.
(3) A (A) For ta
xable years beginning on or after January 1, 2009, and
before January 1, 2011, a "qualified employee" shall not
include any of the following:
(A)
(i) An employee certified as a qualified employee in an
enterprise zone designated in accordance with Chapter 12.8
(commencing with Section 7070) of Division 7 of Title 1 of the
Government Code.
(B)
(ii) An employee certified as a qualified disadvantaged
individual in a manufacturing enhancement area designated in
accordance with Section 7073.8 of the Government Code.
(C)
(iii) An employee certified as a qualified employee in
a targeted tax area designated in accordance with Section 7097 of the
Government Code.
(D)
(iv) An employee certified as a qualified disadvantaged
individual or a qualified displaced employee in a local agency
military base recovery area (LAMBRA) designated in accordance with
Chapter 12.97 (commencing with Section 7105) of Division 7 of Title 1
of the Government Code.
(E)
(v) An employee whose wages are included in calculating
any other credit allowed under this part.
(B) For taxable years beginning on or after January 1, 2011, and
before January 1, 2013, a "qualified employee" shall not include any
employee whose wages or hours are included, directly or indirectly,
in calculating any other credit allowed under this part.
(4) "Qualified (A)
For taxable years beginning on or after January 1, 2009, and before
January 1, 2011, a "qualified employer" means a taxpayer that,
as of the last day of the preceding taxable year, employed a total of
20 or fewer employees.
(B) For taxable years beginning on or after January 1, 2011, and
before January 1, 2013, a "qualified employer" means a taxpayer that,
as of the last day of the preceding taxable year, employed a total
of 50 or fewer employees.
(5) "Qualified wages" means wages subject to Division 6
(commencing with Section 13000) of the Unemployment Insurance Code.
(6) "Annual full-time equivalent" means either of the following:
(A) In the case of a full-time employee paid hourly qualified
wages, "annual full-time equivalent" means the total number of hours
worked for the taxpayer by the employee (not to exceed 2,000 hours
per employee) divided by 2,000.
(B) In the case of a salaried full-time employee, "annual
full-time equivalent" means the total number of weeks worked for the
taxpayer by the employee divided by 52.
(c) The net increase in qualified full-time employees of a
qualified employer shall be determined as provided by this
subdivision:
(1) (A) The net increase in qualified full-time employees shall be
determined on an annual full-time equivalent basis by subtracting
from the amount determined in subparagraph (C) the amount determined
in subparagraph (B).
(B) The total number of qualified full-time employees employed in
the preceding taxable year by the taxpayer and by any trade or
business acquired by the taxpayer during the current taxable year.
(C) The total number of full-time employees employed in the
current taxable year by the taxpayer and by any trade or business
acquired during the current taxable year.
(2) For taxpayers who that first
commence doing business in this state during the taxable year, the
number of full-time employees for the immediately preceding prior
taxable year shall be zero.
(d) In the case where the credit allowed by this section exceeds
the "net tax," the excess may be carried over to reduce the "net tax"
in the following year, and the succeeding seven years if
necessary, until the credit is exhausted.
(e) Any deduction otherwise allowed under this part for qualified
wages shall not be reduced by the amount of the credit allowed under
this section.
(f) For purposes of this section:
(1) All employees of the trades or businesses that are treated as
related under either Section 267, 318, or 707 of the Internal Revenue
Code shall be treated as employed by a single taxpayer.
(2) In determining whether the taxpayer has first commenced doing
business in this state during the taxable year, the provisions of
subdivision (f) of Section 17276 17276.20
, without application of paragraph (7) of that subdivision,
shall apply.
(g) (1) (A) Credit under this section and Section 23623
shall be allowed only for credits claimed on a
timely filed original returns
return received by the Franchise Tax Board on or before the
cut-off date established by the Franchise Tax Board or December
31, 2013, whichever occurs earlier .
(B) For purposes of this paragraph, the cut-off date shall be the
last day of the calendar quarter within which the Franchise Tax Board
estimates it will have received timely filed original returns
claiming credits under this section and Section 23623 that
cumulatively total four hundred million dollars ($400,000,000) for
all taxable years.
(2) The date a return is received shall be determined by the
Franchise Tax Board.
(3) (A) The determinations of the Franchise Tax Board with respect
to the cut-off date, the date a return is received, and whether a
return has been timely filed for purposes of this subdivision may not
be reviewed in any administrative or judicial proceeding .
(B) Any disallowance of a credit claimed due to a determination
under this subdivision, including the application of the limitation
specified in subparagraph (B) of paragraph (1), shall be
treated as a mathematical error appearing on the return. Any amount
of tax resulting from such disallowance may be assessed by the
Franchise Tax Board in the same manner as provided by Section 19051.
(4) The Franchise Tax Board shall periodically provide notice on
its Internet Web site with respect to the amount of credit
under this section and Section 23623 claimed on timely filed
original returns received by the Franchise Tax Board.
(h) (1) The Franchise Tax Board may prescribe rules ,
guidelines or procedures necessary or appropriate to carry
out the purposes of this section, including any guidelines regarding
the limitation on total credits allowable under this section and
Section 23623 and guidelines necessary to avoid the application of
paragraph (2) of subdivision (f) through split-ups, shell
corporations, partnerships, tiered ownership structures, or
otherwise.
(2) Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code does not apply to any
standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the Franchise Tax Board pursuant
to this section.
(i) This section shall remain in effect only until December 1 of
the calendar year after the year of the cut-off date, and as of that
December 1 , or December 31, 2013, whichever occurs earlier,
is repealed.
SEC. 11. Section 23101 of the Revenue
and Taxation Code is amended to read:
23101. (a) "Doing business" means actively engaging in any
transaction for the purpose of financial or pecuniary gain or profit.
(b) For taxable years beginning on or after January 1, 2011, a
taxpayer is doing business in this state for a taxable year if any of
the following conditions has been satisfied:
(1) The taxpayer is organized or commercially domiciled in this
state.
(2) Sales, as defined in subdivision (e) or (f) of Section 25120
as applicable for the taxable year, of the taxpayer in this state
exceed the lesser of five hundred thousand dollars ($500,000) or 25
percent of the taxpayer's total sales. For purposes of this
paragraph, sales of the taxpayer include sales by an agent or
independent contractor of the taxpayer. For purposes of this
paragraph, sales in this state shall be determined using the rules
for assigning sales under Section Sections
25135 and subdivision (b) of Section 25136
, and the regulations thereunder, as modified by
regulations under Section 25137.
(3) The real property and tangible personal property of the
taxpayer in this state exceed the lesser of fifty thousand dollars
($50,000) or 25 percent of the taxpayer's total real property and
tangible personal property. The value of real and tangible personal
property and the determination of whether property is in this state
shall be determined using the rules contained in Sections 25129 to
25131, inclusive, and the regulations thereunder, as modified by
regulation under Section 25137.
(4) The amount paid in this state by the taxpayer for
compensation, as defined in subdivision (c) of Section 25120, exceeds
the lesser of fifty thousand dollars ($50,000) or 25 percent of the
total compensation paid by the taxpayer. Compensation in this state
shall be determined using the rules for assigning payroll contained
in Section 25133 and the regulations thereunder, as modified by
regulations under Section 25137.
(c) (1) The Franchise Tax Board shall annually revise the amounts
in paragraphs (2), (3), and (4) of subdivision (b) in accordance with
subdivision (h) of Section 17041.
(2) For purposes of the adjustment required by paragraph (1),
subdivision (h) of Section 17041 shall be applied by substituting
"2012" in lieu of "1988."
(d) The sales, property, and payroll of the taxpayer include the
taxpayer's pro rata or distributive share of pass-through entities.
For purposes of this subdivision, "pass-through entities" means a
partnership or an "S" corporation.
SEC. 12. Section 23612.2 of the Revenue
and Taxation Code is amended to read:
23612.2. (a) There shall be allowed as a credit against the
"tax" (as "tax," as defined by Section
23036) 23036, for the taxable year an
amount equal to the sales or use tax paid or incurred during the
taxable year by the taxpayer in connection with the taxpayer's
purchase of qualified property.
(b) For purposes of this section:
(1) "Taxpayer" means a corporation engaged in a trade or business
within an enterprise zone.
(2) "Qualified property" means:
(A) Any of the following:
(i) Machinery and machinery parts used for fabricating,
processing, assembling, and manufacturing.
(ii) Machinery and machinery parts used for the production of
renewable energy resources.
(iii) Machinery and machinery parts used for either of the
following:
(I) Air pollution control mechanisms.
(II) Water pollution control mechanisms.
(iv) Data-processing and communications equipment, including, but
not limited to, computers, computer-automated drafting systems, copy
machines, telephone systems, and faxes.
(v) Motion picture manufacturing equipment central to production
and postproduction, including, but not limited to, cameras, audio
recorders, and digital image and sound processing equipment.
(B) The total cost of qualified property purchased and placed in
service in any taxable year that may be taken into account by any
taxpayer for purposes of claiming this credit shall not exceed twenty
million dollars ($20,000,000).
(C) The qualified property is used by the taxpayer exclusively in
an enterprise zone.
(D) The qualified property is purchased and placed in service
before the date the enterprise zone designation expires, is no longer
binding, or becomes inoperative.
(3) "Enterprise zone" means the area designated as an enterprise
zone pursuant to Chapter 12.8 (commencing with Section 7070) of
Division 7 of Title 1 of the Government Code.
(c) If the taxpayer has purchased property upon which a use tax
has been paid or incurred, the credit provided by this section shall
be allowed only if qualified property of a comparable quality and
price is not timely available for purchase in this state.
(d) (1) In the case where the credit
otherwise allowed under this section exceeds the "tax" for the
taxable year, that portion of the credit which exceeds the "tax" may
be carried over and added to the credit, if any, in the following
year, and succeeding years if necessary, until the credit is
exhausted. The credit shall be applied first to the earliest taxable
years possible.
(2) Notwithstanding paragraph (1), for taxable years beginning on
or after January 1, 2011:
(A) In the case of any portion of a credit available for carryover
and attributable to a taxable year beginning before January 1, 2006,
that portion shall not be carried forward.
(B) In the case of credits first allowed in taxable years
beginning on or after January 1, 2006, the carryover period shall be
five years from the year for which the credit was first allowed.
(e) Any taxpayer who elects to be subject to this section shall
not be entitled to increase the basis of the qualified property as
otherwise required by Section 164(a) of the Internal Revenue Code
with respect to sales or use tax paid or incurred in connection with
the taxpayer's purchase of qualified property.
(f) (1) The amount of credit otherwise allowed under this section
and Section 23622.7, including any credit carryover from prior years,
that may reduce the "tax" for the taxable year shall not exceed the
amount of tax which would be imposed on the taxpayer's business
income attributable to the enterprise zone determined as if that
attributable income represented all of the income of the taxpayer
subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the
enterprise zone. For that purpose, the taxpayer's business income
attributable to sources in this state first shall be determined in
accordance with Chapter 17 (commencing with Section 25101). That
business income shall be further apportioned to the enterprise zone
in accordance with Article 2 (commencing with Section 25120) of
Chapter 17, modified for purposes of this section in accordance with
paragraph (3).
(3) Business income shall be apportioned to the enterprise zone by
multiplying the total California business income of the taxpayer by
a fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is two. For purposes of
this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the enterprise zone during the
taxable year, and the denominator of which is the average value of
all the taxpayer's real and tangible personal property owned or
rented and used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the enterprise zone during
the taxable year for compensation, and the denominator of which is
the total compensation paid by the taxpayer in this state during the
taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "tax" for the taxable
year, as provided in subdivision (d).
(g) The amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 1998.
(h) For taxable years beginning on or after January 1, 2011, the
credit allowed by this section must be claimed on a timely filed,
original return of the taxpayer.
SEC. 13. Section 23622.7 of the Revenue
and Taxation Code is amended to read:
23622.7. (a) (1) There shall be allowed a
credit against the "tax" (as defined by Section 23036) to a taxpayer
who employs a qualified employee in an enterprise zone during the
taxable year who first commenced employment with the qualified
taxpayer in taxable years beginning before January 1, 2011 .
The credit shall be equal to the sum of each of the following:
(1)
(A) Fifty percent of qualified wages in the first year
of employment.
(2)
(B) Forty percent of qualified wages in the second year
of employment.
(3)
(C) Thirty percent of qualified wages in the third year
of employment.
(4)
(D) Twenty percent of qualified wages in the fourth
year of employment.
(5)
(E) Ten percent of qualified wages in the fifth year of
employment.
(2) There shall be allowed a credit against the "tax," as defined
in Section 23036, to a taxpayer who employs a qualified taxpayer in
an enterprise zone during the taxable year who first commenced
employment with the qualified taxpayer in taxable years beginning on
or after January 1, 2011. The credit shall be equal to five thousand
dollars ($5,000) for each net increase in qualified full-time
employees, as specified in subdivision (c), employed during the
taxable year by a qualified taxpayer.
(b) For purposes of this section:
(1) "Qualified For taxable years beginning
before January 1, 2011, "qualified wages" means:
(A) (i) Except as provided in clause (ii), that portion of wages
paid or incurred by the taxpayer during the taxable year to qualified
employees that does not exceed 150 percent of the minimum wage.
(ii) For up to 1,350 qualified employees who are employed by the
taxpayer in the Long Beach Enterprise Zone in aircraft manufacturing
activities described in Codes 3721 to 3728, inclusive, and Code 3812
of the Standard Industrial Classification (SIC) Manual published by
the United States Office of Management and Budget, 1987 edition,
"qualified wages" means that portion of hourly wages that does not
exceed 202 percent of the minimum wage.
(B) Wages received during the 60-month period beginning with the
first day the employee commences employment with the taxpayer.
Reemployment in connection with any increase, including a regularly
occurring seasonal increase, in the trade or business operations of
the taxpayer does not constitute commencement of employment for
purposes of this section.
(C) Qualified wages do not include any wages paid or incurred by
the taxpayer on or after the zone expiration date. However, wages
paid or incurred with respect to qualified employees who are employed
by the taxpayer within the enterprise zone within the 60-month
period prior to the zone expiration date shall continue to qualify
for the credit under this section after the zone expiration date, in
accordance with all provisions of this section applied as if the
enterprise zone designation were still in existence and binding.
(2) "Acquired" includes any gift, inheritance, transfer incident
to divorce, or any other transfer, whether or not for consideration.
(2)
(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.
(3)
(4) "Zone expiration date" means the date the
enterprise zone designation expires, is no longer binding, or becomes
inoperative.
(4)
(5) (A) "Qualified employee" means an individual who
meets all of the following requirements:
(i) At least 90 percent of whose services for the taxpayer during
the taxable year are directly related to the conduct of the taxpayer'
s trade or business located in an enterprise zone.
(ii) Performs at least 50 percent of his or her services for the
taxpayer during the taxable year in an enterprise zone.
(iii) Is hired by the taxpayer after the date of original
designation of the area in which services were performed as an
enterprise zone.
(iv) Is For an individual who first
commenced employment with the taxpayer in taxable years beginning
before January 1, 2011, he or she is any of the following:
(I) Immediately preceding the qualified employee's commencement of
employment with the taxpayer, was a person eligible for services
under the federal Job Training Partnership Act (29 U.S.C. Sec. 1501
et seq.), or its successor, who is receiving, or is eligible to
receive, subsidized employment, training, or services funded by the
federal Job Training Partnership Act, or its successor.
(II) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a person eligible to be a
voluntary or mandatory registrant under the Greater Avenues for
Independence Act of 1985 (GAIN) provided for pursuant to Article 3.2
(commencing with Section 11320) of Chapter 2 of Part 3 of Division 9
of the Welfare and Institutions Code, or its successor.
(III) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was an economically disadvantaged
individual 14 years of age or older.
(IV) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a dislocated worker who meets
any of the following:
(aa)
(ia) Has been terminated or laid off or who has
received a notice of termination or layoff from employment, is
eligible for or has exhausted entitlement to unemployment insurance
benefits, and is unlikely to return to his or her previous industry
or occupation.
(bb)
(ib) Has been terminated or has received a notice of
termination of employment as a result of any permanent closure or any
substantial layoff at a plant, facility, or enterprise, including an
individual who has not received written notification but whose
employer has made a public announcement of the closure or layoff.
(cc)
(ic) Is long-term unemployed and has limited
opportunities for employment or reemployment in the same or a similar
occupation in the area in which the individual resides, including an
individual 55 years of age or older who may have substantial
barriers to employment by reason of age.
(dd)
(id) Was self-employed (including farmers and ranchers)
and is unemployed as a result of general economic conditions in the
community in which he or she resides or because of natural disasters.
(ee)
(ie) Was a civilian employee of the Department of
Defense employed at a military installation being closed or realigned
under the Defense Base Closure and Realignment Act of 1990.
(ff)
(if) Was an active member of the armed forces or
National Guard as of September 30, 1990, and was either involuntarily
separated or separated pursuant to a special benefits program.
(gg)
(ig) Is a seasonal or migrant worker who experiences
chronic seasonal unemployment and underemployment in the agriculture
industry, aggravated by continual advancements in technology and
mechanization.
(hh)
(ih) Has been terminated or laid off, or has received a
notice of termination or layoff, as a consequence of compliance with
the Clean Air Act.
(V) Immediately preceding the qualified employee's commencement of
employment with the taxpayer, was a disabled individual who is
eligible for or enrolled in, or has completed a state rehabilitation
plan or is a service-connected disabled veteran, veteran of the
Vietnam era, or veteran who is recently separated from military
service.
