Amended in Assembly March 19, 2013

California Legislature—2013–14 Regular Session

Assembly Bill No. 9

Introduced by Assembly Member Holden

December 3, 2012

An act begin delete relating to economic development end delete begin insert to amend Sections 17053.74 and 23622.7 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy end insert .

LEGISLATIVE COUNSEL’S DIGEST

AB 9, as amended, Holden. begin delete State government: economic development. end delete begin insert Income taxes: credits: enterprise zone. end insert

begin insert

The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws, including credits for taxpayers that employ qualified employees, as defined, in an enterprise zone.

end insert begin insert

This bill would modify the definition of a qualified employee, as specified, and require qualified wages to exceed an average monthly wage of $2,000, as specified.

end insert begin insert

This bill would also make technical, nonsubstantive changes.

end insert begin insert

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.

end insert begin insert

This bill would take effect immediately as a tax levy.

end insert begin delete

Existing law provides for the establishment of various job training and economic development programs, administered by the Employment Development Department and other state agencies.

end delete begin delete

This bill would declare the intent of the Legislature to enact legislation that promotes job and business growth and encourages economic development.

end delete

Vote:  begin delete majority end delete begin insert ²⁄₃ end insert . Appropriation: no. Fiscal committee:  begin delete no end delete begin insert yes end insert . State-mandated local program: no.

The people of the State of California do enact as follows:

begin insert

begin insert SECTION 1. end insert   

end insert

begin insert Section 17053.74 of the end insert begin insert Revenue and Taxation
Code end insert begin insert is amended to read: end insert

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 published by the United States Office of
Management and Budget, 1987 edition, “qualified wages” means
that portion of hourly wages that does not exceed 202 percent of
the minimum wage.

(B) Wages received during the 60-month period beginning with
the first day the employee commences employment with the
taxpayer. Reemployment in connection with any increase, including
a regularly occurring seasonal increase, in the trade or business
operations of the taxpayer does not constitute commencement of
employment for purposes of this section.

(C) Qualified wages do not include any wages paid or incurred
by the taxpayer on or after the zone expiration date. However,
wages paid or incurred with respect to qualified employees who
are employed by the taxpayer within the enterprise zone within
the 60-month period prior to the zone expiration date shall continue
to qualify for the credit under this section after the zone expiration
date, in accordance with all provisions of this section applied as
if the enterprise zone designation were still in existence and
binding.

begin insert

(D) Qualified wages received by the employee from the taxpayer
during the taxable year shall exceed an average monthly wage of
two thousand dollars ($2,000).

end insert

(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 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 begin delete Job Training Partnership end delete
begin insert Workforce Investment end insert Act begin insert of 1998 end insert (29 U.S.C. Sec. begin delete 1501 end delete begin insert 2801 end insert et
seq.), or its successor, who is receiving, or is eligible to receive,
subsidized employment, training, or services funded by the federal
begin delete Job Training Partnership end delete begin insert Workforce Investment end insert Act begin insert of 1998 end insert , 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 begin delete Greater
Avenues for Independence Act of 1985 (GAIN) end delete begin insert welfare-to-work
activities under the CalWORKs program end insert provided for begin delete pursuant to end delete
begin insert in end insert Article begin delete 3.2 end delete begin insert 1 end insert (commencing with Section begin delete 11320) end delete begin insert 11200) end insert of
Chapter 2 of Part 3 of Division 9 of the Welfare and Institutions
Code, or its successor.

(III) Immediately preceding the qualified employee’s
commencement of employment with the taxpayer, was an
economically disadvantaged individual 14 years of age or older.

(IV) Immediately preceding the qualified employee’s
commencement of employment with the taxpayer, was a dislocated
worker who meets any of the following:

(aa) 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 begin insert or an
employee employed in an industry that was significantly impacted
by sequestration in the federal Balanced Budget and Emergency
Deficit Control Act of 1985 (BBEDCA, Title II of Public Law
99-177, commonly known as the Gramm-Rudman-Hollings Act) end insert .

(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
Clean Air Act begin insert or the California Global Warming Solutions Act of
2006 (Division 25.5 (commencing with Section 38500) of the
Health and Safety Code) end insert .

