BILL NUMBER: AB 231 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MARCH 24, 2011
AMENDED IN ASSEMBLY MARCH 22, 2011
INTRODUCED BY Assembly Members V. Manuel Pérez and Alejo
(Coauthors: Assembly Members Bradford, Galgiani, Roger Hernández,
Hueso, Perea, and Solorio)
FEBRUARY 2, 2011
An act to amend Sections 7070, 7071, 7072, 7072.5, 7073.1, 7076,
7076.1, 7081, 7085, 7085.1, 7085.5, and 7114.2 of, to amend the
heading of Chapter 12.8 (commencing with Section 7070) of Division 7
of Title 1 of, to add Section 7072.6 to, to repeal Sections 7073.8
and 7073.9 of, and to repeal Chapter 12.93 (commencing with Section
7097) of Division 7 of Title 1 of, the Government Code, and to amend
Sections 17053.45, 17053.46, 17053.70, 17235, 23612.2, 23645, 23646,
and 24384.5 of, to amend and repeal Sections 17053.34, 17053.47,
17053.74, 23622.7, 23622.8, and 23634 of, to add Sections 17053.73
and 23622.6 to, and to add and repeal Sections 17050 and 23036.3 of,
the Revenue and Taxation Code, relating to economic development, to
take effect immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
AB 231, as amended, V. Manuel Pérez. Economic development:
economic development areas.
(1) The Enterprise Zone Act provides for the designation and
oversight by the Department of Housing and Community Development of
various types of economic development areas throughout the state,
including enterprise zones, targeted tax areas, local agency military
base recovery areas (LAMBRAs), and Manufacturing Enhancement Areas,
collectively known as geographically targeted economic development
areas, or G-TEDAs. Pursuant to these provisions, qualifying entities
in those areas may receive certain tax and regulatory incentives.
This bill would rename the act as the California Economic and
Community Development Zone Act.
This bill would delete the provisions governing Manufacturing
Enhancement Areas and targeted tax areas, and make various revisions
in the requirements for designating and administering enterprise
zones and LAMBRAs, and G-TEDA collectively.
(2) The Personal Income Tax Law and the Corporation Tax Law
authorize a taxpayer to claim certain tax incentives for activities
conducted in an enterprise zone or a LAMBRA, including a credit for a
specified percentage of wages paid during the taxable year to a
qualified employee, as defined, who is employed by the taxpayer
during the taxable year in an enterprise zone or a LAMBRA.
This bill would, with respect to employees hired before January 1,
2011, increase specified requirements for an individual to be a
qualified employee for purposes of the enterprise zone hiring
credits, and make other specified changes relating to the
requirements for a taxpayer to take advantage of the credits.
This bill would, with respect to employees hired after January 1,
2011, create a new enterprise zone and LAMBRA hiring credit, similar
to the enterprise zone hiring credit in existing law, except that the
credit would be available only for a qualified employee for each of
the first 3 years of employment and modify the applicable percentage
amounts. This bill would impose specified requirements for a taxpayer
to claim this credit, including a registration requirement made
under penalty of perjury. By expanding the crime of perjury, this
bill would impose a state-mandated local program. This bill would
also limit the carryover period to 15 years.
This bill would, for taxable years beginning on or after January
1, 2011, and before January 1, 2013, impose a specified 50% overall
limitation on these credits, as provided.
(3) The Personal Income Tax Law and the Corporation Tax Law allow
a credit in an amount equal to the amount of sales or use tax paid in
connection with qualified property that is purchased and placed in
service during the taxable year by a taxpayer engaged in a trade or
business in an enterprise zone or LAMBRA, and allow unused credits to
be carried over indefinitely to subsequent taxable years.
This bill would require the taxpayer to register, as specified, a
business in an enterprise zone or a LAMBRA before the taxpayer can
claim a credit, and would limit the carryover period to 15 years.
This bill would also impose a specified 50% overall limitation on
these credits as provided.
(4) The Personal Income Tax Law and the Corporation Tax Law allow
deductions in the amount of net interest received by a taxpayer in
payment of a debt of a person or entity engaged in a trade or
business in an enterprise zone.
This bill would , for taxable years beginning on or after
January 1, 2011, and before January 1, 2013, limit
the amount of these deductions to 50% of the net interest received by
a taxpayer in payment of debt, as specified.
(5) The Personal Income Tax Law and the Corporation Tax Law allow
specified credits for hiring employees in a targeted tax area and
manufacturing enhancement area.
This bill would limit the credits to qualified employees hired by
a qualified taxpayer before January 1, 2011.
(6) 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.
(7) This bill would include a change in state statute that would
result in a taxpayer paying a higher tax within the meaning of
Section 3 of Article XIII A of the California Constitution, and thus
would require for passage the approval of 2/3 of the membership of
each house of the Legislature.
(8) This bill would take effect immediately as a tax levy.
Vote: 2/3. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The heading of Chapter 12.8 (commencing
with Section 7070) of Division 7 of Title 1 of the
Government Code is amended to read:
CHAPTER 12.8. ENTERPRISE CALIFORNIA
ECONOMIC AND COMMUNITY DEVELOPMENT ZONE ACT
SEC. 2. Section 7070 of the Government
Code is amended to read:
7070. (a) This chapter shall be known and
may be cited as the Enterprise California
Economic and Community Development Zone Act.
(b) Wherever the term "Enterprise Zone Act" appears in statute or
regulation, it shall be construed to refer to the California Economic
and Community Development Zone Act.
SEC. 3. Section 7071 of the Government
Code is amended to read:
7071. The Legislature finds and declares as follows:
(a) The health, safety, and welfare of the people of California
depend upon the development, stability, and expansion of private
business, industry, and commerce, and there are certain areas within
the state that are economically depressed due to a lack of investment
in the private sector. Therefore, it is declared to be the purpose
of this chapter to help stabilize local communities, alleviate
poverty, and enhance the state's economic prosperity through the
implementation of public and privately funded programs and services
that stimulate business and industrial growth in the depressed
areas of the state by relaxing regulatory controls that
impede private investment .
(b) The geographically targeted economic development area (G-TEDA)
programs are based on the economic principle that targeting
significant incentives to lower income communities allows these
communities to more effectively compete for new businesses and retain
existing businesses, which results in increased tax revenues, less
reliance on social services, and lower public safety costs. Residents
and businesses also directly benefit from these more sustainable
economic conditions through improved neighborhoods, business
expansion, and job creation.
(b) It
(c) Therefore, it is in the
economic interest of the state to have one strong, combined, and
business-friendly business- and community
development-friendly incentive program to help attract business
and industry to the state, to help retain and expand existing state
business and industry, and to create increased job opportunities for
all Californians.
(c) No enterprise zone shall be designated in which any boundary
thereof is drawn in a manner so as to include larger stable
businesses or heavily residential areas to the detriment of areas
that are truly economically depressed.
(d) Nothing in this chapter shall be construed to infringe upon
regulations relating to the civil rights, equal employment rights,
equal opportunity rights, or fair housing rights of any person.
SEC. 4. Section 7072 of the Government
Code is amended to read:
7072. For purposes of this chapter, the following definitions
shall apply:
(a) "Department" means the Department of Housing and Community
Development.
(b) "Date of original designation" means the earlier of the
following:
(1) The date the eligible area receives designation as an
enterprise zone by the department pursuant to this chapter.
(2) In the case of an enterprise zone deemed designated pursuant
to subdivision (e) of Section 7073, the date the enterprise zone or
program area received original designation by the former Trade and
Commerce Agency pursuant to Chapter 12.8 (commencing with Section
7070) or Chapter 12.9 (commencing with Section 7080), as those
chapters read prior to January 1, 1997.
(c) "Eligible area" means any of the following:
(1) (A) An area designated as an enterprise
zone pursuant to Chapter 12.8 (commencing with Section 7070), as it
read prior to January 1, 1997, or as a targeted economic development
area, neighborhood development area, or program area pursuant to
Chapter 12.9 (commencing with Section 7080), as it read prior to
January 1, 1997.
(2) A geographic area that, based upon the determination of the
department, fulfills at least one of the following criteria:
(A) The proposed geographic area meets the Urban Development
Action Grant criteria of the United States Department of Housing and
Urban Development.
(B) The area within the proposed eligible area has experienced
plant closures within the past two years affecting more than 100
workers.
(C) The city or county has submitted material to the department
for a finding that the proposed geographic area meets criteria of
economic distress related to those used in determining eligibility
under the Urban Development Action Grant Program and is therefore an
eligible area.
(D) The area within the proposed zone has a history of
gang-related activity, whether or not crimes of violence have been
committed.
(3) A geographic area that meets at least two of the following
criteria:
(B) A geographic area within census tracts of the proposed
eligible area with a median household income for a family of four
that does not exceed 80 percent of the statewide median income for
the most recently available calendar year, as well as meeting at
least one of the following criteria:
(A)
(i) The census tracts within the proposed eligible area
have an unemployment rate not less than 3 percentage points above
the statewide average for the most recent calendar year as determined
by the Employment Development Department.
(B)
(ii) The county of census
tracts for the proposed eligible area has
are served by public schools that have more than 70
percent of the children enrolled in public school
participating in the federal free lunch program.
(C) The median household income for a family of four within the
census tracts of the proposed eligible area does not exceed 80
percent of the statewide median income for the most recently
available calendar year.
(iii) The area within the proposed zone has experienced
significant distress factors, as defined by the department,
including, but not limited to, a history of significant gang-related
activity, high crime rates, or a significant number of plant or
business closures, or all of these.
(2) The amendments made to this subdivision during the 2011
portion of the 2011-12 Regular Session shall apply only to requests
for proposals issued on or after January 1, 2011.
(d) "Enterprise zone" means any area within a city, county, or
city and county that is designated as an enterprise zone by the
department in accordance with Section
Sections 7073 and 7073.3 that include an eligible area and
a qualifying commercial or industrial area, or both, as defined by
the department .
(e) "Governing body" means a county board of supervisors or a city
council, as appropriate.
(f) "G-TEDA" means a geographically targeted economic development
area, which is an area designated as an enterprise zone , a
Manufacturing Enhancement Area , a targeted tax
area, or a local agency military base recovery area.
(g) "High-technology industries" includes, but is not limited to,
the computer, biological engineering, electronics, and
telecommunications industries.
(h) "Resident," unless otherwise defined, means a person whose
principal place of residence is within a targeted employment area.
(i) (1) "Targeted With respect to a
targeted employment area adopted or amended prior to April 1, 2011,
"targeted employment area" means an area within a city, county,
or city and county that is composed solely of those census tracts
designated by the United States Department of Housing and Urban
Development as having at least 51 percent of its residents of low- or
moderate-income levels, using either the most recent United States
Department of Census Bureau data
available at the time of the original enterprise zone application or
the most recent census data available at the time the targeted
employment area is designated to determine that eligibility. The
purpose of a "targeted employment area" is to encourage businesses in
an enterprise zone to hire eligible residents of certain geographic
areas within a city, county, or city and county. A targeted
employment area may be, but is not required to be, the same as all or
part of an enterprise zone. A targeted employment area's boundaries
need not be contiguous. A targeted employment area does not need to
encompass each eligible census tract within a city, county, or city
and county. The governing body of each city, county, or city and
county that has jurisdiction of the enterprise zone shall identify
those census tracts whose residents are in the most need of this
employment targeting. Only those census tracts within the
jurisdiction of the city, county, or city and county that has
jurisdiction of the enterprise zone may be included in a targeted
employment area.
(2) At least a part of each eligible census tract within a
targeted employment area shall be within the territorial jurisdiction
of the city, county, or city and county that has jurisdiction for an
enterprise zone. If an eligible census tract encompasses the
territorial jurisdiction of two or more local governmental entities,
all of those entities shall be a party to the designation of a
targeted employment area. However, any one or more of those entities,
by resolution or ordinance, may specify that it shall not
participate in the application as an applicant, but shall agree to
complete all actions stated within the application that apply to its
jurisdiction, if the area is designated.
(3) Each local governmental entity of each city, county, or city
and county that has jurisdiction of an enterprise zone shall approve,
by resolution or ordinance, the boundaries of its targeted
employment area, regardless of whether a census tract within the
proposed targeted employment area is outside the jurisdiction of the
local governmental entity.
(4) (A) Within 180 days of updated United States census data
becoming available, each local governmental entity of each city,
county, or city and county that has jurisdiction of an enterprise
zone shall approve, by resolution or ordinance, boundaries of its
targeted employment area reflecting the new census data. If no
changes are necessary to the boundaries based on the most current
census data, the enterprise zone may send a letter to the department
stating that a review has been undertaken by the respective local
governmental entities and no boundary changes are required.
(B) A targeted employment area boundary approved prior to the 2000
United States census data becoming available that has not been
reviewed and its boundaries revised to reflect the most recent census
data, shall be reviewed and updated, and a new resolution or
ordinance submitted by the appropriate local governmental entity to
the department, by July 1, 2007. However, enterprise zones that
expire on or prior to December 31, 2008, shall be exempt from the
update requirement.
(5) With respect to a targeted employment area adopted or amended
on or after April 1, 2011, "targeted employment area" means an area
within a city, county, or city and county that is composed solely of
those census block groups designated by the United States Department
of Housing and Urban Development as having at least 51 percent of
their residents of low-income levels, using the most recent United
States Census Bureau data available at the time the targeted
employment area is adopted or amended to determine its eligibility.
SEC. 5. Section 7072.5 of the
Government Code is amended to read:
7072.5. (a) By April 1, 1998, a governing
body that has already designated adopted
a target targeted employment area
may request, by a resolution of all cities or counties having
jurisdiction over the enterprise zone, to redesignate
readopt the targeted employment area using more
current census data. A targeted employment area shall be
comprised of comprise census tracts from only
one decennial census.
(b) This section shall apply only to targeted employment areas
adopted prior to April 1, 2011.
SEC. 6. Section 7072.6 is added to the
Government Code , to read:
7072.6. (a) After receiving notification from the department of
being conditionally designated as an enterprise zone, the governing
body of the jurisdiction administering the enterprise zone shall
adopt a resolution or ordinance adopting a targeted employment area
that meets all the conditions of this section and those set forth in
paragraph (2) of subdivision (i) of Section 7072, and is consistent
with the purposes set forth in this section. If two or more
jurisdictions are jointly administering an enterprise zone, a
resolution or ordinance adopting the targeted employment area shall
be adopted by each governing body.
(b) A targeted employment area serves as the residential base of
potential low-income workers who are available to work in businesses
located in an enterprise zone. The purpose of a targeted employment
area is to help identify neighborhoods of low-income workers for the
purpose of providing those workers with employment assistance,
training, and job placement. Businesses located in an enterprise zone
are encouraged to hire locally to help address some of the poverty
and economic dislocation that led to the area's designation as an
enterprise zone.
(c) (1) A targeted employment area may be, but is not required to
be, the same as all or part of an enterprise zone. A targeted
employment area's boundaries need not be contiguous. A targeted
employment area does not need to encompass each eligible census tract
or block group within a city, county, or city and county. The
governing body of each city, county, or city and county that has
jurisdiction over the zone shall identify those census block groups
whose residents are in the most need of this employment targeting.
Only those census block groups within the jurisdiction of the city,
county, or city and county that have jurisdiction over the zone may
be included in a targeted employment area.
(2) At least part of each eligible census block group within a
targeted employment area shall be within the territorial jurisdiction
of the city, county, or city and county that has jurisdiction over
an enterprise zone. If an eligible census tract encompasses the
territorial jurisdiction of two or more local governmental entities,
all of those entities shall be a party to the designation of the
targeted employment area. However, any one or more of those entities,
by resolution or ordinance, may specify that it or they shall not
participate in the application as an applicant or applicants, but
shall agree to complete all actions stated within the application
that apply to its or their jurisdiction, if the area is designated.
(d) (1) A targeted employment area shall be designated based on
data from the most current household income data published by the
United States Census Bureau at the time that the targeted employment
area is designated or modified, including being updated pursuant to
paragraph (2).
(2) Every targeted employment area boundary shall be reviewed and
updated to the extent necessary to accommodate the new household
income data provided by the United States Census Bureau in its
five-year American Community Survey. Each governmental entity of each
city, county, or city and county that has jurisdiction over an
enterprise zone shall approve, by resolution or ordinance, the
boundaries of its targeted employment area reflecting the new
household data and send a copy of its resolution with the changes
that are necessary to the boundaries based on the most current census
data, or the governmental entity that has jurisdiction over the zone
shall send a letter to the department stating that the review has
been undertaken by the respective local governmental entities and no
boundary changes are required.
(3) (A) A targeted employment area boundary that is not updated,
or for which a letter indicating that no changes are necessary has
not been received by the department within 180 days of the release of
new household data, is invalidated for a period of two years, except
as modified by subparagraph (C).
(B) The department shall send a notice to the Franchise Tax Board
and the local enterprise zone administrator that the targeted
employment area is invalid and that no additional employees will be
certified based on an employee living in a targeted employment area,
other than a business that has already had one or more vouchers
certified by the zone using the targeted employment area as the
qualifying criterion under subparagraph (A) of paragraph (4) of
subdivision (b) of Sections 17053.74 and 23622.7 of the Revenue and
Taxation Code.
(C) A business that has previously received certification of an
employee is exempt from subparagraph (A). The vouchering exemption is
nontransferable to any other business.
(e) This section shall apply only to targeted employment areas
adopted on or after April 1, 2011.
SEC. 7. Section 7073.1 of the
Government Code is amended to read:
7073.1. (a) Except as provided in subdivision (e)
(f) , any city, county, or city and county with
an eligible area within its jurisdiction may complete a preliminary
application for designation as an enterprise zone. The applying
entity shall establish definitive boundaries for the proposed
enterprise zone and the targeted employment area. An entity may
propose zones in areas with noncontiguous boundaries, and the
department may designate those areas as zones if the director
determines both of the following:
(1) The noncontiguous area is needed to implement the applicant's
economic development strategy.
(2) The excluded area between the proposed zone boundaries would
not, based on the proposed economic strategy, also benefit from the
zone designation.
(b) If a census block group or portion of a census block group
included in an enterprise zone proposed in an application submitted
to the department on or after January 1, 2011, is within, or
previously was within, the boundaries of a previously designated
enterprise zone, then the aggregate size of the proposed enterprise
zone shall not exceed the size of the previously designated
enterprise zone by more than 15 percent.
(b)
(c) (1) In designating enterprise zones, the department
shall select from the applications submitted those proposed
enterprise zones that, upon a comparison of all of the applications
submitted, indicate that they propose the most appropriate economic
development strategy and implementation plan utilizing state and
local programs and incentives to create jobs, attract private sector
investment, and improve the economic conditions within the zone
proposed. The department shall prescribe a format that promotes
succinct and focused strategies and plans, and set minimum standards
for the strategies and plans. For the purposes of this subdivision,
important elements of a strategy or plan may include, but are not
limited to, all of the following:
(A) An assessment of current financial and community development
strengths, needs, and opportunities.
(B) A framework for investment of time, action, and money.
(C) Clear articulation of goals.
(D) Measurable objectives, including targets.
(E) Proposed implementation activities and tasks, including
timeframes, and a framework for evaluating performance, including
qualitative and quantitative benchmarks.
(F) An identification of local resources, including incentives,
the jurisdiction will utilize to implement the strategy or plan and
how those resources will help to leverage or maximize the benefit of
state resources that become available for enterprise zone
communities.
(2) For purposes of this subdivision, local incentives
resources may include, but are not
limited to, all of the following:
(A) The suspension or relaxation of locally originated or modified
building codes, zoning laws, general development plans, or rent
controls.
(B) The elimination or reduction of fees for applications,
permits, and local government services.
(C) The establishment of a streamlined permit process.
(D) Elimination or reduction of construction taxes or business
license taxes.
(E) The provision or expansion of infrastructure.
(F) The targeting of federal block grant moneys, including small
cities, education, and health and welfare block grants.
(G) The targeting of economic development grants and loan moneys,
including grant and loan moneys provided by the United States
Department of Housing and Urban Development.
(H) The targeting of state and federal job disadvantaged and
vocational education grant moneys, including moneys provided by the
federal Workforce Investment Act of 1998 (Public Law 105-220), or its
successor.
(I) The targeting of federal or state transportation grant moneys.
(J) The targeting of federal or state low-income housing and
rental assistance moneys.
(K) The use of tax allocation bonds, special assessment bonds,
bonds under the Mello-Roos Community Facilities Act of 1982 (Chapter
2.5 (commencing with Section 53311) of Part 1 of Division 2 of Title
5), industrial development bonds, revenue bonds, private activity
bonds, housing bonds, bonds issued pursuant to the Marks-Roos Local
Bond Pooling Act of 1985 (Article 4 (commencing with Section 6584) of
Chapter 5), certificates of participation, hospital bonds,
redevelopment bonds, school bonds, and all special provisions
provided for under federal tax law for enterprise community or
empowerment zone bonds.
(L) Redevelopment tax increment moneys and local financing
authorities.
(M) Federal Workforce Investment Act moneys and programs funded
with those moneys.
(N) Federal Community Development Block Grant Program moneys.
(O) CalWORKs funding and other related resources.
(P) Local education entities, including K-12, adult education,
community colleges, and public and private universities.
(3) When designating new enterprise zones, the department shall
take into consideration the location of existing zones and make every
effort to locate new zones in a manner that will not adversely
affect any existing zones.
(4) When reviewing and ranking new enterprise zone applications,
the department shall give bonus points to applications from
jurisdictions that meet minimum threshold points and at
least two both of the following criteria:
(A) The percentage of households within the census tracts
block groups of the proposed enterprise zone
area, the income of which is below the poverty level, is at least
17.5 20 percent.
(B) The average unemployment rate for the census tracts
block groups of the proposed enterprise zone
area was not less than five percentage points above the statewide
average for the most recent calendar year as determined by the
Employment Development Department.
(C) The applicant jurisdiction has, and can document that it has,
a unique distress factor affecting long-term economic development,
including, but not limited to, resource depletion, plant closure,
industry recession, natural disaster, or military base closure.
(5) Except as modified pursuant to paragraph (4), applications
shall be ranked by the appropriateness of the economic development
strategy and implementation plan, including all of the following:
(A) The extent the strategy clearly identifies the local
resources, incentives, and programs that will be made available to
the zone for meeting its goals and objectives.
(B) The extent the strategy provides for attracting private sector
investment.
(C) The extent the strategy includes related regional and
community-based partnerships for achieving the goals and objectives
in the strategy.
(D) The extent the strategy fits within the jurisdiction's overall
economic development strategy, including the extent the strategy and
implementation plan is appropriate for the local community.
(E) The extent the strategy addresses the hiring and retention of
unemployed or underemployed residents or low-income individuals in
the proposed zone and surrounding areas.
(F) The extent the strategy sets reasonable and measurable
benchmarks, goals, and objectives.
(G) The extent the strategy sets forth an appropriate funding
schedule for management, oversight, and program delivery within the
zone relative to the benchmarks, goals, and objectives in the
strategy.
(H) The extent that the economic development strategy has a
comprehensive incentive package for attracting private investment to
the enterprise zone.
(c)
(d) In evaluating applications for designation, the
department shall ensure that applications are not disqualified solely
because of technical deficiencies, and shall provide applicants with
an opportunity to correct the deficiencies. Applications shall be
disqualified if the deficiencies are not corrected within two weeks.
(d)
(e) Except upon dedesignation pursuant to subdivision
(c) of Section 7076.1, Section 7076.2, or Section 7085.1, a
designation made by the department shall be binding for a period of
15 years from the date of the original designation.
(f) The applicant shall be required to begin implementation of the
enterprise zone plan contained in the final application within six
months after notification of final designation, or the enterprise
zone shall be dedesignated.
(e)
(g) (1) This section shall
only apply only to enterprise zone
applications for which the department has issued a solicitation for
new enterprise zone designations on or after January 1, 2007.
(2) The amendments made to this section during the 2011 portion of
the 2011-12 Regular Session shall apply only to enterprise zone
applications for which the department has issued a solicitation for
new enterprise zone designations on or after January 1, 2011.
SEC. 8. Section 7073.8 of the
Government Code is repealed.
7073.8. (a) The department shall designate up to two
Manufacturing Enhancement Areas requested by the governing boards of
cities each of which shall meet at least the following criteria:
(1) The unemployment rate in the county in which the applicant is
located has been at least three times the state average from 1990 to
1995, inclusive.
(2) The applicant city is, or portions of the city are, designated
a federal enterprise community or empowerment zone pursuant to
Subchapter U (commencing with Section 1391) of Chapter 1 of Subtitle
A of Title 26 of the United States Code.
(3) The applicant city is located in a Border Environment
Cooperation Commission region as specified in Section 3473 of Title
19 of the United States Code.
(4) At least one of the following:
(A) The designated area has grown by less than 5 percent in
population per year for each of the two years preceding the
application date.