(VI) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was an ex-offender. An individual
shall be treated as convicted if he or she was placed on probation by
a state court without a finding of guilt.
(VII) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a person eligible for or a
recipient of any of the following:
(aa)
(ia) Federal Supplemental Security Income benefits.
(bb)
(ib) Aid to Families with Dependent Children.
(cc)
(ic) Food stamps.
(dd)
(id) State and local general assistance.
(VIII) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a member of a federally
recognized Indian tribe, band, or other group of Native American
descent.
(IX) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a resident of a targeted
employment area (as defined in Section 7072 of the Government Code).
(X) An employee who qualified the taxpayer for the enterprise zone
hiring credit under former Section 23622 or the program area hiring
credit under former Section 23623.
(XI) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a member of a targeted group, as
defined in Section 51(d) of the Internal Revenue Code, or its
successor.
(B) Priority for employment shall be provided to an individual who
is enrolled in a qualified program under the federal Job Training
Partnership Act or the Greater Avenues for Independence Act of 1985
or who is eligible as a member of a targeted group under the Work
Opportunity Tax Credit (Section 51 of the Internal Revenue Code), or
its successor.
(v) For a qualified employee who first commences employment with a
taxpayer in taxable years beginning on or after January 1, 2011,
that individual is a "qualified full-time employee" if, in addition
to any other requirement imposed by this section, he or she was
either:
(I) Paid wages by the qualified employer for services of not less
than an average of 35 hours per week.
(II) A salaried employee and was paid compensation during the
taxable year for full-time employment, within the meaning of Section
515 of the Labor Code, by the qualified employer.
(5)
(6 ) (A) "Taxpayer"
means a corporation engaged in a trade or business within an
enterprise zone designated pursuant to Chapter 12.8 (commencing with
Section 7070) of Division 7 of Title 1 of the Government Code.
(B) (i) Notwithstanding subparagraph (A), a "taxpayer" shall not
include any person or entity described in subparagraph (A) that first
commences business activity in an enterprise zone during the taxable
year and has, within 24 months before the taxpayer first commenced
business activity in the enterprise zone, had an overall reduction in
the number of employees employed by the taxpayer within the state
outside of the enterprise zone, unless that person or entity has made
a written offer of employment to each of the employees employed at
the location within the state where employment was reduced for such
employees to continue their employment with that person or entity
within the enterprise zone.
(ii) In determining whether the taxpayer has first commenced doing
business in the enterprise zone during the taxable year, the
provisions of subdivision (g) of Section 24416.20, without
application of paragraph (7) of that subdivision, shall apply.
(iii) The written offer referred to in this subparagraph shall be
made prior to the termination of employment at the location within
the state that is outside the enterprise zone.
(iv) If any employee described in clause (i) does not timely
receive a written offer, the person or entity shall not be a
qualified taxpayer for that taxable year, even if other employees do
receive a written offer.
(v) A person or entity may be required to provide, upon request of
the Franchise Tax Board, written certification, under penalty of
perjury, that the requirements of this subparagraph were met.
(vi) 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.
(6)
(7) "Seasonal employment" means employment by a
taxpayer that has regular and predictable substantial reductions in
trade or business operations.
(8) "Annual full-time equivalent" means either of the following:
(A) In the case of a full-time employee paid hourly wages, "annual
full-time equivalent" means the total number of hours worked for the
taxpayer by the employee (not to exceed 2,000 hours per employee)
divided by 2,000.
(B) In the case of a salaried full-time employee, "annual
full-time equivalent" means the total number of weeks worked for the
taxpayer by the employee divided by 52.
(c) Except as provided in paragraph (2), the net increase in
qualified full-time employees of a qualified taxpayer shall be
determined by paragraph (1):
(1) (A) (i) If the state's average nonfarm employment, as
determined by the Franchise Tax Board based upon information
published by the Employment Development Department as
of March 15 of each calendar year,
has not decreased for the calendar years beginning on the third and
the second January 1st immediately preceding the beginning of the
current taxable year, as compared with second and first calendar
years respectively, then the net increase in qualified full-time
employees shall be determined on an annual full-time equivalent basis
based on the amount of the increase of qualified full-time
equivalent employees in excess of the greatest of the number of
qualified full-time equivalent employees employed by the qualified
taxpayer in any of the three immediately preceding taxable years, as
determined under subparagraph (B).
(ii) The amount determined under clause (i) shall include the
fractional amount, if any, of the increase for the taxable year.
(B) The net increase in qualified full-time employees for the
current taxable year shall be determined by subtracting the amount
determined under clause (ii) from the amount determined under clause
(i). If the amount determined under clause (ii) is equal to or
exceeds the amount determined under clause (i), the amount determined
under this subparagraph shall be zero.
(i) (I) The total number of qualified full-time employees employed
in the current taxable year by the qualified taxpayer and by any
trade or business acquired by the qualified taxpayer during the
current taxable year.
(II) The greatest total number of qualified full-time employees
employed in any of the three preceding taxable years by the qualified
taxpayer and by any trade or business acquired by the qualified
taxpayer during the current taxable year.
(ii) The increase in the total number of full-time employees
(determined under the full-time equivalent rules of paragraph (8) of
subdivision (b)) employed by the qualified taxpayer in this state
shall be determined by subtracting the amount determined under
subclause (II) from the amount determined under subclause (I). If the
amount determined under subclause (II) is equal to or exceeds the
amount determined under subclause (I), the amount determined under
this clause shall be zero.
(I) The total number of full-time employees employed in this state
in the current taxable year by the qualified taxpayer and by any
trade or business acquired by the qualified taxpayer during the
current taxable year.
(II) The greatest total number of full-time employees of the
qualified taxpayer employed in this state in any of the three
preceding taxable years by the qualified taxpayer and by any trade or
business acquired by the qualified taxpayer during the current
taxable year.
(2) (A) (i) If there is a decrease in the state's nonfarm
employment, as determined by the Franchise Tax Board based upon
information published by the Employment Development Department as of
March 15 of each calendar year, for the calendar years beginning on
the third and the second January 1 immediately preceding the current
taxable year, the net increase in qualified full-time employees shall
be determined on an annual full-time equivalent basis as the lesser
of the amount determined under subparagraph (C) or the amount
determined under subparagraph (B).
(ii) The amount determined under clause (i) shall include the
fractional amount, if any, of the increase for the taxable year.
(B) The increase in the total number of qualified full-time
employees shall be determined by subtracting the amount determined
under clause (ii) from the amount determined under clause (i). If the
amount determined under clause (ii) is equal to or exceeds the
amount determined under clause (i), the amount determined under this
subparagraph shall be zero.
(i) The total number of qualified full-time employees employed in
the current taxable year by the qualified taxpayer and by any trade
or business acquired by the qualified taxpayer during the current
taxable year.
(ii) The total number of qualified full-time employees employed in
the preceding taxable year by the qualified taxpayer and by any
trade or business acquired by the qualified taxpayer during the
current taxable year.
(C) The increase in the total number of full-time employees
(determined under the full-time equivalent rules of paragraph (8) of
subdivision (b)) employed by the qualified taxpayer in this state
shall be determined by subtracting the amount determined under clause
(ii) from the amount determined under clause (i). If the amount
determined under clause (ii) is equal to or exceeds the amount
determined under clause (i), the amount determined under this
subparagraph shall be zero.
(i) The total number of full-time employees employed in this state
in the current taxable year by the qualified taxpayer and by any
trade or business acquired by the qualified taxpayer during the
current taxable year.
(ii) The total number of full-time employees of the qualified
taxpayer employed in this state in the preceding taxable year by the
qualified taxpayer and by any trade or business acquired by the
qualified taxpayer during the current taxable year.
(3) For qualified taxpayers who first commence doing business in
this state during the taxable year, the number of qualified full-time
employees under subparagraph (B) of paragraph (1) and the number of
full-time employees under subparagraph (C) of paragraph (2) for the
preceding taxable year shall be zero.
(4) For purposes of determining the number of full-time employees
of the qualified taxpayer who are employed in this state under
paragraphs (1) and (2), only those employees who receive wages that
are subject to Division 6 (commencing with Section 13000) of the
Unemployment Insurance Code from the qualified taxpayer comprising
more than 50 percent of that employee's total wages received from the
qualified taxpayer for the taxable year, shall be included.
(5) For purposes of determining the increase in the number of
qualified full-time employees of a qualified taxpayer under this
section and Sections 23622.8, 23634, and 23646, the increase shall be
determined separately for the targeted tax area, and each enterprise
zone, manufacturing enhancement area, or local agency military base
recovery area with respect to which a taxpayer is a qualified
taxpayer.
(6) Any determination of the Franchise Tax Board under this
subdivision with respect to whether there is an increase, a decrease,
or no change in the state's nonfarm employment for any calendar year
shall be final and may not be reviewed in any administrative or
judicial proceeding, even if the data published by the Employment
Development Department as of March 15 of any calendar year upon which
the Franchise Tax Board relied in making its determination is
substantially revised and would otherwise change which formula is
applicable under this subdivision.
(c)
(d) The For qualified employees
who first commenced employment with the taxpayer in taxable years
beginning before January 1, 2011, the taxpayer shall do
both of the following:
(1) Obtain from the Employment Development Department, as
permitted by federal law, the local county or city Job Training
Partnership Act administrative entity, the local county GAIN office
or social services agency, or the local government administering the
enterprise zone, a certification that provides that a qualified
employee meets the eligibility requirements specified in clause (iv)
of subparagraph (A) of paragraph (4) of subdivision (b). The
Employment Development Department may provide preliminary screening
and referral to a certifying agency. The Employment Development
Department shall develop a form for this purpose. The Department of
Housing and Community Development shall develop regulations governing
the issuance of certificates by local governments pursuant to
subdivision (a) of Section 7086 of the Government Code.
(2) For any qualified employee who first commenced employment in
taxable years beginning before January 1, 2011, for which, as of the
later of July 1, 2011, or the date the qualified employee first
commenced employment, a certification described in paragraph (1) has
not been obtained and a request for certification described in
paragraph (1) has not been previously submitted, then a request for
certification described in paragraph (1) with respect to that
employee shall be submitted to the certifying entity no later than
the date that is the later of 90 days after July 1, 2011, or 30 days
after the date the qualified employee first commenced employment. A
credit shall be allowed under this section with respect to a
qualified employee described in the preceding sentence only if a
request for certification was timely submitted in accordance with
this paragraph.
(2)
(3) Retain a copy of the certification and provide it
upon request to the Franchise Tax Board.
(d)
(e) (1) For purposes of this section:
(A) All employees of all corporations which are members of the
same controlled group of corporations shall be treated as employed by
a single taxpayer.
(B) The credit, if any, allowable by this section to each member
shall be determined by reference to its proportionate share of the
expense of the qualified wages giving rise to the credit, and shall
be allocated in that manner.
(C) For purposes of this subdivision, "controlled group of
corporations" means "controlled group of corporations" as defined in
Section 1563(a) of the Internal Revenue Code, except that:
(i) "More than 50 percent" shall be substituted for "at least 80
percent" each place it appears in Section 1563(a)(1) of the Internal
Revenue Code.
(ii) The determination shall be made without regard to subsections
(a)(4) and (e)(3)(C) of Section 1563 of the Internal Revenue Code.
(2) If an employer acquires the major portion of a trade or
business of another employer (hereinafter in this paragraph referred
to as the "predecessor") or the major portion of a separate unit of a
trade or business of a predecessor, then, for purposes of applying
this section (other than subdivision (e) (f)
) for any calendar year ending after that acquisition, the
employment relationship between a qualified employee and an employer
shall not be treated as terminated if the employee continues to be
employed in that trade or business.
(e)
(f) (1) (A) If For qualified
employees who first commence employment with the qualified taxpayer
in a taxable year beginning before January 1, 2011, if the
employment, other than seasonal employment, of any qualified employee
with respect to whom qualified wages are taken into account under
subdivision (a) is terminated by the taxpayer at any time during the
first 270 days of that employment, whether or not consecutive, or
before the close of the 270th calendar day after the day in which
that employee completes 90 days of employment with the taxpayer, the
tax imposed by this part for the taxable year in which that
employment is terminated shall be increased by an amount equal to the
credit allowed under subdivision (a) for that taxable year and all
prior taxable years attributable to qualified wages paid or incurred
with respect to that employee.
(B) If the seasonal employment of any qualified employee, with
respect to whom qualified wages are taken into account under
subdivision (a) is not continued by the taxpayer for a period of 270
days of employment during the 60-month period beginning with the day
the qualified employee commences seasonal employment with the
taxpayer, the tax imposed by this part, for the taxable year that
includes the 60th month following the month in which the qualified
employee commences seasonal employment with the taxpayer, shall be
increased by an amount equal to the credit allowed under subdivision
(a) for that taxable year and all prior taxable years attributable to
qualified wages paid or incurred with respect to that qualified
employee.
(2) (A) Subparagraph (A) of paragraph (1) shall not apply to any
of the following:
(i) A termination of employment of a qualified employee who
voluntarily leaves the employment of the taxpayer.
(ii) A termination of employment of a qualified employee who,
before the close of the period referred to in subparagraph (A) of
paragraph (1), becomes disabled and unable to perform the services of
that employment, unless that disability is removed before the close
of that period and the taxpayer fails to offer reemployment to that
employee.
(iii) A termination of employment of a qualified employee, if it
is determined that the termination was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that employee.
(iv) A termination of employment of a qualified employee due to a
substantial reduction in the trade or business operations of the
taxpayer.
(v) A termination of employment of a qualified employee, if that
employee is replaced by other qualified employees so as to create a
net increase in both the number of employees and the hours of
employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of
the following:
(i) A failure to continue the seasonal employment of a qualified
employee who voluntarily fails to return to the seasonal employment
of the taxpayer.
(ii) A failure to continue the seasonal employment of a qualified
employee who, before the close of the period referred to in
subparagraph (B) of paragraph (1), becomes disabled and unable to
perform the services of that seasonal employment, unless that
disability is removed before the close of that period and the
taxpayer fails to offer seasonal employment to that qualified
employee.
(iii) A failure to continue the seasonal employment of a qualified
employee, if it is determined that the failure to continue the
seasonal employment was due to the misconduct (as defined in Sections
1256-30 to 1256-43, inclusive, of Title 22 of the California Code of
Regulations) of that qualified employee.
(iv) A failure to continue seasonal employment of a qualified
employee due to a substantial reduction in the regular seasonal trade
or business operations of the taxpayer.
(v) A failure to continue the seasonal employment of a qualified
employee, if that qualified employee is replaced by other qualified
employees so as to create a net increase in both the number of
seasonal employees and the hours of seasonal employment.
(C) For purposes of paragraph (1), the employment relationship
between the taxpayer and a qualified employee shall not be treated as
terminated by either of the following:
(i) By a transaction to which Section 381(a) of the Internal
Revenue Code applies, if the qualified employee continues to be
employed by the acquiring corporation.
(ii) By reason of a mere change in the form of conducting the
trade or business of the taxpayer, if the qualified employee
continues to be employed in that trade or business and the taxpayer
retains a substantial interest in that trade or business.
(3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
(f)
(g) Rules similar to the rules provided in Section 46
(e) and (h) of the Internal Revenue Code shall apply to both of the
following:
(1) An organization to which Section 593 of the Internal Revenue
Code applies.
(2) A regulated investment company or a real estate investment
trust subject to taxation under this part.
(g)
(h) For purposes of this section, "enterprise zone"
means an area designated as an enterprise zone pursuant to Chapter
12.8 (commencing with Section 7070) of Division 7 of Title 1 of the
Government Code.
(h)
(i) The credit allowable under this section shall be
reduced by the credit allowed under Sections 23623.5, 23625, and
23646 claimed for the same employee. The credit shall also be reduced
by the federal credit allowed under Section 51 of the Internal
Revenue Code.
In addition, any deduction otherwise allowed under this part for
the wages or salaries paid or incurred by the taxpayer upon which the
credit is based shall be reduced by the amount of the credit, prior
to any reduction required by subdivision (i)
(j) or (j) (k) .
(i)
(j) (1) In the case where the
credit otherwise allowed under this section exceeds the "tax" for the
taxable year, that portion of the credit that exceeds the "tax" may
be carried over and added to the credit, if any, in succeeding
taxable years, until the credit is exhausted. The credit shall be
applied first to the earliest taxable years possible.
(2) Notwithstanding paragraph (1), for taxable years beginning on
or after January 1, 2011:
(A) In the case of any portion of a credit available for carryover
and attributable to a taxable year beginning before January 1, 2006,
that portion shall not be carried forward.
(B) In the case of credits first allowed in taxable years
beginning on or after January 1, 2006, the carryover period shall be
five years from the year for which the credit was first allowed.
(j)
(k) (1) The amount of the credit otherwise allowed under
this section and Section 23612.2, including any credit carryover
from prior years, that may reduce the "tax" for the taxable year
shall not exceed the amount of tax which would be imposed on the
taxpayer's business income attributable to the enterprise zone
determined as if that attributable income represented all of the
income of the taxpayer subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the
enterprise zone. For that purpose, the taxpayer's business
attributable to sources in this state first shall be determined in
accordance with Chapter 17 (commencing with Section 25101). That
business income shall be further apportioned to the enterprise zone
in accordance with Article 2 (commencing with Section 25120) of
Chapter 17, modified for purposes of this section in accordance with
paragraph (3).