(V) Immediately preceding the qualified employee’s
commencement of employment with the taxpayer, was a disabled
individual who is eligible for or enrolled in, or has completed a
state rehabilitation plan or is a service-connected disabled veteran,
veteran of the Vietnam era, or veteran who is recently separated
from military service.

(VI) Immediately preceding the qualified employee’s
commencement of employment with the taxpayer, was an
ex-offender. An individual shall be treated as convicted if he or
she was placed on probation by a state court without a finding of
guilt.

(VII) Immediately preceding the qualified employee’s
commencement of employment with the taxpayer, was a person
eligible for or a recipient of any of the following:

(aa) Federal Supplemental Security Income benefits.

begin delete

(bb)  Aid to Families with Dependent Children.

end delete begin insert

(bb) Welfare-to-work activities under the CalWORKs program.

end insert

(cc) CalFresh benefits.

(dd) State and local general assistance.

(VIII) Immediately preceding the qualified employee’s
commencement of employment with the taxpayer, was a member
of a federally recognized Indian tribe, band, or other group of
Native American descent.

(IX) Immediately preceding the qualified employee’s
commencement of employment with the taxpayer, was a resident
of a targeted employment area, as defined in Section 7072 of the
Government Code.

(X) An employee who qualified the taxpayer for the enterprise
zone hiring credit under former Section 17053.8 or the program
area hiring credit under former Section 17053.11.

(XI) Immediately preceding the qualified employee’s
commencement of employment with the taxpayer, was a member
of a targeted group, as defined in Section 51(d) of the Internal
Revenue Code, or its successor.

(B)  begin delete Priority for employment shall be provided end delete begin insert The taxpayer
shall give priority for employment end insert to an individual who is enrolled
in a qualified program under the federal Job Training Partnership
Act or begin insert welfare-to-work activities under end insert the begin delete Greater Avenues for
Independence Act of 1985 end delete begin insert CalWORKs program end insert 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 begin delete local end delete county begin delete GAIN office end delete
begin insert department administering welfare-to-work activities under the
CalWORKs program end insert or social services agency, or the local
government administering the enterprise zone, a certification which
provides that a qualified employee meets the eligibility
requirements specified in clause (iv) of subparagraph (A) of
paragraph (4) of subdivision (b). The Employment Development
Department may provide preliminary screening and referral to a
certifying agency. The Employment Development Department
shall develop a form for this purpose. The Department of Housing
and Community Development shall develop regulations governing
the issuance of certificates by local governments pursuant to
subdivision (a) of Section 7086 of the Government Code.

(2) 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.

begin insert

begin insert SEC. 2. end insert   

end insert

begin insert Section 23622.7 of the end insert begin insert Revenue and Taxation Code end insert begin insert is
amended to read: end insert

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 published by the United States Office of
Management and Budget, 1987 edition, “qualified wages” means
that portion of hourly wages that does not exceed 202 percent of
the minimum wage.

(B) Wages received during the 60-month period beginning with
the first day the employee commences employment with the
taxpayer. Reemployment in connection with any increase, including
a regularly occurring seasonal increase, in the trade or business
operations of the taxpayer does not constitute commencement of
employment for purposes of this section.

(C) Qualified wages do not include any wages paid or incurred
by the taxpayer on or after the zone expiration date. However,
wages paid or incurred with respect to qualified employees who
are employed by the taxpayer within the enterprise zone within
the 60-month period prior to the zone expiration date shall continue
to qualify for the credit under this section after the zone expiration
date, in accordance with all provisions of this section applied as
if the enterprise zone designation were still in existence and
binding.

begin insert

(D) Qualified wages received by the employee from the taxpayer
during the taxable year shall exceed an average monthly wage of
two thousand dollars ($2,000).

end insert

(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 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 begin delete Job Training Partnership end delete
begin insert Workforce Investment end insert Act begin insert of 1998 end insert (29 U.S.C. Sec. begin delete 1501 end delete begin insert 2801 end insert et
seq.), or its successor, who is receiving, or is eligible to receive,
subsidized employment, training, or services funded by the federal
begin delete Job Training Partnership end delete begin insert Workforce Investment end insert Act begin insert of 1998 end insert , 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 begin delete Greater
Avenues for Independence Act of 1985 (GAIN) end delete begin insert welfare-to-work
activities under the CalWORKs program end insert provided for begin delete pursuant to end delete
begin insert in end insert Article begin delete 3.2 end delete begin insert 1 end insert (commencing with Section begin delete 11320) end delete begin insert 11200) end insert of
Chapter 2 of Part 3 of Division 9 of the Welfare and Institutions
Code, or its successor.

