Amended in Senate June 25, 2013

Amended in Senate June 24, 2013

Amended in Senate June 24, 2013

California Legislature—2013–14 Regular Session

Assembly Bill No. 93

Introduced by Committee on Budget (Blumenfield (Chair), Bloom, Bonilla, Campos, Chesbro, Daly, Dickinson, Gordon, Jones-Sawyer, Mitchell, Mullin, Muratsuchi, Nazarian, Skinner, Stone, and Ting)

January 10, 2013

An act to amend Section 13073.5 of, to add Sections 7090, 7099.5, and 7119 to, and to repeal Chapter 12.8 (commencing with Section 7070), Chapter 12.93 (commencing with Section 7097), and Chapter 12.97 (commencing with Section 7105) of Division 7 of Title 1 of, the Government Code, to amend and repeal Sections 17053.33, 17053.34, 17053.45, 17053.46, 17053.47, 17053.70, 17053.74, 17053.75, 17235, 17267.2, 17267.6, 17268, 17276.2, 17276.5, 17276.6, 19136.8, 23612.2, 23622.7, 23622.8, 23633, 23634, 23645, 23646, 24356.6, 24356.7, 24356.8, 24384.5, 24416.2, 24416.5, and 24416.6 of, to add Section 18410.2 to, to add and repeal Sections 6377.1, 17053.73, 17059.2, 23626, and 23689 of, and to repeal, amend, and repeal Sections 17053.80 and 23623 of, the Revenue and Taxation Code, relating to economic development, making an appropriation therefor, and declaring the urgency thereof, to take effect immediately.

LEGISLATIVE COUNSEL’S DIGEST

AB 93, as amended, Committee on Budget. Economic development: taxation: credits, deductions, begin insert exemptions, end insert and net operating losses.

(1) Existing law provides for the designation and oversight by the Department of Housing and Community Development of various economic development areas in the state, including enterprise zones, manufacturing enhancement areas, targeted tax areas, and local agency military base recovery areas, or LAMBRAs. Existing law allows various incentives to businesses operating in these areas.

This bill would repeal the provisions authorizing those designations on January 1, 2014.

(2) The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws, including hiring credits and sales and use tax credits for taxpayers within the specified economic development areas, and a hiring credit for taxpayers, other than those allowed a credit with respect to operating in the specified economic development areas. Those laws, for taxpayers engaged in business within specified economic development areas, authorize specified net operating loss carryovers and expense deductions in computing income subject to taxes. Those laws also authorize an interest deduction for interest received in payment of indebtedness of a person engaged in business in an enterprise zone.

This bill generally would make these provisions inoperative for taxable years beginning on or after January 1, 2014, and repeal these provisions on either December 1, 2014, or December 1, 2019, as provided. This bill would limit the application of sales and use tax credits to sales and use tax paid for purchases before January 1, 2014, and limit the carryover of those credits to the begin delete 5 end delete begin insert 10 end insert succeeding years, limit the application of the hiring credits to employees hired within a specified period before January 1, 2014, and begin insert limit the carryovers for those credits to the 10 succeeding years. The bill would end insert limit the interest deduction to interest received before January 1, 2014.

This bill would also allow a credit against tax under both laws for each taxable year beginning on or after January 1, 2014, and before January 1, 2025, in an amount as provided in a written agreement between the Governor’s Office of Business and Economic Development and the taxpayer, agreed upon by the California Competes Tax Credit Committee as established by this bill, and based on specified factors, including the number of jobs the taxpayer will create or retain in the state and the amount of investment in the state by the taxpayer. The bill would limit the aggregate amount of credits allowed to taxpayers to a specified sum per fiscal year.

This bill would, under both laws for taxable years beginning on or after begin delete July end delete begin insert January end insert 1, 2014, and before January 1, begin delete 2019, end delete begin insert 2021, end insert allow a credit against tax for portions of the wages paid by a taxpayer engaged in a trade or business within a designated census tract, as defined, or a former enterprise zone to certain full-time employees who provide services for that taxpayer in connection with that trade or business. The bill would require the Population Research Unit in the Department of Finance to identify designated census tracts in accordance with certain criteria.

(3) Existing sales and use tax laws impose taxes on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state, or on the storage, use, or other consumption in this state of tangible personal property purchased from a retailer for storage, use, or other consumption in this state, and provides various exemptions from those taxes.

The bill would exempt from those taxes, on and after begin delete January end delete begin insert July end insert 1, 2014, and before January 1, 2019, begin insert or before July 1, 2021, end insert the gross receipts from the sale of, and the storage, use, or other consumption of, qualified tangible personal property purchased by a qualified person for use primarily in manufacturing, processing, refining, fabricating, or recycling of property, as specified; qualified tangible personal property purchased for use by a contractor for specified purposes, as provided; and qualified tangible personal property purchased for use by a qualified person to be used primarily in research and development, as provided. The bill would require the purchaser to furnish the retailer with an exemption certificate, as specified.

The Bradley-Burns Uniform Local Sales and Use Tax Law authorizes counties and cities to impose local sales and use taxes in conformity with the Sales and Use Tax Law, and existing law authorizes districts, as specified, to impose transactions and use taxes in conformity with the Transactions and Use Tax Law, which conforms to the Sales and Use Tax Law. Exemptions from state sales and use taxes are incorporated into these laws.

This bill would specify that this exemption does not apply to local sales and use taxes, transactions and use taxes, and specified state taxes from which revenues are deposited into the Local Public Safety Fund, the Education Protection Account, the Local Revenue Fund, the Fiscal Recovery Fund, or the Local Revenue Fund 2011.

(4) This bill would appropriate up to $600,000 for allocation to a committee and departments, as specified, by the Director of Finance in furtherance of the objectives of this bill, as provided.

(5) This bill declare that it is to take effect immediately as an urgency statute.

Vote: ²⁄₃. Appropriation: yes. Fiscal committee: yes. State-mandated local program: no.

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

SECTION 1.  

The Legislature finds and declares all of the
following:

(a) California’s economic development policy should be to
create good jobs with middle-class wages and benefits.

(b) State assistance regarding employment should be focused
upon those individuals facing barriers to employment, and state
tax policy should encourage businesses to invest in California.

(c) The state’s largest economic development program, the
enterprise zone program, is in need of comprehensive reform. The
Public Policy Institute of California released a study in 2009
finding that enterprise zones have “no statistically significant effect
on either employment levels or employment growth rates.”
Furthermore, the Legislative Analyst’s Office has issued several
reports concluding that enterprise zones do not create jobs, finding
that the enterprise zone program is “expensive and not strongly
effective.”