(3) Business income shall be apportioned to the enterprise zone by
multiplying the total California business income of the taxpayer by
a fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is two. For purposes of
this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the enterprise zone during the
income year, and the denominator of which is the average value of all
the taxpayer's real and tangible personal property owned or rented
and used in this state during the income year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the enterprise zone during
the income year for compensation, and the denominator of which is the
total compensation paid by the taxpayer in this state during the
income year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "tax" for the taxable
year, as provided in subdivision (i) (j)
.
(k)
(l) The changes made to this section by the act adding
this subdivision shall apply to taxable years on or after January 1,
1997.
(m) For taxable years beginning on or after January 1, 2011, the
credit allowed by this section must be claimed on a timely filed
original return of the taxpayer.
SEC. 14. Section 23622.8 of the Revenue
and Taxation Code is amended to read:
23622.8. (a) (1) For each taxable year
beginning on or after January 1, 1998, there shall be allowed a
credit against the "tax" (as "tax," as
defined in Section 23036) 23036, to a
qualified taxpayer for hiring a qualified disadvantaged individual
during the taxable year for employment in the manufacturing
enhancement area. The For qualified
disadvantaged individuals who first commenced employment in taxable
years beginning on or after January 1, 1998, and before January 1,
2011, the credit shall be equal to the sum of each of the
following:
(1)
(A) Fifty percent of the qualified wages in the first
year of employment.
(2)
(B) Forty percent of the qualified wages in the second
year of employment.
(3)
(C) Thirty percent of the qualified wages in the third
year of employment.
(4)
(D) Twenty percent of the qualified wages in the fourth
year of employment.
(5)
(E) Ten percent of the qualified wages in the fifth
year of employment.
(2) For qualified disadvantaged individuals who first commenced
employment in taxable years beginning on or after January 1, 2011,
the credit shall be equal to five thousand dollars ($5,000) for each
net increase in qualified full-time employees, as specified in
subdivision (c), employed during the taxable year by a qualified
taxpayer.
(b) For purposes of this section:
(1) "Qualified For taxable
years beginning on or after January 1, 1998, and before January 1,
2011, "qualified wages" means:
(A) That portion of wages paid or incurred by the qualified
taxpayer during the taxable year to qualified disadvantaged
individuals that does not exceed 150 percent of the minimum wage.
(B) The total amount of qualified wages which may be taken into
account for purposes of claiming the credit allowed under this
section shall not exceed two million dollars ($2,000,000) per taxable
year.
(C) Wages received during the 60-month period beginning with the
first day the qualified disadvantaged individual commences employment
with the qualified taxpayer. Reemployment in connection with any
increase, including a regularly occurring seasonal increase, in the
trade or business operations of the qualified taxpayer does not
constitute commencement of employment for purposes of this section.
(D) Qualified wages do not include any wages paid or incurred by
the qualified taxpayer on or after the manufacturing enhancement area
expiration date. However, wages paid or incurred with respect to
qualified employees who are employed by the qualified taxpayer within
the manufacturing enhancement area within the 60-month period prior
to the manufacturing enhancement area expiration date shall continue
to qualify for the credit under this section after the manufacturing
enhancement area expiration date, in accordance with all provisions
of this section applied as if the manufacturing enhancement area
designation were still in existence and binding.
(2) "Acquired" includes any gift, inheritance, transfer incident
to divorce, or any other transfer, whether or not for consideration.
(2)
(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.
(3)
(4) "Manufacturing enhancement area" means an area
designated pursuant to Section 7073.8 of the Government Code
according to the procedures of Chapter 12.8 (commencing with Section
7070) of Division 7 of Title 1 of the Government Code.
(4)
(5) "Manufacturing enhancement area expiration date"
means the date the manufacturing enhancement area designation
expires, is no longer binding, or becomes inoperative.
(5)
(6) "Qualified disadvantaged individual" means an
individual who satisfies all of the following requirements:
(A) (i) At least 90 percent of whose services for the qualified
taxpayer during the taxable year are directly related to the conduct
of the qualified taxpayer's trade or business located in a
manufacturing enhancement area.
(ii) Who performs at least 50 percent of his or her services for
the qualified taxpayer during the taxable year in the manufacturing
enhancement area.
(B) Who is hired by the qualified taxpayer after the designation
of the area as a manufacturing enhancement area in which the
individual's services were primarily performed.
(C) Who For an individual who
first commenced employment with the qualified taxpayer in taxable
years beginning on or after January 1, 1998, and before January 1,
2011, he or she is any of the following immediately preceding
the individual's commencement of employment with the qualified
taxpayer:
(i) An individual who has been determined eligible for services
under the federal Job Training Partnership Act (29 U.S.C. Sec. 1501
et seq.) or its successor.
(ii) Any voluntary or mandatory registrant under the Greater
Avenues for Independence Act of 1985, or its successor, as provided
pursuant to Article 3.2 (commencing with Section 11320) of Chapter 2
of Part 3 of Division 9 of the Welfare and Institutions Code.
(iii) Any individual who has been certified eligible by the
Employment Development Department under the federal Targeted Jobs Tax
Credit Program, or its successor, whether or not this program is in
effect.
(v) For a qualified disadvantaged individual who first commences
employment in taxable years beginning on or after January 1, 2011,
that individual is a
"qualified full-time employee" if, in addition to any other
requirement imposed by this section, he or she was either:
(I) Paid wages by the qualified employer for services of not less
than an average of 35 hours per week.
(II) A salaried employee and was paid compensation during the
taxable year for full-time employment, within the meaning of Section
515 of the Labor Code, by the qualified employer.
(6)
(7) (A) "Qualified taxpayer"
means any corporation engaged in a trade or business within a
manufacturing enhancement area designated pursuant to Section 7073.8
of the Government Code and that meets all of the following
requirements:
(A)
(i) Is engaged in those lines of business described in
Codes 0211 to 0291, inclusive, Code 0723, or in Codes 2011 to 3999,
inclusive, of the Standard Industrial Classification (SIC) Manual
published by the United States Office of Management and Budget, 1987
edition.
(B)
(ii) At least 50 percent of the qualified taxpayer's
workforce hired after the designation of the manufacturing
enhancement area is composed of individuals who, at the time of hire,
are residents of the county in which the manufacturing enhancement
area is located.
(C)
(iii) Of this percentage of local hires, at least 30
percent shall be qualified disadvantaged individuals.
(B) (i) Notwithstanding subparagraph (A), a "qualified taxpayer"
shall not include any person or entity described in subparagraph (A)
that first commences business activity in a manufacturing enhancement
area during the taxable year and has, within 24 months before the
taxpayer first commenced business activity in the manufacturing area,
had an overall reduction in the number of employees employed by the
taxpayer within the state outside of the manufacturing enhancement
area, unless that person or entity has made a written offer of
employment to each of the employees employed at the location within
the state where employment was reduced for such employees to continue
their employment with that person or entity within the manufacturing
enhancement area.
(ii) The written offer referred to in this subparagraph shall be
made prior to the termination of employment at the location within
the state that is outside the manufacturing enhancement area.
(iii) If any employee described in clause (i) of this subparagraph
does not timely receive a written offer, the person or entity shall
not be a qualified taxpayer for that taxable year, even if other
employees do receive a written offer.
(iv) A person or entity may be required to provide, upon request
of the Franchise Tax Board, written certification, under penalty of
perjury, that the requirements of this subparagraph were met.
(v) 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.
(vi) In determining whether the qualified taxpayer has first
commenced doing business in the manufacturing enhancement area during
the taxable year, the provisions of subdivision (g) of Section
24416.20, without application of paragraph (7) of that subdivision,
shall apply.
(7)
(8) "Seasonal employment" means employment by a
qualified taxpayer that has regular and predictable substantial
reductions in trade or business operations.
(9) "Annual full-time equivalent" means either of the following:
(A) In the case of a full-time employee paid hourly wages, "annual
full-time equivalent" means the total number of hours worked for the
taxpayer by the employee (not to exceed 2,000 hours per employee)
divided by 2,000.
(B) In the case of a salaried full-time employee, "annual
full-time equivalent" means the total number of weeks worked for the
taxpayer by the employee divided by 52.
(c) Except as provided in paragraph (2), the net increase in
qualified full-time employees of a qualified taxpayer shall be
determined by paragraph (1):
(1) (A) (i) If the state's average nonfarm employment, as
determined by the Franchise Tax Board based upon information
published by the Employment Development Department as of March 15 of
each calendar year, has not decreased for the calendar years
beginning on the third and the second January 1 immediately preceding
the beginning of the current taxable year, as compared with second
and first calendar years respectively, then the net increase in
qualified full-time employees shall be determined on an annual
full-time equivalent basis based on the amount of the increase of
qualified full-time equivalent employees in excess of the greatest of
the number of qualified full-time equivalent employees employed by
the qualified taxpayer in any of the three immediately preceding
taxable years, as determined under subparagraph (B).
(ii) The amount determined under clause (i) shall include the
fractional amount, if any, of the increase for the taxable year.
(B) The net increase in qualified full-time employees for the
current taxable year shall be determined by subtracting the amount
determined under clause (ii) from the amount determined under clause
(i). If the amount determined under clause (ii) is equal to or
exceeds the amount determined under clause (i), the amount determined
under this subparagraph shall be zero.
(i) (I) The total number of qualified full-time employees employed
in the current taxable year by the qualified taxpayer and by any
trade or business acquired by the qualified taxpayer during the
current taxable year.
(II) The greatest total number of qualified full-time employees
employed in any of the three preceding taxable years by the qualified
taxpayer and by any trade or business acquired by the qualified
taxpayer during the current taxable year.
(ii) The increase in the total number of full-time employees
(determined under the full-time equivalent rules of paragraph (9) of
subdivision (b)) employed by the qualified taxpayer in this state
shall be determined by subtracting the amount determined under
subclause (II) from the amount determined under subclause (I). If the
amount determined under subclause (II) is equal to or exceeds the
amount determined under subclause (I), the amount determined under
this clause shall be zero.
(I) The total number of full-time employees employed in this state
in the current taxable year by the qualified taxpayer and by any
trade or business acquired by the qualified taxpayer during the
current taxable year.
(II) The greatest total number of full-time employees of the
qualified taxpayer employed in this state in any of the three
preceding taxable years by the qualified taxpayer and by any trade or
business acquired by the qualified taxpayer during the current
taxable year.
(2) (A) (i) If there is a decrease in the state's nonfarm
employment, as determined by the Franchise Tax Board based upon
information published by the Employment Development Department as of
March 15 of each calendar year, for the calendar years beginning on
the third and the second January 1 immediately preceding the current
taxable year, the net increase in qualified full-time employees shall
be determined on an annual full-time equivalent basis as the lesser
of the amount determined under subparagraph (C) or the amount
determined under subparagraph (B).
(ii) The amount determined under clause (i) shall include the
fractional amount, if any, of the increase for the taxable year.
(B) The increase in the total number of qualified full-time
employees shall be determined by subtracting the amount determined
under clause (ii) from the amount determined under clause (i). If the
amount determined under clause (ii) is equal to or exceeds the
amount determined under clause (i), the amount determined under this
subparagraph shall be zero.
(i) The total number of qualified full-time employees employed in
the current taxable year by the qualified taxpayer and by any trade
or business acquired by the qualified taxpayer during the current
taxable year.
(ii) The total number of qualified full-time employees employed in
the preceding taxable year by the qualified taxpayer and by any
trade or business acquired by the qualified taxpayer during the
current taxable year.
(C) The increase in the total number of full-time employees
(determined under the full-time equivalent rules of paragraph (9) of
subdivision (b)) employed by the qualified taxpayer in this state
shall be determined by subtracting the amount determined under clause
(ii) from the amount determined under clause (i). If the amount
determined under clause (ii) is equal to or exceeds the amount
determined under clause (i), the amount determined under this
subparagraph shall be zero.
(i) The total number of full-time employees employed in this state
in the current taxable year by the qualified taxpayer and by any
trade or business acquired by the qualified taxpayer during the
current taxable year.
(ii) The total number of full-time employees of the qualified
taxpayer employed in this state in the preceding taxable year by the
qualified taxpayer and by any trade or business acquired by the
qualified taxpayer during the current taxable year.
(3) For qualified taxpayers who first commence doing business in
this state during the taxable year, the number of qualified full-time
employees under subparagraph (B) of paragraph (1) and the number of
full-time employees under subparagraph (C) of paragraph (2) for the
preceding taxable year shall be zero.
(4) For purposes of determining the number of full-time employees
of the qualified taxpayer who are employed in this state under
paragraphs (1) and (2), only those employees who receive wages that
are subject to Division 6 (commencing with Section 13000) of the
Unemployment Insurance Code from the qualified taxpayer comprising
more than 50 percent of that employee's total wages received from the
qualified taxpayer for the taxable year, shall be included.
(5) For purposes of determining the increase in the number of
qualified full-time employees of a qualified taxpayer under this
section and Sections 23622.7, 23634, and 23646, the increase shall be
determined separately for the targeted tax area, and each enterprise
zone, manufacturing enhancement area, or local agency military base
recovery area with respect to which a taxpayer is a qualified
taxpayer.
(6) Any determination of the Franchise Tax Board under this
subdivision with respect to whether there is an increase, a decrease,
or no change in the state's nonfarm employment for any calendar year
shall be final and may not be reviewed in any administrative or
judicial proceeding, even if the data published by the Employment
Development Department as of March 15 of any calendar year upon which
the Franchise Tax Board relied in making its determination is
substantially revised and would otherwise change which formula is
applicable under this subdivision.
(c)
(d) (1) For purposes of this section, all of the
following apply:
(A) All employees of all corporations that are members of the same
controlled group of corporations shall be treated as employed by a
single qualified taxpayer.
(B) The credit (if any) allowable by this section with respect to
each member shall be determined by reference to its proportionate
share of the expenses of the qualified wages giving rise to the
credit and shall be allocated in that manner.
(C) Principles that apply in the case of controlled groups of
corporations, as specified in subdivision (d) of Section 23622.7,
shall apply with respect to determining employment.
(2) If a qualified taxpayer acquires the major portion of a trade
or business of another employer (hereinafter in this paragraph
referred to as the "predecessor") or the major portion of a separate
unit of a trade or business of a predecessor, then, for purposes of
applying this section (other than subdivision (d)
(e) ) for any calendar year ending after that acquisition,
the employment relationship between a qualified disadvantaged
individual and a qualified taxpayer shall not be treated as
terminated if the qualified disadvantaged individual continues to be
employed in that trade or business.
(d)
(e) (1) (A) If For qualified
disadvantaged individuals who first commenced employment with a
qualified taxpayer in taxable years beginning on or after January 1,
1998, and before January 1, 2011, if the employment, other than
seasonal employment, of any qualified disadvantaged individual, with
respect to whom qualified wages are taken into account under
subdivision (b) is terminated by the qualified taxpayer at any time
during the first 270 days of that employment (whether or not
consecutive) or before the close of the 270th calendar day after the
day in which that qualified disadvantaged individual completes 90
days of employment with the qualified taxpayer, the tax imposed by
this part for the taxable year in which that employment is terminated
shall be increased by an amount equal to the credit allowed under
subdivision (a) for that taxable year and all prior taxable years
attributable to qualified wages paid or incurred with respect to that
qualified disadvantaged individual.
(B) If the seasonal employment of any qualified disadvantaged
individual, with respect to whom qualified wages are taken into
account under subdivision (a) is not continued by the qualified
taxpayer for a period of 270 days of employment during the 60-month
period beginning with the day the qualified disadvantaged individual
commences seasonal employment with the qualified taxpayer, the tax
imposed by this part, for the income year that includes the 60th
month following the month in which the qualified disadvantaged
individual commences seasonal employment with the qualified taxpayer,
shall be increased by an amount equal to the credit allowed under
subdivision (a) for that taxable year and all prior taxable years
attributable to qualified wages paid or incurred with respect to that
qualified disadvantaged individual.
(2) (A) Subparagraph (A) of paragraph (1) does not apply to any of
the following:
(i) A termination of employment of a qualified disadvantaged
individual who voluntarily leaves the employment of the qualified
taxpayer.
(ii) A termination of employment of a qualified disadvantaged
individual who, before the close of the period referred to in
subparagraph (A) of paragraph (1), becomes disabled to perform the
services of that employment, unless that disability is removed before
the close of that period and the qualified taxpayer fails to offer
reemployment to that individual.
(iii) A termination of employment of a qualified disadvantaged
individual, if it is determined that the termination was due to the
misconduct (as defined in Sections 1256-30 to 1256-43, inclusive, of
Title 22 of the California Code of Regulations) of that individual.
(iv) A termination of employment of a qualified disadvantaged
individual due to a substantial reduction in the trade or business
operations of the qualified taxpayer.
(v) A termination of employment of a qualified disadvantaged
individual, if that individual is replaced by other qualified
disadvantaged individuals so as to create a net increase in both the
number of employees and the hours of employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of
the following:
(i) A failure to continue the seasonal employment of a qualified
disadvantaged individual who voluntarily fails to return to the
seasonal employment of the qualified taxpayer.
(ii) A failure to continue the seasonal employment of a qualified
disadvantaged individual who, before the close of the period referred
to in subparagraph (B) of paragraph (1), becomes disabled and unable
to perform the services of that seasonal employment, unless that
disability is removed before the close of that period and the
qualified taxpayer fails to offer seasonal employment to that
qualified disadvantaged individual.
(iii) A failure to continue the seasonal employment of a qualified
disadvantaged individual, if it is determined that the failure to
continue the seasonal employment was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that qualified disadvantaged
individual.