(B) The median household income for the designated area is under
twenty-five thousand dollars ($25,000) per year.
(C) The designated area has a population of under 20,000 persons
according to the 1990 federal census.
(D) The designated area is located in a rural community.
(5) An audit of the program shall be made pursuant to Section
7076.1 by the department with the cooperation of the local governing
board. The audit shall be used to determine how effective the
designation has been in attracting manufacturing facilities and
creating new employment opportunities. Continuation of the
designation is contingent on evidence of success of the program.
(b) For purposes of applying any provision of the Revenue and
Taxation Code, any Manufacturing Enhancement Area designated pursuant
to this section shall not be considered an enterprise zone
designated pursuant to this chapter.
(c) The designation as a Manufacturing Enhancement Area pursuant
to this section shall be binding for a period of 15 years, commencing
January 1, 1998.
SEC. 9. Section 7073.9 of the
Government Code is repealed.
7073.9. Upon approval by the department of an application by a
city, county, or city and county, a manufacturing enhancement area in
Imperial County is expanded to the extent proposed, but in no event
by more than a 200-acre site that is located in Imperial County and
used for purposes of those lines of business described 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, to include definitive boundaries that are
contiguous to the manufacturing enhancement area. The department
shall approve an application for expansion of the manufacturing
enhancement area if it determines that the proposed additional
territory meets the criteria specified in Section 7073.8 to the same
extent as the existing territory of the manufacturing area and if all
of the following conditions are met:
(a) The governing body of each city in which the manufacturing
enhancement is located approves an ordinance or resolution approving
the proposed expansion of that area.
(b) The additional territory proposed to be added to the
manufacturing enhancement area is zoned for industrial or commercial
use.
(c) Basic infrastructure, including, but not limited to, gas,
water, electrical service, and sewer systems is available to the
additional territory proposed to be added to the manufacturing
enhancement area.
SEC. 10. Section 7076 of the Government
Code is amended to read:
7076. (a) The department shall serve as a liaison between
the state and enterprise zone residents, businesses, workers,
nonprofit organizations, and local governments. State agencies and
departments shall affirmatively support their statutory
responsibilities under this chapter and, consistent with their
statutory duties, respond to requests made by and on the behalf of an
enterprise zone.
(b) (1) The department shall provide
technical assistance to the enterprise zones designated pursuant to
this chapter with respect to all of the following activities:
(A) Furnish limited onsite assistance to the enterprise zones when
appropriate.
(B) Ensure that the locality has developed a method to make
residents, businesses, and neighborhood organizations aware of the
opportunities to participate in the program.
(C) Help the locality develop a marketing program for the
enterprise zone.
(D) Coordinate activities of other state agencies regarding the
enterprise zones.
(E) Monitor the progress of the program.
(F) Help businesses to participate in the program.
(2) Notwithstanding existing law, the provision of services in
subparagraphs (A) to (F), inclusive, shall be a high priority of the
department.
(3) The department may, at its discretion, undertake other
activities in providing management and technical assistance for
successful implementation of this chapter.
(b) The applicant shall be required to begin implementation of the
enterprise zone plan contained in the final application within six
months after notification of final designation or the enterprise zone
shall lose its designation.
(c) The department shall assess a fee of fifteen dollars ($15) on
each enterprise zone and manufacturing enhancement area
for each application for issuance of a certificate pursuant
to subdivision (j) of Section 17053.47 of, subdivision (c) of
Section 17053.74 of, subdivision (c) of Section 23622.7 of, or
subdivision (i) of Section 23622.8 of, the Revenue and Taxation Code.
The department shall collect the fee for deposit into the Enterprise
Zone Fund, pursuant to Section 7072.3, for the costs of
administering this chapter. The enterprise zone or
manufacturing enhancement area administrator shall collect
this fee at the time an application is submitted for issuance of a
certificate.
(d) (1) (A) The department shall establish a registration process
for businesses located in a zone that includes, but is not limited
to, the creation of a zone business registration form and recommended
outreach methods to help inform businesses of the registration
process.
(B) The department shall make the registration form available on
its Internet Web site. The information sought from a business on the
registration form shall include, but not be limited to, all of the
following:
(i) The name and location of the business.
(ii) The type of business based on the applicable first three
digits of the North American Industry Classification System.
(iii) The size of the business based on gross annual receipts for
the year prior to registration.
(iv) The total number of employees of the business and the total
number of employees of the business that work within the enterprise
zone, for the year prior to registration.
(2) Registration shall be a precondition for claiming an
enterprise zone-related tax incentive, including, but not limited to,
the hiring credit, the sales and use tax credit, and the net
interest deduction; however, a business shall not be required to
register until six months following the department's establishment of
the registration process. Businesses shall retain a copy of the
registration for use in preparation of their tax return.
(3) The registration information shall be updated at least once
every five years.
(e) Certificates for hiring credits shall be processed and
approved or denied based upon the regulations and administrative
memoranda in effect as of the date of the application.
Clarifications, interpretations, and other items contained within a
memorandum shall be binding upon the department, businesses,
enterprise zones, and all other applicable entities, as consistent
with state and federal law, unless the memorandum is modified or
repealed in writing.
(f) (1) (A) The department shall maintain, and post on its
Internet Web site, a catalog of all administrative memoranda in
effect that implement this chapter, including the subject matter of
the memoranda and the effective dates of their publication,
modification, or repeal, along with the text of the memoranda.
(B) The department shall post on its Internet Web site the
publication, modification, or repeal of any of those administrative
memoranda, within 10 business days of that publication, modification,
or repeal.
(2) The department shall post on its Internet Web site enterprise
zone and targeted employment area boundary approvals, modifications,
and repeals within 10 business days of the approval, modification, or
repeal becoming final.
SEC. 11. Section 7076.1 of the
Government Code is amended to read:
7076.1. (a) The department may audit the program of any
jurisdiction in any designated G-TEDA at any time during the duration
of the designation, as appropriate. However, the department shall
audit each G-TEDA at least once every five years from the date of
designation or the operative date of this section, whichever is the
latest. The matters to be examined in the course of an audit shall
include an examination of the progress made by the G-TEDA toward
meeting the goals, objectives, and commitments set forth in its
original application and the department's memorandum of understanding
with the G-TEDA.
(b) The department shall, for each audit, determine a result of
superior, pass, or fail in accordance with subdivision (c). The
results of each audit shall be based upon the success of the G-TEDA
in making substantial and sustained efforts since the later of its
designation or last audit to meet the standards, criteria, and
conditions contained in the application and the memorandum of
understanding (MOU) between the department and the G-TEDA, as may be
amended pursuant to the agreement of the G-TEDA and the department.
In each audit, the department shall focus upon the G-TEDA's use of
the marketing plan, local incentives, financing programs, job
development, and program management as described in the application
and the MOU. The department shall also evaluate the vouchering plan,
staffing levels, budget, and elements unique to each application.
(c) For purposes of subdivision (b), an audit determination of
superior, pass, or fail shall be made in accordance with the
following:
(1) A G-TEDA will be determined to be superior if each
jurisdiction comprising the G-TEDA does all of the following:
(A) Meets 90 to 100 percent of its goals, objectives,
and commitments as defined in its application, most recent audit,
biennial report, and memorandum of understanding with the department,
and as determined by the department in consultation with the G-TEDA.
An equivalent or similar commitment may be substituted for an
existing commitment of a G-TEDA if it is determined by the department
that an original commitment was not realistically practical or is no
longer relevant.
(B) Demonstrates that it has reviewed and updated its goals,
objectives, and commitments as defined in its original application,
most recent audit, biennial report, and memorandum of understanding
with the department.
(C) Identifies to the department's satisfaction that it has
incorporated economic development commitments in addition to those
commitments previously made in its application.
(2) (A) A G-TEDA will be determined to be passing if each
jurisdiction comprising the area meets or exceeds
75 to 90 percent of its goals, objectives, or commitments
as defined in its original application, most recent audit, biennial
report, and memorandum of understanding with the department, and as
determined by the department in consultation with the G-TEDA. An
equivalent or similar commitment may be substituted for an existing
commitment of a G-TEDA if it is determined by the department that an
original commitment was not realistically practical or is no longer
relevant.
(B) Any G-TEDA that is determined to be passing may appeal in
writing to the department for a determination of superior. Only one
appeal may be filed pursuant to this subparagraph with respect to a
determination by the department, and may be filed no later than 30
days after the G-TEDA's receipt of the determination to which the
appeal pertains. The department shall respond in writing to any
appeal that is properly filed pursuant to this subparagraph within 60
days of the date of that filing.
(3) (A) A G-TEDA will be determined to be failing if any
jurisdiction comprising the G-TEDA fails to meet or exceed 75 percent
of its goals, objectives, or commitments as defined in its original
application, most recent audit, biennial report, and memorandum of
understanding with the department, and as determined by the
department in consultation with the G-TEDA. An equivalent or similar
commitment may be substituted for an existing commitment of a G-TEDA
if it is determined by the department that an original commitment was
not realistically practical or is no longer relevant.
(B) Any G-TEDA that is determined to be failing shall enter into a
written agreement with the department that specifies those items
that the G-TEDA is required to remedy or improve. Failure of the
G-TEDA and the department to negotiate and enter into a written
agreement as so described within 60 days of the last day upon which
the department is required to deliver a response letter pursuant to
subparagraph (C) of paragraph (4) shall result in the
dedesignation of the G-TEDA on January 1 immediately following the
department's written notice of dedesignation to the G-TEDA.
A
(C) A written agreement entered
into pursuant to this subparagraph paragraph
shall be for a six-month period. If, upon the expiration of the
agreement, the department determines that the G-TEDA has not met or
implemented at least 75 percent of the conditions set forth in the
agreement, the department shall, after immediately providing written
notification to each jurisdiction comprising the G-TEDA that the
G-TEDA is to be dedesignated , dedesignate .
Dedesignation of the G-TEDA is effective on the
first day of the month next following the date upon which the
agreement expired. If, upon expiration of the agreement, the
department determines that the G-TEDA has met or implemented at least
75 percent of the conditions set forth in the agreement, the
department shall do either of the following:
(i) Allow the G-TEDA an additional year, or a longer period in the
department's discretion, to meet or implement those conditions in
their entirety.
(ii) Pursuant to written notice provided immediately to each
jurisdiction that comprises the G-TEDA that the G-TEDA is to be
dedesignated, dedesignate the G-TEDA effective on January 1
immediately following the date of the department's written
notification of dedesignation to those jurisdictions.
(D) Any business, located within any
jurisdiction that comprises a G-TEDA that has been dedesignated, that
has elected to avail itself of any state tax incentive specifically
applicable to a G-TEDA for any taxable or income year beginning prior
to the dedesignation of the G-TEDA may, to the extent the business
is otherwise still eligible for those incentives, continue to avail
itself of those incentives for a period equal to the remaining life
of the G-TEDA. However, any business, located within any jurisdiction
that comprises a G-TEDA that has been dedesignated, that has not
availed itself of any state tax incentive in the manner described in
the preceding sentence may not, after dedesignation of the G-TEDA,
avail itself of any state incentive specifically applicable to a
G-TEDA.
(4) (A) Notwithstanding paragraphs (1) to (3), inclusive, a G-TEDA
shall be determined to be failing if any jurisdiction comprising the
G-TEDA, in the determination of the director, provides funding
support in at least three of the previous five years at a level that
is less than 75 percent of the amount committed to in the G-TEDA's
memorandum of understanding with the department.
(B) In the event that a G-TEDA is determined to be failing
pursuant to this paragraph, subparagraph (B) of paragraph (3) shall
apply.
(C) Any G-TEDA that is determined to be failing pursuant to this
paragraph may appeal in writing to the department. The appeal shall
be filed within 30 days of the G-TEDA's receipt of the determination
to which the appeal pertains. The department shall respond in writing
to any appeal that is properly filed within 60 days of the date of
filing.
(d) In undertaking its audit responsibilities pursuant to this
section, the department shall seek appropriate opportunities to
provide technical assistance and training to help G-TEDAs address
inadequacies identified through the audit of the program. Assistance
may include, but is not limited to, workshops, mentoring programs,
and referrals to other federal, state, and local public and private
entities.
(d)
(e) (1) For purposes of this section, "dedesignation"
means that a G-TEDA is no longer a G-TEDA for purposes of either
Section 7073 or 7085.
(2) Upon notification by the department of the dedesignation of a
G-TEDA and the end of the appeal period with respect to that
dedesignation, the department shall initiate an application process
for a new designation as provided in Section 7073, 7073.8, 7085,
7097, or 7114.
(f) In addition to any other oversight activities that the
department determines are appropriate and necessary, the department
shall review the progress reports submitted by a G-TEDA pursuant to
Section 7085.1 and determine whether an audit is warranted.
SEC. 12. Section 7081 of the Government
Code is amended to read:
7081. (a) Notwithstanding any other
provision of state law, and to the extent permitted by federal law,
the Employment Development Department and the State Department of
Education shall give high priority to the training of unemployed
individuals who reside in a targeted employment area or a designated
enterprise zone. The
(b) When developing workforce development and training plans and
strategies, including, but not limited to, federal Workforce
Development Act funds, a state entity shall consider how the G-TEDA
programs could be integrated so as to maximize the benefits to
workers and businesses.
(c) The Employment Development Department shall, consistent with
its duties to assist unemployed workers who are registered in the
one-stop career centers, provide letters to unemployed prospective
employees that could be used to certify their eligibility as a person
participating in a program developed pursuant to the federal
Workforce Investment Act of 1998 (29 U.S.C. Sec. 2081 et seq.).
(d) The department may assist
localities in designating local business, labor, and education
consortia to broker activities between the employment community and
educational and training institutions. Any available discretionary
funds may be used to assist the creation of those consortia.
(e) Local education entities that administer student work permits
shall consider how enterprise zone program hiring credits could be
used to benefit lower income students who apply for work permits at
their offices.
SEC. 13. Section 7085 of the Government
Code is amended to read:
7085. (a) Notwithstanding Section 7550.5, the department shall
submit a report to the Legislature every five
six years beginning January 1, 1998, that
evaluates the effect of the program on retaining and increasing
employment among targeted populations as described in
subdivision (c) , public and private investment, and
incomes, and on state and local tax revenues in designated
enterprise zones. The report shall include a department review of the
progress and effectiveness of each enterprise zone, including, but
not limited to, any efforts made regarding training and
placement of unemployed individuals pursuant to Section 7081.
The Employment Development Department , the State Department of
Social Services, and the State Department of Education shall,
for the purposes of the report, provide the department with existing
data on unemployed individuals receiving training. The Franchise Tax
Board shall make available to the department and the Legislature
aggregate information on the dollar value of enterprise zone tax
credits that are claimed each year by businesses pursuant to
Section 7085.5. The Department of General Services shall provide
information on the use and outcomes that the department tracks
relating to the enterprise zone procurement preference .
(b) An enterprise zone governing body shall provide information at
the request of the department as necessary for the department to
prepare the report required pursuant to subdivision (a).
(c) Targeted populations included within the report required
pursuant to subdivision (a) shall include, but not be limited to, the
disabled, disabled veterans, individuals formerly on forms of
federal and state assistance, individuals within the targeted
employment areas, and ex-offenders.
(d) The base year for the report required pursuant to subdivision
(a) shall be the calendar year commencing January 1, 2012.
SEC. 14. Section 7085.1 of the
Government Code is amended to read:
7085.1. (a) The governing board of the G-TEDA shall report to the
department by October 1, 2008, and by that date every other year
thereafter, on the activities of the G-TEDA in the previous two
fiscal years and its plans for the current and following fiscal year.
The biennial report shall include at least both
all of the following:
(1) The progress the G-TEDA has made during the period covered by
the report relative to its goals, objectives, and commitments set
forth in its original application and the department's memorandum of
understanding with the G-TEDA.
(2) Identification of the previous two years' funding, including
in-kind funding. The previous two years' funding levels shall be
compared to the funding levels identified in its original application
and the department's memorandum of understanding with the G-TEDA,
and the amount identified in the previous year's biennial report. An
explanation of any meaningful discrepancies in these amounts shall be
provided.
(3) Identification of the financial value of local incentives
provided during the report period, and of federal and other state
resources accessed to serve the residents, workers, and businesses in
the G-TEDA.
(4) The following information based on the certification
applications approved in the zones relating to the hiring credit:
(A) The number of jobs for which certifications have been issued.
(B) The number of new employees for which certifications have been
issued.
(C) The number of employees replacing previous employees for which
certification, were issued.
(D) The number of employees by qualified employee category
pursuant to Sections 17053.74 and 23622.7 of the Revenue and Taxation
Code.
(E) The total range and the average, median, and mean employee
wage rates that were certified.
(F) The number of businesses obtaining certification for qualified
employees.
(G) The industry classification, based on the North American
Industry Classification System, of businesses obtaining certification
of qualified employees.
(H) The distribution of employee certifications among industry
sectors, based on the North American Industry Classification System.
(I) The distribution of employee certifications by the annual
receipts and asset value of the business obtaining qualified employee
certifications.
(J) The number of state-certified small businesses that submitted
qualified employee certification applications.
(K) The number of state-certified disabled veteran owned business
enterprises that submitted applications.
(b) A copy of the biennial report developed pursuant to
subdivision (a) shall also be submitted to the legislative bodies of
the local jurisdictions comprising
the G-TEDA. The progress of the G-TEDA in
meeting the goals, objectives, and commitments set forth in the
original application and the memorandum of understanding with the
department shall be reviewed at least biennially by these
the legislative bodies , either as part
of the approval of the G-TEDA's annual work plan or separately, at
the discretion of the legislative body of the local
jurisdictions comprising the G-TEDA .
(c) (1) G-TEDAs designated prior to January 1, 2007, shall have
until April 15, 2008, to update their benchmarks, goals, objectives,
and funding levels for administering the G-TEDA program, in order to
make them measurable and conducive to the successful completion of
the economic development strategy. The local legislative body and the
department shall approve the updated goals and objectives. The
updated goals and objectives shall be included as an update to the
existing memorandum of understanding between the G-TEDA and the
department.
(2) G-TEDAs that fail to obtain approved updated goals and
objectives by April 15, 2008, shall be dedesignated effective July 1,
2008. The Director of Housing and Community Development shall
provide notice of prospective dedesignation to the local government
no later than May 1, 2008. The director may authorize up to two
60-calendar-day extensions, if the local government and G-TEDA are
acting in good faith and the additional time would allow them to meet
the requirements of this subdivision. Businesses located within a
G-TEDA that have been dedesignated shall continue to have access to
tax incentives previously authorized within the G-TEDA pursuant to
Section 7082.2.
(3) G-TEDAs designated prior to January 1, 2007, are not required
to implement the biennial reporting requirements of subdivisions (a)
and (b) until October 1, 2009.
(4) G-TEDAs that expire prior to January 1, 2010, are not required
to meet the conditions of this subdivision.
(d) The department shall biennially make available to the
Legislature information related to the progress that each G-TEDA is
making toward implementing its goals, objectives, and commitments set
forth in the original application, the department's memorandum of
understanding with the G-TEDA, and the biennial report.
(e) G-TEDAs that fail to submit a timely biennial report to the
department shall be audited pursuant to Section 7076.1.
SEC. 15. Section 7085.5 of the
Government Code is amended to read:
7085.5. (a) The Franchise Tax Board shall
annually make available to the department and the Legislature
information, by enterprise zone and by city or county, on the dollar
value of the enterprise zone tax credits and other tax related
incentives that are claimed each year by businesses and shall
design and distribute forms and instructions that will allow the
following information to be accessible:
(a)
(1) The total number of jobs for which the
hiring credits are claimed.
(b) The number of new employees for which hiring credits are
claimed.
(c)
(2) The number of businesses claiming each individual
tax credit.
(d)
(3) The nature of the business claiming each individual
tax credit.
(e)
(4) The distribution of zone tax incentives among
industry groups.
(f)
(5) The distribution of zone tax incentives by the
annual receipts and asset value of the business claiming each
individual tax credit.
(6) The total amount of capital investments made, as well as the
value of the total amount of credit claimed by businesses under the
sales and use tax credit.
(g)
(7) Any other information that the Franchise Tax Board
and the department deem to be important in determining the cost to,
and benefit derived by, the taxpayers of the state.
(b) In developing this information, the Franchise Tax Board shall
review returns from personal and corporate tax returns. The totals
for each tax incentive shall, at a minimum, be reported separately.
SEC. 16. Chapter 12.93 (commencing with Section
7097) of Division 7 of Title 1 of the Government Code
is repealed.
SEC. 17. Section 7114.2 of the
Government Code is amended to read:
7114.2. (a) The department shall assess each LAMBRA a fee of
fifteen dollars ($15) for each application for issuance of a
certificate pursuant to subdivision (c) of Section 17053.46 of the
Revenue and Taxation Code and subdivision (c) of Section 23646 of the
Revenue and Taxation Code. The department shall collect the fee for
deposit into the Enterprise Zone Fund, pursuant to Section 7072.3,
for the costs of administering this chapter. The LAMBRA administrator
shall collect this fee at the time an application is submitted for
issuance of a certificate.
(b) The department shall adopt regulations governing the
imposition and collection of fees pursuant to this section and the
issuance of certificates pursuant to subdivision (c) of Section
17053.46 of the Revenue and Taxation Code and subdivision (c) of
Section 23646 of the Revenue and Taxation Code. The regulations shall
provide for a notice or invoice to fee payers as to the amount and
purpose of the fee. The adoption of the regulations shall be deemed
to be an emergency and necessary for the immediate preservation of
the public peace, health and safety, or general welfare.
Notwithstanding subdivision (e) of Section 11346.1, the regulations
shall remain in effect for no more than 360 days unless the agency
complies with all the provisions of Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 as required by
subdivision (e) of Section 11346.1.
(c) (1) (A) The department shall establish a registration process
for businesses located in a LAMBRA that includes, but is not limited
to, the creation of a LAMBRA business registration form and
recommended outreach methods to help inform businesses of the
registration process.
(B) The department shall make the registration form available on
its Internet Web site. The information sought from a business on the
registration form shall include, but not be limited to, all of the
following:
(i) The name and location of the business.
(ii) The type of business based on the applicable first three
digits of the North American Industry Classification System.
(iii) The size of the business based on gross annual receipts for
the year prior to registration.
(iv) The total number of employees of the business and the total
number of employees of the business that work within the LAMBRA, for
the year prior to registration.
(2) Registration shall be a precondition for claiming a
LAMBRA-related tax incentive, including, but not limited to, the
hiring credit, the sales and use tax credit, and the net interest
deduction; however, a business shall not be required to register
until six months following the department's establishment of the
registration process. Businesses shall retain a copy of the
registration for use in preparation of their tax return.
(3) The registration information shall be updated at least once
every five years.
SEC. 18. Section 17050 is added to the
Revenue and Taxation Code , to read:
17050. (a) Notwithstanding any provision of this part or Part
10.2 (commencing with Section 18401) to the contrary, for each
taxable year beginning on or after January 1, 2011, and before
January 1, 2013, the total of all credits otherwise allowable under
Sections 17053.45, 17053.46, 17053.70, 17053.73, and 17053.74,
including the carryover of these credits, for the taxable year shall
not reduce the "net tax," as defined in Section 17039, below the
applicable amount.
(b) For purposes of this section, the "applicable amount" shall be
equal to 50 percent of the "net tax," as defined in Section 17039,
before application of any credits.
(c) The amount of any credit otherwise allowable for the taxable
year under Sections 17053.45, 17053.46, 17053.70, 17053.73, and
17053.74 that is not allowed due to the application of this section
shall remain a credit carryover amount as otherwise allowed by this
part.
(d) The carryover period for any credit that is not allowed due to
the application of this section shall be increased by the number of
taxable years the credit, or any portion thereof, was not allowed.
(e) This section shall not apply to a taxpayer with gross income
of less than one million dollars ($1,000,000) for the taxable year.
(f) This section shall remain in effect only until December 1,
2013, and as of that date is repealed.
SEC. 19. Section 17053.34 of the
Revenue and Taxation Code is amended to read:
17053.34. (a) For each taxable year beginning on or after January
1, 1998, there shall be allowed a credit against the "net tax" (as
defined in Section 17039) to a qualified taxpayer who employs a
qualified employee in a targeted tax area during the taxable year.
The credit shall be equal to the sum of each of the following:
(1) Fifty percent of qualified wages in the first year of
employment.
(2) Forty percent of qualified wages in the second year of
employment.
(3) Thirty percent of qualified wages in the third year of
employment.
(4) Twenty percent of qualified wages in the fourth year of
employment.
(5) Ten percent of qualified wages in the fifth year of
employment.
(b) For purposes of this section:
(1) "Qualified wages" means:
(A) That portion of wages paid or incurred by the qualified
taxpayer during the taxable year to qualified employees that does not
exceed 150 percent of the minimum wage.
