BILL ANALYSIS Ó
SB 1179
Page 1
Date of Hearing: August 8, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 1179 (Walters) - As Amended: August 7, 2012
Policy Committee: Revenue and
Taxation Vote: 6-2
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill allows a $3,000 credit for each net increase in
qualified full-time employees hired during the taxable year by a
qualified employer, as specified. Specifically, this bill:
1)Applies to taxable years beginning on or after January 1,
2013.
2)Defines a qualified full-time employee as an employee who is a
disabled veteran, as defined in Military and Veterans Code
Section 999, as specified, and defines a qualified employer as
a taxpayer that is primarily engaged in the lines of business
classified in Code 339113 of the North American Industry
Classification System (NAICS), which is defined as surgical
appliance and supplies manufacturing.
3)Provides that credits must be claimed on timely filed original
returns received by the Franchise Tax Board (FTB) on or before
when FTB estimates it will have received timely filed original
returns claiming credits that cumulatively total $25 million.
4)Reduces the cumulative total of the Small Business Hiring
Credit (SBHC) from $400 million to $375 million in order to
fund the credit contain in SB 1179.
5)Takes immediate effect as a tax levy.
FISCAL EFFECT
The FTB estimated that an earlier version of this bill would
reduce General Fund revenues by $200,000 in fiscal year (FY)
SB 1179
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2012-13, by $600,000 in FY 2013-14, and by $800,000 in FY
2014-15.
COMMENTS
1)Purpose . The author argues the men and women who serve our
country have placed themselves in harm's way to defend our
freedom, and the least we can do is make an effort to ensure a
smoother transition home for our returning veterans. The
author states SB 1179 is a narrowly crafted manufacturers' tax
credit designed to encourage the hiring of disabled veterans
in the surgical appliance and device manufacturing industries.
2)Efficacy of hiring credits. With the national unemployment
rate hovering above 8%, some have advocated job creation tax
credits as a means of revitalizing the struggling economy.
The question, however, is whether such credits actually work.
Recently, Daniel Wilson, assistant director of the Center for
the Study of Innovation and Productivity at the Federal
Reserve Bank of San Francisco, attempted to answer this
question. In a paper co-authored with Robert Chirinko of the
University of Illinois at Chicago, Wilson examined the period
between January 1990 and August 2009, and found that, among
states where employers could qualify for credits immediately
after enactment of the credit legislation, there was a slight
employment increase of 0.12%. These findings would suggest
that hiring credits, at least at the state level, are an
inefficient tool for stimulating job growth.
3)Duration of credit. As noted above, this bill's credit is
capped at roughly $25 million for all taxable years. Given
the relatively targeted nature of the credit, the FTB
estimates revenue losses of $600,000 in FY 2013-14, growing to
$800,000 by FY 2014-15. At this rate, it could take roughly
30 years for the entire allocation to be utilized. This
Committee may wish to consider an earlier sunset date to
review the credit's efficacy.
4)Narrow targeting . This bill would target one, relatively
small industry among the many in California. It is unclear
why this industry was targeted and it is unknown to what
extent this industry hires, or would hire, employees that have
the skills possessed by disabled veterans.
SB 1179
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5)Small Business Hiring Credit Program . Implementation of this
bill will reduce the authorized credits under the SBHC and use
the amount of the reduction to fund the credit authorized in
SB 1179. According to FTB, use of the SBHC as of early May
had reached a cumulative credits value of $114 million.
6)Relevant legislation. The slow pace of using the existing
small business hiring credit program has led to the
introduction of numerous bills, none of which have been
chaptered, that would change the allocation or relax the
requirements on the existing credit:
a) AB 2037 (Davis), 2012, creates a $300 million state New
Markets Tax Credit program for the purpose of stimulating
economic development. This bill is scheduled to be heard
August 8 in this committee.
b) AB 11 (Portantino), 2011, transfers $200 million of the
allocation for the existing small business hiring credit
and used it for a new credit equal to 20% of annual
workers' compensation premiums paid by qualified taxpayers.
AB 11 was held on the Assembly Revenue and Taxation
Committee's Suspense File.
c) AB 234 (Wieckowski), 2011, expands the existing small
business hiring credit to encourage the employment of the
chronically unemployed. AB 234 was held on the Assembly
Revenue and Taxation Committee's Suspense File.
d) AB 236 (Swanson), 2011, reallocated $50 million from the
New Jobs Tax Credit to establish a new credit designed to
encourage the hiring of the chronically unemployed. AB 236
was held on this Committee's Suspense File.
e) AB 248 (Perea), 2011, provides a personal income tax
(PIT) credit equal to 25% of the value of qualified medical
services personally provided by a physician free of charge
or at a reduced rate. AB 248 was held on this Committee's
Suspense File.
f) AB 643 (Davis), 2011, is similar to AB 2037. AB 643 was
held on this Committee's Suspense File.
g) AB 1009 (Wieckowski), 2011, modifies the jobs tax credit
to allow employers with 100 or fewer employees to be
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eligible. AB 1009 was held on the Assembly Revenue and
Taxation Committee's Suspense File.
h) AB 1195 (Allen), 2011, expands the pool of eligible
claimants for the Jobs Tax Credit from taxpayers with 20 or
fewer employees to those with 50 or fewer employees. AB
1195 is pending on the Senate Appropriations Committee
Suspense File.
i) AB 1596 (Cook), 2011, would modify the New Jobs Tax
Credit by allowing the credit to employers with up to 50
employees. AB 1596 was held on the Assembly Revenue and
Taxation Committee's Suspense File.
j) SB 156 (Emmerson), 2011, would have modified the New
Jobs Tax Credit by allowing the credit to employers with up
to 50 employees. SB 156 was subsequently amended to a
different subject.
7)There is no registered opposition to this bill.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081