(iv) A failure to continue seasonal employment of a qualified
disadvantaged individual due to a substantial reduction in the
regular seasonal trade or business operations of the qualified
taxpayer.
(v) A failure to continue the seasonal employment of a qualified
disadvantaged individual, if that qualified disadvantaged individual
is replaced by other qualified disadvantaged individuals so as to
create a net increase in both the number of seasonal employees and
the hours of seasonal employment.
(C) For purposes of paragraph (1), the employment relationship
between the qualified taxpayer and a qualified disadvantaged
individual shall not be treated as terminated by either of the
following:
(i) By a transaction to which Section 381(a) of the Internal
Revenue Code applies, if the qualified disadvantaged individual
continues to be employed by the acquiring corporation.
(ii) By reason of a mere change in the form of conducting the
trade or business of the qualified taxpayer, if the qualified
disadvantaged individual continues to be employed in that trade or
business and the qualified taxpayer retains a substantial interest in
that trade or business.
(3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
(e)
(f) The credit shall be reduced by the credit allowed
under Section 23621. The credit shall also be reduced by the federal
credit allowed under Section 51 of the Internal Revenue Code.
In addition, any deduction otherwise allowed under this part for
the wages or salaries paid or incurred by the qualified taxpayer upon
which the credit is based shall be reduced by the amount of the
credit, prior to any reduction required by subdivision (f)
(g) or (g) (h) .
(f)
(g) (1) In the case where the
credit otherwise allowed under this section exceeds the "tax" for the
taxable year, that portion of the credit that exceeds the "tax" may
be carried over and added to the credit, if any, in succeeding years,
until the credit is exhausted. The credit shall be applied first to
the earliest taxable years possible.
(2) Notwithstanding paragraph (1), for taxable years beginning on
or after January 1, 2011:
(A) In the case of any portion of a credit available for carryover
and attributable to a taxable year beginning before January 1, 2006,
that portion shall not be carried forward.
(B) In the case of credits first allowed in taxable years
beginning on or after January 1, 2006, the carryover period shall be
five years from the year for which the credit was first allowed.
(g)
(h) (1) The amount of credit otherwise allowed under
this section, including prior year credit carryovers, that may reduce
the "tax" for the taxable year shall not exceed the amount of tax
that would be imposed on the qualified taxpayer's business income
attributed to a manufacturing enhancement area determined as if that
attributed income represented all of the net income of the qualified
taxpayer subject to tax under this part.
(2) Attributable income is that portion of the taxpayer's
California source business income that is apportioned to the
manufacturing enhancement area. For that purpose, the taxpayer's
business income attributable to sources in this state first shall be
determined in accordance with Chapter 17 (commencing with Section
25101). That business income shall be further apportioned to the
manufacturing enhancement area in accordance with Article 2
(commencing with Section 25120) of Chapter 17, modified for purposes
of this section in accordance with paragraph (3).
(3) Income shall be apportioned to a manufacturing enhancement
area by multiplying the total California business income of the
taxpayer by a fraction, the numerator of which is the property factor
plus the payroll factor, and the denominator of which is two. For
the purposes of this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the manufacturing enhancement
area during the taxable year, and the denominator of which is the
average value of all the taxpayer's real and tangible personal
property owned or rented and used in this state during the taxable
year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the manufacturing
enhancement area during the taxable year for compensation, and the
denominator of which is the total compensation paid by the taxpayer
in this state during the taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "tax" for the taxable
year, as provided in subdivision (g) (h)
.
(h)
(i) If the taxpayer is allowed a credit pursuant to
this section for qualified wages paid or incurred, only one credit
shall be allowed to the taxpayer under this part with respect to any
wage consisting in whole or in part of those qualified wages.
(i)
(j) The For
qualified disadvantaged individuals who commenced employment in
taxable years beginning on or after January 1, 1998, and before
January 1, 2011, the qualified taxpayer shall do both
of the following:
(1) Obtain from the Employment Development Department, as
permitted by federal law, the local county or city Job Training
Partnership Act administrative entity, the local county GAIN office
or social services agency, or the local government administering the
manufacturing enhancement area, a certification that provides that a
qualified disadvantaged individual meets the eligibility requirements
specified in paragraph (5) of subdivision (b). The Employment
Development Department may provide preliminary screening and referral
to a certifying agency. The Department of Housing and Community
Development shall develop regulations governing the issuance of
certificates pursuant to subdivision (d) of Section 7086 of the
Government Code and shall develop forms for this purpose.
(2) For any qualified disadvantaged individual who first commenced
employment in taxable years beginning before January 1, 2011, for
which, as of the later of July 1, 2011, or the date the qualified
disadvantaged individual first commenced employment, a certification
described in paragraph (1) has not been obtained and a request for
certification described in paragraph (1) has not been previously
submitted, then a request for certification described in paragraph
(1) with respect to that employee shall be submitted to the
certifying entity no later than the date that is the later of 90 days
after July 1, 2011, or 30 days after the date the qualified
disadvantaged individual first commenced employment. A credit shall
be allowed under this section with respect to a qualified
disadvantaged individual described in the preceding sentence only if
a request for certification was timely submitted in accordance with
this paragraph.
(2)
(3) Retain a copy of the certification and provide it
upon request to the Franchise Tax Board.
(k) For taxable years beginning on or after January 1, 2011, the
credit allowed by this section must be claimed on a timely filed
original return of the qualified taxpayer.
SEC. 15. Section 23623 of the Revenue
and Taxation Code , as added by Section 8 of Chapter 10 of
the Third Extraordinary Session of the Statutes of 2009,
is repealed.
23623. (a) For each taxable year beginning on or after January 1,
2009, there shall be allowed as a credit against the "tax," as
defined in Section 23036, three thousand dollars ($3,000) for each
net increase in qualified full-time employees, as specified in
subdivision (c), hired during the taxable year by a qualified
employer.
(b) For purposes of this section:
(1) "Acquired" includes any gift, inheritance, transfer incident
to divorce, or any other transfer, whether or not for consideration.
(2) "Qualified full-time employee" means:
(A) A qualified employee who was paid qualified wages during the
taxable year by the qualified employer for services of not less than
an average of 35 hours per week.
(B) A
qualified employee who was a salaried employee and was paid
compensation during the taxable year for full-time employment, within
the meaning of Section 515 of the Labor Code, by the qualified
employer.
(3) A "qualified employee" shall not include any of the following:
(A) An employee certified as a qualified employee in an enterprise
zone designated in accordance with Chapter 12.8 (commencing with
Section 7070) of Division 7 of Title 1 of the Government Code.
(B) An employee certified as a qualified disadvantaged individual
in a manufacturing enhancement area designated in accordance with
Section 7073.8 of the Government Code.
(C) An employee certified as a qualified employee in a targeted
tax area designated in accordance with Section 7097 of the Government
Code.
(D) An employee certified as a qualified disadvantaged individual
or a qualified displaced employee in a local agency military base
recovery area (LAMBRA) designated in accordance with Chapter 12.97
(commencing with Section 7105) of Division 7 of Title 1 of the
Government Code.
(E) An employee whose wages are included in calculating any other
credit allowed under this part.
(4) "Qualified employer" means a taxpayer that, as of the last day
of the preceding taxable year, employed a total of 20 or fewer
employees.
(5) "Qualified wages" means wages subject to Division 6
(commencing with Section 13000) of the Unemployment Insurance Code.
(6) "Annual full-time equivalent" means either of the following:
(A) In the case of a full-time employee paid hourly qualified
wages, "annual full-time equivalent" means the total number of hours
worked for the taxpayer by the employee (not to exceed 2,000 hours
per employee) divided by 2,000.
(B) In the case of a salaried full-time employee, "annual
full-time equivalent" means the total number of weeks worked for the
taxpayer by the employee divided by 52.
(c) The net increase in qualified full-time employees of a
qualified employer shall be determined as provided by this
subdivision:
(1) (A) The net increase in qualified full-time employees shall be
determined on an annual full-time equivalent basis by subtracting
from the amount determined in subparagraph (C) the amount determined
in subparagraph (B).
(B) The total number of qualified full-time employees employed in
the preceding taxable year by the taxpayer and by any trade or
business acquired by the taxpayer during the current taxable year.
(C) The total number of full-time employees employed in the
current taxable year by the taxpayer and by any trade or business
acquired during the current taxable year.
(2) For taxpayers who first commence doing business in this state
during the taxable year, the number of full-time employees for the
immediately preceding prior taxable year shall be zero.
(d) In the case where the credit allowed by this section exceeds
the "tax," the excess may be carried over to reduce the "tax" in the
following year, and succeeding seven years if necessary, until the
credit is exhausted.
(e) Any deduction otherwise allowed under this part for qualified
wages shall not be reduced by the amount of the credit allowed under
this section.
(f) For purposes of this section:
(1) All employees of the trades or businesses that are treated as
related under either Section 267, 318, or 707 of the Internal Revenue
Code shall be treated as employed by a single taxpayer.
(2) In determining whether the taxpayer has first commenced doing
business in this state during the taxable year, the provisions of
subdivision (f) of Section 17276, without application of paragraph
(7) of that subdivision, shall apply.
(g) (1) (A) Credit under this section and Section 17053.80 shall
be allowed only for credits claimed on timely filed original returns
received by the Franchise Tax Board on or before the cut-off date
established by the Franchise Tax Board.
(B) For purposes of this paragraph, the cut-off date shall be the
last day of the calendar quarter within which the Franchise Tax Board
estimates it will have received timely filed original returns
claiming credits under this section and Section 17053.80 that
cumulatively total four hundred million dollars ($400,000,000) for
all taxable years.
(2) The date a return is received shall be determined by the
Franchise Tax Board.
(3) (A) The determinations of the Franchise Tax Board with respect
to the cut-off date, the date a return is received, and whether a
return has been timely filed for purposes of this subdivision may not
be reviewed in any administrative or judicial proceeding.
(B) Any disallowance of a credit claimed due to a determination
under this subdivision, including the application of the limitation
specified in paragraph (1), shall be treated as a mathematical error
appearing on the return. Any amount of tax resulting from such
disallowance may be assessed by the Franchise Tax Board in the same
manner as provided by Section 19051.
(4) The Franchise Tax Board shall periodically provide notice on
its Web site with respect to the amount of credit under this section
and Section 17053.80 claimed on timely filed original returns
received by the Franchise Tax Board.
(h) (1) The Franchise Tax Board may prescribe rules, guidelines or
procedures necessary or appropriate to carry out the purposes of
this section, including any guidelines regarding the limitation on
total credits allowable under this section and Section 17053.80 and
guidelines necessary to avoid the application of paragraph (2) of
subdivision (f) through split-ups, shell corporations, partnerships,
tiered ownership structures, or otherwise.
(2) Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code does not apply to any
standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the Franchise Tax Board pursuant
to this section.
(i) This section shall remain in effect only until December 1 of
the calendar year after the year of the cut-off date, and as of that
December 1 is repealed.
SEC. 16. Section 23623 of the Revenue
and Taxation Code , as added by Section 8 of Chapter 17 of
the Third Extraordinary Session of the Statutes of 2009,
is amended to read:
23623. (a) (1) For each taxable year
beginning on or after January 1, 2009, and before January 1,
2011, there shall be allowed as a credit against the "tax," as
defined in Section 23036, three thousand dollars ($3,000) for each
net increase in qualified full-time employees, as specified in
subdivision (c), hired during the taxable year by a qualified
employer.
(2) For each taxable year beginning on or after January 1, 2011,
and before January 1, 2013, there shall be allowed as a credit
against the "tax," as defined in Section 23036, four thousand dollars
($4,000) for each net increase in qualified full-time employees, as
specified in subdivision (c), hired during the taxable year by a
qualified employer.
(b) For purposes of this section:
(1) "Acquired" includes any gift, inheritance, transfer incident
to divorce, or any other transfer, whether or not for consideration.
(2) "Qualified full-time employee" means:
(A) A qualified employee who was paid qualified wages during the
taxable year by the qualified employer for services of not less than
an average of 35 hours per week.
(B) A qualified employee who was a salaried employee and was paid
compensation during the taxable year for full-time employment, within
the meaning of Section 515 of the Labor Code, by the qualified
employer.
(3) A (A) For
taxable years beginning on or after January 1, 2009, and before
January 1, 2011, a "qualified employee" shall not include any
of the following:
(A)
(i) An employee certified as a qualified employee in an
enterprise zone designated in accordance with Chapter 12.8
(commencing with Section 7070) of Division 7 of Title 1 of the
Government Code.
(B)
(ii) An employee certified as a qualified disadvantaged
individual in a manufacturing enhancement area designated in
accordance with Section 7073.8 of the Government Code.
(C)
(iii) An employee certified as a qualified employee in
a targeted tax area designated in accordance with Section 7097 of the
Government Code.
(D)
(iv) An employee certified as a qualified disadvantaged
individual or a qualified displaced employee in a local agency
military base recovery area (LAMBRA) designated in accordance with
Chapter 12.97 (commencing with Section 7105) of Division 7 of Title 1
of the Government Code.
(E)
(v) An employee whose wages are included in calculating
any other credit allowed under this part.
(B) For taxable years beginning on or after January 1, 2011, and
before January 1, 2013, a "qualified employee" shall not include any
employee whose wages or hours are included, directly or indirectly,
in calculating any other credit allowed under this part.
(4) "Qualified (A)
For taxable years beginning on or after January 1, 2009, and before
January 1, 2011, a "qualified employer" means a taxpayer that,
as of the last day of the preceding taxable year, employed a total of
20 or fewer employees.
(B) For taxable years beginning on or after January 1, 2011, and
before January 1, 2013, a "qualified employer" means a taxpayer that,
as of the last day of the preceding taxable year, employed a total
of 50 or fewer employees.
(5) "Qualified wages" means wages subject to Division 6
(commencing with Section 13000) of the Unemployment Insurance Code.
(6) "Annual full-time equivalent" means either of the following:
(A) In the case of a full-time employee paid hourly qualified
wages, "annual full-time equivalent" means the total number of hours
worked for the taxpayer by the employee (not to exceed 2,000 hours
per employee) divided by 2,000.
(B) In the case of a salaried full-time employee, "annual
full-time equivalent" means the total number of weeks worked for the
taxpayer by the employee divided by 52.
(c) The net increase in qualified full-time employees of a
qualified employer shall be determined as provided by this
subdivision:
(1) (A) The net increase in qualified full-time employees shall be
determined on an annual full-time equivalent basis by subtracting
from the amount determined in subparagraph (C) the amount determined
in subparagraph (B).
(B) The total number of qualified full-time employees employed in
the preceding taxable year by the taxpayer and by any trade or
business acquired by the taxpayer during the current taxable year.
(C) The total number of full-time employees employed in the
current taxable year by the taxpayer and by any trade or business
acquired during the current taxable year.
(2) For taxpayers who that first
commence doing business in this state during the taxable year, the
number of full-time employees for the immediately preceding prior
taxable year shall be zero.
(d) In the case where the credit allowed by this section exceeds
the "tax," the excess may be carried over to reduce the "tax" in the
following year, and the succeeding seven years if
necessary, until the credit is exhausted.
(e) Any deduction otherwise allowed under this part for qualified
wages shall not be reduced by the amount of the credit allowed under
this section.
(f) For purposes of this section:
(1) All employees of the trades or businesses that are treated as
related under either Section 267, 318, or 707 of the Internal Revenue
Code shall be treated as employed by a single taxpayer.
(2) In determining whether the taxpayer has first commenced doing
business in this state during the taxable year, the provisions of
subdivision (f) (g) of Section
17276 24416.20 , without application of
paragraph (7) of that subdivision, shall apply.
(g) (1) (A) Credit under this section and Section
17053.80 shall be allowed only for credits claimed on
a timely filed original returns return
received by the Franchise Tax Board on or before the cut-off
date established by the Franchise Tax Board , or December 31,
2013, whichever occurs earlier .
(B) For purposes of this paragraph, the cut-off date shall be the
last day of the calendar quarter within which the Franchise Tax Board
estimates it will have received timely filed original returns
claiming credits under this section and Section 17053.80 that
cumulatively total four hundred million dollars ($400,000,000) for
all taxable years.
(2) The date a return is received shall be determined by the
Franchise Tax Board.
(3) (A) The determinations of the Franchise Tax Board with respect
to the cut-off date, the date a return is received, and whether a
return has been timely filed for purposes of this subdivision may not
be reviewed in any administrative or judicial proceeding.
(B) Any disallowance of a credit claimed due to a determination
under this subdivision, including the application of the limitation
specified in subparagraph (B) of paragraph (1), shall be
treated as a mathematical error appearing on the return. Any amount
of tax resulting from such disallowance may be assessed by the
Franchise Tax Board in the same manner as provided by Section 19051.
(4) The Franchise Tax Board shall periodically provide notice on
its Internet Web site with respect to the amount of credit
under this section and Section 17053.80 claimed on timely filed
original returns received by the Franchise Tax Board.
(h) (1) The Franchise Tax Board may prescribe rules, guidelines
, or procedures necessary or appropriate to carry out the
purposes of this section, including any guidelines ,
regarding the limitation on total credits allowable under this
section and Section 17053.80 and guidelines necessary to avoid the
application of paragraph (2) of subdivision (f) through
split-ups, shell corporations, partnerships, tiered
ownership structures, or otherwise.
(2) Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code does not apply to any
standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the Franchise Tax Board pursuant
to this section.