(d) It is the intent of the Legislature to reform state tax incentives
for the hiring of individuals in enterprise zones to refocus those
tax incentives on creating new, good jobs within those zones and
within other areas of the state suffering from high rates of
unemployment and poverty.

(e) It is the intent of the Legislature to exempt manufacturing
equipment from state sales and use taxes in order to make
California more competitive in attracting new businesses to the
state, and to bring California in line with the 48 other states that
exempt manufacturing equipment from sales and use tax.

(f) It is the intent of the Legislature in appropriating funds
pursuant to this act to provide the California Competes Tax Credit
Committee, and the departments that are required to administer
this act, with an important tool to attract and retain high-value
employers. The program created by this act will allow businesses
to publicly apply for tax credits allowed on the basis of job creation
and retention standards. This program is intended to be a model
of transparency and accountability for the state’s job creation
efforts in that performance measurements will ensure that the
effective use of taxpayer dollars is maximized.

SEC. 2.  

Section 7090 is added to the Government Code, to
read:

7090.  

Chapter 12.8 (commencing with Section 7070) is
repealed on January 1, 2014.

SEC. 3.  

Section 7099.5 is added to the Government Code, to
read:

7099.5.  

Chapter 12.93 (commencing with Section 7097) is
repealed on January 1, 2014.

SEC. 4.  

Section 7119 is added to the Government Code, to
read:

7119.  

Chapter 12.97 (commencing with Section 7105) is
repealed on January 1, 2014.

SEC. 5.  

Section 13073.5 of the Government Code is amended
to read:

13073.5.  

The Legislature finds and declares that: (1) population
size and distribution patterns in California exert a major influence
on the physical, social, and economic structure of the state and on
the quality of the environment generally; (2) sound and current
data and methods to estimate population trends are necessary to
enable state, regional, and local agencies to plan and function
properly; and (3) there is a critical need for a proper study of the
implications of present and future population trends in order that
state, regional, and local agencies might develop or reexamine
policies and actions based thereon.

The Population Research Unit shall:

(a) Develop basic demographic data and statistical compilations,
which may include a current population survey and a mid-decade
census.

(b) Design and test methods of research and data collection.

(c) Conduct local population estimates as required by law.

(d) Validate all official census data and population statistics.

(e) Analyze and prepare projections of enrollments in public
schools, colleges, and universities.

(f) Analyze governmental records to establish characteristics
of migration and distribution.

(g) Publish annual estimates of the population of the state and
its composition.

(h) Prepare short- and long-range projections of population and
its composition.

(i) Provide advisory services to state agencies and other levels
of government.

(j) Evaluate and recommend data requirements for determining
population and population growth.

(k) Analyze the demographic features of the causes and
consequences of patterns of natural increase or decrease, migration,
and population concentration within the state.

(l) Assess the need for population data required for determining
the allocation of federal, state, and other subvention revenues.

(m) Request and obtain from any department, division,
commission, or other agency of the state all assistance and
information to enable the unit to effectively carry out the provisions
of this section.

(n) Cooperate with the Office of Planning and Research with
respect to functions involving mutual areas of concern relating to
demography and state planning.

(o) Enter into agreements to carry out the purposes of this
section, including the application for and acceptance of federal
funds or private foundation grants for demographic studies.

(p) Act as primary state government liaison with the Census
Bureau, United States Department of Commerce, in the acquisition
and distribution of census data and related documentation to state
agencies.

(q) Administer, with other agencies, a State Census Data Center
which will be responsible for acquiring decennial and other census
data from the Bureau of the Census, and for providing necessary
information to the Legislature and to the executive branch and for
seeking to ensure the availability of census information to local
governments. The unit and the Office of Planning and Research
shall be responsible for designating subcenters of the State Census
Data Center as needed. The unit will provide materials to
subcenters of the State Census Data Center, will coordinate the
efforts of the subcenters to avoid duplication and may consult in
the design of standard reports to be offered by the center and its
subcenters.

(r) Coordinate with the Office of Planning and Research
Environmental Data Center for the purposes of ensuring
consistency and compatibility of data products, improving public
access to data, ensuring the consistent interpretation of data, and
avoiding duplication of functions.

(s) (1) Determine those census tracts that are to be designated
census tracts based on data from the five-year American
Community Survey (ACS). The census tracts that are within the
highest quartile for both civilian unemployment and poverty
statistics, as determined in paragraphs (2) and (3), shall be
determined to be designated census tracts as described in paragraph
(7) of subdivision (b) of Section 17053.73, and paragraph (7) of
subdivision (b) of Section 23626 of the Revenue and Taxation
Code.

(2) To determine the census tracts that are within the highest
quartile of census tracts with the highest civilian unemployment,
the census tracts shall be sorted by the respective civilian
unemployment rate of each in ascending order, or from the lowest
(0 percent) to the highest (100 percent) according to the following:

(A) Census tracts without a civilian labor force shall be
excluded.

(B) After ordering the census tracts by the civilian
unemployment rate of each, the census tracts shall be divided into
four equal groups or quartiles as follows:

(i) The first quartile shall represent the lowest fourth of the
census tracts (1 percent to less than 26 percent).

(ii) The second quartile shall represent the second fourth (26
percent to less than 51 percent).

(iii) The third quartile shall represent the third fourth (51 percent
to less than 76 percent).

(iv) The fourth quartile shall represent the fourth fourth (76
percent to 100 percent, inclusive).

(C) The last or highest quartile shall represent the top 25 percent
of the census tracts with the highest civilian unemployment rates.

(3) To determine the census tracts that are within the quartile
of census tracts with the highest poverty, the census tracts shall
be sorted by the respective percentage of population below poverty
of each in ascending order, or from the lowest (0 percent) to the
highest (100 percent) according to the following:

(A) Consistent with poverty statistics in the ACS, which adhere
to the standards specified by the federal Office of Management
and Budget in Statistical Policy Directive 14, the poverty thresholds
as specified by the United States Census Bureau shall be used to
determine those individuals below poverty.

(B) To determine those individuals below poverty, different
thresholds, as specified by the United States Census Bureau, shall
be applied to families, people living alone, or people living with
nonrelatives (unrelated individuals).

(C) If a family’s total income is less than the dollar value of the
appropriate threshold, then that family and every individual in it
shall be considered to be below poverty.

(D) If an unrelated individual’s total income is less than the
appropriate threshold, then that individual shall be considered to
be below poverty.