(B) Wages received during the 60-month period beginning with the
first day the employee commences employment with the qualified
taxpayer. Reemployment in connection with any increase, including a
regularly occurring seasonal increase, in the trade or business
operations of the qualified taxpayer does not constitute commencement
of employment for purposes of this section.
(C) Qualified wages do not include any wages paid or incurred by
the qualified taxpayer on or after the targeted tax area expiration
date. However, wages paid or incurred with respect to qualified
employees who are employed by the qualified taxpayer within the
targeted tax area within the 60-month period prior to the targeted
tax area expiration date shall continue to qualify for the credit
under this section after the targeted tax area expiration date, in
accordance with all provisions of this section applied as if the
targeted tax area designation were still in existence and binding.
(2) "Minimum wage" means the wage established by the Industrial
Welfare Commission as provided for in Chapter 1 (commencing with
Section 1171) of Part 4 of Division 2 of the Labor Code.
(3) "Targeted tax area expiration date" means the date the
targeted tax area designation expires, is revoked, is no longer
binding, or becomes inoperative.
(4) (A) "Qualified employee" means an individual who is hired
by a qualified taxpayer before January 1, 2011, and who meets
all of the following requirements:
(i) At least 90 percent of his or her services for the qualified
taxpayer during the taxable year are directly related to the conduct
of the qualified taxpayer's trade or business located in a targeted
tax area.
(ii) Performs at least 50 percent of his or her services for the
qualified taxpayer during the taxable year in a targeted tax area.
(iii) Is hired by the qualified taxpayer after the date of
original designation of the area in which services were performed as
a targeted tax area.
(iv) Is any of the following:
(I) Immediately preceding the qualified employee's commencement of
employment with the qualified taxpayer, was a person eligible for
services under the federal Job Training Partnership Act (29 U.S.C.
Sec. 1501 et seq.), or its successor, who is receiving, or is
eligible to receive, subsidized employment, training, or services
funded by the federal Job Training Partnership Act, or its successor.
(II) Immediately preceding the qualified employee's commencement
of employment with the qualified taxpayer, was a person eligible to
be a voluntary or mandatory registrant under the Greater Avenues for
Independence Act of 1985 (GAIN) provided for pursuant to Article 3.2
(commencing with Section 11320) of Chapter 2 of Part 3 of Division 9
of the Welfare and Institutions Code, or its successor.
(III)
(I) 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)
(II) Immediately preceding the qualified employee's
commencement of employment with the qualified taxpayer, was a
dislocated worker who meets any of the following:
(aa) Has been terminated or laid off or who has received a notice
of termination or layoff from employment, is eligible for or has
exhausted entitlement to unemployment insurance benefits, and is
unlikely to return to his or her previous industry or occupation.
(bb) Has been terminated or has received a notice of termination
of employment as a result of any permanent closure or any substantial
layoff at a plant, facility, or enterprise, including an individual
who has not received written notification but whose employer has made
a public announcement of the closure or layoff.
(cc) Is long-term unemployed and has limited opportunities for
employment or reemployment in the same or a similar occupation in the
area in which the individual resides, including an individual 55
years of age or older who may have substantial barriers to employment
by reason of age.
(dd) Was self-employed (including farmers and ranchers) and is
unemployed as a result of general economic conditions in the
community in which he or she resides or because of natural disasters.
(ee) Was a civilian employee of the Department of Defense employed
at a military installation being closed or realigned under the
Defense Base Closure and Realignment Act of 1990.
(ff) Was an active member of the Armed Forces or National Guard as
of September 30, 1990, and was either involuntarily separated or
separated pursuant to a special benefits program.
(gg) Is a seasonal or migrant worker who experiences chronic
seasonal unemployment and underemployment in the agriculture
industry, aggravated by continual advancements in technology and
mechanization.
(hh) Has been terminated or laid off, or has received a notice of
termination or layoff, as a consequence of compliance with the
federal Clean Air Act.
(V)
(III) 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 .
(IV) Immediately preceding the
qualified employee's commencement of employment with the
taxpayer, was a service-connected disabled veteran, veteran of
the Vietnam era, or veteran who is recently separated from military
service.
(VI)
(V) 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)
(VI) Immediately preceding the qualified employee's
commencement of employment with the qualified taxpayer, was a person
eligible for or a recipient of any of the following:
(aa) Federal Supplemental Security Income benefits.
(bb) Aid to Families with Dependent Children.
(cc) Food stamps.
(dd) State and local general assistance.
(VIII)
(VII) 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)
(VIII) Immediately preceding the qualified employee's
commencement of employment with the qualified taxpayer, was a
resident of a targeted tax area.
(X)
(IX) 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 Workforce Investment Act or the CalWORKs
program or who is eligible as a member of a targeted group
under the Work Opportunity Tax Credit (Section 51 of the Internal
Revenue Code), or its successor.
(5) (A) "Qualified taxpayer" means a person or entity that meets
both of the following:
(i) Is engaged in a trade or business within a targeted tax area
designated pursuant to Chapter 12.93 (commencing with Section 7097)
of Division 7 of Title 1 of the Government Code.
(ii) Is engaged in those lines of business described in Codes 2000
to 2099, inclusive; 2200 to 3999, inclusive; 4200 to 4299,
inclusive; 4500 to 4599, inclusive; and 4700 to 5199, inclusive, of
the Standard Industrial Classification (SIC) Manual published by the
United States Office of Management and Budget, 1987 edition.
(B) In the case of any passthrough entity, the determination of
whether a taxpayer is a qualified taxpayer under this section shall
be made at the entity level and any credit under this section or
Section 23634 shall be allowed to the passthrough entity and passed
through to the partners or shareholders in accordance with applicable
provisions of this part or Part 11 (commencing with Section 23001).
For purposes of this subdivision, the term "passthrough entity" means
any partnership or S corporation.
(6) "Seasonal employment" means employment by a qualified taxpayer
that has regular and predictable substantial reductions in trade or
business operations.
(c) If the qualified taxpayer is allowed a credit for qualified
wages pursuant to this section, only one credit shall be allowed to
the taxpayer under this part with respect to those qualified wages.
(d) The qualified taxpayer shall do both of the following:
(1) Obtain from the Employment Development Department, as
permitted by federal law, the local county or city Job
Training Partnership Act administrative entity, the local county GAIN
office federal Workforce Investment Act of 1998
administrative entity, the local county CalWORKs program 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) Retain a copy of the certification and provide it upon request
to the Franchise Tax Board.
(e) (1) For purposes of this section:
(A) All employees of trades or businesses, which are not
incorporated, that are under common control shall be treated as
employed by a single taxpayer.
(B) The credit, if any, allowable by this section with respect to
each trade or business shall be determined by reference to its
proportionate share of the expense of the qualified wages giving rise
to the credit, and shall be allocated in that manner.
(C) Principles that apply in the case of controlled groups of
corporations, as specified in subdivision (d) of Section 23634, shall
apply with respect to determining employment.
(2) If an employer acquires the major portion of a trade or
business of another employer (hereinafter in this paragraph referred
to as the "predecessor") or the major portion of a separate unit of a
trade or business of a predecessor, then, for purposes of applying
this section (other than subdivision (f)) for any calendar year
ending after that acquisition, the employment relationship between a
qualified employee and an employer shall not be treated as terminated
if the employee continues to be employed in that trade or business.
(f) (1) (A) If the employment, other than seasonal employment, of
any qualified employee, with respect to whom qualified wages are
taken into account under subdivision (a) is terminated by the
qualified taxpayer at any time during the first 270 days of that
employment (whether or not consecutive) or before the close of the
270th calendar day after the day in which that employee completes 90
days of employment with the qualified taxpayer, the tax imposed by
this part for the taxable year in which that employment is terminated
shall be increased by an amount equal to the credit allowed under
subdivision (a) for that taxable year and all prior taxable years
attributable to qualified wages paid or incurred with respect to that
employee.
(B) If the seasonal employment of any qualified employee, with
respect to whom qualified wages are taken into account under
subdivision (a) is not continued by the qualified taxpayer for a
period of 270 days of employment during the 60-month period beginning
with the day the qualified employee commences seasonal employment
with the qualified taxpayer, the tax imposed by this part, for the
taxable year that includes the 60th month following the month in
which the qualified employee commences seasonal employment with the
qualified taxpayer, shall be increased by an amount equal to the
credit allowed under subdivision (a) for that taxable year and all
prior taxable years attributable to qualified wages paid or incurred
with respect to that qualified employee.
(2) (A) Subparagraph (A) of paragraph (1) shall not apply to any
of the following:
(i) A termination of employment of a qualified employee who
voluntarily leaves the employment of the qualified taxpayer.
(ii) A termination of employment of a qualified employee who,
before the close of the period referred to in subparagraph (A) of
paragraph (1), becomes disabled and unable to perform the services of
that employment, unless that disability is removed before the close
of that period and the qualified taxpayer fails to offer reemployment
to that employee.
(iii) A termination of employment of a qualified employee, if it
is determined that the termination was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that employee.
(iv) A termination of employment of a qualified employee due to a
substantial reduction in the trade or business operations of the
qualified taxpayer.
(v) A termination of employment of a qualified employee, if that
employee is replaced by other qualified employees so as to create a
net increase in both the number of employees and the hours of
employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of
the following:
(i) A failure to continue the seasonal employment of a qualified
employee who voluntarily fails to return to the seasonal employment
of the qualified taxpayer.
(ii) A failure to continue the seasonal employment of a qualified
employee who, before the close of the period referred to in
subparagraph (B) of paragraph (1), becomes disabled and unable to
perform the services of that seasonal employment, unless that
disability is removed before the close of that period and the
qualified taxpayer fails to offer seasonal employment to that
qualified employee.
(iii) A failure to continue the seasonal employment of a qualified
employee, if it is determined that the failure to continue the
seasonal employment was due to the misconduct (as defined in Sections
1256-30 to 1256-43, inclusive, of Title 22 of the California Code of
Regulations) of that qualified employee.
(iv) A failure to continue seasonal employment of a qualified
employee due to a substantial reduction in the regular seasonal trade
or business operations of the qualified taxpayer.
(v) A failure to continue the seasonal employment of a qualified
employee, if that qualified employee is replaced by other qualified
employees so as to create a net increase in both the number of
seasonal employees and the hours of seasonal employment.
(C) For purposes of paragraph (1), the employment relationship
between the qualified taxpayer and a qualified employee shall not be
treated as terminated by reason of a mere change in the form of
conducting the trade or business of the qualified taxpayer, if the
qualified employee continues to be employed in that trade or business
and the qualified taxpayer retains a substantial interest in that
trade or business.
(3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
(g) In the case of an estate or trust, both of the following
apply:
(1) The qualified wages for any taxable year shall be apportioned
between the estate or trust and the beneficiaries on the basis of the
income of the estate or trust allocable to each.
(2) Any beneficiary to whom any qualified wages have been
apportioned under paragraph (1) shall be treated, for purposes of
this part, as the employer with respect to those wages.
(h) For purposes of this section, "targeted tax area" means an
area designated pursuant to Chapter 12.93 (commencing with Section
7097) of Division 7 of Title 1 of the Government Code.
(i) In the case where the credit otherwise allowed under this
section exceeds the "net tax" for the taxable year, that portion of
the credit that exceeds the "net tax" may be carried over and added
to the credit, if any, in succeeding
taxable years, until the credit is exhausted. The credit
shall be applied first to the earliest taxable years possible.
(j) (1) The amount of the credit otherwise allowed under this
section and Section 17053.33, including any credit carryover from
prior years, that may reduce the "net tax" for the taxable year shall
not exceed the amount of tax that would be imposed on the qualified
taxpayer's business income attributable to the targeted tax area
determined as if that attributable income represented all of the
income of the qualified taxpayer subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the targeted
tax area. For that purpose, the taxpayer's business income
attributable to sources in this state first shall be determined in
accordance with Chapter 17 (commencing with Section 25101) of Part
11. That business income shall be further apportioned to the targeted
tax area in accordance with Article 2 (commencing with Section
25120) of Chapter 17 of Part 11, modified for purposes of this
section in accordance with paragraph (3).
(3) Business income shall be apportioned to the targeted tax area
by multiplying the total California business income of the taxpayer
by a fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is two. For purposes of
this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the targeted tax area during the
taxable year, and the denominator of which is the average value of
all the taxpayer's real and tangible personal property owned or
rented and used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the targeted tax area during
the taxable year for compensation, and the denominator of which is
the total compensation paid by the taxpayer in this state during the
taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "net tax" for the
taxable year, as provided in subdivision (h).
(5) In the event that a credit carryover is allowable under
subdivision (h) for any taxable year after the targeted tax area
expiration date, the targeted tax area shall be deemed to remain in
existence for purposes of computing the limitation specified in this
subdivision.
(k) This section shall remain in effect only until January 1,
2017, and as of that date is repealed.
SEC. 20. Section 17053.45 of the
Revenue and Taxation Code is amended to read:
17053.45. (a) For each taxable year beginning on or after January
1, 1995, there shall be allowed as a credit against the "net tax"
(as defined by Section 17039) an amount equal to the sales or use tax
paid or incurred by the taxpayer in connection with the purchase of
qualified property to the extent that the qualified property does not
exceed a value of one million dollars ($1,000,000).
(b) For purposes of this section:
(1) "LAMBRA" means a local agency military base recovery area
designated in accordance with Section 7114 of the Government Code.
(2) "Taxpayer" means a taxpayer that conducts a trade or business
within a LAMBRA and, for the first two taxable years, has a net
increase in jobs (defined as 2,000 paid hours per employee per year)
of one or more employees in the LAMBRA.
(A) The net increase in the number of jobs shall be determined by
subtracting the total number of full-time employees (defined as 2,000
paid hours per employee per year) the taxpayer employed in this
state in the taxable year prior to commencing business operations in
the LAMBRA from the total number of full-time employees the taxpayer
employed in this state during the second taxable year after
commencing business operations in the LAMBRA. For taxpayers who
commence doing business in this state with their LAMBRA business
operation, the number of employees for the taxable year prior to
commencing business operations in the LAMBRA shall be zero. If the
taxpayer has a net increase in jobs in the state, the credit shall be
allowed only if one or more full-time employees is employed within
the LAMBRA.
(B) The total number of employees employed in the LAMBRA shall
equal the sum of both of the following:
(i) The total number of hours worked in the LAMBRA for the
taxpayer by employees (not to exceed 2,000 hours per employee) who
are paid an hourly wage divided by 2,000.
(ii) The total number of months worked in the LAMBRA for the
taxpayer by employees who are salaried employees divided by 12.
(C) In the case of a taxpayer who first commences doing business
in the LAMBRA during the taxable year, for purposes of clauses (i)
and (ii), respectively, of subparagraph (B), the divisors "2,000" and
"12" shall be multiplied by a fraction, the numerator of which is
the number of months of the taxable year that the taxpayer was doing
business in the LAMBRA and the denominator of which is 12.
(3) "Qualified property" means property that is each of the
following:
(A) Purchased by the taxpayer for exclusive use in a trade or
business conducted within a LAMBRA.
(B) Purchased before the date the LAMBRA designation expires, is
no longer binding, or becomes inoperative.
(C) Any of the following:
(i) High technology equipment, including, but not limited to,
computers and electronic processing equipment.
(ii) Aircraft maintenance equipment, including, but not limited
to, engine stands, hydraulic mules, power carts, test equipment,
handtools, aircraft start carts, and tugs.
(iii) Aircraft components, including, but not limited to, engines,
fuel control units, hydraulic pumps, avionics, starts, wheels, and
tires.
(iv) Section 1245 property, as defined in Section 1245(a)(3) of
the Internal Revenue Code.
(c) The credit provided under subdivision (a) shall be allowed
only for qualified property manufactured in California unless
qualified property of a comparable quality and price is not available
for timely purchase and delivery from a California manufacturer.
(d) In the case where the credit otherwise allowed under this
section exceeds the "net tax" for the taxable year, that portion of
the credit which exceeds the "net tax" may be carried over and added
to the credit, if any, in the following year, and the
succeeding 14 years if necessary , until the
credit is exhausted. The credit shall be applied first to the
earliest taxable years possible.
(e) Any taxpayer who elects to be subject to this section shall
not be entitled to increase the basis of the property as otherwise
required by Section 164(a) of the Internal Revenue Code with respect
to sales or use tax paid or incurred in connection with the purchase
of qualified property.
(f) (1) The amount of credit otherwise allowed under this section
and Section 17053.46, including any credit carryover from prior
years, that may reduce the "net tax" for the taxable year shall not
exceed the amount of tax that would be imposed on the taxpayer's
business income attributed to a LAMBRA determined as if that
attributable income represented all the income of the taxpayer
subject to tax under this part.
(2) Attributable income is that portion of the taxpayer's
California source business income that is apportioned to the LAMBRA.
For that purpose, the taxpayer's business income that is attributable
to sources in this state shall first be determined in accordance
with Chapter 17 (commencing with Section 25101) of Part 11. That
business income shall be further apportioned to the LAMBRA in
accordance with Article 2 (commencing with Section 25120) of Chapter
17 of Part 11, as modified for purposes of this section in accordance
with paragraph (3).
(3) Income shall be apportioned to a LAMBRA by multiplying the
total California business income of the taxpayer by a fraction, the
numerator of which is the property factor, plus the payroll factor,
and the denominator of which is two. For purposes of this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the LAMBRA during the taxable
year, and the denominator of which is the average value of all the
taxpayer's real and tangible personal property owned or rented and
used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the LAMBRA during the
taxable year for compensation, and the denominator of which is the
total compensation paid by the taxpayer in this state during the
taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "net tax" for the
taxable year, as provided in subdivision (d).
(g) (1) If the qualified property is disposed of or no longer used
by the taxpayer in the LAMBRA, at any time before the close of the
second taxable year after the property is placed in service, the
amount of the credit previously claimed, with respect to that
property, shall be added to the taxpayer's tax liability in the
taxable year of that disposition or nonuse.
(2) At the close of the second taxable year, if the taxpayer has
not increased the number of its employees as determined by paragraph
(2) of subdivision (b), then the amount of the credit previously
claimed shall be added to the taxpayer's net tax for the taxpayer's
second taxable year.
(h) If the taxpayer is allowed a credit for qualified property
pursuant to this section, only one credit shall be allowed to the
taxpayer under this part with respect to that qualified property.
(i) A taxpayer shall be required to register a business pursuant
to the Local Agency Military Base Recovery Area Act (Chapter 12.97
(commencing with Section 7105) of Division 7 of Title 1 of the
Government Code), and shall state under penalty of perjury that the
taxpayer is a registered business in one or more LAMBRAs, as a
condition of claiming a credit under this section.
(i)
(j) The amendments made to this section by the act
adding this subdivision shall apply to taxable years beginning on or
after January 1, 1998.
(k) The amendments made to this section by the act adding this
subdivision shall apply only to taxable years beginning on or after
January 1, 2011.
SEC. 21. Section 17053.46 of the
Revenue and Taxation Code is amended to read:
17053.46. (a) For each taxable year beginning on or after January
1, 1995, there shall be allowed as a credit against the "net tax"
(as defined in Section 17039) to a qualified taxpayer for hiring a
qualified disadvantaged individual or a qualified displaced employee
during the taxable year for employment in the LAMBRA. The credit
shall be equal to the sum of each of the following:
(1) Fifty Thirty percent of the
qualified wages in the first year of employment.
(2) Forty percent of the qualified wages in the second year of
employment.
(3) Thirty Fifty percent
of the qualified wages in the third year of employment.
(4) Twenty percent of the qualified wages in the fourth year of
employment.
(5) Ten percent of the qualified wages in the fifth year of
employment.
(b) For purposes of this section:
(1) "Qualified wages" means:
(A) That (i) Except
as modified by clause (ii), 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 150 180 percent of the
minimum wage.
(ii) For qualified employees who are employed by the taxpayer in
manufacturing activities described in Codes 311 to 339, inclusive, of
the North American Industry Classification System published by the
United States Office of Management and Budget, 2007 edition,
"qualified wages" means that portion of hourly wages that does not
exceed 202 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
36-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 36-month period prior to the
LAMBRA expiration date shall continue to qualify for the credit under
this section after the LAMBRA expiration date, in accordance with
all provisions of this section applied as if the LAMBRA designation
were still in existence and binding.
(2) "Minimum wage" means the wage established by the Industrial
Welfare Commission as provided for in Chapter 1 (commencing with
Section 1171) of Part 4 of Division 2 of the Labor Code.
(3) "LAMBRA" means a local agency military base recovery area
designated in accordance with Section 7114 of the Government Code.
(4) "Qualified disadvantaged individual" means an individual who
satisfies all of the following requirements:
(A) (i) At least 90 percent of whose services for the taxpayer
during the taxable year are directly related to the conduct of the
taxpayer's trade or business located in a LAMBRA.
(ii) Who performs at least 50 percent of his or her services for
the taxpayer during the taxable year in the LAMBRA.
(B) Who is hired by the employer after the designation of the area
as a LAMBRA in which the individual's services were primarily
performed.
(C) Who is any of the following immediately preceding the
individual's commencement of employment with the taxpayer:
(i) An individual who has been determined eligible for services
under the federal Job Training Partnership Act (29 U.S.C. Sec. 1501
et seq.).
(ii) Any voluntary or mandatory registrant under the Greater
Avenues for Independence Act of 1985 as provided pursuant to Article
3.2 (commencing with Section 11320) of Chapter 2 of Part 3 of
Division 9 of the Welfare and Institutions Code.
(iii)
(i) An economically disadvantaged individual age 16
years or older.
(iv)
(ii) 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
federal Clean Air Act.
(v)
(iii) 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)
(iv) 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)
(v) 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)
(vi) Is a member of a federally recognized Indian
tribe, band, or other group of Native American descent.
(5) "Qualified taxpayer" means a taxpayer or partnership that
conducts a trade or business within a LAMBRA and, for the first two
taxable years, has a net increase in jobs (defined as 2,000 paid
hours per employee per year) of one or more employees in the LAMBRA.
(A) The net increase in the number of jobs shall be determined by
subtracting the total number of full-time employees (defined as 2,000
paid hours per employee per year) the taxpayer employed in this
state in the taxable year prior to commencing business operations in
the LAMBRA from the total number of full-time employees the taxpayer
employed in this state during the second taxable year after
commencing business operations in the LAMBRA. For taxpayers who
commence doing business in this state with their LAMBRA business
operation, the number of employees for the taxable year prior to
commencing business operations in the LAMBRA shall be zero. If the
taxpayer has a net increase in jobs in the state, the credit shall be
allowed only if one or more full-time employees is employed within
the LAMBRA.
(B) The total number of employees employed in the LAMBRA shall
equal the sum of both of the following:
(i) The total number of hours worked in the LAMBRA for the
taxpayer by employees (not to exceed 2,000 hours per employee) who
are paid an hourly wage divided by 2,000.
(ii) The total number of months worked in the LAMBRA for the
taxpayer by employees who are salaried employees divided by 12.
(C) In the case of a taxpayer who first commences doing business
in the LAMBRA during the taxable year, for purposes of clauses (i)
and (ii), respectively, of subparagraph (B), the divisors "2,000" and
"12" shall be multiplied by a fraction, the numerator of which is
the number of months of the taxable year that the taxpayer was doing
business in the LAMBRA and the denominator of which is 12.
(6) "Qualified displaced employee" means an individual who
satisfies all of the following requirements:
(A) Any civilian or military employee of a base or former base who
has been displaced as a result of a federal base closure act.
(B) (i) At least 90 percent of whose services for the taxpayer
during the taxable year are directly related to the conduct of the
taxpayer's trade or business located in a LAMBRA.
(ii) Who performs at least 50 percent of his or her services for
the taxpayer during the taxable year in a LAMBRA.
(C) Who is hired by the employer after the designation of the area
in which services were performed as a LAMBRA.
(7) "Seasonal employment" means employment by a qualified taxpayer
that has regular and predictable substantial reductions in trade or
business operations.
(8) "LAMBRA expiration date" means the date the LAMBRA designation
expires, is no longer binding, or becomes inoperative.
(c) For qualified disadvantaged individuals or qualified displaced
employees hired on or after January 1, 2001, the taxpayer shall do
both of the following:
(1) Obtain Apply for certification, within
36 months of an employee being hired, 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 federal Workforce
Investment Act of 1998 administrative entity, the local county
CalWORKs program office or social services agency, or the local
government administering the LAMBRA, a certification that provides
that a qualified disadvantaged individual or qualified displaced
employee meets the eligibility requirements specified in subparagraph
(C) of paragraph (4) of subdivision (b) or subparagraph (A) of
paragraph (6) of subdivision (b). The Employment Development
Department may provide preliminary screening and referral to a
certifying agency. The Department of Housing and Community
Development shall develop regulations governing the issuance of
certificates pursuant to Section 7114.2 of the Government Code and
shall develop forms for this purpose.
(2) Retain a copy of the certification and provide it upon request
to the Franchise Tax Board.