(i) This section shall remain in effect only until December 1 of
the calendar year after the year of the cut-off date, and as of that
December 1 , or December 31, 2013, whichever occurs
earlier, is repealed.
SEC. 17. Section 23633 of the Revenue
and Taxation Code is amended to read:
23633. (a) For each taxable year beginning on or after January 1,
1998, there shall be allowed as a credit against the "tax"
(as "tax, as defined by Section 23036)
23036, for the taxable year an amount equal to
the sales or use tax paid or incurred during the taxable year by the
qualified taxpayer in connection with the qualified taxpayer's
purchase of qualified property.
(b) For purposes of this section:
(1) "Qualified property" means property that meets all of the
following requirements:
(A) Is any of the following:
(i) Machinery and machinery parts used for fabricating,
processing, assembling, and manufacturing.
(ii) Machinery and machinery parts used for the production of
renewable energy resources.
(iii) Machinery and machinery parts used for either of the
following:
(I) Air pollution control mechanisms.
(II) Water pollution control mechanisms.
(iv) Data-processing and communications equipment, such as
computers, computer-automated drafting systems, copy machines,
telephone systems, and faxes.
(v) Motion picture manufacturing equipment central to production
and post production, such as cameras, audio recorders, and digital
image and sound processing equipment.
(B) The total cost of qualified property purchased and placed in
service in any taxable year that may be taken into account by any
qualified taxpayer for purposes of claiming this credit shall not
exceed twenty million dollars ($20,000,000).
(C) The qualified property is used by the qualified taxpayer
exclusively in a targeted tax area.
(D) The qualified property is purchased and placed in service
before the date the targeted tax area designation expires, is
revoked, is no longer binding, or becomes inoperative.
(2) (A) "Qualified taxpayer" means a corporation that meets both
of the following:
(i) Is engaged in a trade or business within a targeted tax area
designated pursuant to Chapter 12.93 (commencing with Section 7097)
of Division 7 of Title 1 of the Government Code.
(ii) Is engaged in those lines of business described in Codes 2000
to 2099, inclusive; 2200 to 3999, inclusive; 4200 to 4299,
inclusive; 4500 to 4599, inclusive; and 4700 to 5199, inclusive, of
the Standard Industrial Classification (SIC) Manual published by the
United States Office of Management and Budget, 1987 edition.
(B) In the case of any pass-through entity, the determination of
whether a taxpayer is a qualified taxpayer under this section shall
be made at the entity level and any credit under this section or
Section 17053.33 shall be allowed to the pass-through entity and
passed through to the partners or shareholders in accordance with
applicable provisions of this part or Part 10 (commencing with
Section 17001). For purposes of this subparagraph, the term
"pass-through entity" means any partnership or S corporation.
(3) "Targeted tax area" means the area designated pursuant to
Chapter 12.93 (commencing with Section 7097) of Division 7 of Title 1
of the Government Code.
(c) If the qualified taxpayer is allowed a credit for qualified
property pursuant to this section, only one credit shall be allowed
to the taxpayer under this part with respect to that qualified
property.
(d) If the qualified taxpayer has purchased property upon which a
use tax has been paid or incurred, the credit provided by this
section shall be allowed only if qualified property of a comparable
quality and price is not timely available for purchase in this state.
(e) (1) In the case where the credit
otherwise allowed under this section exceeds the "tax" for the
taxable year, that portion of the credit that exceeds the "tax" may
be carried over and added to the credit, if any, in the following
year, and succeeding years if necessary, until the credit is
exhausted. The credit shall be applied first to the earliest taxable
years possible.
(2) Notwithstanding paragraph (1), for taxable years beginning on
or after January 1, 2011:
(A) In the case of any portion of a credit available for carryover
and attributable to a taxable year beginning before January 1, 2006,
that portion shall not be carried forward.
(B) In the case of credits first allowed in taxable years
beginning on or after January 1, 2006, the carryover period shall be
five years from the year for which the credit was first allowed.
(f) Any qualified taxpayer who elects to be subject to this
section shall not be entitled to increase the basis of the qualified
property as otherwise required by Section 164(a) of the Internal
Revenue Code with respect to sales or use tax paid or incurred in
connection with the qualified taxpayer's purchase of qualified
property.
(g) (1) The amount of credit otherwise allowed under this section
and Section 23634, including any credit carryover from prior years,
that may reduce the "tax" for the taxable year shall not exceed the
amount of tax that would be imposed on the qualified taxpayer's
business income attributable to the targeted tax area determined as
if that attributable income represented all of the income of the
qualified taxpayer subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the targeted
tax area. For that purpose, the taxpayer's business income
attributable to sources in this state first shall be determined in
accordance with Chapter 17 (commencing with Section 25101). That
business income shall be further apportioned to the targeted tax area
in accordance with Article 2 (commencing with Section 25120) of
Chapter 17, modified for purposes of this section in accordance with
paragraph (3).
(3) Business income shall be apportioned to the targeted tax area
by multiplying the total California business income of the taxpayer
by a fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is two. For purposes of
this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the targeted tax area during the
taxable year and the denominator of which is the average value of
all the taxpayer's real and tangible personal property owned or
rented and used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the targeted tax area during
the taxable year for compensation, and the denominator of which is
the total compensation paid by the taxpayer in this state during the
taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "tax" for the taxable
year, as provided in subdivision (e).
(5) In the event that a credit carryover is allowable under
subdivision (e) for any taxable year after the targeted tax area
designation has expired, has been revoked, is no longer binding, or
has become inoperative, the targeted tax area shall be deemed to
remain in existence for purposes of computing the limitation
specified in this subdivision.
(h) The changes made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 1998.
(i) For taxable years beginning on or after January 1, 2011, the
credit allowed by this section must be claimed on a timely filed
original return of the taxpayer.
SEC. 18. Section 23634 of the Revenue
and Taxation Code is amended to read:
23634. (a) (1) For each taxable year
beginning on or after January 1, 1998, there shall be allowed a
credit against the "tax" (as "tax," as
defined by Section 23036) 23036, to a
qualified taxpayer who employs a qualified employee in a targeted tax
area during the taxable year. The For
qualified employees who first commenced employment in taxable years
beginning on or after January 1, 1998, and before January 1, 2011,
the credit shall be equal to the sum of each of the following:
(1)
(A) Fifty percent of qualified wages in the first year
of employment.
(2)
(B) Forty percent of qualified wages in the second year
of employment.
(3)
(C) Thirty percent of qualified wages in the third year
of employment.
(4)
(D) Twenty percent of qualified wages in the fourth
year of employment.
(5)
(E) Ten percent of qualified wages in the fifth year of
employment.
(2) For qualified employees who first commence employment in a
taxable year beginning on or after January 1, 2011, the credit shall
be equal to five thousand dollars ($5,000) for each net increase in
qualified full-time employees, as specified in subdivision (c),
employed during the taxable year by a qualified taxpayer.
(b) For purposes of this section:
(1) "Qualified For taxable
years beginning on or after January 1, 1998, and before January 1,
2011, "qualified wages" means:
(A) That portion of wages paid or incurred by the qualified
taxpayer during the taxable year to qualified employees that does not
exceed 150 percent of the minimum wage.
(B) Wages received during the 60-month period beginning with the
first day the employee commences employment with the qualified
taxpayer. Reemployment in connection with any increase, including a
regularly occurring seasonal increase, in the trade or business
operations of the qualified taxpayer does not constitute commencement
of employment for purposes of this section.
(C) Qualified wages do not include any wages paid or incurred by
the qualified taxpayer on or after the targeted tax area expiration
date. However, wages paid or incurred with respect to qualified
employees who are employed by the qualified taxpayer within the
targeted tax area within the 60-month period prior to the targeted
tax area expiration date shall continue to qualify for the credit
under this section after the targeted tax area expiration date, in
accordance with all provisions of this section applied as if the
targeted tax area designation were still in existence and binding.
(2) "Acquired" includes any gift, inheritance, transfer incident
to divorce, or any other transfer, whether or not for consideration.
(2)
(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.
(3)
(4) "Targeted tax area expiration date" means the date
the targeted tax area designation expires, is revoked, is no longer
binding, or becomes inoperative.
(4)
(5) (A) "Qualified employee" means an individual who
meets all of the following requirements:
(i) At least 90 percent of his or her services for the qualified
taxpayer during the taxable year are directly related to the conduct
of the qualified taxpayer's trade or business located in a targeted
tax area.
(ii) Performs at least 50 percent of his or her services for the
qualified taxpayer during the taxable year in a targeted tax area.
(iii) Is hired by the qualified taxpayer after the date of
original designation of the area in which services were performed as
a targeted tax area.
(iv) Is For an individual who
first commenced employment with the qualified taxpayer in taxable
years beginning on or after January 1, 1998, and before January 1,
2011, he or she is any of the following:
(I) Immediately preceding the qualified employee's commencement of
employment with the qualified taxpayer, was a person eligible for
services under the federal Job Training Partnership Act (29 U.S.C.
Sec. 1501 et seq.), or its successor, who is receiving, or is
eligible to receive, subsidized employment, training, or services
funded by the federal Job Training Partnership Act, or its successor.
(II) Immediately preceding the qualified employee's commencement
of employment with the qualified taxpayer, was a person eligible to
be a voluntary or mandatory registrant under the Greater Avenues for
Independence Act of 1985 (GAIN) provided for pursuant to Article 3.2
(commencing with Section 11320) of Chapter 2 of Part 3 of Division 9
of the Welfare and Institutions Code, or its successor.
(III) Immediately preceding the qualified employee's commencement
of employment with the qualified taxpayer, was an economically
disadvantaged individual 14 years of age or older.
(IV) Immediately preceding the qualified employee's commencement
of employment with the qualified taxpayer, was a dislocated worker
who meets any of the following:
(aa)
(ia) Has been terminated or laid off or who has
received a notice of termination or layoff from employment, is
eligible for or has exhausted entitlement to unemployment insurance
benefits, and is unlikely to return to his or her previous industry
or occupation.
(bb)
(ib) Has been terminated or has received a notice of
termination of employment as a result of any permanent closure or any
substantial layoff at a plant, facility, or enterprise, including an
individual who has not received written notification but whose
employer has made a public announcement of the closure or layoff.
(cc)
(ic) Is long-term unemployed and has limited
opportunities for employment or reemployment in the same or a similar
occupation in the area in which the individual resides, including an
individual 55 years of age or older who may have substantial
barriers to employment by reason of age.
(dd)
(id) Was self-employed (including farmers and ranchers)
and is unemployed as a result of general economic conditions in the
community in which he or she resides or because of natural disasters.
(ee)
(ie) Was a civilian employee of the Department of
Defense employed at a military installation being closed or realigned
under the Defense Base Closure and Realignment Act of 1990.
(ff)
(if) Was an active member of the Armed Forces or
National Guard as of September 30, 1990, and was either involuntarily
separated or separated pursuant to a special benefits program.
(gg)
(ig) Is a seasonal or migrant worker who experiences
chronic seasonal unemployment and underemployment in the agriculture
industry, aggravated by continual advancements in technology and
mechanization.
(hh)
(ih) Has been terminated or laid off, or has received a
notice of termination or layoff, as a consequence of compliance with
the Clean Air Act.
(V) Immediately preceding the qualified employee's commencement of
employment with the qualified taxpayer, was a disabled individual
who is eligible for or enrolled in, or has completed a state
rehabilitation plan or is a service-connected disabled veteran,
veteran of the Vietnam era, or veteran who is recently separated from
military service.
(VI) Immediately preceding the qualified employee's commencement
of employment with the qualified taxpayer, was an ex-offender. An
individual shall be treated as convicted if he or she was placed on
probation by a state court without a finding of guilt.
(VII) Immediately preceding the qualified employee's commencement
of employment with the qualified taxpayer, was a person eligible for
or a recipient of any of the following:
(aa)
(ia) Federal Supplemental Security Income benefits.
(bb)
(ib) Aid to Families with Dependent Children.
(cc)
(ic) Food stamps.
(dd)
(id) State and local general assistance.
(VIII) Immediately preceding the qualified employee's commencement
of employment with the qualified taxpayer, was a member of a
federally recognized Indian tribe, band, or other group of Native
American descent.
(IX) Immediately preceding the qualified employee's commencement
of employment with the qualified taxpayer, was a resident of a
targeted tax area.
(X) Immediately preceding the qualified employee's commencement of
employment with the taxpayer, was a member of a targeted group, as
defined in Section 51(d) of the Internal Revenue Code, or its
successor.
(B) Priority for employment shall be provided to an individual who
is enrolled in a qualified program under the federal Job Training
Partnership Act or the Greater Avenues for Independence Act of 1985
or who is eligible as a member of a targeted group under the Work
Opportunity Tax Credit (Section 51 of the Internal Revenue Code), or
its successor.
(v) For a qualified employee who first commences employment in
taxable years beginning on or after January 1, 2011, that individual
is a "qualified full-time employee" if, in addition to any other
requirement imposed by this section, he or she was either:
(I) Paid wages by the qualified taxpayer for services of not less
than an average of 35 hours per week.
(II) A salaried employee and is paid compensation during the
taxable year for full-time employment, within the meaning of Section
515 of the Labor Code, by the qualified taxpayer.
(5)
(6) (A) "Qualified taxpayer" means a person or entity
that meets both of the following:
(i) Is engaged in a trade or business within a targeted tax area
designated pursuant to Chapter 12.93 (commencing with Section 7097)
of Division 7 of Title 1 of the Government Code.
(ii) Is engaged in those lines of business described in Codes 2000
to 2099, inclusive; 2200 to 3999, inclusive; 4200 to 4299,
inclusive; 4500 to 4599, inclusive; and 4700 to 5199, inclusive, of
the Standard Industrial Classification (SIC) Manual published by the
United States Office of Management and Budget, 1987 edition.
(B) In the case of any passthrough entity, the determination of
whether a taxpayer is a qualified taxpayer under this section shall
be made at the entity level and any credit under this section or
Section 17053.34 shall be allowed to the passthrough entity and
passed through to the partners or shareholders in accordance with
applicable provisions of this part or Part 10 (commencing with
Section 17001). For purposes of this subparagraph, the term
"passthrough entity" means any partnership or S corporation.
(C) (i) Notwithstanding subparagraph (A), a "qualified taxpayer"
shall not include any person or entity described in subparagraph (A)
that first commences business activity in a targeted tax area during
the taxable year and has, within 24 months before the taxpayer first
commenced business activity in the targeted tax area, had an overall
reduction in the number of employees employed by the taxpayer within
the state outside of the targeted tax area, unless that person or
entity has made a written offer of employment to each of the
employees employed at the location within the state where employment
was reduced for such employees to continue their employment with that
person or entity within the targeted tax area.
(ii) The written offer referred to in this subparagraph shall be
made prior to the termination of employment at the location within
the state that is outside the targeted tax area.
(iii) If any employee described in clause (i) does not timely
receive a written offer, the person or entity shall not be a
qualified taxpayer for that taxable year, even if other employees do
receive a written offer.
(iv) A person or entity may be required to provide, upon request
of the Franchise Tax Board, written certification, under penalty of
perjury, that the requirements of this subparagraph were met.
(v) 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.
(vi) In determining whether the qualified taxpayer has first
commenced doing business in the targeted tax area during the taxable
year, the provisions of subdivision (g) of Section 24416.20, without
application of paragraph (7) of that subdivision, shall apply.
(6)
(7) "Seasonal employment" means employment by a
qualified taxpayer that has regular and predictable substantial
reductions in trade or business operations.
(8) "Annual full-time equivalent" means either of the following:
(A) In the case of a full-time employee paid hourly wages, "annual
full-time equivalent" means the total number of hours worked for the
taxpayer by the employee (not to exceed 2,000 hours per employee)
divided by 2,000.
(B) In the case of a salaried full-time employee, "annual
full-time equivalent" means the total number of weeks worked for the
taxpayer by the employee divided by 52.
(c) Except as provided in paragraph (2), the net increase in
qualified full-time employees of a qualified taxpayer shall be
determined by paragraph (1):
(1) (A) (i) If the state's average nonfarm employment, as
determined by the Franchise Tax Board based upon information
published by the Employment Development Department as of March 15 of
each calendar year, has not decreased for the calendar years
beginning on the third and the second January 1 immediately preceding
the beginning of the current taxable year, as compared with the
second and the first calendar years respectively, then the net
increase in qualified full-time employees shall be determined on an
annual full-time equivalent basis based on the amount of the increase
of qualified full-time equivalent employees in excess of the
greatest of the number of qualified full-time equivalent employees
employed by the qualified taxpayer in any of the three immediately
preceding taxable years, as determined under subparagraph (B).
(ii) The amount determined under clause (i) shall include the
fractional amount, if any, of the increase for the taxable year.
(B) The net increase in qualified full-time employees for the
current taxable year shall be determined by subtracting the amount
determined under clause (ii) from the amount determined under clause
(i). If the amount determined under clause (ii) is equal to or
exceeds the amount determined under clause (i), the amount determined
under this subparagraph shall be zero.
(i) (I) The total number of qualified full-time employees employed
in the current taxable year by the qualified taxpayer and by any
trade or business acquired by the qualified taxpayer during the
current taxable year.
(II) The greatest total number of qualified full-time employees
employed in any of the three preceding taxable years by the qualified
taxpayer and by any trade or business acquired by the qualified
taxpayer during the current taxable year.