(E) Poverty status shall be determined for all people except
institutionalized people, people in military group quarters, people
in college dormitories, and unrelated individuals under 15 years
of age.

(F) Census tracts that do not have a population for whom poverty
status is determined shall be excluded.

(G) After ordering the census tracts by the respective percent
below poverty of each, the census tracts shall be divided into four
equal quartiles as follows:

(i) The first quartile shall represent the lowest fourth of the
census tracts (1 percent to less than 26 percent).

(ii) The second quartile shall represent the second fourth (26
percent to less than 51 percent).

(iii) The third quartile shall represent the third fourth (51 percent
to less than 76 percent).

(iv) The fourth quartile shall represent the fourth fourth (76
percent to 100 percent, inclusive).

(H) The last or highest quartile shall represent the top 25 percent
of the census tracts with the highest percentage of population below
poverty.

(4) To determine the census tracts that are within the lowest
quartile of census tracts with the lowest civilian unemployment
and poverty, the census tracts shall be sorted by the respective
civilian unemployment and poverty rates of each in ascending
order, or from the lowest (0 percent) to the highest (100 percent)
according to the following:

(A) Census tracts without a civilian labor force are to be
excluded.

(B) After ordering the census tracts by the civilian
unemployment and poverty rates of each, the census tracts shall
be divided into four equal groups or quartiles as follows:

(i) The first quartile shall represent the lowest fourth of the
census tracts (1 percent to less than 26 percent).

(ii) The second quartile shall represent the second fourth (26
percent to less than 51 percent).

(iii) The third quartile shall represent the third fourth (51 percent
to less than 76 percent).

(iv) The fourth quartile shall represent the fourth fourth (76
percent to 100 percent, inclusive).

(C) The first or lowest quartile shall represent the bottom 25
percent of the census tracts with the lowest civilian unemployment
and poverty rates.

SEC. 6.  

Section 6377.1 is added to the Revenue and Taxation
Code, to read:

6377.1.  

(a)  begin insert (1) end insert begin insert   end insert Except as provided in subdivision (e), on or
after July 1, 2014, and before January 1, 2019, there are exempted
from the taxes imposed by this part the gross receipts from the sale
of, and the storage, use, or other consumption in this state of, any
of the following:

begin delete

(1)

end delete

begin insert (A) end insert  Qualified tangible personal property purchased for use by
a qualified person to be used primarily in any stage of the
manufacturing, processing, refining, fabricating, or recycling of
tangible personal property, beginning at the point any raw materials
are received by the qualified person and introduced into the process
and ending at the point at which the manufacturing, processing,
refining, fabricating, or recycling has altered tangible personal
property to its completed form, including packaging, if required.

begin delete

(2)

end delete

begin insert (B) end insert  Qualified tangible personal property purchased for use by
a qualified person to be used primarily in research and
development.

begin delete

(3)

end delete

begin insert (C) end insert  Qualified tangible personal property purchased for use by
a qualified person to be used primarily to maintain, repair, measure,
or test any qualified tangible personal property described in
begin delete paragraph (1) or (2) end delete begin insert subparagraph (A) or (B) end insert .

begin delete

(4)

end delete

begin insert (D) end insert  Qualified tangible personal property purchased for use by
a contractor purchasing that property for use in the performance
of a construction contract for the qualified person, that will use
that property as an integral part of the manufacturing, processing,
refining, fabricating, or recycling process, or as a research or
storage facility for use in connection with those processes.

begin insert

(2) Except as provided in subdivision (e), on or after July 1,
2014, and before July 1, 2021, there are exempted from the taxes
imposed by this part the gross receipts from the sale of, and the
storage, use, or other consumption in this state of qualified tangible
personal property purchased for use within a designated census
tract, as defined in paragraph (7) of subdivision (b) of Section
17053.73 and paragraph (7) of subdivision (b) of Section 23626,
or a former enterprise zone, as defined in paragraph (8) of
subdivision (b) of Section 17053.73 and paragraph (8) of
subdivision (b) of Section 23626, by any of the following:

end insert begin insert

(A) A qualified person to be used primarily in any stage of the
manufacturing, processing, refining, fabricating, or recycling of
tangible personal property, beginning at the point any raw
materials are received by the qualified person and introduced into
the process and ending at the point at which the manufacturing,
processing, refining, fabricating, or recycling has altered tangible
personal property to its completed form, including packaging, if
required.

end insert begin insert

(B) A qualified person to be used primarily in research and
development.

end insert begin insert

(C) A qualified person to be used primarily to maintain, repair,
measure, or test any qualified tangible personal property described
in subparagraph (A) or (B).

end insert begin insert

(D) A contractor purchasing that property for use in the
performance of a construction contract for the qualified person,
that will use that property as an integral part of the manufacturing,
processing, refining, fabricating, or recycling process, or as a
research or storage facility for use in connection with those
processes.

end insert

(b) For purposes of this section:

(1) “Fabricating” means to make, build, create, produce, or
assemble components or tangible personal property to work in a
new or different manner.

(2) “Manufacturing” means the activity of converting or
conditioning tangible personal property by changing the form,
composition, quality, or character of the property for ultimate sale
at retail or use in the manufacturing of a product to be ultimately
sold at retail. Manufacturing includes any improvements to tangible
personal property that result in a greater service life or greater
functionality than that of the original property.

(3) “Primarily” means 50 percent or more of the time.

(4) “Process” means the period beginning at the point at which
any raw materials are received by the qualified person and
introduced into the manufacturing, processing, refining, fabricating,
or recycling activity of the qualified person and ending at the point
at which the manufacturing, processing, refining, fabricating, or
recycling activity of the qualified person has altered tangible
personal property to its completed form, including packaging, if
required. Raw materials shall be considered to have been
introduced into the process when the raw materials are stored on
the same premises where the qualified person’s manufacturing,
processing, refining, fabricating, or recycling activity is conducted.
Raw materials that are stored on premises other than where the
qualified person’s manufacturing, processing, refining, fabricating,
or recycling activity is conducted shall not be considered to have
been introduced into the manufacturing, processing, refining,
fabricating, or recycling process.

(5) “Processing” means the physical application of the materials
and labor necessary to modify or change the characteristics of
tangible personal property.

(6) (A) “Qualified person” means a person that is primarily
engaged in those lines of business described in Codes 3111 to
3399, inclusive, 541711, or 541712 of the North American Industry
Classification System (NAICS) published by the United States
Office of Management and Budget (OMB), 2012 edition.