(III) Immediately preceding the qualified employee’s
commencement of employment with the taxpayer, was an
economically disadvantaged individual 14 years of age or older.

(IV) Immediately preceding the qualified employee’s
commencement of employment with the taxpayer, was a dislocated
worker who meets any of the following:

(aa) 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 begin insert or an
employee employed in an industry that was significantly impacted
by sequestration in the federal Balanced Budget and Emergency
Deficit Control Act of 1985 (BBEDCA, Title II of Public Law
99-177, commonly known as the Gramm-Rudman-Hollings Act) end insert .

(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
Clean Air Act begin insert or the California Global Warming Solutions Act of
2006 (Division 25.5 (commencing with Section 38500) of the
Health and Safety Code) end insert .

(V) Immediately preceding the qualified employee’s
commencement of employment with the taxpayer, was a disabled
individual who is eligible for or enrolled in, or has completed a
state rehabilitation plan or is a service-connected disabled veteran,
veteran of the Vietnam era, or veteran who is recently separated
from military service.

(VI) Immediately preceding the qualified employee’s
commencement of employment with the taxpayer, was an
ex-offender. An individual shall be treated as convicted if he or
she was placed on probation by a state court without a finding of
guilt.

(VII) Immediately preceding the qualified employee’s
commencement of employment with the taxpayer, was a person
eligible for or a recipient of any of the following:

(aa) Federal Supplemental Security Income benefits.

begin delete

(bb)  Aid to Families with Dependent Children.

end delete begin insert

(bb) Welfare-to-work activities under the CalWORKs program.

end insert

(cc) CalFresh benefits.

(dd) State and local general assistance.

(VIII) Immediately preceding the qualified employee’s
commencement of employment with the taxpayer, was a member
of a federally recognized Indian tribe, band, or other group of
Native American descent.

(IX) Immediately preceding the qualified employee’s
commencement of employment with the taxpayer, was a resident
of a targeted employment area (as defined in Section 7072 of the
Government Code).

(X) An employee who qualified the taxpayer for the enterprise
zone hiring credit under former Section 23622 or the program area
hiring credit under former Section 23623.

(XI) Immediately preceding the qualified employee’s
commencement of employment with the taxpayer, was a member
of a targeted group, as defined in Section 51(d) of the Internal
Revenue Code, or its successor.

(B)  begin delete Priority for employment shall be provided end delete begin insert The taxpayer
shall give priority for employment end insert to an individual who is enrolled
in a qualified program under the federal Job Training Partnership
Act or begin insert welfare-to-work activities under end insert the begin delete Greater Avenues for
Independence Act of 1985 end delete begin insert CalWORKs program end insert 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 begin delete local end delete county begin delete GAIN office end delete
begin insert department administering welfare-to-work activities under the
CalWORKs program end insert or social services agency, or the local
government administering the enterprise zone, a certification that
provides that a qualified employee meets the eligibility
requirements specified in clause (iv) of subparagraph (A) of
paragraph (4) of subdivision (b). The Employment Development
Department may provide preliminary screening and referral to a
certifying agency. The Employment Development Department
shall develop a form for this purpose. The Department of Housing
and Community Development shall develop regulations governing
the issuance of certificates by local governments pursuant to
subdivision (a) of Section 7086 of the Government Code.

(2) 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.

begin insert

begin insert SEC. 3. end insert   

end insert begin insert

This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.

end insert

begin delete

SECTION 1.  

The Legislature finds and declares all of the
following:

(a) California workers and businesses are currently facing some
of the harshest economic conditions since the Great Depression.

(b) Unemployment in California remains in the double digits
after the mortgage crisis and the subsequent economic collapse.

(c) It is estimated that over 2.5 million Californians have lost
jobs during this recession and bankruptcies among small businesses
have been nearly double the national average.

end delete

begin delete

SEC. 2.  

It is the intent of the Legislature to enact legislation
that promotes job and business growth and encourages economic
development.

end delete