(ii) The increase in the total number of full-time employees
(determined under the full-time equivalent rules of paragraph (8) of
subdivision (b)) employed by the qualified taxpayer in this state
shall be determined by subtracting the amount determined under
subclause (II) from the amount determined under subclause (I). If the
amount determined under subclause (II) is equal to or exceeds the
amount determined under subclause (I), the amount determined under
this clause shall be zero.
(I) The total number of full-time employees employed in this state
in the current taxable year by the qualified taxpayer and by any
trade or business acquired by the qualified taxpayer during the
current taxable year.
(II) The greatest total number of full-time employees of the
qualified taxpayer employed in this state in any of the three
preceding taxable years by the qualified taxpayer and by any trade or
business acquired by the qualified taxpayer during the current
taxable year.
(2) (A) (i) If there is a decrease in the state's nonfarm
employment, as determined by the Franchise Tax Board based upon
information published by the Employment Development Department as of
March 15 of each calendar year, for the calendar years beginning on
the third and the second January 1 immediately preceding the current
taxable year, the net increase in qualified full-time employees shall
be determined on an annual full-time equivalent basis as the lesser
of the amount determined under subparagraph (C) or the amount
determined under subparagraph (B).
(ii) The amount determined under clause (i) shall include the
fractional amount, if any, of the increase for the taxable year.
(B) The increase in the total number of qualified full-time
employees shall be determined by subtracting the amount determined
under clause (ii) from the amount determined under clause (i). If the
amount determined under clause (ii) is equal to or exceeds the
amount determined under clause (i), the amount determined under this
subparagraph shall be zero.
(i) The total number of qualified full-time employees employed in
the current taxable year by the qualified taxpayer and by any trade
or business acquired by the qualified taxpayer during the current
taxable year.
(ii) The total number of qualified full-time employees employed in
the preceding taxable year by the qualified taxpayer and by any
trade or business acquired by the qualified taxpayer during the
current taxable year.
(C) The increase in the total number of full-time employees
(determined under the full-time equivalent rules of paragraph (8) of
subdivision (b)) employed by the qualified taxpayer in this state
shall be determined by subtracting the amount determined under clause
(ii) from the amount determined under clause (i). If the amount
determined under clause (ii) is equal to or exceeds the amount
determined under clause (i), the amount determined under this
subparagraph shall be zero.
(i) The total number of full-time employees employed in this state
in the current taxable year by the qualified taxpayer and by any
trade or business acquired by the qualified taxpayer during the
current taxable year.
(ii) The total number of full-time employees of the qualified
taxpayer employed in this state in the preceding taxable year by the
qualified taxpayer and by any trade or business acquired by the
qualified taxpayer during the current taxable year.
(3) For qualified taxpayers who first commence doing business in
this state during the taxable year, the number of qualified full-time
employees under subparagraph (B) of paragraph (1) and the number of
full-time employees under subparagraph (C) of paragraph (2) for the
preceding taxable year shall be zero.
(4) For purposes of determining the number of full-time employees
of the qualified taxpayer who are employed in this state under
paragraphs (1) and (2), only those employees who receive wages that
are subject to Division 6 (commencing with Section 13000) of the
Unemployment Insurance Code from the qualified taxpayer comprising
more than 50 percent of that employee's total wages received from the
qualified taxpayer for the taxable year, shall be included.
(5) For purposes of determining the increase in the number of
qualified full-time employees of a qualified taxpayer under this
section and Sections 23622.7, 23622.8, and 23646, the increase shall
be determined separately for the targeted tax area, and each
enterprise zone, manufacturing enhancement area, or local agency
military base recovery area with respect to which a taxpayer is a
qualified taxpayer.
(6) Any determination of the Franchise Tax Board under this
subdivision with respect to whether there is an increase, a decrease,
or no change in the state's nonfarm employment for any calendar year
shall be final and may not be reviewed in any administrative or
judicial proceeding, even if the data published by the Employment
Development Department as of March 15 of any calendar year upon which
the Franchise Tax Board relied in making its determination is
substantially revised and would otherwise change which formula is
applicable under this subdivision.
(c)
(d) If the qualified taxpayer is allowed a credit for
qualified wages pursuant to this section, only one credit shall be
allowed to the taxpayer under this part with respect to those
qualified wages.
(d) The
(e) For qualified employees who first commenced
employment with a qualified taxpayer in taxable years beginning on or
after January 1, 1998, and before January 1, 2011, the
qualified taxpayer shall do both of the following:
(1) Obtain from the Employment Development Department, as
permitted by federal law, the local county or city Job Training
Partnership Act administrative entity, the local county GAIN office
or social services agency, or the local government administering the
targeted tax area, a certification that provides that a qualified
employee meets the eligibility requirements specified in clause (iv)
of subparagraph (A) of paragraph (4) of subdivision (b). The
Employment Development Department may provide preliminary screening
and referral to a certifying agency. The Department of Housing and
Community Development shall develop regulations for the issuance of
certificates pursuant to subdivision (g) of Section 7097 of the
Government Code, and shall develop forms for this purpose.
(2) For any qualified employee who first commenced employment in
taxable years beginning on or after January 1, 1998, and before
January 1, 2011, for which, as of the date the qualified employee
first commenced employment, a certification described in paragraph
(1) has not been obtained and a request for certification described
in paragraph (1) has not been previously submitted, then a request
for certification described in paragraph (1) with respect to that
employee shall be submitted to the certifying entity no later than
the date that is the later of 90 days after July 1, 2011, or 30 days
after the date the qualified employee first commenced employment. A
credit shall be allowed under this section with respect to a
qualified employee described in the preceding sentence only if a
request for certification was timely submitted in accordance with
this paragraph.
(2)
(3) Retain a copy of the certification and provide it
upon request to the Franchise Tax Board.
(e)
(f) (1) For purposes of this section:
(A) All employees of all corporations that are members of the same
controlled group of corporations shall be treated as employed by a
single taxpayer.
(B) The credit, if any, allowable by this section to each member
shall be determined by reference to its proportionate share of the
expense of the qualified wages giving rise to the credit, and shall
be allocated in that manner.
(C) For purposes of this subdivision, "controlled group of
corporations" means "controlled group of corporations" as defined in
Section 1563(a) of the Internal Revenue Code, except that:
(i) "More than 50 percent" shall be substituted for "at least 80
percent" each place it appears in Section 1563(a)(1) of the Internal
Revenue Code.
(ii) The determination shall be made without regard to subsections
(a)(4) and (e)(3)(C) of Section 1563 of the Internal Revenue Code.
(2) If an employer acquires the major portion of a trade or
business of another employer (hereinafter in this paragraph referred
to as the "predecessor") or the major portion of a separate unit of a
trade or business of a predecessor, then, for purposes of applying
this section (other than subdivision (f)) for any calendar year
ending after that acquisition, the employment relationship between a
qualified employee and an employer shall not be treated as terminated
if the employee continues to be employed in that trade or business.
(f)
(g) (1) (A) If For qualified
employees who first commenced employment with a qualified
taxpayer in taxable years beginning on or after January 1, 1998, and
before January 1, 2011, if the employment, other than seasonal
employment, of any qualified employee with respect to whom qualified
wages are taken into account under subdivision (a) is terminated by
the qualified taxpayer at any time during the first 270 days of that
employment (whether or not consecutive) or before the close of the
270th calendar day after the day in which that employee completes 90
days of employment with the qualified taxpayer, the tax imposed by
this part for the taxable year in which that employment is terminated
shall be increased by an amount equal to the credit allowed under
subdivision (a) for that taxable year and all prior taxable years
attributable to qualified wages paid or incurred with respect to that
employee.
(B) If the seasonal employment of any qualified employee, with
respect to whom qualified wages are taken into account under
subdivision (a) is not continued by the qualified taxpayer for a
period of 270 days of employment during the 60-month period beginning
with the day the qualified employee commences seasonal employment
with the qualified taxpayer, the tax imposed by this part, for the
taxable year that includes the 60th month following the month in
which the qualified employee commences seasonal employment with the
qualified taxpayer, shall be increased by an amount equal to the
credit allowed under subdivision (a) for that taxable year and all
prior taxable years attributable to qualified wages paid or incurred
with respect to that qualified employee.
(2) (A) Subparagraph (A) of paragraph (1) shall not apply to any
of the following:
(i) A termination of employment of a qualified employee who
voluntarily leaves the employment of the qualified taxpayer.
(ii) A termination of employment of a qualified employee who,
before the close of the period referred to in subparagraph (A) of
paragraph (1), becomes disabled and unable to perform the services of
that employment, unless that disability is removed before the close
of that period and the qualified taxpayer fails to offer reemployment
to that employee.
(iii) A termination of employment of a qualified employee, if it
is determined that the termination was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that employee.
(iv) A termination of employment of a qualified employee due to a
substantial reduction in the trade or business operations of the
taxpayer.
(v) A termination of employment of a qualified employee, if that
employee is replaced by other qualified employees so as to create a
net increase in both the number of employees and the hours of
employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of
the following:
(i) A failure to continue the seasonal employment of a qualified
employee who voluntarily fails to return to the seasonal employment
of the qualified taxpayer.
(ii) A failure to continue the seasonal employment of a qualified
employee who, before the close of the period referred to in
subparagraph (B) of paragraph (1), becomes disabled and unable to
perform the services of that seasonal employment, unless that
disability is removed before the close of that period and the
qualified taxpayer fails to offer seasonal employment to that
qualified employee.
(iii) A failure to continue the seasonal employment of a qualified
employee, if it is determined that the failure to continue the
seasonal employment was due to the misconduct (as defined in Sections
1256-30 to 1256-43, inclusive, of Title 22 of the California Code of
Regulations) of that qualified employee.
(iv) A failure to continue seasonal employment of a qualified
employee due to a substantial reduction in the regular seasonal trade
or business operations of the qualified taxpayer.
(v) A failure to continue the seasonal employment of a qualified
employee, if that qualified employee is replaced by other qualified
employees so as to create a net increase in both the number of
seasonal employees and the hours of seasonal
employment.
(C) For purposes of paragraph (1), the employment relationship
between the qualified taxpayer and a qualified employee shall not be
treated as terminated by either of the following:
(i) By a transaction to which Section 381(a) of the Internal
Revenue Code applies, if the qualified employee continues to be
employed by the acquiring corporation.
(ii) By reason of a mere change in the form of conducting the
trade or business of the qualified taxpayer, if the qualified
employee continues to be employed in that trade or business and the
qualified taxpayer retains a substantial interest in that trade or
business.
(3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
(g)
(h) Rules similar to the rules provided in Sections 46
(e) and (h) of the Internal Revenue Code shall apply to both of the
following:
(1) An organization to which Section 593 of the Internal Revenue
Code applies.
(2) A regulated investment company or a real estate investment
trust subject to taxation under this part.
(h)
(i) For purposes of this section, "targeted tax area"
means an area designated pursuant to Chapter 12.93 (commencing with
Section 7097) of Division 7 of Title 1 of the Government Code.
(i)
(j) (1) In the case where the
credit otherwise allowed under this section exceeds the "tax" for the
taxable year, that portion of the credit that exceeds the "tax" may
be carried over and added to the credit, if any, in succeeding
taxable years, until the credit is exhausted. The credit shall be
applied first to the earliest taxable years possible.
(2) Notwithstanding paragraph (1), for taxable years beginning on
or after January 1, 2011:
(A) In the case of any portion of a credit available for carryover
and attributable to a taxable year beginning before January 1, 2006,
that portion shall not be carried forward.
(B) In the case of credits first allowed in taxable years
beginning on or after January 1, 2006, the carryover period shall be
five years from the year for which the credit was first allowed.
(j)
(k) (1) The amount of the credit otherwise allowed
under this section and Section 23633, including any credit carryover
from prior years, that may reduce the "tax" for the taxable year
shall not exceed the amount of tax that would be imposed on the
qualified taxpayer's business income attributable to the targeted tax
area determined as if that attributable income represented all of
the income of the qualified taxpayer subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the targeted
tax area. For that purpose, the taxpayer's business income
attributable to sources in this state first shall be determined in
accordance with Chapter 17 (commencing with Section 25101). That
business income shall be further apportioned to the targeted tax area
in accordance with Article 2 (commencing with Section 25120) of
Chapter 17, modified for purposes of this section in accordance with
paragraph (3).
(3) Business income shall be apportioned to the targeted tax area
by multiplying the total California business income of the taxpayer
by a fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is two. For purposes of
this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the targeted tax area during the
taxable year, and the denominator of which is the average value of
all the taxpayer's real and tangible personal property owned or
rented and used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the targeted tax area during
the taxable year for compensation, and the denominator of which is
the total compensation paid by the taxpayer in this state during the
taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "tax" for the taxable
year, as provided in subdivision (h) (j)
.
(5) In the event that a credit carryover is allowable under
subdivision (h) (j) for any taxable
year after the targeted tax area designation has expired or been
revoked, the targeted tax area shall be deemed to remain in existence
for purposes of computing the limitation specified in this
subdivision.
(l) For taxable years beginning on or after January 1, 2011, the
credit allowed by this section must be claimed on a timely filed
original return of the qualified taxpayer.
SEC. 19. Section 23645 of the Revenue
and Taxation Code is amended to read:
23645. (a) For each taxable year beginning on or after January 1,
1995, there shall be allowed as a credit against the "tax"
(as "tax," as defined by Section 23036)
23036, for the taxable year an amount equal to
the sales or use tax paid or incurred by the taxpayer in connection
with the purchase of qualified property to the extent that the
qualified property does not exceed a value of twenty million dollars
($20,000,000).
(b) For purposes of this section:
(1) "LAMBRA" means a local agency military base recovery area
designated in accordance with Section 7114 of the Government Code.
(2) "Taxpayer" means a corporation that conducts a trade or
business within a LAMBRA and, for the first two taxable years, has a
net increase in jobs (defined as 2,000 paid hours per employee per
year) of one or more employees in the LAMBRA.
(A) The net increase in the number of jobs shall be determined by
subtracting the total number of full-time employees (defined as 2,000
paid hours per employee per year) the taxpayer employed in this
state in the taxable year prior to commencing business operations in
the LAMBRA from the total number of full-time employees the taxpayer
employed in this state during the second taxable year after
commencing business operations in the LAMBRA. For taxpayers who
commence doing business in this state with their LAMBRA business
operation, the number of employees for the taxable year prior to
commencing business operations in the LAMBRA shall be zero. If the
taxpayer has a net increase in jobs in the state, the credit shall be
allowed only if one or more full-time employees is employed within
the LAMBRA.
(B) The total number of employees employed in the LAMBRA shall
equal the sum of both of the following:
(i) The total number of hours worked in the LAMBRA for the
taxpayer by employees (not to exceed 2,000 hours per employee) who
are paid an hourly wage divided by 2,000.
(ii) The total number of months worked in the LAMBRA for the
taxpayer by employees that are salaried employees divided by 12.
(C) In the case of a taxpayer who first commences doing business
in the LAMBRA during the taxable year, for purposes of clauses (i)
and (ii), respectively, of subparagraph (B) the divisors "2,000" and
"12" shall be multiplied by a fraction, the numerator of which is the
number of months of the taxable year that the taxpayer was doing
business in the LAMBRA and the denominator of which is 12.
(3) "Qualified property" means property that is each of the
following:
(A) Purchased by the taxpayer for exclusive use in a trade or
business conducted within a LAMBRA.
(B) Purchased before the date the LAMBRA designation expires, is
no longer binding, or becomes inoperative.
(C) Any of the following:
(i) High technology equipment, including, but not limited to,
computers and electronic processing equipment.
(ii) Aircraft maintenance equipment, including, but not limited
to, engine stands, hydraulic mules, power carts, test equipment,
handtools, aircraft start carts, and tugs.
(iii) Aircraft components, including, but not limited to, engines,
fuel control units, hydraulic pumps, avionics, starts, wheels, and
tires.
(iv) Section 1245 property, as defined in Section 1245(a)(3) of
the Internal Revenue Code.
(c) The credit provided under subdivision (a) shall only be
allowed for qualified property manufactured in California unless
qualified property of a comparable quality and price is not available
for timely purchase and delivery from a California manufacturer.
(d) (1) In the case where the credit
otherwise allowed under this section exceeds the "tax" for the
taxable year, that portion of the credit which exceeds the "tax" may
be carried over and added to the credit, if any, in succeeding years,
until the credit is exhausted. The credit shall be applied first to
the earliest taxable years possible.
(2) Notwithstanding paragraph (1), for taxable years beginning on
or after January 1, 2011:
(A) In the case of any portion of a credit available for carryover
and attributable to a taxable year beginning before January 1, 2006,
that portion shall not be carried forward.
(B) In the case of credits first allowed in taxable years
beginning on or after January 1, 2006, the carryover period shall be
five years from the year for which the credit was first allowed.
(e) Any taxpayer who elects to be subject to this section shall
not be entitled to increase the basis of the property as otherwise
required by Section 164(a) of the Internal Revenue Code with respect
to sales or use tax paid or incurred in connection with the purchase
of qualified property.
(f) (1) The amount of the credit otherwise allowed under this
section and Section 23646, including any credit carryovers from prior
years, that may reduce the "tax" for the taxable year shall not
exceed the amount of tax that would be imposed on the taxpayer's
business income attributed to a LAMBRA determined as if that
attributable income represented all the income of the taxpayer
subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the LAMBRA.
For that purpose, the taxpayer's business income that is attributable
to sources in this state shall first be determined in accordance
with Chapter 17 (commencing with Section 25101). That business income
shall be further apportioned to the LAMBRA in accordance with
Article 2 (commencing with Section 25120) of Chapter 17, modified for
purposes of this section in accordance with paragraph (3).