(d) (1) For purposes of this section, both of the following apply:
(A) All employees of trades or businesses that are under common
control shall be treated as employed by a single employer.
(B) The credit (if any) allowable by this section with respect to
each trade or business shall be determined by reference to its
proportionate share of the qualified wages giving rise to the credit.
The regulations prescribed under this paragraph shall be based on
principles similar to the principles that apply in the case of
controlled groups of corporations as specified in subdivision (e) of
Section 23622.
(2) (A) 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.
(B) If a taxpayer relocated to a LAMBRA from within the state, the
taxpayer shall be allowed a credit only for that number of employees
that exceeds the number of employees at the previous location. The
number of employees at the previous location and the type of jobs
undertaken shall be established by the Employment Development
Department. Exceptions to this subparagraph shall be limited to the
following:
(i) Employees who undertake core work activities or activities
that are the primary job duties of the employee that are
significantly different from those activities at the previous
location, as determined by the Employment Development Department.
(ii) Employees of taxpayers that receive a bona fide offer to
relocate to another state.
(iii) Employees who relocate as a result of a natural disaster,
civic unrest, or eminent domain proceeding.
(e) (1) (A) If the employment, other than seasonal employment, of
any employee, with respect to whom qualified wages are taken into
account under subdivision (a) is terminated by the taxpayer at any
time during the first 270 300 days of
that employment (whether or not consecutive) or before the close of
the 270th 300th 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 270 300 days
of employment during the 60-month 36-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 36th month following the month in
which the qualified disadvantaged individual commences seasonal
employment with the qualified taxpayer, shall be increased by an
amount equal to the credit allowed under subdivision (a) for that
taxable year and all prior taxable years attributable to qualified
wages paid or incurred with respect to that qualified disadvantaged
individual.
(2) (A) Subparagraph (A) of paragraph (1) shall not apply to any
of the following:
(i) A termination of employment of an employee who voluntarily
leaves the employment of the taxpayer.
(ii) A termination of employment of an individual who, before the
close of the period referred to in subparagraph (A) of paragraph (1),
becomes disabled to perform the services of that employment, unless
that disability is removed before the close of that period and the
taxpayer fails to offer reemployment to that individual.
(iii) A termination of employment of an individual, if it is
determined that the termination was due to the misconduct (as defined
in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that individual.
(iv) A termination of employment of an individual due to a
substantial reduction in the trade or business operations of the
taxpayer.
(v) A termination of employment of an individual, if that individual
is replaced by other qualified employees so as to create a net
increase in both the number of employees and the hours of employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of
the following:
(i) A failure to continue the seasonal employment of a qualified
disadvantaged individual who voluntarily fails to return to the
seasonal employment of the qualified taxpayer.
(ii) A failure to continue the seasonal employment of a qualified
disadvantaged individual who, before the close of the period referred
to in subparagraph (B) of paragraph (1), becomes disabled and unable
to perform the services of that seasonal employment, unless that
disability is removed before the close of that period and the
qualified taxpayer fails to offer seasonal employment to that
individual.
(iii) A failure to continue the seasonal employment of a qualified
disadvantaged individual, if it is determined that the failure to
continue the seasonal employment was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that qualified disadvantaged
individual.
(iv) A failure to continue seasonal employment of a qualified
disadvantaged individual due to a substantial reduction in the
regular seasonal trade or business operations of the qualified
taxpayer.
(v) A failure to continue the seasonal employment of a qualified
disadvantaged individual, if that individual is replaced by other
qualified displaced employees so as to create a net increase in both
the number of seasonal employees and the hours of seasonal
employment.
(C) For purposes of paragraph (1), the employment relationship
between the taxpayer and an employee shall not be treated as
terminated by reason of a mere change in the form of conducting the
trade or business of the taxpayer, if the employee continues to be
employed in that trade or business and the taxpayer retains a
substantial interest in that trade or business.
(3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
(4) At the close of the second taxable year, if the taxpayer has
not increased the number of its employees as determined by paragraph
(5) of subdivision (b), then the amount of the credit previously
claimed shall be added to the taxpayer's net tax for the taxpayer's
second taxable year.
(f) In the case of an estate or trust, both of the following
apply:
(1) The qualified wages for any taxable year shall be apportioned
between the estate or trust and the beneficiaries on the basis of the
income of the estate or trust allocable to each.
(2) Any beneficiary to whom any qualified wages have been
apportioned under paragraph (1) shall be treated (for purposes of
this part) as the employer with respect to those wages.
(g) The credit shall be reduced by the credit allowed under
Section 17053.7. The credit shall also be reduced by the federal
credit allowed under Section 51 of the Internal Revenue Code.
In addition, any deduction otherwise allowed under this part for
the wages or salaries paid or incurred by the taxpayer upon which the
credit is based shall be reduced by the amount of the credit, prior
to any reduction required by subdivision (h) or (i).
(h) In the case where the credit otherwise allowed under this
section exceeds the "net tax" for the taxable year, that portion of
the credit that exceeds the "net tax" may be carried over and added
to the credit, if any, in the following year, and the
succeeding 14 years if necessary , until the
credit is exhausted. The credit shall be applied first to the
earliest taxable years possible.
(i) (1) The amount of credit otherwise allowed under this section
and Section 17053.45, including prior year credit carryovers, that
may reduce the "net tax" for the taxable year shall not exceed the
amount of tax that would be imposed on the taxpayer's business income
attributed to a LAMBRA determined as if that attributed income
represented all of the net income of the taxpayer subject to tax
under this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the LAMBRA.
For that purpose, the taxpayer's business income that is attributable
to sources in this state first shall be determined in accordance
with Chapter 17 (commencing with Section 25101) of Part 11. That
business income shall be further apportioned to the LAMBRA in
accordance with Article 2 (commencing with Section 25120) of Chapter
17 of Part 11, modified for purposes of this section in accordance
with paragraph (3).
(3) Income shall be apportioned to a LAMBRA by multiplying the
total California business income of the taxpayer by a fraction, the
numerator of which is the property factor plus the payroll factor,
and the denominator of which is two. For purposes of this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the LAMBRA during the taxable
year, and the denominator of which is the average value of all the
taxpayer's real and tangible personal property owned or rented and
used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the LAMBRA during the
taxable year for compensation, and the denominator of which is the
total compensation paid by the taxpayer in this state during the
taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "net tax" for the
taxable year, as provided in subdivision (h).
(j) If the taxpayer is allowed a credit pursuant to this section
for qualified wages paid or incurred, only one credit shall be
allowed to the taxpayer under this part with respect to any wage
consisting in whole or in part of those qualified wages.
(k) A credit shall not be allowed under this section to a taxpayer
that has been notified by the Director of Industrial Relations of a
final determination, based on the taxpayer's history of significant
employment violations, that the taxpayer is considered by the
Department of Industrial Relations as a serious, repeated, and
willful violator of state employment laws, including, but not limited
to, demonstrating a failure to successfully abate these violations.
(l) A taxpayer shall be required to register a business pursuant
to the Local Agency Military Base Recovery Area Act (Chapter 12.97
(commencing with Section 7105) of Division 7 of Title 1 of the
Government Code), and shall state under penalty of perjury that the
taxpayer is a registered business in one or more LAMBRAs, as a
condition of claiming a credit under this section.
(m) The changes made to this section by the act adding this
subdivision shall apply only to qualified disadvantaged individuals
hired by a qualified taxpayer on or after January 1, 2011.
SEC. 22. Section 17053.47 of the
Revenue and Taxation Code is amended to read:
17053.47. (a) For each taxable year beginning on or after January
1, 1998, there shall be allowed a credit against the "net tax" (as
defined in Section 17039) to a qualified taxpayer for hiring a
qualified disadvantaged individual during the taxable year for
employment in the manufacturing enhancement area. The credit shall be
equal to the sum of each of the following:
(1) Fifty percent of the qualified wages in the first year of
employment.
(2) Forty percent of the qualified wages in the second year of
employment.
(3) Thirty percent of the qualified wages in the third year of
employment.
(4) Twenty percent of the qualified wages in the fourth year of
employment.
(5) Ten percent of the qualified wages in the fifth year of
employment.
(b) For purposes of this section:
(1) "Qualified wages" means:
(A) That portion of wages paid or incurred by the qualified
taxpayer during the taxable year to qualified disadvantaged
individuals that does not exceed 150 percent of the minimum wage.
(B) The total amount of qualified wages which may be taken into
account for purposes of claiming the credit allowed under this
section shall not exceed two million dollars ($2,000,000) per taxable
year.
(C) Wages received during the 60-month period beginning with the
first day the qualified disadvantaged individual commences employment
with the qualified taxpayer. Reemployment in connection with any
increase, including a regularly occurring seasonal increase, in the
trade or business operations of the taxpayer does not constitute
commencement of employment for purposes of this section.
(D) Qualified wages do not include any wages paid or incurred by
the qualified taxpayer on or after the manufacturing enhancement area
expiration date. However, wages paid or incurred with respect to
qualified employees who are employed by the qualified taxpayer within
the manufacturing enhancement area within the 60-month period prior
to the manufacturing enhancement area expiration date shall continue
to qualify for the credit under this section after the manufacturing
enhancement area expiration date, in accordance with all provisions
of this section applied as if the manufacturing enhancement area
designation were still in existence and binding.
(2) "Minimum wage" means the wage established by the Industrial
Welfare Commission as provided for in Chapter 1 (commencing with
Section 1171) of Part 4 of Division 2 of the Labor Code.
(3) "Manufacturing enhancement area" means an area designated
pursuant to Section 7073.8 of the Government Code according to the
procedures of Chapter 12.8 (commencing with Section 7070) of Division
7 of Title 1 of the Government Code.
(4) "Manufacturing enhancement area expiration date" means the
date the manufacturing enhancement area designation expires, is no
longer binding, or becomes inoperative.
(5) "Qualified disadvantaged individual" means an individual who
was hired by a qualified taxpayer before January 1, 2011, and
who satisfies all of the following requirements:
(A) (i) At least 90 percent of whose services for the qualified
taxpayer during the taxable year are directly related to the conduct
of the qualified taxpayer's trade or business located in a
manufacturing enhancement area.
(ii) Who performs at least 50 percent of his or her services for
the qualified taxpayer during the taxable year in the manufacturing
enhancement area.
(B) Who is hired by the qualified taxpayer after the designation
of the area as a manufacturing enhancement area in which the
individual's services were primarily performed.
(C) Who is any of the following ,
immediately preceding the individual's commencement of employment
with the qualified taxpayer : , was certified
as 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.
(i) An individual who has been determined eligible for services
under the federal Job Training Partnership Act (29 U.S.C. Sec. 1501
et seq.), or its successor.
(ii) Any voluntary or mandatory registrant under the Greater
Avenues for Independence Act of 1985, or its successor, as provided
pursuant to Article 3.2 (commencing with Section 11320) of Chapter 2
of Part 3 of Division 9 of the Welfare and Institutions Code.
(iii) Any individual who has been certified eligible by the
Employment Development Department under the federal Targeted Jobs Tax
Credit Program, or its successor, whether or not this program is in
effect.
(6) "Qualified taxpayer" means any taxpayer engaged in a trade or
business within a manufacturing enhancement area designated pursuant
to Section 7073.8 of the Government Code and who meets all of the
following requirements:
(A) Is engaged in those lines of business described in Codes 0211
to 0291, inclusive, Code 0723, or in Codes 2011 to 3999, inclusive,
of the Standard Industrial Classification (SIC) Manual published by
the United States Office of Management and Budget, 1987 edition.
(B) At least 50 percent of the qualified taxpayer's workforce
hired after the designation of the manufacturing enhancement area is
composed of individuals who, at the time of hire, are residents of
the county in which the manufacturing enhancement area is located.
(C) Of this percentage of local hires, at least 30 percent shall
be qualified disadvantaged individuals.
(7) "Seasonal employment" means employment by a qualified taxpayer
that has regular and predictable substantial reductions in trade or
business operations.
(c) (1) For purposes of this section, all of the following apply:
(A) All employees of trades or businesses that are under common
control shall be treated as employed by a single qualified taxpayer.
(B) The credit (if any) allowable by this section with respect to
each trade or business shall be determined by reference to its
proportionate share of the expense of the qualified wages giving rise
to the credit and shall be allocated in that manner.
(C) Principles that apply in the case of controlled groups of
corporations, as specified in subdivision (d) of Section 23622.7,
shall apply with respect to determining employment.
(2) If a qualified taxpayer acquires the major portion of a trade
or business of another employer (hereinafter in this paragraph
referred to as the "predecessor") or the major portion of a separate
unit of a trade or business of a predecessor, then, for purposes of
applying this section (other than subdivision (d)) for any calendar
year ending after that acquisition, the employment relationship
between a qualified disadvantaged individual and a qualified taxpayer
shall not be treated as terminated if the qualified disadvantaged
individual continues to be employed in that trade or business.
(d) (1) (A) If the employment, other than seasonal employment, of
any qualified disadvantaged individual, with respect to whom
qualified wages are taken into account under subdivision (b) is
terminated by the qualified taxpayer at any time during the first 270
days of that employment (whether or not consecutive) or before the
close of the 270th calendar day after the day in which that qualified
disadvantaged individual completes 90 days of employment with the
qualified taxpayer, the tax imposed by this part for the taxable year
in which that employment is terminated shall be increased by an
amount equal to the credit allowed under subdivision (a) for that
taxable year and all prior taxable years attributable to qualified
wages paid or incurred with respect to that qualified disadvantaged
individual.
(B) If the seasonal employment of any qualified disadvantaged
individual, with respect to whom qualified wages are taken into
account under subdivision (a) is not continued by the qualified
taxpayer for a period of 270 days of employment during the 60-month
period beginning with the day the qualified disadvantaged individual
commences seasonal employment with the qualified taxpayer, the tax
imposed by this part, for the taxable year that includes the 60th
month following the month in which the qualified disadvantaged
individual commences seasonal employment with the qualified taxpayer,
shall be increased by an amount equal to the credit allowed under
subdivision (a) for that taxable year and all prior taxable years
attributable to qualified wages paid or incurred with respect to that
qualified disadvantaged individual.
(2) (A) Subparagraph (A) of paragraph (1) does not apply to any of
the following:
(i) A termination of employment of a qualified disadvantaged
individual who voluntarily leaves the employment of the qualified
taxpayer.
(ii) A termination of employment of a qualified disadvantaged
individual who, before the close of the period referred to in
subparagraph (A) of paragraph (1), becomes disabled to perform the
services of that employment, unless that disability is removed before
the close of that period and the taxpayer fails to offer
reemployment to that individual.
(iii) A termination of employment of a qualified disadvantaged
individual, if it is determined that the termination was due to the
misconduct (as defined in Sections 1256-30 to 1256-43, inclusive, of
Title 22 of the California Code of Regulations) of that individual.
(iv) A termination of employment of a qualified disadvantaged
individual due to a substantial reduction in the trade or business
operations of the qualified taxpayer.
(v) A termination of employment of a qualified disadvantaged
individual, if that individual is replaced by other qualified
disadvantaged individuals so as to create a net increase in both the
number of employees and the hours of employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of
the following:
(i) A failure to continue the seasonal employment of a qualified
disadvantaged individual who voluntarily fails to return to the
seasonal employment of the qualified taxpayer.
(ii) A failure to continue the seasonal employment of a qualified
disadvantaged individual who, before the close of the period referred
to in subparagraph (B) of paragraph (1), becomes disabled and unable
to perform the services of that seasonal employment, unless that
disability is removed before the close of that period and the
qualified taxpayer fails to offer seasonal employment to that
qualified disadvantaged individual.
(iii) A failure to continue the seasonal employment of a qualified
disadvantaged individual, if it is determined that the failure to
continue the seasonal employment was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that qualified disadvantaged
individual.
(iv) A failure to continue seasonal employment of a qualified
disadvantaged individual due to a substantial reduction in the
regular seasonal trade or business operations of the qualified
taxpayer.
(v) A failure to continue the seasonal employment of a qualified
disadvantaged individual, if that qualified disadvantaged individual
is replaced by other qualified disadvantaged individuals so as to
create a net increase in both the number of seasonal employees and
the hours of seasonal employment.
(C) For purposes of paragraph (1), the employment relationship
between the qualified taxpayer and a qualified disadvantaged
individual shall not be treated as terminated by reason of a mere
change in the form of conducting the trade or business of the
qualified taxpayer, if the qualified disadvantaged individual
continues to be employed in that trade or business and the qualified
taxpayer retains a substantial interest in that trade or business.
(3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
(e) In the case of an estate or trust, both of the following
apply:
(1) The qualified wages for any taxable year shall be apportioned
between the estate or trust and the beneficiaries on the basis of the
income of the estate or trust allocable to each.
(2) Any beneficiary to whom any qualified wages have been
apportioned under paragraph (1) shall be treated (for purposes of
this part) as the employer with respect to those wages.
(f) The credit shall be reduced by the credit allowed under
Section 17053.7. The credit shall also be reduced by the federal
credit allowed under Section 51 of the Internal Revenue Code.
In addition, any deduction otherwise allowed under this part for
the wages or salaries paid or incurred by the qualified taxpayer upon
which the credit is based shall be reduced by the amount of the
credit, prior to any reduction required by subdivision (g) or (h).
(g) In the case where the credit otherwise allowed under this
section exceeds the "net tax" for the taxable year, that portion of
the credit that exceeds the "net tax" may be carried over and added
to the credit, if any, in succeeding years, until the credit is
exhausted. The credit shall be applied first to the earliest taxable
years possible.
(h) (1) The amount of credit otherwise allowed under this section,
including prior year credit carryovers, that may reduce the "net tax"
for the taxable year shall not exceed the amount of tax that would
be imposed on the qualified taxpayer's business income attributed to
a manufacturing enhancement area determined as if that attributed
income represented all of the net income of the qualified taxpayer
subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the
manufacturing enhancement area. For that purpose, the taxpayer's
business income that is attributable to sources in this state first
shall be determined in accordance with Chapter 17 (commencing with
Section 25101) of Part 11. That business income shall be further
apportioned to the manufacturing enhancement area in accordance with
Article 2 (commencing with Section 25120) of Chapter 17 of Part 11,
modified for purposes of this section in accordance with paragraph
(3).
(3) Income shall be apportioned to a manufacturing enhancement
area by multiplying the total California business income of the
taxpayer by a fraction, the numerator of which is the property factor
plus the payroll factor, and the denominator of which is two. For
purposes of this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the manufacturing enhancement
area during the taxable year, and the denominator of which is the
average value of all the taxpayer's real and tangible personal
property owned or rented and used in this state during the taxable
year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the manufacturing
enhancement area during the taxable year for compensation, and the
denominator of which is the total compensation paid by the taxpayer
in this state during the taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "net tax" for the
taxable year, as provided in subdivision (g).
(i) If the taxpayer is allowed a credit pursuant to this section
for qualified wages paid or incurred, only one credit shall be
allowed to the taxpayer under this part with respect to any wage
consisting in whole or in part of those qualified wages.
(j) The qualified taxpayer shall do both of the following:
(1) Obtain from the Employment Development Department, as
permitted by federal law, the local county or city Job
Training Partnership Act administrative entity, the local county GAIN
office federal Workforce Investment Act of 1998
administrative entity, local county CalWORKs program office or
social services agency, or the local government administering the
manufacturing enhancement area, a certification that provides that a
qualified disadvantaged individual meets the eligibility requirements
specified in paragraph (5) of subdivision (b). The Employment
Development Department may provide preliminary screening and referral
to a certifying agency. The Department of Housing and Community
Development shall develop regulations governing the issuance of
certificates pursuant to subdivision (d) of Section 7086 of the
Government Code and shall develop forms for this purpose.
(2) Retain a copy of the certification and provide it upon request
to the Franchise Tax Board.
(k) This section shall remain in effect only until January 1,
2017, and as of that date is repealed.
SEC. 23. Section 17053.70 of the
Revenue and Taxation Code is amended to read:
17053.70. (a) There shall be allowed as a credit against the "net
tax" (as defined in Section 17039) for the taxable year an amount
equal to the sales or use tax paid or incurred during the taxable
year by the taxpayer in connection with the taxpayer's purchase of
qualified property.
(b) For purposes of this section:
(1) "Taxpayer" means a person or entity engaged in a trade or
business within an enterprise zone.
(2) "Qualified property" means:
(A) Any of the following:
(i) Machinery and machinery parts used for fabricating,
processing, assembling, and manufacturing.
(ii) Machinery and machinery parts used for the production of
renewable energy resources.
(iii) Machinery and machinery parts used for either of the
following:
(I) Air pollution control mechanisms.
(II) Water pollution control mechanisms.
(iv) Data processing and communications equipment, including, but
not limited, to computers, computer-automated drafting systems, copy
machines, telephone systems, and faxes.
(v) Motion picture manufacturing equipment central to production
and postproduction, including, but not limited to, cameras, audio
recorders, and digital image and sound processing equipment.
(B) The total cost of qualified property purchased and placed in
service in any taxable year that may be taken into account by any
taxpayer for purposes of claiming this credit shall not exceed one
million dollars ($1,000,000).
(C) The qualified property is used by the taxpayer exclusively in
an enterprise zone.
(D) The qualified property is purchased and placed in service
before the date the enterprise zone designation expires, is no longer
binding, or becomes inoperative.
(3) "Enterprise zone" means the area designated as an enterprise
zone pursuant to Chapter 12.8 (commencing with Section 7070) of
Division 7 of Title 1 of the Government Code.
(c) If the taxpayer has purchased property upon which a use tax
has been paid or incurred, the credit provided by this section shall
be allowed only if qualified property of a comparable quality and
price is not timely available for purchase in this state.
(d) In the case where the credit otherwise allowed under
this section exceeds the "net tax" for the taxable year, that portion
of the credit that exceeds the "net tax" may be carried over and
added to the credit, if any, in the following year, and the
succeeding 14 taxable years if necessary
, until the credit is exhausted. The credit shall be applied first
to the earliest taxable years possible.
(e) Any taxpayer who elects to be subject to this section shall
not be entitled to increase the basis of the qualified property as
otherwise required by Section 164(a) of the Internal Revenue Code
with respect to sales or use tax paid or incurred in connection with
the taxpayer's purchase of qualified property.
(f) (1) The amount of 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) A taxpayer shall be required to register a business pursuant
to the Enterprise Zone Act (Chapter 12.8 (commencing with Section
7070) of Division 7 of Title 1 of the Government Code), and shall
state under penalty of perjury that the taxpayer is a registered
business in one or more enterprise zones, as a condition of claiming
a credit under this section.
(g)
(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) The amendments made to this section by the act adding this
subdivision shall apply only to taxable years beginning on or after
January 1, 2011.
SEC. 24. Section 17053.73 is added to the
Revenue and Taxation Code , to read:
17053.73. (a) There shall be allowed a credit against the "net
tax" (as defined in Section 17039) to a taxpayer that employs a
qualified employee in an enterprise zone during the taxable year. The
credit shall be equal to the sum of each of the following:
(1) Thirty percent of qualified wages in the first year of
employment.
(2) Forty percent of qualified wages in the second year of
employment.
(3) Fifty percent of qualified wages in the third year of
employment.
(b) For purposes of this section:
(1) "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.
(2) "Minimum wage" means the wage established by the Industrial
Welfare Commission as provided for in Chapter 1 (commencing with
Section 1171) of Part 4 of Division 2 of the Labor Code.
(3) (A) "Qualified employee" means an individual who was hired by
a taxpayer on or after January 1, 2011, and who meets all of the
following requirements:
(i) At least 90 percent of whose services for the taxpayer during
the taxable year are directly related to the conduct of the taxpayer'
s trade or business located in an enterprise zone.
(ii) Performs at least 50 percent of his or her services for the
taxpayer during the taxable year in an enterprise zone.
(iii) Is hired by the taxpayer after the date of original
designation of the area in which services were performed as an
enterprise zone.
(iv) Is any of the following:
(I) Immediately preceding the qualified employee's commencement of
employment with the taxpayer, was an economically disadvantaged
individual 14 years of age or older.
(II) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a dislocated worker who meets
any of the following:
(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.
(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.
(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.
(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.
(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.
(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.
(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.
(ih) Has been terminated or laid off, or has received a notice of
termination or layoff, as a consequence of compliance with the
federal Clean Air Act.
(III) 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.
(IV) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a service-connected disabled
veteran, veteran of the Vietnam era, or veteran who is recently
separated from military service.
(V) 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.
(VI) 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:
(ia) Federal Supplemental Security Income benefits.
(ib) Temporary Assistance for Needy Families.
(ic) Medi-Cal or Healthy Families.
(id) Food stamps.
(ie) State and local general assistance.
(if) Intensive services including employment training services
funded through the federal Workforce Investment Act (Public Law
105-220).
(ig) Voluntary or mandatory services under the California Work
Opportunity and Responsibility to Kids (CalWORKs) program (Chapter 2
(commencing with Section 11200) of Part 3 of Division 9 of the
Welfare and Institutions Code).