(B) Notwithstanding subparagraph (A), “qualified person” shall
not include either of the following:

(i) An apportioning trade or business that is required to apportion
its business income pursuant to subdivision (b) of Section 25128.

(ii) A trade or business conducted wholly within this state that
would be required to apportion its business income pursuant to
subdivision (b) of Section 25128 if it were subject to apportionment
pursuant to Section 25101.

(7) (A) “Qualified tangible personal property” includes, but is
not limited to, all of the following:

(i) Machinery and equipment, including component parts and
contrivances such as belts, shafts, moving parts, and operating
structures.

(ii) Equipment or devices used or required to operate, control,
regulate, or maintain the machinery, including, but not limited to,
computers, data-processing equipment, and computer software,
together with all repair and replacement parts with a useful life of
one or more years therefor, whether purchased separately or in
conjunction with a complete machine and regardless of whether
the machine or component parts are assembled by the qualified
person or another party.

(iii) Tangible personal property used in pollution control that
meets standards established by this state or any local or regional
governmental agency within this state.

(iv) Special purpose buildings and foundations used as an
integral part of the manufacturing, processing, refining, fabricating,
or recycling process, or that constitute a research or storage facility
used during those processes. Buildings used solely for warehousing
purposes after completion of those processes are not included.

(B) “Qualified tangible personal property” shall not include any
of the following:

(i) Consumables with a useful life of less than one year.

(ii) Furniture, inventory, and equipment used in the extraction
process, or equipment used to store finished products that have
completed the manufacturing, processing, refining, fabricating, or
recycling process.

(iii) Tangible personal property used primarily in administration,
general management, or marketing.

(8) “Refining” means the process of converting a natural
resource to an intermediate or finished product.

(9) “Research and development” means those activities that are
described in Section 174 of the Internal Revenue Code or in any
regulations thereunder.

(10) “Useful life” for tangible personal property that is treated
as having a useful life of one or more years for state income or
franchise tax purposes shall be deemed to have a useful life of one
or more years for purposes of this section. “Useful life” for tangible
personal property that is treated as having a useful life of less than
one year for state income or franchise tax purposes shall be deemed
to have a useful life of less than one year for purposes of this
section.

(c) An exemption shall not be allowed under this section unless
the purchaser furnishes the retailer with an exemption certificate,
completed in accordance with any instructions or regulations as
the board may prescribe, and the retailer retains the exemption
certificate in its records and furnishes it to the board upon request.

(d) (1)    Notwithstanding the Bradley-Burns Uniform Local
Sales and Use Tax Law (Part 1.5 (commencing with Section 7200))
and the Transactions and Use Tax Law (Part 1.6 (commencing
with Section 7251)), the exemption established by this section
shall not apply with respect to any tax levied by a county, city, or
district pursuant to, or in accordance with, either of those laws.

(2) Notwithstanding subdivision (a), the exemption established
by this section shall not apply with respect to any tax levied
pursuant to Section 6051.2, 6051.5, 6201.2, or 6201.5, pursuant
to Section 35 of Article XIII of the California Constitution, or any
tax levied pursuant to Section 6051 or 6201 that is deposited in
the State Treasury to the credit of the Local Revenue Fund 2011
pursuant to Section 6051.15 or 6201.15.

(e) (1) The exemption provided by this section shall not apply
to either of the following:

(A) Any tangible personal property purchased during any
calendar year that exceeds two hundred million dollars
($200,000,000) of purchases of qualified tangible personal property
for which an exemption is claimed by a qualified person under
this section. For purposes of this subparagraph, in the case of a
qualified person that is required to be included in a combined report
under Section 25101 or authorized to be included in a combined
report under Section 25101.15, the aggregate of all purchases of
qualified personal property for which an exemption is claimed
pursuant to this section by all persons that are required or
authorized to be included in a combined report shall not exceed
two hundred million dollars ($200,000,000) in any calendar year.

(B) The sale or storage, use, or other consumption of property
that, within one year from the date of purchase, is removed from
California, converted from an exempt use under subdivision (a)
to some other use not qualifying for exemption, or used in a manner
not qualifying for exemption.

(2) If a purchaser certifies in writing to the seller that the tangible
personal property purchased without payment of the tax will be
used in a manner entitling the seller to regard the gross receipts
from the sale as exempt from the sales tax, and the purchase
exceeds the two-hundred-million-dollar ($200,000,000) limitation
begin delete of end delete begin insert described in end insert subparagraph (A) of paragraph (1), or within one
year from the date of purchase, the purchaser removes that property
from California, converts that property for use in a manner not
qualifying for the exemption, or uses that property in a manner
not qualifying for the exemption, the purchaser shall be liable for
payment of sales tax, with applicable interest, as if the purchaser
were a retailer making a retail sale of the tangible personal property
at the time the tangible personal property is begin insert so purchased, end insert removed,
converted, or used, and the begin delete sales price end delete begin insert cost end insert of the tangible personal
property to the purchaser shall be deemed the gross receipts from
that retail sale.

(f) This section shall apply to leases of qualified tangible
personal property classified as “continuing sales” and “continuing
purchases” in accordance with Sections 6006.1 and 6010.1. The
exemption established by this section shall apply to the rentals
payable pursuant to the lease, provided the lessee is a qualified
person and the tangible personal property is used in an activity
described in subdivision (a).

(g) (1) Upon the effective date of this section, the Department
of Finance shall estimate the total dollar amount of exemptions
that will be taken for each calendar year, or any portion thereof,
for which this section provides an exemption.

(2) No later than each March 1 next following a calendar year
for which this section provides an exemption, the board shall
provide to the Joint Legislative Budget Committee a report of the
total dollar amount of exemptions taken under this section for the
immediately preceding calendar year. The report shall compare
the total dollar amount of exemptions taken under this section for
that calendar year with the department’s estimate for that same
calendar year. If that total dollar amount taken is less than the
estimate for that calendar year, the report shall identify options for
increasing exemptions taken so as to meet estimated amounts.

(h) This section is repealed on January 1, 2019.

SEC. 7.  

Section 17053.33 of the Revenue and Taxation Code
is amended to read:

17053.33.  

(a) For each taxable year beginning on or after
January 1, 1998, and before January 1, 2014, 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 qualified taxpayer in
connection with the qualified taxpayer’s purchase of qualified
property before January 1, 2014.

(b) For purposes of this section:

(1) “Qualified property” means property that meets all of the
following requirements:

(A) Is any of the following:

(i) Machinery and machinery parts used for fabricating,
processing, assembling, and manufacturing.

(ii) Machinery and machinery parts used for the production of
renewable energy resources.