(3) Income shall be apportioned to a LAMBRA by multiplying the
total California business income of the taxpayer by a fraction, the
numerator of which is the property factor, plus the payroll factor,
and the denominator of which is two. For purposes of this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the LAMBRA during the taxable
year, and the denominator of which is the average value of all the
taxpayer's real and tangible personal property owned or rented and
used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the LAMBRA during the
taxable year for compensation, and the denominator of which is the
total compensation paid by the taxpayer in this state during the
taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "tax" for the taxable
year, as provided in subdivision (d).
(g) (1) If the qualified property is disposed of or no longer used
by the taxpayer in the LAMBRA, at any time before the close of the
second taxable year after the property is placed in service, the
amount of the credit previously claimed, with respect to that
property, shall be added to the taxpayer's tax liability in the
taxable year of that disposition or nonuse.
(2) At the close of the second taxable year, if the taxpayer has
not increased the number of its employees as determined by paragraph
(2) of subdivision (b), then the amount of the credit previously
claimed shall be added to the taxpayer's tax for the taxpayer's
second taxable year.
(h) If the taxpayer is allowed a credit for qualified property
pursuant to this section, only one credit shall be allowed to the
taxpayer under this part with respect to that qualified property.
(i) The amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 1998.
(j) For taxable years beginning on or after January 1, 2011, the
credit allowed by this section must be claimed on a timely filed
original return of the taxpayer.
SEC. 20. Section 23646 of the Revenue
and Taxation Code is amended to read:
23646. (a) (1) For each taxable year
beginning on or after January 1, 1995, there shall be allowed as a
credit against the "tax" (as "tax," as
defined in Section 23036) 23036, to a
qualified taxpayer for hiring a qualified disadvantaged individual or
a qualified displaced employee during the taxable year for
employment in the LAMBRA. The For qualified
disadvantaged individuals or qualified displaced employees who first
commenced employment in taxable years beginning on after January 1,
1995, and before January 1, 2011, the credit shall be equal to
the sum of each of the following:
(1)
(A) Fifty percent of the qualified wages in the first
year of employment.
(2)
(B) Forty percent of the qualified wages in the second
year of employment.
(3)
(C) Thirty percent of the qualified wages in the third
year of employment.
(4)
(D) Twenty percent of the qualified wages in the fourth
year of employment.
(5)
(E) Ten percent of the qualified wages in the fifth
year of employment.
(2) For qualified disadvantaged individuals or qualified displaced
employees who first commence employment in a taxable year beginning
on or after January 1, 2011, the credit shall be equal to five
thousand dollars ($5,000) for each net increase in qualified
full-time employees, as specified in subdivision (c), employed during
the taxable year by the qualified taxpayer.
(b) For purposes of this section:
(1) "Qualified For taxable years beginning
on or after January 1, 1995, and before January 1, 2011, "qualified
wages" means:
(A) That portion of wages paid or incurred by the employer during
the taxable year to qualified disadvantaged individuals or qualified
displaced employees that does not exceed 150 percent of the minimum
wage.
(B) The total amount of qualified wages which may be taken into
account for purposes of claiming the credit allowed under this
section shall not exceed two million dollars ($2,000,000) per taxable
year.
(C) Wages received during the 60-month period beginning with the
first day the individual commences employment with the taxpayer.
Reemployment in connection with any increase, including a regularly
occurring seasonal increase, in the trade or business operation of
the qualified taxpayer does not constitute commencement of employment
for purposes of this section.
(D) Qualified wages do not include any wages paid or incurred by
the qualified taxpayer on or after the LAMBRA expiration date.
However, wages paid or incurred with respect to qualified
disadvantaged individuals or qualified displaced employees who are
employed by the qualified taxpayer within the LAMBRA within the
60-month period prior to the LAMBRA expiration date shall continue to
qualify for the credit under this section after the LAMBRA
expiration date, in accordance with all provisions of this section
applied as if the LAMBRA designation were still in existence and
binding.
(2) "Acquired" includes any gift, inheritance, transfer incident
to divorce, or any other transfer, whether or not for consideration.
(2)
(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.
(3)
(4) "LAMBRA" means a local agency military base
recovery area designated in accordance with the provisions of Section
7114 of the Government Code.
(4)
(5) "Qualified disadvantaged individual" means an
individual who satisfies all of the following requirements:
(A) (i) At least 90 percent of whose services for the taxpayer
during the taxable year are directly related to the conduct of the
taxpayer's trade or business located in a LAMBRA.
(ii) Who performs Performs at least
50 percent of his or her services for the taxpayer during the taxable
year in the LAMBRA.
(B) Who is Is hired by the employer
after the designation of the area as a LAMBRA in which the individual'
s services were primarily performed.
(C) Who For an individual who
first commenced employment in taxable years beginning on or after
January 1, 1995, and before January 1, 2011, he or she is any
of the following immediately preceding the individual's commencement
of employment with the taxpayer:
(i) An individual who has been determined eligible for services
under the federal Job Training Partnership Act (29 U.S.C. Sec. 1501
et seq.), or its successor.
(ii) Any voluntary or mandatory registrant under the Greater
Avenues for Independence Act of 1985 provided for pursuant to Article
3.2 (commencing with Section 11320) of Chapter 2 of Part 3 of
Division 9 of the Welfare and Institutions Code.
(iii) An economically disadvantaged individual age 16 years or
older.
(iv) A dislocated worker who meets any of the following
conditions:
(I) Has been terminated or laid off or who has received a notice
of termination or layoff from employment, is eligible for or has
exhausted entitlement to unemployment insurance benefits, and is
unlikely to return to his or her previous industry or occupation.
(II) Has been terminated or has received a notice of termination
of employment as a result of any permanent closure or any substantial
layoff at a plant, facility, or enterprise, including an individual
who has not received written notification but whose employer has made
a public announcement of the closure or layoff.
(III) Is long-term unemployed and has limited opportunities for
employment or reemployment in the same or a similar occupation in the
area in which the individual resides, including an individual 55
years of age or older who may have substantial barriers to employment
by reason of age.
(IV) Was self-employed (including farmers and ranchers) and is
unemployed as a result of general economic conditions in the
community in which he or she resides or because of natural disasters.
(V) Was a civilian employee of the Department of Defense employed
at a military installation being closed or realigned under the
Defense Base Closure and Realignment Act of 1990.
(VI) Was an active member of the Armed Forces or National Guard as
of September 30, 1990, and was either involuntarily separated or
separated pursuant to a special benefits program.
(VII) Experiences chronic seasonal unemployment and
underemployment in the agriculture industry, aggravated by continual
advancements in technology and mechanization.
(VIII) Has been terminated or laid off or has received a notice of
termination or layoff as a consequence of compliance with the Clean
Air Act.
(v) An individual who is enrolled in or has completed a state
rehabilitation plan or is a service-connected disabled veteran,
veteran of the Vietnam era, or veteran who is recently separated from
military service.
(vi) An ex-offender. An individual shall be treated as convicted
if he or she was placed on probation by a state court without a
finding of guilty.
(vii) A recipient of:
(I) Federal Supplemental Security Income benefits.
(II) Aid to Families with Dependent Children.
(III) Food stamps.
(IV) State and local general assistance.
(viii) Is a member of a federally recognized Indian tribe, band,
or other group of Native American descent.
(D) For an qualified disadvantaged individual who first commences
employment in taxable years beginning on or after January 1, 2011,
and who meets the requirements of this paragraph, that individual is
a "qualified full-time employee" if, in addition to any other
requirement imposed by this section, he or she was either:
(i) Paid wages by the qualified taxpayer for services of not less
than an average of 35 per hours per week.
(ii) A salaried employee and was paid compensation during the
taxable year for full-time employment, within the meaning of Section
515 of the Labor Code, by the qualified employer.
(5)
(6) (A) "Qualified taxpayer"
means a corporation that conducts a trade or business within a LAMBRA
and, for the first two taxable years, has a net increase in jobs
(defined as 2,000 paid hours per employee per year) of one or more
employees as determined below in the LAMBRA.
(A)
(B) The net increase in the number of jobs shall be
determined by subtracting the total number of full-time employees
(defined as 2,000 paid hours per employee per year) the taxpayer
employed in this state in the taxable year prior to commencing
business operations in the LAMBRA from the total number of full-time
employees the taxpayer employed in this state during the second
taxable year after commencing business operations in the LAMBRA. For
taxpayers who commence doing business in this state with their LAMBRA
business operation, the number of employees for the taxable year
prior to commencing business operations in the LAMBRA shall be zero.
If the taxpayer has a net increase in jobs in the state, the credit
shall be allowed only if one or more full-time employees is employed
within the LAMBRA.
(B)
(C) The total number of employees employed in the
LAMBRA shall equal the sum of both of the following:
(i) The total number of hours worked in the LAMBRA for the
taxpayer by employees (not to exceed 2,000 hours per employee) who
are paid an hourly wage divided by 2,000.
(ii) The total number of months worked in the LAMBRA for the
taxpayer by employees who are salaried employees divided by 12.
(C)
(D) In the case of a qualified taxpayer that first
commences doing business in the LAMBRA during the taxable year, for
purposes of clauses (i) and (ii), respectively, of subparagraph
(B) (C) the divisors "2,000" and "12"
shall be multiplied by a fraction, the numerator of which is the
number of months of the taxable year that the taxpayer was doing
business in the LAMBRA and the denominator of which is 12.
(E) (i) Notwithstanding subparagraph (A), a "qualified taxpayer"
shall not include any person or entity described in subparagraph (A)
that first commences business activity in a LAMBRA during the taxable
year and has, within 24 months before the taxpayer first commenced
business activity in the LAMBRA, had an overall reduction in the
number of employees employed by the taxpayer within the state outside
of the LAMBRA, unless that person or entity has made a written offer
of employment to each of the employees employed at the location
within the state where employment was reduced for such employees to
continue their employment with that person or entity within the
LAMBRA.
(ii) In determining whether the taxpayer has first commenced doing
business in the LAMBRA during the taxable year, the provisions of
subdivision (g) of Section 24416.20, without application of paragraph
(7) of that subdivision, shall apply.
(iii) The written offer referred to in this subparagraph shall be
made prior to the termination of employment at the location within
the state that is outside the LAMBRA.
(iv) If any employee described in clause (i) of this subparagraph
does not timely receive a written offer, the person or entity shall
not be a qualified taxpayer for that taxable year, even if other
employees do receive a written offer.
(v) A person or entity may be required to provide, upon request of
the Franchise Tax Board, written certification, under penalty of
perjury, that the requirements of this subparagraph were met.
(vi) 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.
(6)
(7) "Qualified displaced employee" means an individual
who satisfies all of the following requirements:
(A) Any civilian or military employee of a base or former base
that has been displaced as a result of a federal base closure act.
(B) (i) At least 90 percent of whose services for the taxpayer
during the taxable year are directly related to the conduct of the
taxpayer's trade or business located in a LAMBRA.
(ii) Who performs at least 50 percent of his or her services for
the taxpayer during the taxable year in a LAMBRA.
(C) Who is hired by the employer after the designation of the area
in which services were performed as a LAMBRA.
(D) For an individual who first commences employment in taxable
years beginning on or after January 1, 2011, and who meets the
requirements of this paragraph other than the requirements of
subparagraph (A), that individual is a "qualified full-time employee"
if, in addition to any other requirement imposed by this section, he
or she was either:
(i) Paid wages by the qualified taxpayer for services of not less
than an average of 35 per hours per week.
(ii) A salaried employee and was paid compensation during the
taxable year for full-time employment, within the meaning
of Section 515 of the Labor Code, by
the qualified employer.
(7)
(8) "Seasonal employment" means employment by a
qualified taxpayer that has regular and predictable substantial
reductions in trade or business operations.
(8)
(9) "LAMBRA expiration date" means the date the LAMBRA
designation expires, is no longer binding, or becomes inoperative.
(10) "Annual full-time equivalent" means either of the following:
(A) In the case of a full-time employee paid hourly wages, "annual
full-time equivalent" means the total number of hours worked for the
taxpayer by the employee (not to exceed 2,000 hours per employee)
divided by 2,000.
(B) In the case of a salaried full-time employee, "annual
full-time equivalent" means the total number of weeks worked for the
taxpayer by the employee divided by 52.
(c) Except as provided in paragraph (2), the net increase in
qualified full-time employees of a qualified taxpayer shall be
determined by paragraph (1):
(1) (A) (i) If the state's average nonfarm employment, as
determined by the Franchise Tax Board based upon information
published by the Employment Development Department as of March 15 of
each calendar year, has not decreased for the calendar years
beginning on the third and the second January 1 immediately preceding
the beginning of the current taxable year, as compared with the
second and the first calendar years respectively, then the net
increase in qualified full-time employees shall be determined on an
annual full-time equivalent basis based on the amount of the increase
of qualified full-time equivalent employees in excess of the
greatest of the number of qualified full-time equivalent employees
employed by the qualified taxpayer in any of the three immediately
preceding taxable years, as determined under subparagraph (B).
(ii) The amount determined under clause (i) shall include the
fractional amount, if any, of the increase for the taxable year.
(B) The net increase in qualified full-time employees for the
current taxable year shall be determined by subtracting the amount
determined under clause (ii) from the amount determined under clause
(i). If the amount determined under clause (ii) is equal to or
exceeds the amount determined under clause (i), the amount determined
under this subparagraph shall be zero.
(i) (I) The total number of qualified full-time employees employed
in the current taxable year by the qualified taxpayer and by any
trade or business acquired by the qualified taxpayer during the
current taxable year.
(II) The greatest total number of qualified full-time employees
employed in any of the three preceding taxable years by the qualified
taxpayer and by any trade or business acquired by the qualified
taxpayer during the current taxable year.
(ii) The increase in the total number of full-time employees
(determined under the full-time equivalent rules of paragraph (10)
of subdivision (b)) employed by the qualified taxpayer in this state
shall be determined by subtracting the amount determined under
subclause (II) from the amount determined under subclause (I). If the
amount determined under subclause (II) is equal to or exceeds the
amount determined under subclause (I), the amount determined under
this clause shall be zero.
(I) The total number of full-time employees employed in this state
in the current taxable year by the qualified taxpayer and by any
trade or business acquired by the qualified taxpayer during the
current taxable year.
(II) The greatest total number of full-time employees of the
qualified taxpayer employed in this state in any of the three
preceding taxable years by the qualified taxpayer and by any trade or
business acquired by the qualified taxpayer during the current
taxable year.
(2) (A) (i) If there is a decrease in the state's nonfarm
employment, as determined by the Franchise Tax Board based upon
information published by the Employment Development Department as of
March 15 of each calendar year, for the calendar years beginning on
the third and the second January 1 immediately preceding the current
taxable year, the net increase in qualified full-time employees shall
be determined on an annual full-time equivalent basis as the lesser
of the amount determined under subparagraph (C) or the amount
determined under subparagraph (B).
(ii) The amount determined under clause (i) shall include the
fractional amount, if any, of the increase for the taxable year.
(B) The increase in the total number of qualified full-time
employees shall be determined by subtracting the amount determined
under clause (ii) from the amount determined under clause (i). If the
amount determined under clause (ii) is equal to or exceeds the
amount determined under clause (i), the amount determined under this
subparagraph shall be zero.
(i) The total number of qualified full-time employees employed in
the current taxable year by the qualified taxpayer and by any trade
or business acquired by the qualified taxpayer during the current
taxable year.
(ii) The total number of qualified full-time employees employed in
the preceding taxable year by the qualified taxpayer and by any
trade or business acquired by the qualified taxpayer during the
current taxable year.
(C) The increase in the total number of full-time employees
(determined under the full-time equivalent rules of paragraph (10) of
subdivision (b)) employed by the qualified taxpayer in this state
shall be determined by subtracting the amount determined under clause
(ii) from the amount determined under clause (i). If the amount
determined under clause (ii) is equal to or exceeds the amount
determined under clause (i), the amount determined under this
subparagraph shall be zero.
(i) The total number of full-time employees employed in this state
in the current taxable year by the qualified taxpayer and by any
trade or business acquired by the qualified taxpayer during the
current taxable year.
(ii) The total number of full-time employees of the qualified
taxpayer employed in this state in the preceding taxable year by the
qualified taxpayer and by any trade or business acquired by the
qualified taxpayer during the current taxable year.
(3) For qualified taxpayers who first commence doing business in
this state during the taxable year, the number of qualified full-time
employees under subparagraph (B) of paragraph (1) and the number of
full-time employees under subparagraph (C) of paragraph (2) for the
preceding taxable year shall be zero.
(4) For purposes of determining the number of full-time employees
of the qualified taxpayer who are employed in this state under
paragraphs (1) and (2), only those employees who receive wages that
are subject to Division 6 (commencing with Section 13000) of the
Unemployment Insurance Code from the qualified taxpayer comprising
more than 50 percent of that employee's total wages received from the
qualified taxpayer for the taxable year, shall be included.
(5) For purposes of determining the increase in the number of
qualified full-time employees of a qualified taxpayer under this
section and Sections 23622.7, 23622.8, and 23634, the increase shall
be determined separately for the targeted tax area, and each
enterprise zone, manufacturing enhancement area, or local agency
military base recovery area with respect to which a taxpayer is a
qualified taxpayer.