(ih) Federal Work Opportunity Tax Credit (Section 51 of the
Internal Revenue Code).
(VII) 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.
(VIII) 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,
and the employee is receiving a wage that does not exceed the median
income for a family of four within the census block groups of the
enterprise zone, as defined by the United States Census Bureau.
(IX) 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.
(B) Priority for employment shall be provided to an individual who
is enrolled in a qualified program under the federal Workforce
Investment Act or the CalWORKs program 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.
(4) "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 180 percent of the minimum wage.
(ii) Qualified employees who are employed by a taxpayer in
manufacturing activities described in Codes 311 to 339, inclusive, of
the North American Industry Classification System published by the
United States Office of Management and Budget, 2007 edition,
"qualified wages" means that portion of hourly wages that does not
exceed 202 percent of the minimum wage.
(B) Wages received during the 36-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 shall 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 36-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.
(5) "Seasonal employment" means employment by a taxpayer that has
regular and predictable substantial reductions in trade or business
operations.
(6) "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.
(7) "Zone expiration date" means the date the enterprise zone
designation expires, is no longer binding, or becomes inoperative.
(c) The taxpayer shall do both of the following:
(1) Apply for certification, within 36 months of an employee being
hired, from the Employment Development Department, as permitted by
federal law, the local county or city federal Workforce Investment
Act administrative entity, the local county CalWORKs program 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 businesses located in an enterprise zone as of the
department's implementation of the intensive services activities
funded through the federal Workforce Investment Act. The Department
of Housing and Community Development shall develop regulations
governing the issuance of certificates by local governments pursuant
to subdivision (a) of Section 7086 of the Government Code.
(2) Retain a copy of the certification and provide it upon request
to the Franchise Tax Board.
(d) (1) For purposes of this section:
(A) All employees of trades or businesses, which are not
incorporated, that are under common control shall be treated as
employed by a single taxpayer.
(B) The credit, if any, allowable by this section with respect to
each trade or business shall be determined by reference to its
proportionate share of the expense of the qualified wages giving rise
to the credit, and shall be allocated in that manner.
(C) Principles that apply in the case of controlled groups of
corporations, as specified in subdivision (d) of Section 23622.7,
shall apply with respect to determining employment.
(2) (A) If an employer acquires the major portion of a trade or
business of another employer (hereinafter in this paragraph referred
to as the "predecessor") or the major portion of a separate unit of a
trade or business of a predecessor, then, for purposes of applying
this section (other than subdivision (e)) for any calendar year
ending after that acquisition, the employment relationship between a
qualified employee and an employer shall not be treated as terminated
if the employee continues to be employed in that trade or business.
(B) If a taxpayer relocated to an enterprise zone from within the
state, the taxpayer shall be allowed a credit only for that number of
employees that exceeds the number of employees at the previous
location. The number of employees at the previous location and the
type of jobs undertaken shall be established by the Employment
Development Department. Exceptions to this subparagraph shall be
limited to the following:
(i) Employees who undertake core work activities or activities
that are the primary job duties of the employee that are
significantly different from those activities at the previous
location, as determined by the Employment Development Department.
(ii) Employees of taxpayers that receive a bona fide offer to
relocate to another state.
(iii) Employees who relocate as a result of a natural disaster,
civic unrest, or eminent domain proceeding.
(e) (1) (A) If the employment, other than seasonal employment, of
any qualified employee, with respect to whom qualified wages are
taken into account under subdivision (a), is terminated by the
taxpayer at any time during the first 300 days of that employment
(whether or not consecutive) or before the close of the 300th
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 300
days of employment during the 36-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 36th month following the month in which the qualified
employee commences seasonal employment with the taxpayer, shall be
increased by an amount equal to the credit allowed under subdivision
(a) for that taxable year and all prior taxable years attributable to
qualified wages paid or incurred with respect to that qualified
employee.
(2) (A) Subparagraph (A) of paragraph (1) shall not apply to any
of the following:
(i) A termination of employment of a qualified employee who
voluntarily leaves the employment of the taxpayer.
(ii) A termination of employment of a qualified employee who,
before the close of the period referred to in paragraph (1), becomes
disabled and unable to perform the services of that employment,
unless that disability is removed before the close of that period and
the taxpayer fails to offer reemployment to that employee.
(iii) A termination of employment of a qualified employee, if it
is determined that the termination was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that employee.
(iv) A termination of employment of a qualified employee due to a
substantial reduction in the trade or business operations of the
taxpayer.
(v) A termination of employment of a qualified employee, if that
employee is replaced by other qualified employees so as to create a
net increase in both the number of employees and the hours of
employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of
the following:
(i) A failure to continue the seasonal employment of a qualified
employee who voluntarily fails to return to the seasonal employment
of the taxpayer.
(ii) A failure to continue the seasonal employment of a qualified
employee who, before the close of the period referred to in
subparagraph (B) of paragraph (1), becomes disabled and unable to
perform the services of that seasonal employment, unless that
disability is removed before the close of that period and the
taxpayer fails to offer seasonal employment to that qualified
employee.
(iii) A failure to continue the seasonal employment of a qualified
employee, if it is determined that the failure to continue the
seasonal employment was due to the misconduct (as defined in Sections
1256-30 to 1256-43, inclusive, of Title 22 of the California Code of
Regulations) of that qualified employee.
(iv) A failure to continue seasonal employment of a qualified
employee due to a substantial reduction in the regular seasonal trade
or business operations of the taxpayer.
(v) A failure to continue the seasonal employment of a qualified
employee, if that qualified employee is replaced by other qualified
employees so as to create a net increase in both the number of
seasonal employees and the hours of seasonal employment.
(C) For purposes of paragraph (1), the employment relationship
between the taxpayer and a qualified employee shall not be treated as
terminated by reason of a mere change in the form of conducting the
trade or business of the taxpayer, if the qualified employee
continues to be employed in that trade or business and the taxpayer
retains a substantial interest in that trade or business.
(3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
(f) In the case of an estate or trust, both of the following
apply:
(1) The qualified wages for any taxable year shall be apportioned
between the estate or trust and the beneficiaries on the basis of the
income of the estate or trust allocable to each.
(2) Any beneficiary to whom any qualified wages have been
apportioned under paragraph (1) shall be treated, for purposes of
this part, as the employer with respect to those wages.
(g) 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 (h) or (i).
(h) In the case where the credit otherwise allowed under this
section exceeds the "net tax" for the taxable year, that portion of
the credit that exceeds the "net tax" may be carried over and added
to the credit, if any, in the following year, and the succeeding 14
years if necessary, until the credit is exhausted. The credit shall
be applied first to the earliest taxable years possible.
(i) (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) A credit shall not be allowed under this section for a
taxpayer that has been notified by the Director of Industrial
Relations of a final determination, based on the taxpayer's history
of significant employment violations, that the taxpayer is considered
by the Department of Industrial Relations as a serious, repeated,
and willful violator of
state employment laws, including, but not limited to, demonstrating a
failure to successfully abate these violations.
(k) A taxpayer shall be required to register a business pursuant
to the Enterprise Zone Act (Chapter 12.8 (commencing with Section
7070) of Division 7 of Title 1 of the Government Code), and shall
state under penalty of perjury that the taxpayer is a registered
business in one or more enterprise zones, as a condition of claiming
a credit under this section.
SEC. 25. Section 17053.74 of the
Revenue and Taxation Code is amended to read:
17053.74. (a) There shall be allowed a credit against the "net
tax" (as defined in Section 17039) to a taxpayer who employs a
qualified employee in an enterprise zone during the taxable year. The
credit shall be equal to the sum of each of the following:
(1) Fifty percent of qualified wages in the first year of
employment.
(2) Forty percent of qualified wages in the second year of
employment.
(3) Thirty percent of qualified wages in the third year of
employment.
(4) Twenty percent of qualified wages in the fourth year of
employment.
(5) Ten percent of qualified wages in the fifth year of
employment.
(b) For purposes of this section:
(1) "Qualified wages" means:
(A) (i) Except as provided in clause (ii), that portion of wages
paid or incurred by the taxpayer during the taxable year to qualified
employees that does not exceed 150 percent of the minimum wage.
(ii) For up to 1,350 qualified employees who are employed by the
taxpayer in the Long Beach Enterprise Zone in aircraft manufacturing
activities described in Codes 3721 to 3728, inclusive, and
Code 3812 of the Standard Industrial Classification (SIC) Manual
311 to 339, inclusive, of the North American Industry
Classification System published by the United States Office of
Management and Budget, 1987 2007
edition, "qualified wages" means that portion of hourly wages that
does not exceed 202 percent of the minimum wage.
(B) Wages received during the 60-month period beginning with the
first day the employee commences employment with the taxpayer.
Reemployment in connection with any increase, including a regularly
occurring seasonal increase, in the trade or business operations of
the taxpayer does not constitute commencement of employment for
purposes of this section.
(C) Qualified wages do not include any wages paid or incurred by
the taxpayer on or after the zone expiration date. However, wages
paid or incurred with respect to qualified employees who are employed
by the taxpayer within the enterprise zone within the 60-month
period prior to the zone expiration date shall continue to qualify
for the credit under this section after the zone expiration date, in
accordance with all provisions of this section applied as if the
enterprise zone designation were still in existence and binding.
(2) "Minimum wage" means the wage established by the Industrial
Welfare Commission as provided for in Chapter 1 (commencing with
Section 1171) of Part 4 of Division 2 of the Labor Code.
(3) "Zone expiration date" means the date the enterprise zone
designation expires, is no longer binding, or becomes inoperative.
(4) (A) "Qualified employee" means an individual who was
hired by a taxpayer before January 1, 2011, and who meets all
of the following requirements:
(i) At least 90 percent of whose services for the taxpayer during
the taxable year are directly related to the conduct of the taxpayer'
s trade or business located in an enterprise zone.
(ii) Performs at least 50 percent of his or her services for the
taxpayer during the taxable year in an enterprise zone.
(iii) Is hired by the taxpayer after the date of original
designation of the area in which services were performed as an
enterprise zone.
(iv) Is any of the following:
(I) Immediately preceding the qualified employee's commencement of
employment with the taxpayer, was a person eligible for services
under the federal Job Training Partnership Act (29 U.S.C. Sec. 1501
et seq.), or its successor, who is receiving, or is eligible to
receive, subsidized employment, training, or services funded by the
federal Job Training Partnership Act, or its successor.
(II) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a person eligible to be a
voluntary or mandatory registrant under the Greater Avenues for
Independence Act of 1985 (GAIN) provided for pursuant to Article 3.2
(commencing with Section 11320) of Chapter 2 of Part 3 of Division 9
of the Welfare and Institutions Code, or its successor.
(III)
(I) Immediately preceding the qualified employee's
commencement of employment with the taxpayer, was an economically
disadvantaged individual 14 years of age or older.
(IV)
(II) Immediately preceding the qualified employee's
commencement of employment with the taxpayer, was a dislocated worker
who meets any of the following:
(aa) Has been terminated or laid off or who has received a notice
of termination or layoff from employment, is eligible for or has
exhausted entitlement to unemployment insurance benefits, and is
unlikely to return to his or her previous industry or occupation.
(bb) Has been terminated or has received a notice of termination
of employment as a result of any permanent closure or any substantial
layoff at a plant, facility, or enterprise, including an individual
who has not received written notification but whose employer has made
a public announcement of the closure or layoff.
(cc) Is long-term unemployed and has limited opportunities for
employment or reemployment in the same or a similar occupation in the
area in which the individual resides, including an individual 55
years of age or older who may have substantial barriers to employment
by reason of age.
(dd) Was self-employed (including farmers and ranchers) and is
unemployed as a result of general economic conditions in the
community in which he or she resides or because of natural disasters.
(ee) Was a civilian employee of the Department of Defense employed
at a military installation being closed or realigned under the
Defense Base Closure and Realignment Act of 1990.
(ff) Was an active member of the armed forces or National Guard as
of September 30, 1990, and was either involuntarily separated or
separated pursuant to a special benefits program.
(gg) Is a seasonal or migrant worker who experiences chronic
seasonal unemployment and underemployment in the agriculture
industry, aggravated by continual advancements in technology and
mechanization.
(hh) Has been terminated or laid off, or has received a notice of
termination or layoff, as a consequence of compliance with the
federal Clean Air Act.
(V)
(III) 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 .
(IV) Immediately preceding the
qualified employee's commencement of employment with the taxpayer,
was a service-connected disabled veteran, veteran of the
Vietnam era, or veteran who is recently separated from military
service.
(VI)
(V) 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)
(VI) Immediately preceding the qualified employee's
commencement of employment with the taxpayer, was a person eligible
for or a recipient of any of the following:
(aa) Federal Supplemental Security Income benefits.
(bb) Aid to Families with Dependent Children
Temporary Assistance for Needy Families .
(cc) Medi-Cal or Healthy Families.
(cc)
(dd) Food stamps.
(dd)
(ee) State and local general assistance.
(ff) Intensive services, including employment training services,
funded through the federal Workforce Investment Act (Public Law
105-220).
(gg) Voluntary or mandatory services under the California Work
Opportunity and Responsibility to Kids (CalWORKs) program (Chapter 2
(commencing with Section 11200) of Part 3 of Division 9 of the
Welfare and Institutions Code).
(hh) Federal Work Opportunity Tax Credit (Section 51 of the
Internal Revenue Code).
(VIII)
(VII) 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)
(VIII) 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)
(IX) 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 Workforce Investment Act or the CalWORKs
program or who is eligible as a member of a targeted group
under the Work Opportunity Tax Credit (Section 51 of the Internal
Revenue Code), or its successor.
(5) "Taxpayer" means a person or entity engaged in a trade or
business within an enterprise zone designated pursuant to Chapter
12.8 (commencing with Section 7070) of the Government Code.
(6) "Seasonal employment" means employment by a taxpayer that has
regular and predictable substantial reductions in trade or business
operations.
(c) The taxpayer shall do both of the following:
(1) Obtain from the Employment Development Department, as
permitted by federal law, the local county or city Job
Training Partnership Act administrative entity, the local county GAIN
federal Workforce Investment Act administrative
entity, the local county CalWORKs program 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
businesses located in an enterprise zone as of the department's
implementation of the intensive services activities funded through
the federal Workforce Investment Act . The Department of
Housing and Community Development shall develop regulations governing
the issuance of certificates by local governments pursuant to
subdivision (a) of Section 7086 of the Government Code.
(2) Retain a copy of the certification and provide it upon request
to the Franchise Tax Board.
(d) (1) For purposes of this section:
(A) All employees of trades or businesses, which are not
incorporated, that are under common control shall be treated as
employed by a single taxpayer.
(B) The credit, if any, allowable by this section with respect to
each trade or business shall be determined by reference to its
proportionate share of the expense of the qualified wages giving rise
to the credit, and shall be allocated in that manner.
(C) Principles that apply in the case of controlled groups of
corporations, as specified in subdivision (d) of Section 23622.7,
shall apply with respect to determining employment.
(2) If an employer acquires the major portion of a trade or
business of another employer (hereinafter in this paragraph referred
to as the "predecessor") or the major portion of a separate unit of a
trade or business of a predecessor, then, for purposes of applying
this section (other than subdivision (e)) for any calendar year
ending after that acquisition, the employment relationship between a
qualified employee and an employer shall not be treated as terminated
if the employee continues to be employed in that trade or business.
(e) (1) (A) If the employment, other than seasonal employment, of
any qualified employee, with respect to whom qualified wages are
taken into account under subdivision (a) is terminated by the
taxpayer at any time during the first 270 days of that employment
(whether or not consecutive) or before the close of the 270th
calendar day after the day in which that employee completes 90 days
of employment with the taxpayer, the tax imposed by this part for the
taxable year in which that employment is terminated shall be
increased by an amount equal to the credit allowed under subdivision
(a) for that taxable year and all prior taxable years attributable to
qualified wages paid or incurred with respect to that employee.
(B) If the seasonal employment of any qualified employee, with
respect to whom qualified wages are taken into account under
subdivision (a) is not continued by the taxpayer for a period of 270
days of employment during the 60-month period beginning with the day
the qualified employee commences seasonal employment with the
taxpayer, the tax imposed by this part, for the taxable year that
includes the 60th month following the month in which the qualified
employee commences seasonal employment with the taxpayer, shall be
increased by an amount equal to the credit allowed under subdivision
(a) for that taxable year and all prior taxable years attributable to
qualified wages paid or incurred with respect to that qualified
employee.
(2) (A) Subparagraph (A) of paragraph (1) shall not apply to any
of the following:
(i) A termination of employment of a qualified employee who
voluntarily leaves the employment of the taxpayer.
(ii) A termination of employment of a qualified employee who,
before the close of the period referred to in paragraph (1), becomes
disabled and unable to perform the services of that employment,
unless that disability is removed before the close of that period and
the taxpayer fails to offer reemployment to that employee.
(iii) A termination of employment of a qualified employee, if it
is determined that the termination was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that employee.
(iv) A termination of employment of a qualified employee due to a
substantial reduction in the trade or business operations of the
taxpayer.
(v) A termination of employment of a qualified employee, if that
employee is replaced by other qualified employees so as to create a
net increase in both the number of employees and the hours of
employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of
the following:
(i) A failure to continue the seasonal employment of a qualified
employee who voluntarily fails to return to the seasonal employment
of the taxpayer.
(ii) A failure to continue the seasonal employment of a qualified
employee who, before the close of the period referred to in
subparagraph (B) of paragraph (1), becomes disabled and unable to
perform the services of that seasonal employment, unless that
disability is removed before the close of that period and the
taxpayer fails to offer seasonal employment to that qualified
employee.
(iii) A failure to continue the seasonal employment of a qualified
employee, if it is determined that the failure to continue the
seasonal employment was due to the misconduct (as defined in Sections
1256-30 to 1256-43, inclusive, of Title 22 of the California Code of
Regulations) of that qualified employee.
(iv) A failure to continue seasonal employment of a qualified
employee due to a substantial reduction in the regular seasonal trade
or business operations of the taxpayer.
(v) A failure to continue the seasonal employment of a qualified
employee, if that qualified employee is replaced by other qualified
employees so as to create a net increase in both the number of
seasonal employees and the hours of seasonal employment.
(C) For purposes of paragraph (1), the employment relationship
between the taxpayer and a qualified employee shall not be treated as
terminated by reason of a mere change in the form of conducting the
trade or business of the taxpayer, if the qualified employee
continues to be employed in that trade or business and the taxpayer
retains a substantial interest in that trade or business.
(3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
(f) In the case of an estate or trust, both of the following
apply:
(1) The qualified wages for any taxable year shall be apportioned
between the estate or trust and the beneficiaries on the basis of the
income of the estate or trust allocable to each.
(2) Any beneficiary to whom any qualified wages have been
apportioned under paragraph (1) shall be treated, for purposes of
this part, as the employer with respect to those wages.
(g) For purposes of this section, "enterprise zone" means an area
designated as an enterprise zone pursuant to Chapter 12.8 (commencing
with Section 7070) of Division 7 of Title 1 of the Government Code.
(h) The credit allowable under this section shall be reduced by
the credit allowed under Sections 17053.10, 17053.17 , and
17053.46 claimed for the same employee. The credit shall also be
reduced by the federal credit allowed under Section 51 of the
Internal Revenue Code.
In addition, any deduction otherwise allowed under this part for
the wages or salaries paid or incurred by the taxpayer upon which the
credit is based shall be reduced by the amount of the credit, prior
to any reduction required by subdivision (i) or (j).
(i) In the case where the credit otherwise allowed under this
section exceeds the "net tax" for the taxable year, that portion of
the credit that exceeds the "net tax" may be carried over and added
to the credit, if any, in succeeding taxable years, until the credit
is exhausted. The credit shall be applied first to the earliest
taxable years possible.
(j) (1) The amount of the credit otherwise allowed under this
section and Section 17053.70, including any credit carryover from
prior years, that may reduce the "net tax" for the taxable year shall
not exceed the amount of tax which would be imposed on the taxpayer'
s business income attributable to the enterprise zone determined as
if that attributable income represented all of the income of the
taxpayer subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the
enterprise zone. For that purpose, the taxpayer's business income
attributable to sources in this state first shall be determined in
accordance with Chapter 17 (commencing with Section 25101) of Part
11. That business income shall be further apportioned to the
enterprise zone in accordance with Article 2 (commencing with Section
25120) of Chapter 17 of Part 11, modified for purposes of this
section in accordance with paragraph (3).
(3) Business income shall be apportioned to the enterprise zone by
multiplying the total California business income of the taxpayer by
a fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is two. For purposes of
this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the enterprise zone during the
taxable year, and the denominator of which is the average value of
all the taxpayer's real and tangible personal property owned or
rented and used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the enterprise zone during
the taxable year for compensation, and the denominator of which is
the total compensation paid by the taxpayer in this state during the
taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "net tax" for the
taxable year, as provided in subdivision (i).
(k) The changes made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 1997.
(l) The changes made to this section by
the act adding this subdivision shall apply only to qualified
employees hired prior to January 1, 2011.
(m) This section shall remain in effect only until January 1,
2017, and as of that date is repealed.
SEC. 26. Section 17235 of the Revenue
and Taxation Code is amended to read:
17235. (a) There (1)
For taxable years beginning on or after January 1, 2011, and
before January 1, 2013, there shall be allowed as a deduction in an
amount equal to 50 percent of the amount of net interest received by
the taxpayer in payment on indebtedness of a person or entity engaged
in the conduct of a trade or business located in an enterprise zone.
(2) For taxable years beginning
on or after January 1, 2013, there shall be
allowed as a deduction the amount of net interest received by the
taxpayer in payment on indebtedness of a person or entity engaged in
the conduct of a trade or business located in an enterprise zone.
(b) No A deduction shall be allowed
under this section unless only if at
the time the indebtedness is incurred each of the following
requirements are met:
(1) The trade or business is located solely within an enterprise
zone.
(2) The indebtedness is incurred solely in connection with
activity within the enterprise zone.
(3) The taxpayer has no equity or other ownership interest in the
debtor.
(c) "Enterprise zone" means an area designated as an enterprise
zone pursuant to Chapter 12.8 (commencing with Section 7070) of
Division 7 of Title 1 of the Government Code.
(d) For taxable years beginning on or after January 1, 2011, a
taxpayer shall be required to register a business pursuant to the
Enterprise Zone Act (Chapter 12.8 (commencing with Section 7070) of
Division 7 of Title 1 of the Government Code), and shall state under
penalty of perjury that the taxpayer is a registered business in one
or more enterprise zones, as a condition of claiming a deduction
under this section.
(e) The changes made to this section by the act adding this
subdivision shall apply only to taxable years beginning on or after
January 1, 2011.
SEC. 27. Section 23036.3 is added to the
Revenue and Taxation Code , to read:
23036.3. (a) Notwithstanding any provision of this part or Part
10.2 (commencing with Section 18401) to the contrary, for each
taxable year beginning on or after January 1, 2011, and before
January 1, 2013, the total of all credits otherwise allowable under
Sections 23612.2, 23622.6, 23622.7, 23645, and 23646, including the
carryover of these credits, for the taxable year shall not reduce the
"tax," as defined in Section 23036, below the applicable amount.
(b) For purposes of this section, the "applicable amount" shall be
equal to 50 percent of the "tax," as defined in Section 23036,
before application of any credits.
(c) The amount of any credit otherwise allowable for the taxable
year under Sections 23612.2, 23622.6, 23622.7, 23645, and 23646 that
is not allowed due to the application of this section shall remain a
credit carryover amount as otherwise allowed by this part.
(d) The carryover period for any credit that is not allowed due to
the application of this section shall be increased by the number of
taxable years the credit, or any portion thereof, was not allowed.
(e) This section shall not apply to a taxpayer with gross income
of less than one million dollars ($1,000,000) for the taxable year.
(f) This section shall remain in effect only until December 1,
2013, and as of that date is repealed.
SEC. 28. Section 23612.2 of the Revenue
and Taxation Code is amended to read:
23612.2. (a) There shall be allowed as a credit against the "tax"
(as defined by Section 23036) for the taxable year an amount equal
to the sales or use tax paid or incurred during the taxable year by
the taxpayer in connection with the taxpayer's purchase of qualified
property.
(b) For purposes of this section:
(1) "Taxpayer" means a corporation engaged in a trade or business
within an enterprise zone.
(2) "Qualified property" means:
(A) Any of the following:
(i) Machinery and machinery parts used for fabricating,
processing, assembling, and manufacturing.
(ii) Machinery and machinery parts used for the production of
renewable energy resources.
(iii) Machinery and machinery parts used for either of the
following:
(I) Air pollution control mechanisms.
(II) Water pollution control mechanisms.
(iv) Data-processing and communications equipment, including, but
not limited to, computers, computer-automated drafting systems, copy
machines, telephone systems, and faxes.