(iii) Machinery and machinery parts used for either of the
following:

(I) Air pollution control mechanisms.

(II) Water pollution control mechanisms.

(iv) Data-processing and communications equipment, such as
computers, computer-automated drafting systems, copy machines,
telephone systems, and faxes.

(v) Motion picture manufacturing equipment central to
production and postproduction, such as cameras, audio recorders,
and digital image and sound processing equipment.

(B) The total cost of qualified property purchased and placed
in service in any taxable year that may be taken into account by
any qualified taxpayer for purposes of claiming this credit shall
not exceed one million dollars ($1,000,000).

(C) The qualified property is used by the qualified taxpayer
exclusively in a targeted tax area.

(D) The qualified property is purchased and placed in service
before the date the targeted tax area designation expires, is revoked,
is no longer binding, or becomes inoperative.

(2) (A) “Qualified taxpayer” means a person or entity that meets
both of the following:

(i) Is engaged in a trade or business within a targeted tax area
designated pursuant to Chapter 12.93 (commencing with Section
7097) of Division 7 of Title 1 of the Government Code.

(ii) Is engaged in those lines of business described in Codes
2000 to 2099, inclusive; 2200 to 3999, inclusive; 4200 to 4299,
inclusive; 4500 to 4599, inclusive; and 4700 to 5199, inclusive,
of the Standard Industrial Classification (SIC) Manual published
by the United States Office of Management and Budget, 1987
edition.

(B) In the case of any pass-through entity, the determination of
whether a taxpayer is a qualified taxpayer under this section shall
be made at the entity level and any credit under this section or
Section 23633 shall be allowed to the pass-through entity and
passed through to the partners or shareholders in accordance with
applicable provisions of this part or Part 11 (commencing with
Section 23001). For purposes of this subparagraph, the term
“pass-through entity” means any partnership or S corporation.

(3) “Targeted tax area” means the area designated pursuant to
Chapter 12.93 (commencing with Section 7097) of Division 7 of
Title 1 of the Government Code.

(c) If the qualified taxpayer is allowed a credit for qualified
property pursuant to this section, only one credit shall be allowed
to the taxpayer under this part with respect to that qualified
property.

(d) If the qualified taxpayer has purchased property upon which
a use tax has been paid or incurred, the credit provided by this
section shall be allowed only if qualified property of a comparable
quality and price is not timely available for purchase in this state.

(e) 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 succeeding begin delete five end delete begin insert 10 end insert taxable years, if
necessary, until the credit is exhausted. The credit shall be applied
first to the earliest taxable years possible.

(f) Any qualified taxpayer who elects to be subject to this section
shall not be entitled to increase the basis of the qualified property
as otherwise required by Section 164(a) of the Internal Revenue
Code with respect to sales or use tax paid or incurred in connection
with the qualified taxpayer’s purchase of qualified property.

(g) (1) The amount of the credit otherwise allowed under this
section and Section 17053.34, including any credit carryover from
prior years, that may reduce the “net tax” for the taxable year shall
not exceed the amount of tax that would be imposed on the
qualified taxpayer’s business income attributable to the targeted
tax area determined as if that attributable income represented all
of the income of the qualified taxpayer subject to tax under this
part.

(2) Attributable income shall be that portion of the taxpayer’s
California source business income that is apportioned to the
targeted tax area. 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, if necessary, until the credit is exhausted, as if it were an
amount exceeding the “net tax” for the taxable year, as provided
in subdivision (e). However, the portion of any credit remaining
for carryover to taxable years beginning on or after January 1,
2014, if any, after application of this subdivision, shall be carried
over only to the succeeding begin delete five end delete begin insert 10 end insert taxable years if necessary, until
the credit is exhausted, as if it were an amount exceeding the “net
tax” for the taxable year, as provided in subdivision (e).

(5) In the event that a credit carryover is allowable under
subdivision (e) for any taxable year after the targeted tax area
designation has expired, has been revoked, is no longer binding,
or has become inoperative, the targeted tax area shall be deemed
to remain in existence for purposes of computing the limitation
specified in this subdivision.

(h) The amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 1998.

(i) This section is repealed on December 1, 2014.

SEC. 8.  

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, becomes inoperative, or is repealed.

(4) (A) “Qualified employee” means an individual who meets
all of the following requirements:

(i) At least 90 percent of his or her services for the qualified
taxpayer during the taxable year are directly related to the conduct
of the qualified taxpayer’s trade or business located in a targeted
tax area.

(ii) Performs at least 50 percent of his or her services for the
qualified taxpayer during the taxable year in a targeted tax area.

(iii) Is hired by the qualified taxpayer after the date of original
designation of the area in which services were performed as a
targeted tax area.

(iv) Is any of the following:

(I) Immediately preceding the qualified employee’s
commencement of employment with the qualified taxpayer, was
a person eligible for services under the federal Job Training
Partnership Act (29 U.S.C. Sec. 1501 et seq.), or its successor,
who is receiving, or is eligible to receive, subsidized employment,
training, or services funded by the federal Job Training Partnership
Act, or its successor.

(II) Immediately preceding the qualified employee’s
commencement of employment with the qualified taxpayer, was
a person eligible to be a voluntary or mandatory registrant under
the Greater Avenues for Independence Act of 1985 (GAIN)
provided for pursuant to Article 3.2 (commencing with Section
11320) of Chapter 2 of Part 3 of Division 9 of the Welfare and
Institutions Code, or its successor.

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

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

(aa) 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
Clean Air Act.

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

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

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

(aa) Federal Supplemental Security Income benefits.

(bb) Aid to Families with Dependent Children.

(cc) CalFresh benefits.

(dd) State and local general assistance.

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

(IX) Immediately preceding the qualified employee’s
commencement of employment with the qualified taxpayer, was
a resident of a targeted tax area.

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

(B) Priority for employment shall be provided to an individual
who is enrolled in a qualified program under the federal Job
Training Partnership Act or the Greater Avenues for Independence
Act of 1985 or who is eligible as a member of a targeted group
under the Work Opportunity Tax Credit (Section 51 of the Internal
Revenue Code), or its successor.

(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
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 the succeeding begin delete five end delete begin insert 10 end insert taxable years, if
necessary, 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, if necessary, until the credit is exhausted, as if it were an
amount exceeding the “net tax” for the taxable year, as provided
in subdivision (i). However, the portion of any credit remaining
for carryover to taxable years beginning on or after January 1,
2014, if any, after application of this subdivision, shall be carried
over only to the succeeding begin delete five end delete begin insert 10 end insert taxable years, if necessary,
until the credit is exhausted, as if it were an amount exceeding the
“net tax” for the taxable year, as provided in subdivision (i).

