BILL ANALYSIS Ó
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THIRD READING
Bill No: SB 1179
Author: Walters (R)
Amended: 5/15/12
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 8-0, 5/9/12
AYES: Wolk, Dutton, DeSaulnier, Fuller, Hancock,
Hernandez, La Malfa, Liu
NO VOTE RECORDED: Kehoe
SENATE APPROPRIATIONS COMMITTEE : 7-0, 5/24/12
AYES: Kehoe, Walters, Alquist, Dutton, Lieu, Price,
Steinberg
SUBJECT : Income taxes: credit: manufacturers
SOURCE : Author
DIGEST : This bill enacts a tax credit of $3,000 for
hiring a disabled veteran in specified industries,
commencing in the 2013 taxable year.
ANALYSIS : State law allows taxpayers to claim tax
credits designed as incentives for taxpayers to incur
certain expenses, such as child adoption, or to influence
behavior, including business practices and decisions, such
as research and development credits and Geographically
Targeted Economic Development Area credits. The
Legislature typically enacts such tax incentives to
encourage taxpayers to do something but for the tax credit,
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they would otherwise not do.
This bill, commencing in the 2013 taxable year, allows a
taxpayer primarily engaged in the business of surgical
appliance and supplies manufacturing a tax credit of $3,000
for each net increase in full-time employment of disabled
veterans, as defined. This bill provides that the
Franchise Tax Board (FTB) administers the credit, and caps
the total amount of credit at $25 million. FTB must
periodically update its Web site with the amount of credits
that taxpayers have claimed.
To qualify, the taxpayer must have either paid wages to the
disabled veteran for not less than an average of 35 hours
per week, or paid the disabled veteran a full-time salary.
This bill does not allow taxpayers to claim both this
credit and any other for the same employee, but does
provide that the credit does not affect any business
expense deduction from income any wages paid to disabled
veterans. Taxpayers may only claim the credit on
timely-filed original returns, but may carry over the
credit for seven years.
This bill imports the definition of wages, the method of
measuring the credit on a full-time equivalent basis,
anti-abuse requirements, and procedures for FTB to
administer the credit from the New Jobs Credit (AB 15X3
(Krekorian), Chapter 10, and SB 15X3 (Calderon), Chapter
17, Statutes of 2009-10, 3rd Extraordinary Session).
Comments
The purpose of the bill is to increase disabled veterans
employment in the surgical appliance and device
manufacturing sector.
Surgical appliance and device manufacturing are a
significant industry in California. Examples of products
manufactured by such businesses include orthopedic devices,
prosthetic appliances, surgical dressings, crutches,
surgical sutures, hospital beds, and operating room tables.
According to the 2007 Economic Census, of the 2,219
surgical appliance and device manufacturing establishments
in the United States, California has 296, or 13.3% of the
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U.S. total, employing 22,145 people (19%) with an annual
payroll of $1.2 billion (20%). By value, California ships
15.3% of U.S. shipments. By comparison, California
generates 13% of U.S. Gross Domestic Product, and has 12%
of U.S. population.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
The FTB estimates tax revenue losses of $200,000 in
2012-13, $600,000 in 2013-14, and $800,000 in 2014-15
(General Fund).
Unknown FTB administrative costs, likely in the range of
$300,000 in 2013-14 and $100,000 to $150,000 annually
thereafter (General Fund), until the credit is exhausted.
SUPPORT : (Verified 5/24/12)
American Legion
AMVETS
California Association for Health Services at Home
Vietnam Veterans of America
AGB:mw 5/24/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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