(v) Motion picture manufacturing equipment central to production
and postproduction, including, but not limited to, cameras, audio
recorders, and digital image and sound processing equipment.
(B) The total cost of qualified property purchased and
placed in service in any taxable year that may be taken into account
by any taxpayer for purposes of claiming this credit shall not exceed
twenty million dollars ($20,000,000).
(C) The qualified property is used by the taxpayer exclusively in
an enterprise zone.
(D) The qualified property is purchased and placed in service
before the date the enterprise zone designation expires, is no longer
binding, or becomes inoperative.
(3) "Enterprise zone" means the area designated as an enterprise
zone pursuant to Chapter 12.8 (commencing with Section 7070) of
Division 7 of Title 1 of the Government Code.
(c) If the taxpayer has purchased property upon which a use tax
has been paid or incurred, the credit provided by this section shall
be allowed only if qualified property of a comparable quality and
price is not timely available for purchase in this state.
(d) In the case where the credit otherwise allowed under this
section exceeds the "tax" for the taxable year, that portion of the
credit which exceeds the "tax" may be carried over and added to the
credit, if any, in the following year, and the succeeding
14 years if necessary, until the credit is exhausted. The
credit shall be applied first to the earliest taxable years possible.
(e) Any taxpayer who elects to be subject to this section shall
not be entitled to increase the basis of the qualified property as
otherwise required by Section 164(a) of the Internal Revenue Code
with respect to sales or use tax paid or incurred in connection with
the taxpayer's purchase of qualified property.
(f) (1) The amount of credit otherwise allowed under this section
and Section 23622.7, including any credit carryover from prior years,
that may reduce the "tax" for the taxable year shall not exceed the
amount of tax which would be imposed on the taxpayer's business
income attributable to the enterprise zone determined as if that
attributable income represented all of the income of the taxpayer
subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the
enterprise zone. For that purpose, the taxpayer's business income
attributable to sources in this state first shall be determined in
accordance with Chapter 17 (commencing with Section 25101). That
business income shall be further apportioned to the enterprise zone
in accordance with Article 2 (commencing with Section 25120) of
Chapter 17, modified for purposes of this section in accordance with
paragraph (3).
(3) Business income shall be apportioned to the enterprise zone by
multiplying the total California business income of the taxpayer by
a fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is two. For purposes of
this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the enterprise zone during the
taxable year, and the denominator of which is the average value of
all the taxpayer's real and tangible personal property owned or
rented and used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the enterprise zone during
the taxable year for compensation, and the denominator of which is
the total compensation paid by the taxpayer in this state during the
taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "tax" for the taxable
year, as provided in subdivision (d).
(g) A taxpayer shall be required to register a business pursuant
to the Enterprise Zone Act (Chapter 12.8 (commencing with Section
7070) of Division 7 of Title 1 of the Government Code), and shall
state under penalty of perjury that the taxpayer is a registered
business in one or more enterprise zones, as a condition of claiming
a credit under this section.
(g)
(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) The amendments made to this section by the act adding this
subdivision shall apply only to taxable years beginning on or after
January 1, 2011.
SEC. 29. Section 23622.6 is added to the
Revenue and Taxation Code , to read:
23622.6. (a) For each taxable year beginning on or after January
1, 2011, there shall be allowed a credit against the "tax" (as
defined by Section 23036) to a taxpayer that employs a qualified
employee in an enterprise zone during the taxable year. The credit
shall be equal to the sum of each of the following:
(1) Thirty percent of qualified wages in the first year of
employment.
(2) Forty percent of qualified wages in the second year of
employment.
(3) Fifty percent of qualified wages in the third year of
employment.
(b) For purposes of this section:
(1) "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) "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.
(3) "Minimum wage" means the wage established by the Industrial
Welfare Commission as provided for in Chapter 1 (commencing with
Section 1171) of Part 4 of Division 2 of the Labor Code.
(4) (A) "Qualified employee" means an individual who was hired by
a taxpayer on or after January 1, 2011, and who meets all of the
following requirements:
(i) At least 90 percent of whose services for the taxpayer during
the taxable year are directly related to the conduct of the taxpayer'
s trade or business located in an enterprise zone.
(ii) Performs at least 50 percent of his or her services for the
taxpayer during the taxable year in an enterprise zone.
(iii) Is hired by the taxpayer after the date of original
designation of the area in which services were performed as an
enterprise zone.
(iv) Is any of the following:
(I) Immediately preceding the qualified employee's commencement of
employment with the taxpayer, was an economically disadvantaged
individual 14 years of age or older.
(II) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a dislocated worker who meets
any of the following:
(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.
(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.
(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.
(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.
(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.
(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.
(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.
(ih) Has been terminated or laid off, or has received a notice of
termination or layoff, as a consequence of compliance with the
federal Clean Air Act.
(III) 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.
(IV) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a service-connected disabled
veteran, veteran of the Vietnam era, or veteran who is recently
separated from military service.
(V) 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.
(VI) 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:
(ia) Federal Supplemental Security Income benefits.
(ib) Temporary Assistance for Needy Families.
(ic) Medi-Cal or Healthy Families.
(id) Food stamps.
(ie) State and local general assistance.
(if) Intensive services including employment training services
funded through the federal Workforce Investment Act (Public Law
105-220).
(ig) Voluntary or mandatory services under the California Work
Opportunity and Responsibility to Kids (CalWORKs) program (Chapter 2
(commencing with Section 11200) of Part 3 of Division 9 of the
Welfare and Institutions Code).
(ih) Federal Work Opportunity Tax Credit (Section 51 of the
Internal Revenue Code).
(VII) 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.
(VIII) 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,
and the employee is receiving a wage that does not exceed the median
income for a family of four within the census block groups of the
enterprise zone, as defined by the United States Census Bureau.
(IX) 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.
(B) Priority for employment shall be provided to an individual who
is enrolled in a qualified program under the federal Workforce
Investment Act or the CalWORKs program or who is eligible as a member
of a targeted group under the Work Opportunity Tax Credit (Section
51 of the Internal Revenue Code), or its successor.
(5) "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 180 percent of the minimum wage.
(ii) Qualified employees who are employed by a taxpayer
manufacturing activities described in Codes 311 to 339, inclusive, of
the North American Industry Classification System published by the
United States Office of Management and Budget, 2007 edition,
"qualified wages" means that portion of hourly wages that does not
exceed 202 percent of the minimum wage.
(B) Wages received during the 36-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 shall 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 36-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.
(6) "Seasonal employment" means employment by a taxpayer that has
regular and predictable substantial reductions in trade or business
operations.
(7) "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.
(8) "Zone expiration date" means the date the enterprise zone
designation expires, is no longer binding, or becomes inoperative.
(c) The taxpayer shall do both of the following:
(1) Apply for certification, within 36 months of an employee being
hired, from the Employment Development Department, as permitted by
federal law, the local county or city federal Workforce Investment
Act administrative entity, the local county CalWORKs program 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 businesses located in an enterprise zone as part of
the department's implementation of the intensive services activities
funded through the federal Workforce Investment Act. The Department
of Housing and Community Development shall develop regulations
governing the issuance of certificates by local governments pursuant
to subdivision (a) of Section 7086 of the Government Code.
(2) Retain a copy of the certification and provide it upon request
to the Franchise Tax Board.
(d) (1) For purposes of this section:
(A) All employees of all corporations which are members of the
same controlled group of corporations shall be treated as employed by
a single taxpayer.
(B) The credit, if any, allowable by this section to each member
shall be determined by reference to its proportionate share of the
expense of the qualified wages giving rise to the credit, and shall
be allocated in that manner.
(2) (A) If an employer acquires the major portion of a trade or
business of another employer (hereinafter in this paragraph referred
to as the "predecessor") or the major portion of a separate unit of a
trade or business of a predecessor, then, for purposes of applying
this section (other than subdivision (e)) for any calendar year
ending after that acquisition, the employment relationship between a
qualified employee and an employer shall not be treated as terminated
if the employee continues to be employed in that trade or business.
(B) If a taxpayer relocated to an enterprise zone from within the
state, the taxpayer shall be allowed a credit only for that number of
employees that exceeds the number of employees at the previous
location. The number of employees at the previous location and the
type of jobs undertaken shall be established by the Employment
Development Department. Exceptions to this subparagraph shall be
limited to the following:
(i) Employees who undertake core work activities or activities
that are the primary job duties of the employee that are
significantly different from those activities at the previous
location, as determined by the Employment Development Department.
(ii) Employees of taxpayers that receive a bona fide offer to
relocate to another state.
(iii) Employees who relocate as a result of a natural disaster,
civic unrest, or eminent domain proceeding.
(e) (1) (A) If the employment, other than seasonal employment, of
any qualified employee with respect to whom qualified wages are taken
into account under subdivision (a), is terminated by the taxpayer at
any time during the first 300 days of that employment, whether or
not consecutive, or before the close of the 300th 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 300
days of employment during the 36-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 36th month following the month in which the qualified
employee commences seasonal employment with the taxpayer, shall be
increased by an amount equal to the credit allowed under subdivision
(a) for that taxable year and all prior taxable years attributable to
qualified wages paid or incurred with respect to that qualified
employee.
(2) (A) Subparagraph (A) of paragraph (1) shall not apply to any
of the following:
(i) A termination of employment of a qualified employee who
voluntarily leaves the employment of the taxpayer.
(ii) A termination of employment of a qualified employee who,
before the close of the period referred to in subparagraph (A) of
paragraph (1), becomes disabled and unable to perform the services of
that employment, unless that disability is removed before the close
of that period and the taxpayer fails to offer reemployment to that
employee.
(iii) A termination of employment of a qualified employee, if it
is determined that the termination was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that employee.
(iv) A termination of employment of a qualified employee due to a
substantial reduction in the trade or business operations of the
taxpayer.
(v) A termination of employment of a qualified employee, if that
employee is replaced by other qualified employees so as to create a
net increase in both the number of employees and the hours of
employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of
the following:
(i) A failure to continue the seasonal employment of a qualified
employee who voluntarily fails to return to the seasonal employment
of the taxpayer.
(ii) A failure to continue the seasonal employment of a qualified
employee who, before the close of the period referred to in
subparagraph (B) of paragraph (1), becomes disabled and unable to
perform the services of that seasonal employment, unless that
disability is removed before the close of that period and the
taxpayer fails to offer seasonal employment to that qualified
employee.
(iii) A failure to continue the seasonal employment of a qualified
employee, if it is determined that the failure to continue the
seasonal employment was due to the misconduct (as defined in Sections
1256-30 to 1256-43, inclusive, of Title 22 of the California Code of
Regulations) of that qualified employee.
(iv) A failure to continue seasonal employment of a qualified
employee due to a substantial reduction in the regular seasonal trade
or business operations of the taxpayer.
(v) A failure to continue the seasonal employment of a qualified
employee, if that qualified employee is replaced by other qualified
employees so as to create a net increase in both the number of
seasonal employees and the hours of seasonal employment.
(C) For purposes of paragraph (1), the employment relationship
between the taxpayer and a qualified employee shall not be treated as
terminated by either of the following:
(i) By a transaction to which Section 381(a) of the Internal
Revenue Code applies, if the qualified employee continues to be
employed by the acquiring corporation.
(ii) By reason of a mere change in the form of conducting the
trade or business of the taxpayer, if the qualified employee
continues to be employed in that trade or business and the taxpayer
retains a substantial interest in that trade or business.
(3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
(f) Rules similar to the rules provided in Section 46(e) and (h)
of the Internal Revenue Code shall apply to both of the following:
(1) An organization to which Section 593 of the Internal Revenue
Code applies.
(2) A regulated investment company or a real estate investment
trust subject to taxation under this part.
(g) For purposes of this section, "enterprise zone" means an area
designated as an enterprise zone pursuant to Chapter 12.8 (commencing
with Section 7070) of Division 7 of Title 1 of the Government Code.
(h) The credit allowable under this section shall be reduced by
the credit allowed under Sections 23623.5, 23625, and 23646 claimed
for the same employee. The credit shall also be reduced by the
federal credit allowed under Section 51 of the Internal Revenue Code.
In addition, any deduction otherwise allowed under this part for
the wages or salaries paid or incurred by the taxpayer upon which the
credit is based shall be reduced by the amount of the credit, prior
to any reduction required by subdivision (i) or (j).
(i) In the case where the credit otherwise allowed under this
section exceeds the "tax" for the taxable year, that portion of the
credit that exceeds the "tax" may be carried over and added to the
credit, if any, in the following year, and the succeeding 14 taxable
years, or until the credit is exhausted. The credit shall be applied
first to the earliest taxable years possible.
(j) (1) The amount of the credit otherwise allowed under this
section and Section 23612.2, including any credit carryover from
prior years, that may reduce the "tax" for the taxable year shall not
exceed the amount of tax which would be imposed on the taxpayer's
business income attributable to the enterprise zone determined as if
that attributable income represented all of the income of the
taxpayer subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the
enterprise zone. For that purpose, the taxpayer's business
attributable to sources in this state first shall be determined in
accordance with Chapter 17 (commencing with Section 25101). That
business income shall be further apportioned to the enterprise zone
in accordance with Article 2 (commencing with Section 25120) of
Chapter 17, modified for purposes of this section in accordance with
paragraph (3).
(3) Business income shall be apportioned to the enterprise zone by
multiplying the total California business income of the taxpayer by
a fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of
which is two. For purposes of this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the enterprise zone during the
income year, and the denominator of which is the average value of all
the taxpayer's real and tangible personal property owned or rented
and used in this state during the income year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the enterprise zone during
the income year for compensation, and the denominator of which is the
total compensation paid by the taxpayer in this state during the
income year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "tax" for the taxable
year, as provided in subdivision (i).
(k) A credit shall not be allowed under this section for a
taxpayer that has been notified by the Director of Industrial
Relations of a final determination, based on the taxpayer's history
of significant employment violations, that the taxpayer is considered
by the Department of Industrial Relations as a serious, repeated,
and willful violator of state employment laws, including, but not
limited to, demonstrating a failure to successfully abate these
violations.
(l) A taxpayer shall be required to register a business pursuant
to the Enterprise Zone Act (Chapter 12.8 (commencing with Section
7070) of Division 7 of Title 1 of the Government Code), and shall
state under penalty of perjury that the taxpayer is a registered
business in one or more enterprise zones, as a condition of claiming
a credit under this section.
SEC. 30. Section 23622.7 of the Revenue
and Taxation Code is amended to read:
23622.7. (a) There shall be allowed a credit against the "tax"
(as defined by Section 23036) to a taxpayer who employs a qualified
employee in an enterprise zone during the taxable year. The credit
shall be equal to the sum of each of the following:
(1) Fifty percent of qualified wages in the first year of
employment.
(2) Forty percent of qualified wages in the second year of
employment.
(3) Thirty percent of qualified wages in the third year of
employment.
(4) Twenty percent of qualified wages in the fourth year of
employment.
(5) Ten percent of qualified wages in the fifth year of
employment.
(b) For purposes of this section:
(1) "Qualified wages" means:
(A) (i) Except as provided in clause (ii), that portion of wages
paid or incurred by the taxpayer during the taxable year to qualified
employees that does not exceed 150 percent of the minimum wage.
(ii) For up to 1,350 qualified employees who are employed by the
taxpayer in the Long Beach Enterprise Zone in aircraft manufacturing
activities described in Codes 3721 to 3728, inclusive, and
Code 3812 of the Standard Industrial Classification (SIC) Manual
311 to 339, inclusive, of the North American Industry
Classification System published by the United States Office of
Management and Budget, 1987 2007
edition, "qualified wages" means that portion of hourly wages that
does not exceed 202 percent of the minimum wage.
(B) Wages received during the 60-month period beginning with the
first day the employee commences employment with the taxpayer.
Reemployment in connection with any increase, including a regularly
occurring seasonal increase, in the trade or business operations of
the taxpayer does not constitute commencement of employment for
purposes of this section.
(C) Qualified wages do not include any wages paid or incurred by
the taxpayer on or after the zone expiration date. However, wages
paid or incurred with respect to qualified employees who are employed
by the taxpayer within the enterprise zone within the 60-month
period prior to the zone expiration date shall continue to qualify
for the credit under this section after the zone expiration date, in
accordance with all provisions of this section applied as if the
enterprise zone designation were still in existence and binding.
(2) "Minimum wage" means the wage established by the Industrial
Welfare Commission as provided for in Chapter 1 (commencing with
Section 1171) of Part 4 of Division 2 of the Labor Code.
(3) "Zone expiration date" means the date the enterprise zone
designation expires, is no longer binding, or becomes inoperative.
(4) (A) "Qualified employee" means an individual who was
hired by a taxpayer before January 1, 2011, and who meets all
of the following requirements:
(i) At least 90 percent of whose services for the taxpayer during
the taxable year are directly related to the conduct of the taxpayer'
s trade or business located in an enterprise zone.
(ii) Performs at least 50 percent of his or her services for the
taxpayer during the taxable year in an enterprise zone.
(iii) Is hired by the taxpayer after the date of original
designation of the area in which services were performed as an
enterprise zone.
(iv) Is any of the following:
(I) Immediately preceding the qualified employee's commencement of
employment with the taxpayer, was a person eligible for services
under the federal Job Training Partnership Act (29 U.S.C. Sec. 1501
et seq.), or its successor, who is receiving, or is eligible to
receive, subsidized employment, training, or services funded by the
federal Job Training Partnership Act, or its successor.
(II) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a person eligible to be a
voluntary or mandatory registrant under the Greater Avenues for
Independence Act of 1985 (GAIN) provided for pursuant to Article 3.2
(commencing with Section 11320) of Chapter 2 of Part 3 of Division 9
of the Welfare and Institutions Code, or its successor.
(III)
(I) Immediately preceding the qualified employee's
commencement of employment with the taxpayer, was an economically
disadvantaged individual 14 years of age or older.
(IV)
(II) Immediately preceding the qualified employee's
commencement of employment with the taxpayer, was a dislocated worker
who meets any of the following:
(aa) Has been terminated or laid off or who has received a notice
of termination or layoff from employment, is eligible for or has
exhausted entitlement to unemployment insurance benefits, and is
unlikely to return to his or her previous industry or occupation.
(bb) Has been terminated or has received a notice of termination
of employment as a result of any permanent closure or any substantial
layoff at a plant, facility, or enterprise, including an individual
who has not received written notification but whose employer has made
a public announcement of the closure or layoff.
(cc) Is long-term unemployed and has limited opportunities for
employment or reemployment in the same or a similar occupation in the
area in which the individual resides, including an individual 55
years of age or older who may have substantial barriers to employment
by reason of age.
(dd) Was self-employed (including farmers and ranchers) and is
unemployed as a result of general economic conditions in the
community in which he or she resides or because of natural disasters.
(ee) Was a civilian employee of the Department of Defense employed
at a military installation being closed or realigned under the
Defense Base Closure and Realignment Act of 1990.
(ff) Was an active member of the armed forces or National Guard as
of September 30, 1990, and was either involuntarily separated or
separated pursuant to a special benefits program.
(gg) Is a seasonal or migrant worker who experiences chronic
seasonal unemployment and underemployment in the agriculture
industry, aggravated by continual advancements in technology and
mechanization.
(hh) Has been terminated or laid off, or has received a notice of
termination or layoff, as a consequence of compliance with the
federal Clean Air Act.
(V)
(III) 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 .
(IV) Immediately preceding the
qualified employee's commencement of employment with the taxpayer,
was a service-connected disabled veteran, veteran of the
Vietnam era, or veteran who is recently separated from military
service.
(VI)
(V) 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)
(VI) Immediately preceding the qualified employee's
commencement of employment with the taxpayer, was a person eligible
for or a recipient of any of the following:
(aa) Federal Supplemental Security Income benefits.
(bb) Aid to Families with Dependent Children
Temporary Assistance for Needy Families .
(cc) Medi-Cal or Healthy Families.
(cc)
(dd) Food stamps.
(dd)
(ee) State and local general assistance.
(ff) Intensive services, including employment training services,
funded through the federal Workforce Investment Act (Public Law
105-220).
(gg) Voluntary or mandatory services under the California Work
Opportunity and Responsibility to Kids (CalWORKs) program (Chapter 2
(commencing with Section 11200) of Part 3 of Division 9 of the
Welfare and Institutions Code).
(hh) Federal Work Opportunity Tax Credit (Section 51 of the
Internal Revenue Code).
(VIII)
(VII) 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)
(VIII) 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)
(IX) 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 Workforce Investment Act or the CalWORKs
program or who is eligible as a member of a targeted group
under the Work Opportunity Tax Credit (Section 51 of the Internal
Revenue Code), or its successor.
(5) "Taxpayer" means a corporation engaged in a trade or business
within an enterprise zone designated pursuant to Chapter 12.8
(commencing with Section 7070) of Division 7 of Title 1 of the
Government Code.
(6) "Seasonal employment" means employment by a taxpayer that has
regular and predictable substantial reductions in trade or business
operations.
(c) The taxpayer shall do both of the following:
(1) Obtain from the Employment Development Department, as
permitted by federal law, the local county or city Job
Training Partnership Act administrative entity, the local county GAIN
federal Workforce Investment Act administrative
entity, the local county CalWORKs program 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 businesses located in
a zone as part of the department's implementation of the intensive
services activities funded through the federal Workforce Investment
Act . The Department of Housing and Community Development shall
develop regulations governing the issuance of certificates by local
governments pursuant to subdivision (a) of Section 7086 of the
Government Code.
(2) Retain a copy of the certification and provide it upon request
to the Franchise Tax Board.
(d) (1) For purposes of this section:
(A) All employees of all corporations which are members of the
same controlled group of corporations shall be treated as employed by
a single taxpayer.
(B) The credit, if any, allowable by this section to each member
shall be determined by reference to its proportionate share of the
expense of the qualified wages giving rise to the credit, and shall
be allocated in that manner.
(C) For purposes of this subdivision, "controlled group of
corporations" means "controlled group of corporations" as defined in
Section 1563(a) of the Internal Revenue Code, except that:
(i) "More than 50 percent" shall be substituted for "at least 80
percent" each place it appears in Section 1563(a)(1) of the Internal
Revenue Code.
(ii) The determination shall be made without regard to subsections
(a)(4) and (e)(3)(C) of Section 1563 of the Internal Revenue Code.
(2) If an employer acquires the major portion of a trade or
business of another employer (hereinafter in this paragraph referred
to as the "predecessor") or the major portion of a separate unit of a
trade or business of a predecessor, then, for purposes of applying
this section (other than subdivision (e)) for any calendar year
ending after that acquisition, the employment relationship between a
qualified employee and an employer shall not be treated as terminated
if the employee continues to be employed in that trade or business.
(e) (1) (A) If the employment, other than seasonal employment, of
any qualified employee with respect to whom qualified wages are taken
into account under subdivision (a) is terminated by the taxpayer at
any time during the first 270 days of that employment, whether or not
consecutive, or before the close of the 270th calendar day after the
day in which that employee completes 90 days of employment with the
taxpayer, the tax imposed by this part for the taxable year in which
that employment is terminated shall be increased by an amount equal
to the credit allowed under subdivision (a) for that taxable year and
all prior taxable years attributable to qualified wages paid or
incurred with respect to that employee.
(B) If the seasonal employment of any qualified employee, with
respect to whom qualified wages are taken into account under
subdivision (a) is not continued by the taxpayer for a period of 270
days of employment during the 60-month period beginning with the day
the qualified employee commences seasonal employment with the
taxpayer, the tax imposed by this part, for the taxable year that
includes the 60th month following the month in which the qualified
employee commences seasonal employment with the taxpayer, shall be
increased by an amount equal to the credit allowed under subdivision
(a) for that taxable year and all prior taxable years attributable to
qualified wages paid or incurred with respect to that qualified
employee.
(2) (A) Subparagraph (A) of paragraph (1) shall not apply to any
of the following:
(i) A termination of employment of a qualified employee who
voluntarily leaves the employment of the taxpayer.
(ii) A termination of employment of a qualified employee who,
before the close of the period referred to in subparagraph (A) of
paragraph (1), becomes disabled and unable to perform the services of
that employment, unless that disability is removed before the close
of that period and the taxpayer fails to offer reemployment to that
employee.
(iii) A termination of employment of a qualified employee, if it
is determined that the termination was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that employee.
(iv) A termination of employment of a qualified employee due to a
substantial reduction in the trade or business operations of the
taxpayer.
(v) A termination of employment of a qualified employee, if that
employee is replaced by other qualified employees so as to create a
net increase in both the number of employees and the hours of
employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of
the following:
(i) A failure to continue the seasonal employment of a qualified
employee who voluntarily fails to return to the seasonal employment
of the taxpayer.
(ii) A failure to continue the seasonal employment of a qualified
employee who, before the close of the period referred to in
subparagraph (B) of paragraph (1), becomes disabled and unable to
perform the services of that seasonal employment, unless that
disability is removed before the close of that period and the
taxpayer fails to offer seasonal employment to that qualified
employee.