(5) In the event that a credit carryover is allowable under
subdivision (i) 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) (1) Except as provided in paragraph (2), this section shall
cease to be operative for taxable years beginning on or after January
1, 2014, and shall be repealed on December 1, 2019.

(2) The section shall continue to apply with respect to qualified
employees who are employed by the qualified taxpayer within the
targeted tax area within the 60-month period immediately preceding
January 1, 2014, and qualified wages paid or incurred with respect
to those qualified employees shall continue to qualify for the credit
under this section for taxable years beginning on or after January
1, 2014, in accordance with this section, as amended by the act
adding this subdivision.

SEC. 9.  

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, and before January 1, 2014, 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
before January 1, 2014, 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 succeeding begin delete five end delete begin insert 10 end insert 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 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, if necessary, until the credit is exhausted, as if it were an
amount exceeding the “net tax” for the taxable year, as provided
in subdivision (d). However, the portion of any credit remaining
for carryover to taxable years beginning on or after January 1,
2014, if any, after application of this subdivision, shall be carried
over only to the succeeding begin delete five end delete begin insert 10 end insert taxable years, if necessary,
until the credit is exhausted, 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) The amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 1998.

(j) This section is repealed on December 1, 2014.

SEC. 10.  

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 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 employer
during the taxable year to qualified disadvantaged individuals or
qualified displaced employees that does not exceed 150 percent
of the minimum wage.

(B) The total amount of qualified wages which may be taken
into account for purposes of claiming the credit allowed under this
section shall not exceed two million dollars ($2,000,000) per
taxable year.

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

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

(2) “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) An economically disadvantaged individual age 16 years or
older.

(iv) A dislocated worker who meets any of the following
conditions:

(I) Has been terminated or laid off or who has received a notice
of termination or layoff from employment, is eligible for or has
exhausted entitlement to unemployment insurance benefits, and
is unlikely to return to his or her previous industry or occupation.

(II) Has been terminated or has received a notice of termination
of employment as a result of any permanent closure or any
substantial layoff at a plant, facility, or enterprise, including an
individual who has not received written notification but whose
employer has made a public announcement of the closure or layoff.

(III) Is long-term unemployed and has limited opportunities for
employment or reemployment in the same or a similar occupation
in the area in which the individual resides, including an individual
55 years of age or older who may have substantial barriers to
employment by reason of age.

(IV) Was self-employed (including farmers and ranchers) and
is unemployed as a result of general economic conditions in the
community in which he or she resides or because of natural
disasters.

(V) Was a civilian employee of the Department of Defense
employed at a military installation being closed or realigned under
the Defense Base Closure and Realignment Act of 1990.

(VI) Was an active member of the Armed Forces or National
Guard as of September 30, 1990, and was either involuntarily
separated or separated pursuant to a special benefits program.

(VII) Experiences chronic seasonal unemployment and
underemployment in the agriculture industry, aggravated by
continual advancements in technology and mechanization.

(VIII) Has been terminated or laid off or has received a notice
of termination or layoff as a consequence of compliance with the
Clean Air Act.

(v) An individual who is enrolled in or has completed a state
rehabilitation plan or is a service-connected disabled veteran,
veteran of the Vietnam era, or veteran who is recently separated
from military service.

(vi) An ex-offender. An individual shall be treated as convicted
if he or she was placed on probation by a state court without a
finding of guilty.

(vii) A recipient of:

(I) Federal Supplemental Security Income benefits.

(II) Aid to Families with Dependent Children.

(III) CalFresh benefits.

(IV) State and local general assistance.

(viii) 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, becomes inoperative, or
is repealed.

(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 from the Employment Development Department, as
permitted by federal law, the local county or city Job Training
Partnership Act administrative entity, the local county GAIN office
or social services agency, or the local government administering
the LAMBRA, a certification that provides that a qualified
disadvantaged individual or qualified displaced employee meets
the eligibility requirements specified in subparagraph (C) of
paragraph (4) of subdivision (b) or subparagraph (A) of paragraph
(6) of subdivision (b). The Employment Development Department
may provide preliminary screening and referral to a certifying
agency. The Department of Housing and Community Development
shall develop regulations governing the issuance of certificates
pursuant to Section 7114.2 of the Government Code and shall
develop forms for this purpose.

(2) 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) If an employer acquires the major portion of a trade or
business of another employer (hereinafter in this paragraph referred
to as the “predecessor”) or the major portion of a separate unit of
a trade or business of a predecessor, then, for purposes of applying
this section (other than subdivision (d)) for any calendar year
ending after that acquisition, the employment relationship between
an employee and an employer shall not be treated as terminated if
the employee continues to be employed in that trade or business.

(e) (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 days of that employment (whether
or not consecutive) or before the close of the 270th calendar day
after the day in which that employee completes 90 days of
employment with the taxpayer, the tax imposed by this part for
the taxable year in which that employment is terminated shall be
increased by an amount (determined under those regulations) equal
to the credit allowed under subdivision (a) for that taxable year
and all prior taxable years attributable to qualified wages paid or
incurred with respect to that employee.

(B) If the seasonal employment of any qualified disadvantaged
individual, with respect to whom qualified wages are taken into
account under subdivision (a), is not continued by the qualified
taxpayer for a period of 270 days of employment during the
60-month period beginning with the day the qualified
disadvantaged individual commences seasonal employment with
the qualified taxpayer, the tax imposed by this part, for the taxable
year that includes the 60th month following the month in which
the qualified disadvantaged individual commences seasonal
employment with the qualified taxpayer, shall be increased by an
amount equal to the credit allowed under subdivision (a) for that
taxable year and all prior taxable years attributable to qualified
wages paid or incurred with respect to that qualified disadvantaged
individual.

(2) (A) Subparagraph (A) of paragraph (1) shall not apply to
any of the following:

(i) A termination of employment of an employee who voluntarily
leaves the employment of the taxpayer.

(ii) A termination of employment of an individual who, before
the close of the period referred to in subparagraph (A) of paragraph
(1), becomes disabled to perform the services of that employment,
unless that disability is removed before the close of that period
and the taxpayer fails to offer reemployment to that individual.

(iii) A termination of employment of an individual, if it is
determined that the termination was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of
the California Code of Regulations) of that individual.

(iv) A termination of employment of an individual due to a
substantial reduction in the trade or business operations of the
taxpayer.