(6) Any determination of the Franchise Tax Board under this
subdivision with respect to whether there is an increase, a decrease,
or no change in the state's nonfarm employment for any calendar year
shall be final and may not be reviewed in any administrative or
judicial proceeding, even if the data published by the Employment
Development Department as of March 15 of any calendar year upon which
the Franchise Tax Board relied in making its determination is
substantially revised and would otherwise change which formula is
applicable under this subdivision.
(c)
(d) For qualified disadvantaged individuals or
qualified displaced employees hired on or after January 1, 2001,
and before January 1, 2011, the taxpayer shall do
both of the following:
(1) Obtain from the Employment Development Department, as
permitted by federal law, the administrative entity of the local
county or city for the federal Job Training Partnership Act, or its
successor, the local county GAIN office or social services agency, or
the local government administering the LAMBRA, a certification that
provides that a qualified disadvantaged individual or qualified
displaced employee meets the eligibility requirements specified in
subparagraph (C) of paragraph (4) of subdivision (b) or subparagraph
(A) of paragraph (6) of subdivision (b). The Employment Development
Department may provide preliminary screening and referral to a
certifying agency. The Department of Housing and Community
Development shall develop regulations governing the issuance of
certificates pursuant to Section 7114.2 of the Government Code and
shall develop forms for this purpose.
(2) For any qualified disadvantaged individual or qualified
displaced employee who first commenced employment in a taxable year
beginning on or after January 1, 2001, and before January 1, 2011,
for which, as of the later of July 1, 2011, or the date the qualified
disadvantaged individual or qualified displaced employee first
commenced employment, a certification described in paragraph (1) has
not been obtained and a request for certification described in
paragraph (1) has not been previously submitted, then a request for
certification described in paragraph (1) with respect to that
employee shall be submitted to the certifying entity no later than
the date that is the later of 90 days after July 1, 2011, or 30 days
after the date the qualified disadvantaged individual or qualified
displaced employee first commenced employment. A credit shall be
allowed under this section with respect to a qualified disadvantaged
individual or qualified displaced employee described in the preceding
sentence only if a request for certification was timely submitted in
accordance with this paragraph.
(2)
(3) Retain a copy of the certification and provide it
upon request to the Franchise Tax Board.
(d)
(e) (1) For purposes of this section, both of the
following apply:
(A) All employees of all corporations that are members of the same
controlled group of corporations shall be treated as employed by a
single employer.
(B) The credit (if any) allowable by this section to each member
shall be determined by reference to its proportionate share of the
qualified wages giving rise to the credit.
(2) For purposes of this subdivision, "controlled group of
corporations" has the meaning given to that term by Section 1563(a)
of the Internal Revenue Code, except that both of the following
apply:
(A) "More than 50 percent" shall be substituted for "at least 80
percent" each place it appears in Section 1563(a)(1) of the Internal
Revenue Code.
(B) The determination shall be made without regard to Section 1563
(a)(4) and Section 1563(e)(3)(C) of the Internal Revenue Code.
(3) If an employer acquires the major portion of a trade or
business of another employer (hereinafter in this paragraph referred
to as the "predecessor") or the major portion of a separate unit of a
trade or business of a predecessor, then, for purposes of applying
this section (other than subdivision (e) (f)
) for any calendar year ending after that acquisition, the
employment relationship between an employee and an employer shall not
be treated as terminated if the employee continues to be employed in
that trade or business.
(e)
(f) (1) (A) If For qualified
disadvantaged individuals or qualified displaced employees who first
commenced employment with the qualified taxpayer in taxable years
beginning on or after January 1, 1995, and before January
1, 2011, if the employment of any employee, other than seasonal
employment, with respect to whom qualified wages are taken into
account under subdivision (a) is terminated by the taxpayer at any
time during the first 270 days of that employment (whether or not
consecutive) or before the close of the 270th calendar day after the
day in which that employee completes 90 days of employment with the
taxpayer, the tax imposed by this part for the taxable year in which
that employment is terminated shall be increased by an amount equal
to the credit allowed under subdivision (a) for that taxable year and
all prior income years attributable to qualified wages paid or
incurred with respect to that employee.
(B) If the seasonal employment of any qualified disadvantaged
individual, with respect to whom qualified wages are taken into
account under subdivision (a) is not continued by the qualified
taxpayer for a period of 270 days of employment during the 60-month
period beginning with the day the qualified disadvantaged individual
commences seasonal employment with the qualified taxpayer, the tax
imposed by this part, for the taxable year that includes the 60th
month following the month in which the qualified disadvantaged
individual commences seasonal employment with the qualified taxpayer,
shall be increased by an amount equal to the credit allowed under
subdivision (a) for that taxable year and all prior taxable years
attributable to qualified wages paid or incurred with respect to that
qualified disadvantaged individual.
(2) (A) Subparagraph (A) of paragraph (1) shall not apply to any
of the following:
(i) A termination of employment of an employee who voluntarily
leaves the employment of the taxpayer.
(ii) A termination of employment of an individual who, before the
close of the period referred to in paragraph (1), becomes disabled to
perform the services of that employment, unless that disability is
removed before the close of that period and the taxpayer fails to
offer reemployment to that individual.
(iii) A termination of employment of an individual, if it is
determined that the termination was due to the misconduct (as defined
in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that individual.
(iv) A termination of employment of an individual due to a
substantial reduction in the trade or business operations of the
taxpayer.
(v) A termination of employment of an individual, if that
individual is replaced by other qualified employees so as to create a
net increase in both the number of employees and the hours of
employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of
the following:
(i) A failure to continue the seasonal employment of a qualified
disadvantaged individual who voluntarily fails to return to the
seasonal employment of the qualified taxpayer.
(ii) A failure to continue the seasonal employment of a qualified
disadvantaged individual who, before the close of the period referred
to in subparagraph (B) of paragraph (1), becomes disabled and unable
to perform the services of that seasonal employment, unless that
disability is removed before the close of that period and the
qualified taxpayer fails to offer seasonal employment to that
qualified disadvantaged individual.
(iii) A failure to continue the seasonal employment of a qualified
disadvantaged individual, if it is determined that the failure to
continue the seasonal employment was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that individual.
(iv) A failure to continue seasonal employment of a qualified
disadvantaged individual due to a substantial reduction in the
regular seasonal trade or business operations of the qualified
taxpayer.
(v) A failure to continue the seasonal employment of a qualified
disadvantaged individual, if that individual is replaced by other
qualified disadvantaged individuals so as to create a net increase in
both the number of seasonal employees and the hours of seasonal
employment.
(C) For purposes of paragraph (1), the employment relationship
between the taxpayer and an employee shall not be treated as
terminated by either of the following:
(i) A transaction to which Section 381(a) of the Internal Revenue
Code applies, if the employee continues to be employed by the
acquiring corporation.
(ii) A mere change in the form of conducting the trade or business
of the taxpayer, if the employee continues to be employed in that
trade or business and the taxpayer retains a substantial interest in
that trade or business.
(3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
(4) At the close of the second taxable year, if the taxpayer has
not increased the number of its employees as determined by paragraph
(5) of subdivision (b), then the amount of the credit previously
claimed shall be added to the taxpayer's tax for the taxpayer's
second taxable year.
(f)
(g) In the case of an organization to which Section 593
of the Internal Revenue Code applies, and a regulated investment
company or a real estate investment trust subject to taxation under
this part, rules similar to the rules provided in Section 46(e) and
Section 46(h) of the Internal Revenue Code shall apply.
(g)
(h) The credit shall be reduced by the credit allowed
under Section 23621. The credit shall also be reduced by the federal
credit allowed under Section 51 of the Internal Revenue Code.
In addition, any deduction otherwise allowed under this part for
the wages or salaries paid or incurred by the taxpayer upon which the
credit is based shall be reduced by the amount of the credit, prior
to any reduction required by subdivision (h)
(i) or (i) (j) .
(h)
(i) (1) In the case where the
credit otherwise allowed under this section exceeds the "tax" for the
taxable year, that portion of the credit that exceeds the "tax" may
be carried over and added to the credit, if any, in succeeding years,
until the credit is exhausted. The credit shall be applied first to
the earliest taxable years possible.
(2) Notwithstanding paragraph (1), for taxable years beginning on
or after January 1, 2011:
(A) In the case of any portion of a credit available for carryover
and attributable to a taxable year beginning before January 1, 2006,
that portion shall not be carried forward.
(B) In the case of credits first allowed in taxable years
beginning on or after January 1, 2006, the carryover period shall be
five years from the year for which the credit was first allowed.
(i)
(j) (1) The amount of credit otherwise allowed under
this section and Section 23645, including any prior year carryovers,
that may reduce the "tax" for the taxable year shall not exceed the
amount of tax that would be imposed on the taxpayer's business income
attributed to a LAMBRA determined as if that attributed income
represented all of the income of the taxpayer subject to tax under
this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the LAMBRA.
For that purpose, the taxpayer's business income that is attributable
to sources in this state first shall be determined in accordance
with Chapter 17 (commencing with Section 25101). That business income
shall be further apportioned to the LAMBRA in accordance with
Article 2 (commencing with Section 25120) of Chapter 17, modified for
purposes of this section in accordance with paragraph (3).
(3) Income shall be apportioned to a LAMBRA by multiplying the
total California business income of the taxpayer by a fraction, the
numerator of which is the property factor plus the payroll factor,
and the denominator of which is two. For purposes of this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the LAMBRA during the taxable
year, and the denominator of which is the average value of all the
taxpayer's real and tangible personal property owned or rented and
used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the LAMBRA during the
taxable year for compensation, and the denominator of which is the
total compensation paid by the taxpayer in this state during the
taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "tax" for the taxable
year, as provided in subdivision (h) (i)
.
(j)
(k) If the taxpayer is allowed a credit pursuant to
this section for qualified wages paid or incurred, only one credit
shall be allowed to the taxpayer under this part with respect to any
wage consisting in whole or in part of those qualified wages.
(l) For taxable years beginning on or after January 1, 2011, the
credit allowed by this section must be claimed on a timely filed
original return of the qualified taxpayer.
SEC. 21. Section 25128 of the Revenue
and Taxation Code is amended to read:
25128. (a) (1) Notwithstanding Section
38006, for taxable years beginning before January 1, 2011,
all business income shall be apportioned to this state by
multiplying the business income by a fraction, the numerator of which
is the property factor plus the payroll factor plus twice the sales
factor, and the denominator of which is four, except as provided in
subdivision (b) or (c).
(2) Notwithstanding Section 38006, for taxable years beginning on
or after January 1, 2011, all business income of an apportioning
trade or business, other than an apportioning trade or business
described in subdivision (b), shall be apportioned to this state by
multiplying the business income by the sales factor.
(b) If an apportioning trade or business derives more than 50
percent of its "gross business receipts" from conducting one or more
qualified business activities, all business income of the
apportioning trade or business shall be apportioned to this state by
multiplying business income by a fraction, the numerator of which is
the property factor plus the payroll factor plus the sales factor,
and the denominator of which is three.
(c) For purposes of this section, a "qualified business activity"
means the following:
(1) An agricultural business activity.
(2) An extractive business activity.
(3) A savings and loan activity.
(4) A banking or financial business activity.
(d) For purposes of this section:
(1) "Gross business receipts" means gross receipts described in
subdivision (e) or (f) of Section 25120 (other than gross receipts
from sales or other transactions within an apportioning trade or
business between members of a group of corporations whose income and
apportionment factors are required to be included in a combined
report under Section 25101, limited, if applicable, by Section
25110), whether or not the receipts are excluded from the sales
factor by operation of Section 25137.
(2) "Agricultural business activity" means activities relating to
any stock, dairy, poultry, fruit, furbearing animal, or truck farm,
plantation, ranch, nursery, or range. "Agricultural business activity"
also includes activities relating to cultivating the soil or raising
or harvesting any agricultural or horticultural commodity,
including, but not limited to, the raising, shearing, feeding, caring
for, training, or management of animals on a farm as well as the
handling, drying, packing, grading, or storing on a farm any
agricultural or horticultural commodity in its unmanufactured state,
but only if the owner, tenant, or operator of the farm regularly
produces more than one-half of the commodity so treated.
(3) "Extractive business activity" means activities relating to
the production, refining, or processing of oil, natural gas, or
mineral ore.
(4) "Savings and loan activity" means any activities performed by
savings and loan associations or savings banks which have been
chartered by federal or state law.
(5) "Banking or financial business activity" means activities
attributable to dealings in money or moneyed capital in substantial
competition with the business of national banks.
(6) "Apportioning trade or business" means a distinct trade or
business whose business income is required to be apportioned under
Sections 25101 and 25120, limited, if applicable, by Section 25110,
using the same denominator for each of the applicable payroll,
property, and sales factors.
(7) Paragraph (4) of subdivision (c) shall apply only if the
Franchise Tax Board adopts the Proposed Multistate Tax Commission
Formula for the Uniform Apportionment of Net Income from Financial
Institutions, or its substantial equivalent, and shall become
operative upon the same operative date as the adopted formula.
(8) In any case where the income and
apportionment factors of two or more savings associations or
corporations are required to be included in a combined report under
Section 25101, limited, if applicable, by Section 25110, both of the
following shall apply:
(A) The application of the more than 50 percent test of
subdivision (b) shall be made with respect to the "gross business
receipts" of the entire apportioning trade or business of the group.
(B) The entire business income of the group shall be apportioned
in accordance with either subdivision (a) or (b), or
subdivision (b) of Section 25128.5, as applicable.
SEC. 22. Section 25128.5 of the Revenue
and Taxation Code is repealed.
25128.5. (a) Notwithstanding Section 38006, for taxable years
beginning on or after January 1, 2011, any apportioning trade or
business, other than an apportioning trade or business described in
subdivision (b) of Section 25128, may make an irrevocable annual
election on an original timely filed return, in the manner and form
prescribed by the Franchise Tax Board to apportion its income in
accordance with this section, and not in accordance with Section
25128.
(b) Notwithstanding Section 38006, for taxable years beginning on
or after January 1, 2011, all business income of an apportioning
trade or business making an election described in subdivision (a)
shall be apportioned to this state by multiplying the business income
by the sales factor.
(c) The Franchise Tax Board is authorized to issue regulations
necessary or appropriate regarding the making of an election under
this section, including regulations that are consistent with rules
prescribed for making an election under Section 25113.
SEC. 23. Section 25136 of the Revenue
and Taxation Code is amended to read:
25136. (a) For taxable years beginning before January 1, 2011,
and for taxable years beginning on or after January 1, 2011,
for which Section 25128.5 is operative and an election under
subdivision (a) of Section 25128.5 has not been made,
sales, other than sales of tangible personal property, are in this
state if:
(1) The income-producing activity is performed in this state; or
(2) The income-producing activity is performed both in and outside
this state and a greater proportion of the income-producing activity
is performed in this state than in any other state, based on costs
of performance.
(3) This subdivision shall apply, and subdivision (b) shall not
apply, for any taxable year beginning on or after January 1, 2011,
for which Section 25128.5 is not operative for any taxpayer subject
to the tax imposed under this part.
(b) For taxable years beginning on or after January 1, 2011:
(1) Sales from services are in this state to the extent the
purchaser of the service received the benefit of the service in this
state.
(2) Sales from intangible property are in this state to the extent
the property is used in this state. In the case of marketable
securities, sales are in this state if the customer is in this state.
(3) Sales from the sale, lease, rental, or licensing of real
property are in this state if the real property is located in this
state.
(4) Sales from the rental, lease, or licensing of tangible
personal property are in this state if the property is located in
this state.
(5) (A) If Section 25128.5 is operative, then this subdivision
shall apply in lieu of subdivision (a) for any taxable year for which
an election has been made under subdivision (a) of Section 25128.5.
(B) If Section 25128.5 is not operative, then this subdivision
shall not apply and subdivision (a) shall apply for any taxpayer
subject to the tax imposed under this part.
(C) Notwithstanding subparagraphs (A) or (B), this subdivision
shall apply for purposes of paragraph (2) of subdivision (b) of
Section 23101.
(c) The Franchise Tax Board may prescribe those regulations as
necessary or appropriate to carry out the purposes of subdivision
(b).
(b) This section shall not apply to taxable years beginning on or
after January 1, 2011, and as of December 31, 2011, is repealed.
SEC. 24. Section 25136 is added to the
Revenue and Taxation Code , to read:
25136. (a) Notwithstanding Section 38006, for taxable years
beginning on or after January 1, 2011, sales, other than sales of
tangible personal property, are in this state if:
(1) Sales from services are in this state to the extent the
purchaser of the service received the benefit of the services in this
state.
(2) Sales from intangible property are in this state to the extent
the property is used in this state. In the case of marketable
securities, sales are in this state if the customer is in this state.
(3) Sales from the sale, lease, rental, or licensing of real
property are in this state if the real property is located in this
state.
(4) Sales from the rental, lease, or licensing of tangible
personal property are in this state if the property is located in
this state.
(b) The Franchise Tax Board may prescribe regulations as necessary
or appropriate to carry out the purposes of this section.
SEC. 25. No reimbursement is required by this act
pursuant to Section 6 of Article XIII B of the California
Constitution because the only costs that may be incurred by a local
agency or school district will be incurred because this act creates a
new crime or infraction, eliminates a crime or infraction, or
changes the penalty for a crime or infraction, within the meaning of
Section 17556 of the Government Code, or changes the definition of a
crime within the meaning of Section 6 of Article XIII B of the
California Constitution.
SEC. 26. This act provides for a tax levy within
the meaning of Article IV of the Constitution and shall go into
immediate effect. All matter omitted in this version of the
bill appears in the bill as amended in the Senate, March 24, 2011.
(JR11)
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