(iii) A failure to continue the seasonal employment of a qualified
employee, if it is determined that the failure to continue the
seasonal employment was due to the misconduct (as defined in Sections
1256-30 to 1256-43, inclusive, of Title 22 of the California Code of
Regulations) of that qualified employee.
(iv) A failure to continue seasonal employment of a qualified
employee due to a substantial reduction in the regular seasonal trade
or business operations of the taxpayer.
(v) A failure to continue the seasonal employment of a qualified
employee, if that qualified employee is replaced by other qualified
employees so as to create a net increase in both the number of
seasonal employees and the hours of seasonal employment.
(C) For purposes of paragraph (1), the employment relationship
between the taxpayer and a qualified employee shall not be treated as
terminated by either of the following:
(i) By a transaction to which Section 381(a) of the Internal
Revenue Code applies, if the qualified employee continues to be
employed by the acquiring corporation.
(ii) By reason of a mere change in the form of conducting the
trade or business of the taxpayer, if the qualified employee
continues to be employed in that trade or business and the taxpayer
retains a substantial interest in that trade or business.
(3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
(f) Rules similar to the rules provided in Section 46(e) and (h)
of the Internal Revenue Code shall apply to both of the following:
(1) An organization to which Section 593 of the Internal Revenue
Code applies.
(2) A regulated investment company or a real estate investment
trust subject to taxation under this part.
(g) For purposes of this section, "enterprise zone" means an area
designated as an enterprise zone pursuant to Chapter 12.8 (commencing
with Section 7070) of Division 7 of Title 1 of the Government Code.
(h) The credit allowable under this section shall be reduced by
the credit allowed under Sections 23623.5, 23625, and 23646 claimed
for the same employee. The credit shall also be reduced by the
federal credit allowed under Section 51 of the Internal Revenue Code.
In addition, any deduction otherwise allowed under this part for
the wages or salaries paid or incurred by the taxpayer upon which the
credit is based shall be reduced by the amount of the credit, prior
to any reduction required by subdivision (i) or (j).
(i) In the case where the credit otherwise allowed under this
section exceeds the "tax" for the taxable year, that portion of the
credit that exceeds the "tax" may be carried over and added to the
credit, if any, in succeeding taxable years, until the credit is
exhausted. The credit shall be applied first to the earliest taxable
years possible.
(j) (1) The amount of the credit otherwise allowed under this
section and Section 23612.2, including any credit carryover from
prior years, that may reduce the "tax" for the taxable year shall not
exceed the amount of tax which would be imposed on the taxpayer's
business income attributable to the enterprise zone determined as if
that attributable income represented all of the income of the
taxpayer subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the
enterprise zone. For that purpose, the taxpayer's business
attributable to sources in this state first shall be determined in
accordance with Chapter 17 (commencing with Section 25101). That
business income shall be further apportioned to the enterprise zone
in accordance with Article 2 (commencing with Section 25120) of
Chapter 17, modified for purposes of this section in accordance with
paragraph (3).
(3) Business income shall be apportioned to the enterprise zone by
multiplying the total California business income of the taxpayer by
a fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is two. For purposes of
this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the enterprise zone during the
income year, and the denominator of which is the average value of all
the taxpayer's real and tangible personal property owned or rented
and used in this state during the income year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the enterprise zone during
the income year for compensation, and the denominator of which is the
total compensation paid by the taxpayer in this state during the
income year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "tax" for the taxable
year, as provided in subdivision (i).
(k) The changes made to this section by the act adding this
subdivision shall apply to taxable years on or after January 1, 1997.
(l) The changes made to this
section by the act adding this subdivision shall apply only to
qualified employees hired prior to January 1, 2011.
(m) This section shall remain in effect only until January 1,
2017, and as of the that date is repealed.
SEC. 31. Section 23622.8 of the Revenue
and Taxation Code is amended to read:
23622.8. (a) For each taxable year beginning on or after January
1, 1998, there shall be allowed a credit against the "tax" (as
defined in Section 23036) to a qualified taxpayer for hiring a
qualified disadvantaged individual during the taxable year for
employment in the manufacturing enhancement area. The credit shall be
equal to the sum of each of the following:
(1) Fifty percent of the qualified wages in the first year of
employment.
(2) Forty percent of the qualified wages in the second year of
employment.
(3) Thirty percent of the qualified wages in the third year of
employment.
(4) Twenty percent of the qualified wages in the fourth year of
employment.
(5) Ten percent of the qualified wages in the fifth year of
employment.
(b) For purposes of this section:
(1) "Qualified wages" means:
(A) That portion of wages paid or incurred by the qualified
taxpayer during the taxable year to qualified disadvantaged
individuals that does not exceed 150 percent of the minimum wage.
(B) The total amount of qualified wages which may be taken into
account for purposes of claiming the credit allowed under this
section shall not exceed two million dollars ($2,000,000) per taxable
year.
(C) Wages received during the 60-month period beginning with the
first day the qualified disadvantaged individual commences employment
with the qualified taxpayer. Reemployment in connection with any
increase, including a regularly occurring seasonal increase, in the
trade or business operations of the qualified taxpayer does not
constitute commencement of employment for purposes of this section.
(D) Qualified wages do not include any wages paid or incurred by
the qualified taxpayer on or after the manufacturing enhancement area
expiration date. However, wages paid or incurred with respect to
qualified employees who are employed by the qualified taxpayer within
the manufacturing enhancement area within the 60-month period prior
to the manufacturing enhancement area expiration date shall continue
to qualify for the credit under this section after the manufacturing
enhancement area expiration date, in accordance with all provisions
of this section applied as if the manufacturing enhancement area
designation were still in existence and binding.
(2) "Minimum wage" means the wage established by the Industrial
Welfare Commission as provided for in Chapter 1 (commencing with
Section 1171) of Part 4 of Division 2 of the Labor Code.
(3) "Manufacturing enhancement area" means an area designated
pursuant to Section 7073.8 of the Government Code according to the
procedures of Chapter 12.8 (commencing with Section 7070) of Division
7 of Title 1 of the Government Code.
(4) "Manufacturing enhancement area expiration date" means the
date the manufacturing enhancement area designation expires, is no
longer binding, or becomes inoperative.
(5) "Qualified disadvantaged individual" means an individual who
was hired by a qualified taxpayer before January 1, 2011, and
who satisfies all of the following requirements:
(A) (i) At least 90 percent of whose services for the qualified
taxpayer during the taxable year are directly related to the conduct
of the qualified taxpayer's trade or business located
in a manufacturing enhancement area.
(ii) Who performs at least 50 percent of his or her services for
the qualified taxpayer during the taxable year in the manufacturing
enhancement area.
(B) Who is hired by the qualified taxpayer after the designation
of the area as a manufacturing enhancement area in which the
individual's services were primarily performed.
(C) Who is any of the following ,
immediately preceding the individual's commencement of employment
with the qualified taxpayer : , was certified
as 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.
(i) An individual who has been determined eligible for services
under the federal Job Training Partnership Act (29 U.S.C. Sec. 1501
et seq.) or its successor.
(ii) Any voluntary or mandatory registrant under the Greater
Avenues for Independence Act of 1985, or its successor, as provided
pursuant to Article 3.2 (commencing with Section 11320) of Chapter 2
of Part 3 of Division 9 of the Welfare and Institutions Code.
(iii) Any individual who has been certified eligible by the
Employment Development Department under the federal Targeted Jobs Tax
Credit Program, or its successor, whether or not this program is in
effect.
(6) "Qualified taxpayer" means any corporation engaged in a trade
or business within a manufacturing enhancement area designated
pursuant to Section 7073.8 of the Government Code and that meets all
of the following requirements:
(A) Is engaged in those lines of business described in Codes 0211
to 0291, inclusive, Code 0723, or in Codes 2011 to 3999, inclusive,
of the Standard Industrial Classification (SIC) Manual published by
the United States Office of Management and Budget, 1987 edition.
(B) At least 50 percent of the qualified taxpayer's workforce
hired after the designation of the manufacturing enhancement area is
composed of individuals who, at the time of hire, are residents of
the county in which the manufacturing enhancement area is located.
(C) Of this percentage of local hires, at least 30 percent shall
be qualified disadvantaged individuals.
(7) "Seasonal employment" means employment by a qualified taxpayer
that has regular and predictable substantial reductions in trade or
business operations.
(c) (1) For purposes of this section, all of the following apply:
(A) All employees of all corporations that are members of the same
controlled group of corporations shall be treated as employed by a
single qualified taxpayer.
(B) The credit (if any) allowable by this section with respect to
each member shall be determined by reference to its proportionate
share of the expenses of the qualified wages giving rise to the
credit and shall be allocated in that manner.
(C) Principles that apply in the case of controlled groups of
corporations, as specified in subdivision (d) of Section 23622.7,
shall apply with respect to determining employment.
(2) If a qualified taxpayer acquires the major portion of a trade
or business of another employer (hereinafter in this paragraph
referred to as the "predecessor") or the major portion of a separate
unit of a trade or business of a predecessor, then, for purposes of
applying this section (other than subdivision (d)) for any calendar
year ending after that acquisition, the employment relationship
between a qualified disadvantaged individual and a qualified taxpayer
shall not be treated as terminated if the qualified disadvantaged
individual continues to be employed in that trade or business.
(d) (1) (A) If the employment, other than seasonal employment, of
any qualified disadvantaged individual, with respect to whom
qualified wages are taken into account under subdivision (b) is
terminated by the qualified taxpayer at any time during the first 270
days of that employment (whether or not consecutive) or before the
close of the 270th calendar day after the day in which that qualified
disadvantaged individual completes 90 days of employment with the
qualified taxpayer, the tax imposed by this part for the taxable year
in which that employment is terminated shall be increased by an
amount equal to the credit allowed under subdivision (a) for that
taxable year and all prior taxable years attributable to qualified
wages paid or incurred with respect to that qualified disadvantaged
individual.
(B) If the seasonal employment of any qualified disadvantaged
individual, with respect to whom qualified wages are taken into
account under subdivision (a) is not continued by the qualified
taxpayer for a period of 270 days of employment during the 60-month
period beginning with the day the qualified disadvantaged individual
commences seasonal employment with the qualified taxpayer, the tax
imposed by this part, for the income year that includes the 60th
month following the month in which the qualified disadvantaged
individual commences seasonal employment with the qualified taxpayer,
shall be increased by an amount equal to the credit allowed under
subdivision (a) for that taxable year and all prior taxable years
attributable to qualified wages paid or incurred with respect to that
qualified disadvantaged individual.
(2) (A) Subparagraph (A) of paragraph (1) does not apply to any of
the following:
(i) A termination of employment of a qualified disadvantaged
individual who voluntarily leaves the employment of the qualified
taxpayer.
(ii) A termination of employment of a qualified disadvantaged
individual who, before the close of the period referred to in
subparagraph (A) of paragraph (1), becomes disabled to perform the
services of that employment, unless that disability is removed before
the close of that period and the qualified taxpayer fails to offer
reemployment to that individual.
(iii) A termination of employment of a qualified disadvantaged
individual, if it is determined that the termination was due to the
misconduct (as defined in Sections 1256-30 to 1256-43, inclusive, of
Title 22 of the California Code of Regulations) of that individual.
(iv) A termination of employment of a qualified disadvantaged
individual due to a substantial reduction in the trade or business
operations of the qualified taxpayer.
(v) A termination of employment of a qualified disadvantaged
individual, if that individual is replaced by other qualified
disadvantaged individuals so as to create a net increase in both the
number of employees and the hours of employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of
the following:
(i) A failure to continue the seasonal employment of a qualified
disadvantaged individual who voluntarily fails to return to the
seasonal employment of the qualified taxpayer.
(ii) A failure to continue the seasonal employment of a qualified
disadvantaged individual who, before the close of the period referred
to in subparagraph (B) of paragraph (1), becomes disabled and unable
to perform the services of that seasonal employment, unless that
disability is removed before the close of that period and the
qualified taxpayer fails to offer seasonal employment to that
qualified disadvantaged individual.
(iii) A failure to continue the seasonal employment of a qualified
disadvantaged individual, if it is determined that the failure to
continue the seasonal employment was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that qualified disadvantaged
individual.
(iv) A failure to continue seasonal employment of a qualified
disadvantaged individual due to a substantial reduction in the
regular seasonal trade or business operations of the qualified
taxpayer.
(v) A failure to continue the seasonal employment of a qualified
disadvantaged individual, if that qualified disadvantaged individual
is replaced by other qualified disadvantaged individuals so as to
create a net increase in both the number of seasonal employees and
the hours of seasonal employment.
(C) For purposes of paragraph (1), the employment relationship
between the qualified taxpayer and a qualified disadvantaged
individual shall not be treated as terminated by either of the
following:
(i) By a transaction to which Section 381(a) of the Internal
Revenue Code applies, if the qualified disadvantaged individual
continues to be employed by the acquiring corporation.
(ii) By reason of a mere change in the form of conducting the
trade or business of the qualified taxpayer, if the qualified
disadvantaged individual continues to be employed in that trade or
business and the qualified taxpayer retains a substantial interest in
that trade or business.
(3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
(e) The credit shall be reduced by the credit allowed under
Section 23621. The credit shall also be reduced by the federal credit
allowed under Section 51 of the Internal Revenue Code.
In addition, any deduction otherwise allowed under this part for
the wages or salaries paid or incurred by the qualified taxpayer upon
which the credit is based shall be reduced by the amount of the
credit, prior to any reduction required by subdivision (f) or (g).
(f) In the case where the credit otherwise allowed under this
section exceeds the "tax" for the taxable year, that portion of the
credit that exceeds the "tax" may be carried over and added to the
credit, if any, in succeeding years, until the credit is exhausted.
The credit shall be applied first to the earliest taxable years
possible.
(g) (1) The amount of credit otherwise allowed under this section,
including prior year credit carryovers, that may reduce the "tax"
for the taxable year shall not exceed the amount of tax that would be
imposed on the qualified taxpayer's business income attributed to a
manufacturing enhancement area determined as if that attributed
income represented all of the net income of the qualified taxpayer
subject to tax under this part.
(2) Attributable income is that portion of the taxpayer's
California source business income that is apportioned to the
manufacturing enhancement area. For that purpose, the taxpayer's
business income attributable to sources in this state first shall be
determined in accordance with Chapter 17 (commencing with Section
25101). That business income shall be further apportioned to the
manufacturing enhancement area in accordance with Article 2
(commencing with Section 25120) of Chapter 17, modified for purposes
of this section in accordance with paragraph (3).
(3) Income shall be apportioned to a manufacturing enhancement
area by multiplying the total California business income of the
taxpayer by a fraction, the numerator of which is the property factor
plus the payroll factor, and the denominator of which is two. For
the purposes of this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the manufacturing enhancement
area during the taxable year, and the denominator of which is the
average value of all the taxpayer's real and tangible personal
property owned or rented and used in this state during the taxable
year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the manufacturing
enhancement area during the taxable year for compensation, and the
denominator of which is the total compensation paid by the taxpayer
in this state during the taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "tax" for the taxable
year, as provided in subdivision (g).
(h) If the taxpayer is allowed a credit pursuant to this section
for qualified wages paid or incurred, only one credit shall be
allowed to the taxpayer under this part with respect to any wage
consisting in whole or in part of those qualified wages.
(i) The qualified taxpayer shall do both of the following:
(1) Obtain from the Employment Development Department, as
permitted by federal law, the local county or city Job
Training Partnership Act administrative entity, the local county GAIN
office federal Workforce Investment Act of 1998
administrative entity, the local county CalWORKs program office
or social services agency, or the local government administering the
manufacturing enhancement area, a certification that provides that a
qualified disadvantaged individual meets the eligibility
requirements specified in paragraph (5) of subdivision (b). The
Employment Development Department may provide preliminary screening
and referral to a certifying agency. The Department of Housing and
Community Development shall develop regulations governing the
issuance of certificates pursuant to subdivision (d) of Section 7086
of the Government Code and shall develop forms for this purpose.
(2) Retain a copy of the certification and provide it upon request
to the Franchise Tax Board.
(j) This section shall remain in effect only until January 1,
2017, and as of that date is repealed.
SEC. 32. Section 23634 of the Revenue
and Taxation Code is amended to read:
23634. (a) For each taxable year beginning on or after January 1,
1998, there shall be allowed a credit against the "tax" (as defined
by Section 23036) to a qualified taxpayer who employs a qualified
employee in a targeted tax area during the taxable year. The credit
shall be equal to the sum of each of the following:
(1) Fifty percent of qualified wages in the first year of
employment.
(2) Forty percent of qualified wages in the second year of
employment.
(3) Thirty percent of qualified wages in the third year of
employment.
(4) Twenty percent of qualified wages in the fourth year of
employment.
(5) Ten percent of qualified wages in the fifth year of
employment.
(b) For purposes of this section:
(1) "Qualified wages" means:
(A) That portion of wages paid or incurred by the qualified
taxpayer during the taxable year to qualified employees that does not
exceed 150 percent of the minimum wage.
(B) Wages received during the 60-month period beginning with the
first day the employee commences employment with the qualified
taxpayer. Reemployment in connection with any increase, including a
regularly occurring seasonal increase, in the trade or business
operations of the qualified taxpayer does not constitute commencement
of employment for purposes of this section.
(C) Qualified wages do not include any wages paid or incurred by
the qualified taxpayer on or after the targeted tax area expiration
date. However, wages paid or incurred with respect to qualified
employees who are employed by the qualified taxpayer within the
targeted tax area within the 60-month period prior to the targeted
tax area expiration date shall continue to qualify for the credit
under this section after the targeted tax area expiration date, in
accordance with all provisions of this section applied as if the
targeted tax area designation were still in existence and binding.
(2) "Minimum wage" means the wage established by the Industrial
Welfare Commission as provided for in Chapter 1 (commencing with
Section 1171) of Part 4 of Division 2 of the Labor Code.
(3) "Targeted tax area expiration date" means the date the
targeted tax area designation expires, is revoked, is no longer
binding, or becomes inoperative.
(4) (A) "Qualified employee" means an individual who was
hired by a qualified taxpayer before January 1, 2011, and who
meets all of the following requirements:
(i) At least 90 percent of his or her services for the qualified
taxpayer during the taxable year are directly related to the conduct
of the qualified taxpayer's trade or business located in a targeted
tax area.
(ii) Performs at least 50 percent of his or her services for the
qualified taxpayer during the taxable year in a targeted tax area.
(iii) Is hired by the qualified taxpayer after the date of
original designation of the area in which services were performed as
a targeted tax area.
(iv) Is any of the following:
(I) Immediately preceding the qualified employee's commencement of
employment with the qualified taxpayer, was a person eligible for
services under the federal Job Training Partnership Act (29 U.S.C.
Sec. 1501 et seq.), or its successor, who is receiving, or is
eligible to receive, subsidized employment, training, or services
funded by the federal Job Training Partnership Act, or its successor.
(II) Immediately preceding the qualified employee's commencement
of employment with the qualified taxpayer, was a person eligible to
be a voluntary or mandatory registrant under the Greater Avenues for
Independence Act of 1985 (GAIN) provided for pursuant to Article 3.2
(commencing with Section 11320) of Chapter 2 of Part 3 of Division 9
of the Welfare and Institutions Code, or its successor.
(III)
(I) 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)
(II) Immediately preceding the qualified employee's
commencement of employment with the qualified taxpayer, was a
dislocated worker who meets any of the following:
(aa) Has been terminated or laid off or who has received a notice
of termination or layoff from employment, is eligible for or has
exhausted entitlement to unemployment insurance benefits, and is
unlikely to return to his or her previous industry or occupation.
(bb) Has been terminated or has received a notice of termination
of employment as a result of any permanent closure or any substantial
layoff at a plant, facility, or enterprise, including an individual
who has not received written notification but whose employer has made
a public announcement of the closure or layoff.
(cc) Is long-term unemployed and has limited opportunities for
employment or reemployment in the same or a similar occupation in the
area in which the individual resides, including an individual 55
years of age or older who may have substantial barriers to employment
by reason of age.
(dd) Was self-employed (including farmers and ranchers) and is
unemployed as a result of general economic conditions in the
community in which he or she resides or because of natural disasters.
(ee) Was a civilian employee of the Department of Defense employed
at a military installation being closed or realigned under the
Defense Base Closure and Realignment Act of 1990.
(ff) Was an active member of the Armed Forces or National Guard as
of September 30, 1990, and was either involuntarily separated or
separated pursuant to a special benefits program.
(gg) Is a seasonal or migrant worker who experiences chronic
seasonal unemployment and underemployment in the agriculture
industry, aggravated by continual advancements in technology and
mechanization.
(hh) Has been terminated or laid off, or has received a notice of
termination or layoff, as a consequence of compliance with the
federal Clean Air Act.
(V)
(III) 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 .
(IV) Immediately preceding the
qualified employee's commencement of employment with
taxpayer, was a service-connected disabled veteran, veteran of
the Vietnam era, or veteran who is recently separated from military
service.
(VI)
(V) 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)
(VI) Immediately preceding the qualified employee's
commencement of employment with the qualified taxpayer, was a person
eligible for or a recipient of any of the following:
(aa) Federal Supplemental Security Income benefits.
(bb) Aid to Families with Dependent Children.
(cc) Food stamps.
(dd) State and local general assistance.
(VIII)
(VII) 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)
(VIII) Immediately preceding the qualified employee's
commencement of employment with the qualified taxpayer, was a
resident of a targeted tax area.
(X)
(IX) 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 Workforce Investment Act or the CalWORKs
program or who is eligible as a member of a targeted group
under the Work Opportunity Tax Credit (Section 51 of the Internal
Revenue Code), or its successor.
(5) (A) "Qualified taxpayer" means a person or entity that meets
both of the following:
(i) Is engaged in a trade or business within a targeted tax area
designated pursuant to Chapter 12.93 (commencing with Section 7097)
of Division 7 of Title 1 of the Government Code.
(ii) Is engaged in those lines of business described in Codes 2000
to 2099, inclusive; 2200 to 3999, inclusive; 4200 to 4299,
inclusive; 4500 to 4599, inclusive; and 4700 to 5199, inclusive, of
the Standard Industrial Classification (SIC) Manual published by the
United States Office of Management and Budget, 1987 edition.
(B) In the case of any passthrough entity, the determination of
whether a taxpayer is a qualified taxpayer under this section shall
be made at the entity level and any credit under this section or
Section 17053.34 shall be allowed to the passthrough entity and
passed through to the partners or shareholders in accordance with
applicable provisions of this part or Part 10 (commencing with
Section 17001). For purposes of this subparagraph, the term
"passthrough entity" means any partnership or S corporation.
(6) "Seasonal employment" means employment by a qualified taxpayer
that has regular and predictable substantial reductions in trade or
business operations.
(c) If the qualified taxpayer is allowed a credit for qualified
wages pursuant to this section, only one credit shall be allowed to
the taxpayer under this part with respect to those qualified wages.
(d) The qualified taxpayer shall do both of the following:
(1) Obtain from the Employment Development Department, as
permitted by federal law, the local county or city Job
Training Partnership Act administrative entity, the local county GAIN
office federal Workforce Investment of 1998
administrative entity, the local county CalWORKs program 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) Retain a copy of the certification and provide it upon request
to the Franchise Tax Board.
(e) (1) For purposes of this section:
(A) All employees of all corporations that are members of the same
controlled group of corporations shall be treated as employed by a
single taxpayer.
(B) The credit, if any, allowable by this section to each member
shall be determined by reference to its proportionate share of the
expense of the qualified wages giving rise to the credit, and shall
be allocated in that manner.
(C) For purposes of this subdivision, "controlled group of
corporations" means "controlled group of corporations" as defined in
Section 1563(a) of the Internal Revenue Code, except that:
(i) "More than 50 percent" shall be substituted for "at least 80
percent" each place it appears in Section 1563(a)(1) of the Internal
Revenue Code.
(ii) The determination shall be made without regard to subsections
(a)(4) and (e)(3)(C) of Section 1563 of the Internal Revenue Code.
(2) If an employer acquires the major portion of a trade or
business of another employer (hereinafter in this paragraph referred
to as the "predecessor") or the major portion of a separate unit of a
trade or business of a predecessor, then, for purposes of applying
this section (other than subdivision (f)) for any calendar year
ending after that acquisition, the employment relationship between a
qualified employee and an employer shall not be treated as terminated
if the employee continues to be employed in that trade or business.
(f) (1) (A) If the employment, other than seasonal employment, of
any qualified employee with respect to whom qualified wages are taken
into account under subdivision (a) is terminated by the qualified
taxpayer at any time during the first 270 days of that employment
(whether or not consecutive) or before the close of the 270th
calendar day after the day in which that employee completes 90 days
of employment with the qualified taxpayer, the tax imposed by this
part for the taxable year in which that employment is terminated
shall be increased by an amount equal to the credit allowed under
subdivision (a) for that taxable year and all prior taxable years
attributable to qualified wages paid or incurred with respect to that
employee.