(v) A termination of employment of an individual, if that
individual is replaced by other qualified employees so as to create
a net increase in both the number of employees and the hours of
employment.

(B) Subparagraph (B) of paragraph (1) shall not apply to any
of the following:

(i) A failure to continue the seasonal employment of a qualified
disadvantaged individual who voluntarily fails to return to the
seasonal employment of the qualified taxpayer.

(ii) A failure to continue the seasonal employment of a qualified
disadvantaged individual who, before the close of the period
referred to in subparagraph (B) of paragraph (1), becomes disabled
and unable to perform the services of that seasonal employment,
unless that disability is removed before the close of that period
and the qualified taxpayer fails to offer seasonal employment to
that individual.

(iii) A failure to continue the seasonal employment of a qualified
disadvantaged individual, if it is determined that the failure to
continue the seasonal employment was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of
the California Code of Regulations) of that qualified disadvantaged
individual.

(iv) A failure to continue seasonal employment of a qualified
disadvantaged individual due to a substantial reduction in the
regular seasonal trade or business operations of the qualified
taxpayer.

(v) A failure to continue the seasonal employment of a qualified
disadvantaged individual, if that individual is replaced by other
qualified displaced employees so as to create a net increase in both
the number of seasonal employees and the hours of seasonal
employment.

(C) For purposes of paragraph (1), the employment relationship
between the taxpayer and an employee shall not be treated as
terminated by reason of a mere change in the form of conducting
the trade or business of the taxpayer, if the employee continues to
be employed in that trade or business and the taxpayer retains a
substantial interest in that trade or business.

(3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount
of any credit allowable under this part.

(4) At the close of the second taxable year, if the taxpayer has
not increased the number of its employees as determined by
paragraph (5) of subdivision (b), then the amount of the credit
previously claimed shall be added to the taxpayer’s net tax for the
taxpayer’s second taxable year.

(f) 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 succeeding begin delete five end delete begin insert 10 end insert taxable 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, if necessary, until the credit is exhausted, as if it were an
amount exceeding the “net tax” for the taxable year, as provided
in subdivision (h). However, the portion of any credit remaining
for carryover to taxable years beginning on or after January 1,
2014, if any, after application of this subdivision, shall be carried
over only to the succeeding begin delete five end delete begin insert 10 end insert taxable years if necessary, until
the credit is exhausted, 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) (1) Except as provided in paragraph (2), this section shall
cease to be operative for taxable years beginning on or after January
1, 2014, and shall be repealed on December 1, 2019.

(2) The section shall continue to apply with respect to qualified
employees who are employed by the qualified taxpayer within the
LAMBRA within the 60-month period immediately preceding
January 1, 2014, and qualified wages paid or incurred with respect
to those qualified employees shall continue to qualify for the credit
under this section for taxable years beginning on or after January
1, 2014, in accordance with this section, as amended by the act
adding this subdivision.

SEC. 11.  

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, becomes inoperative, or is repealed.

(5) “Qualified disadvantaged individual” means an individual
who satisfies all of the following requirements:

(A) (i) At least 90 percent of whose services for the 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:

(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 the succeeding begin delete five end delete begin insert 10 end insert taxable years, if
necessary, 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, if necessary, until the credit is exhausted, as if it were an
amount exceeding the “net tax” for the taxable year, as provided
in subdivision (g). However, the portion of any credit remaining
for carryover to taxable years beginning on or after January 1,
2014, if any, after application of this subdivision, shall be carried
over only to the succeeding begin delete five end delete begin insert 10 end insert taxable years if necessary, until
the credit is exhausted, 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
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) (1) Except as provided in paragraph (2), this section shall
cease to be operative for taxable years beginning on or after January
1, 2014, and shall be repealed on December 1, 2019.

(2) The section shall continue to apply with respect to qualified
employees who are employed by the qualified taxpayer within the
manufacturing enhancement area within the 60-month period
immediately preceding January 1, 2014, and qualified wages paid
or incurred with respect to those qualified employees shall continue
to qualify for the credit under this section for taxable years
beginning on or after January 1, 2014, in accordance with the
provisions of this section, as amended by the act adding this
subdivision.

SEC. 12.  

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 before January 1, 2014.

(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 as it read on the
effective date of the act amending this section.

(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 succeeding begin delete five end delete begin insert 10 end insert taxable years, if
necessary, until the credit is exhausted. The credit shall be applied
first to the earliest taxable years possible.

(e) Any taxpayer that 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, if necessary, until the credit is exhausted, as if it were an
amount exceeding the “net tax” for the taxable year, as provided
in subdivision (d). However, the portion of any credit remaining
for carryover to taxable years beginning on or after January 1,
2014, if any, after application of this subdivision, shall be carried
over only to the succeeding begin delete five end delete begin insert 10 end insert taxable years, if necessary,
until the credit is exhausted, as if it were an amount exceeding the
“net tax” for the taxable year, as provided in subdivision (d).

(g) The amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 1998.

(h) This section is repealed on December 1, 2014.

SEC. 13.  

Section 17053.73 is added to the Revenue and
Taxation Code, to read:

17053.73.  

(a) (1) For each taxable year beginning on or after
January 1, 2014, and before January 1, begin delete 2019, end delete begin insert 2021, end insert there shall be
allowed to a qualified taxpayer that hires a qualified full-time
employee and pays or incurs qualified wages attributable to work
performed by the qualified full-time employee in a designated
census tract or former enterprise zone, and that receives a tentative
credit reservation for that qualified full-time employee, a credit
against the “net tax,” as defined in Section 17039, in an amount
calculated under this section.

(2) The amount of the credit allowable under this section for a
taxable year shall be equal to the product of the tentative credit
amount for the taxable year and the applicable percentage for that
taxable year.

(3) (A) If a qualified taxpayer relocates to a designated census
tract or former enterprise zone, the qualified taxpayer shall be
allowed a credit with respect to qualified wages for each qualified
full-time employee employed within the new location only if the
qualified taxpayer provides each employee at the previous location
or locations a written offer of employment at the new location in
the designated census tract or former enterprise zone with
comparable compensation.

(B) For purposes of this paragraph, “relocates to a designated
census tract or former enterprise zone” means an increase in the
number of qualified full-time employees, employed by a qualified
taxpayer, within a designated census tract or tracts or former
enterprise zones within a 12-month period in which there is a
decrease in the number of full-time employees, employed by the
qualified taxpayer in this state, but outside of designated census
tracts or former enterprise zone.

(C) This paragraph shall not apply to a small business.