(B) If the seasonal employment of any qualified employee, with
respect to whom qualified wages are taken into account under
subdivision (a) is not continued by the qualified taxpayer for a
period of 270 days of employment during
the 60-month period beginning with the day the
qualified employee commences seasonal employment with the qualified
taxpayer, the tax imposed by this part, for the taxable year that
includes the 60th month following the month in which the qualified
employee commences seasonal employment with the qualified taxpayer,
shall be increased by an amount equal to the credit allowed under
subdivision (a) for that taxable year and all prior taxable years
attributable to qualified wages paid or incurred with respect to that
qualified employee.
(2) (A) Subparagraph (A) of paragraph (1) shall not apply to any
of the following:
(i) A termination of employment of a qualified employee who
voluntarily leaves the employment of the qualified taxpayer.
(ii) A termination of employment of a qualified employee who,
before the close of the period referred to in subparagraph (A) of
paragraph (1), becomes disabled and unable to perform the services of
that employment, unless that disability is removed before the close
of that period and the qualified taxpayer fails to offer reemployment
to that employee.
(iii) A termination of employment of a qualified employee, if it
is determined that the termination was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that employee.
(iv) A termination of employment of a qualified employee due to a
substantial reduction in the trade or business operations of the
taxpayer.
(v) A termination of employment of a qualified employee, if that
employee is replaced by other qualified employees so as to create a
net increase in both the number of employees and the hours of
employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of
the following:
(i) A failure to continue the seasonal employment of a qualified
employee who voluntarily fails to return to the seasonal employment
of the qualified taxpayer.
(ii) A failure to continue the seasonal employment of a qualified
employee who, before the close of the period referred to in
subparagraph (B) of paragraph (1), becomes disabled and unable to
perform the services of that seasonal employment, unless that
disability is removed before the close of that period and the
qualified taxpayer fails to offer seasonal employment to that
qualified employee.
(iii) A failure to continue the seasonal employment of a qualified
employee, if it is determined that the failure to continue the
seasonal employment was due to the misconduct (as defined in Sections
1256-30 to 1256-43, inclusive, of Title 22 of the California Code of
Regulations) of that qualified employee.
(iv) A failure to continue seasonal employment of a qualified
employee due to a substantial reduction in the regular seasonal trade
or business operations of the qualified taxpayer.
(v) A failure to continue the seasonal employment of a qualified
employee, if that qualified employee is replaced by other qualified
employees so as to create a net increase in both the number of
seasonal employees and the hours of seasonal employment.
(C) For purposes of paragraph (1), the employment relationship
between the qualified taxpayer and a qualified employee shall not be
treated as terminated by either of the following:
(i) By a transaction to which Section 381(a) of the Internal
Revenue Code applies, if the qualified employee continues to be
employed by the acquiring corporation.
(ii) By reason of a mere change in the form of conducting the
trade or business of the qualified taxpayer, if the qualified
employee continues to be employed in that trade or business and the
qualified taxpayer retains a substantial interest in that trade or
business.
(3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
(g) Rules similar to the rules provided in Sections 46(e) and (h)
of the Internal Revenue Code shall apply to both of the following:
(1) An organization to which Section 593 of the Internal Revenue
Code applies.
(2) A regulated investment company or a real estate investment
trust subject to taxation under this part.
(h) For purposes of this section, "targeted tax area" means an
area designated pursuant to Chapter 12.93 (commencing with Section
7097) of Division 7 of Title 1 of the Government Code.
(i) In the case where the credit otherwise allowed under this
section exceeds the "tax" for the taxable year, that portion of the
credit that exceeds the "tax" may be carried over and added to the
credit, if any, in succeeding taxable years, until the credit is
exhausted. The credit shall be applied first to the earliest taxable
years possible.
(j) (1) The amount of the credit otherwise allowed under this
section and Section 23633, including any credit carryover from prior
years, that may reduce the "tax" for the taxable year shall not
exceed the amount of tax that would be imposed on the qualified
taxpayer's business income attributable to the targeted tax area
determined as if that attributable income represented all of the
income of the qualified taxpayer subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the targeted
tax area. For that purpose, the taxpayer's business income
attributable to sources in this state first shall be determined in
accordance with Chapter 17 (commencing with Section 25101). That
business income shall be further apportioned to the targeted tax area
in accordance with Article 2 (commencing with Section 25120) of
Chapter 17, modified for purposes of this section in accordance with
paragraph (3).
(3) Business income shall be apportioned to the targeted tax area
by multiplying the total California business income of the taxpayer
by a fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is two. For purposes of
this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the targeted tax area during the
taxable year, and the denominator of which is the average value of
all the taxpayer's real and tangible personal property owned or
rented and used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the targeted tax area during
the taxable year for compensation, and the denominator of which is
the total compensation paid by the taxpayer in this state during the
taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "tax" for the taxable
year, as provided in subdivision (h).
(5) In the event that a credit carryover is allowable under
subdivision (h) for any taxable year after the targeted tax area
designation has expired or been revoked, the targeted tax area shall
be deemed to remain in existence for purposes of computing the
limitation specified in this subdivision.
(k) This section shall remain in effect only until January 1,
2017, and as of that date is repealed.
SEC. 33. Section 23645 of the Revenue
and Taxation Code is amended to read:
23645. (a) For each taxable year beginning on or after January 1,
1995, there shall be allowed as a credit against the "tax" (as
defined by Section 23036) for the taxable year an amount equal to the
sales or use tax paid or incurred by the taxpayer in connection with
the purchase of qualified property to the extent that the qualified
property does not exceed a value of twenty million dollars
($20,000,000).
(b) For purposes of this section:
(1) "LAMBRA" means a local agency military base recovery area
designated in accordance with Section 7114 of the Government Code.
(2) "Taxpayer" means a corporation that conducts a trade or
business within a LAMBRA and, for the first two taxable years, has a
net increase in jobs (defined as 2,000 paid hours per employee per
year) of one or more employees in the LAMBRA.
(A) The net increase in the number of jobs shall be determined by
subtracting the total number of full-time employees (defined as 2,000
paid hours per employee per year) the taxpayer employed in this
state in the taxable year prior to commencing business operations in
the LAMBRA from the total number of full-time employees the taxpayer
employed in this state during the second taxable year after
commencing business operations in the LAMBRA. For taxpayers who
commence doing business in this state with their LAMBRA business
operation, the number of employees for the taxable year prior to
commencing business operations in the LAMBRA shall be zero. If the
taxpayer has a net increase in jobs in the state, the credit shall be
allowed only if one or more full-time employees is employed within
the LAMBRA.
(B) The total number of employees employed in the LAMBRA shall
equal the sum of both of the following:
(i) The total number of hours worked in the LAMBRA for the
taxpayer by employees (not to exceed 2,000 hours per employee) who
are paid an hourly wage divided by 2,000.
(ii) The total number of months worked in the LAMBRA for the
taxpayer by employees that are salaried employees divided by 12.
(C) In the case of a taxpayer who first commences doing business
in the LAMBRA during the taxable year, for purposes of clauses (i)
and (ii), respectively, of subparagraph (B) the divisors "2,000" and
"12" shall be multiplied by a fraction, the numerator of which is the
number of months of the taxable year that the taxpayer was doing
business in the LAMBRA and the denominator of which is 12.
(3) "Qualified property" means property that is each of the
following:
(A) Purchased by the taxpayer for exclusive use in a trade or
business conducted within a LAMBRA.
(B) Purchased before the date the LAMBRA designation expires, is
no longer binding, or becomes inoperative.
(C) Any of the following:
(i) High technology equipment, including, but not limited to,
computers and electronic processing equipment.
(ii) Aircraft maintenance equipment, including, but not limited
to, engine stands, hydraulic mules, power carts, test equipment,
handtools, aircraft start carts, and tugs.
(iii) Aircraft components, including, but not limited to, engines,
fuel control units, hydraulic pumps, avionics, starts, wheels, and
tires.
(iv) Section 1245 property, as defined in Section 1245(a)(3) of
the Internal Revenue Code.
(c) The credit provided under subdivision (a) shall only be
allowed for qualified property manufactured in California unless
qualified property of a comparable quality and price is not available
for timely purchase and delivery from a California manufacturer.
(d) In the case where the credit otherwise allowed under this
section exceeds the "tax" for the taxable year, that portion of the
credit which exceeds the "tax" may be carried over and added to the
credit, if any, in the following year, and the succeeding
14 years if necessary , until the credit is
exhausted. The credit shall be applied first to the earliest taxable
years possible.
(e) Any taxpayer who elects to be subject to this section shall
not be entitled to increase the basis of the 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) A taxpayer shall be required to register a business pursuant
to the Local Agency Military Base Recovery Area Act (Chapter 12.97
(commencing with Section 7105) of Division 7 of Title 1 of the
Government Code), and shall state under penalty of perjury that the
taxpayer is a registered business in one or more LAMBRAs, as a
condition of claiming a credit under this section.
(i)
(j) The amendments made to this section by the act
adding this subdivision shall apply to taxable years beginning on or
after January 1, 1998.
(k) The amendments made to this section by the act adding this
subdivision shall apply only to taxable years beginning on or after
January 1, 2011.
SEC. 34. Section 23646 of the Revenue
and Taxation Code is amended to read:
23646. (a) For each taxable year beginning on or after January 1,
1995, there shall be allowed as a credit against the "tax" (as
defined in Section 23036) to a qualified taxpayer for hiring a
qualified disadvantaged individual or a qualified displaced employee
during the taxable year for employment in the LAMBRA. The credit
shall be equal to the sum of each of the following:
(1) Fifty Thirty percent of the
qualified wages in the first year of employment.
(2) Forty percent of the qualified wages in the second year of
employment.
(3) Thirty Fifty percent
of the qualified wages in the third year of employment.
(4) Twenty percent of the qualified wages in the fourth year of
employment.
(5) Ten percent of the qualified wages in the fifth year of
employment.
(b) For purposes of this section:
(1) "Qualified wages" means:
(A) (i) 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 150 180 percent of the
minimum wage.
(ii) For up to 1,350 qualified employees who are employed by the
taxpayer in aircraft manufacturing activities described in Codes 311
to 339, inclusive, of the North American Industry Classification
System published by the United States Office of Management and
Budget, 2007 edition, "qualified wages" means that portion of hourly
wages that does not exceed 202 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
36-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 36-month period prior to the
LAMBRA expiration date shall continue to qualify for the credit under
this section after the LAMBRA expiration date, in accordance with
all provisions of this section applied as if the LAMBRA designation
were still in existence and binding.
(2) "Minimum wage" means the wage established by the Industrial
Welfare Commission as provided for in Chapter 1 (commencing with
Section 1171) of Part 4 of Division 2 of the Labor Code.
(3) "LAMBRA" means a local agency military base recovery area
designated in accordance with the provisions of Section 7114 of the
Government Code.
(4) "Qualified disadvantaged individual" means an individual who
satisfies all of the following requirements:
(A) (i) At least 90 percent of whose services for the taxpayer
during the taxable year are directly related to the conduct of the
taxpayer's trade or business located in a LAMBRA.
(ii) Who performs at least 50 percent of his or her services for
the taxpayer during the taxable year in the LAMBRA.
(B) Who is hired by the employer after the designation of the area
as a LAMBRA in which the individual's services were primarily
performed.
(C) Who is any of the following immediately preceding the
individual's commencement of employment with the taxpayer:
(i) An individual who has been determined eligible for services
under the federal Job Training Partnership Act (29 U.S.C. Sec. 1501
et seq.), or its successor.
(ii) Any voluntary or mandatory registrant under the Greater
Avenues for Independence Act of 1985 provided for pursuant to Article
3.2 (commencing with Section 11320) of Chapter 2 of Part 3 of
Division 9 of the Welfare and Institutions Code.
(iii)
(i) An economically disadvantaged individual age 16
years or older.
(iv)
(ii) 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
federal Clean Air Act.
(v)
(iii) 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)
(iv) 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)
(v) 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)
(vi) Is a member of a federally recognized Indian
tribe, band, or other group of Native American descent.
(5) "Qualified taxpayer" means a corporation that conducts a trade
or business within a LAMBRA and, for the first two taxable years,
has a net increase in jobs (defined as 2,000 paid hours per employee
per year) of one or more employees as determined below in the LAMBRA.
(A) The net increase in the number of jobs shall be determined by
subtracting the total number of full-time employees (defined as 2,000
paid hours per employee per year) the taxpayer employed in this
state in the taxable year prior to commencing business operations in
the LAMBRA from the total number of full-time employees the taxpayer
employed in this state during the second taxable year after
commencing business operations in the LAMBRA. For taxpayers who
commence doing business in this state with their LAMBRA business
operation, the number of employees for the taxable year prior to
commencing business operations in the LAMBRA shall be zero. If the
taxpayer has a net increase in jobs in the state, the credit shall be
allowed only if one or more full-time employees is employed within
the LAMBRA.
(B) The total number of employees employed in the LAMBRA shall
equal the sum of both of the following:
(i) The total number of hours worked in the LAMBRA for the
taxpayer by employees (not to exceed 2,000 hours per employee) who
are paid an hourly wage divided by 2,000.
(ii) The total number of months worked in the LAMBRA for the
taxpayer by employees who are salaried employees divided by 12.
(C) In the case of a qualified taxpayer that first commences doing
business in the LAMBRA during the taxable year, for purposes of
clauses (i) and (ii), respectively, of subparagraph (B) the divisors
"2,000" and "12" shall be multiplied by a fraction, the numerator of
which is the number of months of the taxable year that the taxpayer
was doing business in the LAMBRA and the denominator of which is 12.
(6) "Qualified displaced employee" means an individual who
satisfies all of the following requirements:
(A) Any civilian or military employee of a base or former base
that has been displaced as a result of a federal base closure act.
(B) (i) At least 90 percent of whose services for the taxpayer
during the taxable year are directly related to the conduct of the
taxpayer's trade or business located in a LAMBRA.
(ii) Who performs at least 50 percent of his or her services for
the taxpayer during the taxable year in a LAMBRA.
(C) Who is hired by the employer after the designation of the area
in which services were performed as a LAMBRA.
(7) "Seasonal employment" means employment by a qualified taxpayer
that has regular and predictable substantial reductions in trade or
business operations.
(8) "LAMBRA expiration date" means the date the LAMBRA designation
expires, is no longer binding, or becomes inoperative.
(c) For qualified disadvantaged individuals or qualified displaced
employees hired on or after January 1, 2001, the taxpayer shall do
both of the following:
(1) Obtain Apply for certification, within
36 months of an employee being hired, 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 Workforce
Investment Act of 1998 administrative entity, the local
county CalWORKs program office or social services agency, or
the local government administering the LAMBRA, a certification that
provides that a qualified disadvantaged individual or qualified
displaced employee meets the eligibility requirements specified in
subparagraph (C) of paragraph (4) of subdivision (b) or subparagraph
(A) of paragraph (6) of subdivision (b). The Employment Development
Department may provide preliminary screening and referral to a
certifying agency. The Department of Housing and Community
Development shall develop regulations governing the issuance of
certificates pursuant to Section 7114.2 of the Government Code and
shall develop forms for this purpose.
(2) Retain a copy of the certification and provide it upon request
to the Franchise Tax Board.
(d) (1) For purposes of this section, both of the
following apply:
(A) All employees of all corporations that are members of the same
controlled group of corporations shall be treated as employed by a
single employer.
(B) The credit (if any) allowable by this section to each member
shall be determined by reference to its proportionate share of the
qualified wages giving rise to the credit.
(2) For purposes of this subdivision, "controlled group of
corporations" has the meaning given to that term by Section 1563(a)
of the Internal Revenue Code, except that both of the following
apply:
(A) "More than 50 percent" shall be substituted for "at least 80
percent" each place it appears in Section 1563(a)(1) of the Internal
Revenue Code.
(B) The determination shall be made without regard to Section 1563
(a)(4) and Section 1563(e)(3)(C) of the Internal Revenue Code.
(3) (A) If an employer acquires the major
portion of a trade or business of another employer (hereinafter in
this paragraph referred to as the "predecessor") or the major portion
of a separate unit of a trade or business of a predecessor, then,
for purposes of applying this section (other than subdivision (e))
for any calendar year ending after that acquisition, the employment
relationship between an employee and an employer shall not be treated
as terminated if the employee continues to be employed in that trade
or business.
(B) If a taxpayer relocated to a LAMBRA from within the state, the
taxpayer shall be allowed a credit only for that number of employees
that exceeds the number of employees at the previous location. The
number of employees at the previous location and the type of jobs
undertaken shall be established by the Employment Development
Department. Exceptions to this subparagraph shall be limited to the
following:
(i) Employees who undertake core work activities or activities
that are the primary job duties of the employee that are
significantly different from those activities at the previous
location, as determined by the Employment Development Department.
(ii) Employees of taxpayers that receive a bona fide offer to
relocate to another state.
(iii) Employees who relocate as a result of a natural disaster,
civic unrest, or eminent domain proceeding.
(e) (1) (A) If the employment of any employee, other than seasonal
employment, with respect to whom qualified wages are taken into
account under subdivision (a) is terminated by the taxpayer at any
time during the first 270 300 days of
that employment (whether or not consecutive) or before the close of
the 270th 300th 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 270 300 days
of employment during the 60 36 -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 36th month following the month in which
the qualified disadvantaged individual commences seasonal employment
with the qualified taxpayer, shall be increased by an amount equal to
the credit allowed under subdivision (a) for that taxable year and
all prior taxable years attributable to qualified wages paid or
incurred with respect to that qualified disadvantaged individual.
(2) (A) Subparagraph (A) of paragraph (1) shall not apply to any
of the following:
(i) A termination of employment of an employee who voluntarily
leaves the employment of the taxpayer.
(ii) A termination of employment of an individual who, before the
close of the period referred to in paragraph (1), becomes disabled to
perform the services of that employment, unless that disability is
removed before the close of that period and the taxpayer fails to
offer reemployment to that individual.
(iii) A termination of employment of an individual, if it is
determined that the termination was due to the misconduct (as defined
in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that individual.
(iv) A termination of employment of an individual due to a
substantial reduction in the trade or business operations of the
taxpayer.
(v) A termination of employment of an individual, if that
individual is replaced by other qualified employees so as to create a
net increase in both the number of employees and the hours of
employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of
the following:
(i) A failure to continue the seasonal employment of a qualified
disadvantaged individual who voluntarily fails to return to the
seasonal employment of the qualified taxpayer.
(ii) A failure to continue the seasonal employment of a qualified
disadvantaged individual who, before the close of the period referred
to in subparagraph (B) of paragraph (1), becomes disabled and unable
to perform the services of that seasonal employment, unless that
disability is removed before the close of that period and the
qualified taxpayer fails to offer seasonal employment to that
qualified disadvantaged individual.
(iii) A failure to continue the seasonal employment of a qualified
disadvantaged individual, if it is determined that the failure to
continue the seasonal employment was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that individual.
(iv) A failure to continue seasonal employment of a qualified
disadvantaged individual due to a substantial reduction in the
regular seasonal trade or business operations of the qualified
taxpayer.
(v) A failure to continue the seasonal employment of a qualified
disadvantaged individual, if that individual is replaced by other
qualified disadvantaged individuals so as to create a net increase in
both the number of seasonal employees and the hours of seasonal
employment.
(C) For purposes of paragraph (1), the employment relationship
between the taxpayer and an employee shall not be treated as
terminated by either of the following:
(i) A transaction to which Section 381(a) of the Internal Revenue
Code applies, if the employee continues to be employed by the
acquiring corporation.
(ii) A mere change in the form of conducting the trade or business
of the taxpayer, if the employee continues to be employed in that
trade or business and the taxpayer retains a substantial interest in
that trade or business.
(3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
(4) At the close of the second taxable year, if the taxpayer has
not increased the number of its employees as determined by paragraph
(5) of subdivision (b), then the amount of the credit previously
claimed shall be added to the taxpayer's tax for the taxpayer's
second taxable year.
(f) In the case of an organization to which Section 593 of the
Internal Revenue Code applies, and a regulated investment company or
a real estate investment trust subject to taxation under this part,
rules similar to the rules provided in Section 46(e) and Section 46
(h) of the Internal Revenue Code shall apply.
(g) The credit shall be reduced by the credit allowed under
Section 23621. The credit shall also be reduced by the federal credit
allowed under Section 51 of the Internal Revenue Code.
In addition, any deduction otherwise allowed under this part for
the wages or salaries paid or incurred by the taxpayer upon which the
credit is based shall be reduced by the amount of the credit, prior
to any reduction required by subdivision (h) or (i).
(h) In the case where the credit otherwise allowed under this
section exceeds the "tax" for the taxable year, that portion of the
credit that exceeds the "tax" may be carried over and added to the
credit, if any, in the following year, and the succeeding
14 years if necessary , until the credit is
exhausted. The credit shall be applied first to the earliest taxable
years possible.
(i) (1) The amount of credit otherwise allowed under this section
and Section 23645, including any prior year carryovers, that may
reduce the "tax" for the taxable year shall not exceed the amount of
tax that would be imposed on the taxpayer's business income
attributed to a LAMBRA determined as if that attributed income
represented all of the income of the taxpayer subject to tax under
this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the LAMBRA.
For that purpose, the taxpayer's business income that is attributable
to sources in this state first shall be determined in accordance
with Chapter 17 (commencing with Section 25101). That business income
shall be further apportioned to the LAMBRA in accordance with
Article 2 (commencing with Section 25120) of Chapter 17, modified for
purposes of this section in accordance with paragraph (3).
(3) Income shall be apportioned to a LAMBRA by multiplying the
total California business income of the taxpayer by a fraction, the
numerator of which is the property factor plus the payroll factor,
and the denominator of which is two. For purposes of this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the LAMBRA during the taxable
year, and the denominator of which is the average value of all the
taxpayer's real and tangible personal property owned or rented and
used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the LAMBRA during the
taxable year for compensation, and the denominator of which is the
total compensation paid by the taxpayer in this state during the
taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "tax" for the taxable
year, as provided in subdivision (h).
(j) If the taxpayer is allowed a credit pursuant to this section
for qualified wages paid or incurred, only one credit shall be
allowed to the taxpayer under this part with respect to any wage
consisting in whole or in part of those qualified wages.
(k) A credit shall not be allowed under this section to a taxpayer
that has been notified by the Director of Industrial Relations of a
final determination, based on the taxpayer's history of significant
employment violations, that the taxpayer is considered by the
Department of Industrial Relations as a serious, repeated, and
willful violator of state employment laws, including, but not limited
to, demonstrating a failure to successfully abate these violations.
(l) A taxpayer shall be required to register a business pursuant
to the Local Agency Military Base Recovery Area Act (Chapter 12.97
(commencing with Section 7105) of Division 7 of Title 1 of the
Government Code), and shall state under penalty of perjury that the
taxpayer is a registered business in one or more LAMBRAs, as a
condition of claiming a credit under this section.
(m) The changes made to this section by the act adding this
subdivision shall apply only to qualified disadvantaged individuals
hired by a qualified taxpayer on or after January 1, 2011.
SEC. 35. Section 24384.5 of the Revenue
and Taxation Code is amended to read:
24384.5. (a) There (1)
For taxable years beginning on or after January 1, 2011, and
before January 1, 2013, there shall be allowed as a deduction in an
amount equal to 50 percent of the amount of net interest received by
the taxpayer in payment on indebtedness of a person or entity engaged
in the conduct of a trade or business located in an enterprise zone.
(2) For taxable years beginning
on or after January 1, 2013, there shall be allowed as a
deduction the amount of net interest received by the taxpayer in
payment of indebtedness of a person or entity engaged in a trade or
business located in an enterprise zone.
(b) No A deduction shall be allowed
under this section unless only if at
the time the indebtedness is incurred each of the following
requirements are met:
(1) The trade or business is located solely within an enterprise
zone.
(2) The indebtedness is incurred solely in connection with
activity within the enterprise zone.
(3) The taxpayer has no equity or other ownership interest in the
debtor.
(c) "Enterprise zone" means an area designated as an enterprise
zone pursuant to Chapter 12.8 (commencing with Section 7070) of
Division 7 of Title 1 of the Government Code.
(d) For taxable years beginning on or after January 1, 2011, a
taxpayer shall be required to register a business pursuant to the
Enterprise Zone Act (Chapter 12.8 (commencing with Section 7070) of
Division 7 of Title 1 of the Government Code), and shall state under
penalty of perjury that the taxpayer has a registered business in one
or more enterprise zones, as a condition of claiming a deduction
under this section.
(e) The changes made to this section by the act adding this
subdivision shall apply only to taxable years beginning on or after
January 1, 2011.
SEC. 36. 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. 37. 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 Assembly, March 22, 2011.
(JR11)