(4) The credit allowed by this section may be claimed only on
a timely filed original return of the qualified taxpayer and only
with respect to a qualified full-time employee for whom the
qualified taxpayer has received a tentative credit reservation.

(b) For purposes of this section:

(1) The “tentative credit amount” for a taxable year shall be
equal to the product of the applicable credit percentage for each
qualified full-time employee and the qualified wages paid by the
qualified taxpayer during the taxable year to that qualified full-time
employee.

(2) The “applicable percentage” for a taxable year shall be equal
to a fraction, the numerator of which is the net increase in the total
number of full-time employees employed in this state during the
taxable year, determined on an annual full-time equivalent basis,
as compared with the total number of full-time employees
employed in this state during the base year, determined on the
same basis, and the denominator of which shall be the total number
of qualified full-time employees employed in this state during the
taxable year. The applicable percentage shall not exceed 100
percent.

(3) The “applicable credit percentage” means the credit
percentage for the calendar year during which a qualified full-time
employee was first employed by the qualified taxpayer. The
applicable credit percentage for all calendar years shall be 35
percent.

(4) “Base year” means the 2013 taxable year, except in the case
of a qualified taxpayer who first hires a qualified full-time
employee in a taxable year beginning on or after January 1, 2015,
the base year means the taxable year immediately preceding the
taxable year in which a qualified full-time employee was first hired
by the qualified taxpayer.

(5) “Acquired” includes any gift, inheritance, transfer incident
to divorce, or any other transfer, whether or not for consideration.

(6) “Annual full-time equivalent” means either of the following:

(A) In the case of a full-time employee paid hourly qualified
wages, “annual full-time equivalent” means the total number of
hours worked for the qualified taxpayer by the employee, not to
exceed 2,000 hours per employee, divided by 2,000.

(B) In the case of a salaried full-time employee, “annual
full-time equivalent” means the total number of weeks worked for
the qualified taxpayer by the employee divided by 52.

(7) “Designated census tract” means a census tract within the
state that is determined by the Department of Finance to have a
civilian unemployment rate that is within the top 25 percent of all
census tracts within the state and has a poverty rate within the top
25 percent of all census tracts within the state, as prescribed in
Section 13073.5 of the Government Code.

(8) “Former enterprise zone” means an enterprise zone
designated as of December 31, 2011, and any expansion of an
enterprise zone prior to December 31, 2012, under former Chapter
12.8 (commencing with former Section 7070) of Division 7 of
Title 1 of the Government Code, as in effect on December 31,
2012, excluding any census tract within an enterprise zone that is
identified by the Department of Finance pursuant to Section
13073.5 of the Government Code as a census tract within the lowest
quartile of census tracts with the lowest civilian unemployment
and poverty.

(9) “Minimum wage” means the wage established pursuant to
Chapter 1 (commencing with Section 1171) of Part 4 of Division
2 of the Labor Code.

(10) (A) “Qualified full-time employee” means an individual
who meets all of the following requirements:

(i) Performs at least 50 percent of his or her services for the
qualified taxpayer during the taxable year in a designated census
tract or former enterprise zone.

(ii) Receives starting wages that are at least 150 percent of the
minimum wage.

(iii) Is hired by the qualified taxpayer on or after January 1,
2014.

(iv) Is hired by the qualified taxpayer after the date the
Department of Finance determines that the census tract referred
to in clause (i) is a designated census tract or that the census tracts
within a former enterprise zone are not census tracts with the lowest
civilian unemployment and poverty.

(v) Satisfies either of the following conditions:

(I) Is paid qualified wages by the qualified taxpayer for services
not less than an average of 35 hours per week.

(II) Is a salaried employee and was paid compensation during
the taxable year for full-time employment, within the meaning of
Section 515 of the Labor Code, by the qualified taxpayer.

(vi) Upon commencement of employment with the qualified
taxpayer, satisfies any of the following conditions:

(I) Was unemployed for the six months immediately preceding
employment with the qualified taxpayer. In the case of an
individual that completed a program of study at a college,
university, or other postsecondary educational institution, received
a baccalaureate, postgraduate, or professional degree, and was
unemployed for the six months immediately preceding employment
with the qualified taxpayer, that individual must have completed
that program of study at least 12 months prior to the individual’s
commencement of employment with the qualified taxpayer.

(II) Is a veteran that had not been employed since separation
from service in the Armed Forces of the United States.

(III) Was a recipient of the credit allowed under Section 32 of
the Internal Revenue Code, relating to earned income, as applicable
for federal purposes, for the previous taxable year.

begin insert

(IV) Was an ex-offender, within the meaning of Section
17053.74.

end insert

(B) An individual may be considered a qualified full-time
employee only for the period of time commencing with the date
the individual is first employed by the qualified taxpayer and
ending 60 months thereafter.

(11) (A) “Qualified taxpayer” means a person or entity engaged
in a trade or business within a designated census tract or former
enterprise zone that, during the taxable year, pays or incurs
qualified wages.

(B) In the case of any pass-thru 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 23626 shall be allowed to the pass-thru entity and passed
through to the partners and shareholders in accordance with
applicable provisions of this part or Part 11 (commencing with
Section 23001). For purposes of this subdivision, the term
“pass-thru entity” means any partnership or “S” corporation.

(C) “Qualified taxpayers” shall not include any of the following:

(i) Employers that provide temporary help services, as described
in Code 561320 of the North American Industry Classification
System (NAICS) published by the United States Office of
Management and Budget, 2012 Edition.

(ii) Employers that provide retail trade services, as described
in Sector 44-45 of the North American Industry Classification
System (NAICS) published by the United States Office of
Management and Budget, 2012 Edition.

(iii) Employers that are primarily engaged in providing food
services, as described in Code 711110, 722511, 722513, 722514,
or 722515 of the North American Industry Classification System
(NAICS) published by the United States Office of Management
and Budget, 2012 edition.

(iv) Employers that are primarily engaged in services as
described in Code 713210, 721120, or 722410 of the North
American Industry Classification System (NAICS) published by
the United States Office of Management and Budget, 2012 edition.

(D) Subparagraph (C) shall not apply to a taxpayer that is a
“small business.”

(12) “Qualified wages” means those wages that meet all of the
following requirements:

(A) That portion of wages paid or incurred by the qualified
taxpayer during the taxable year to each qualified full-time
employee that exceeds 150 percent of minimum wage, but does
not exceed 350 percent of minimum wage.

(B) Wages paid or incurred during the 60-month period
beginning with the first day the qualified full-time employee
commences employment with the qualified taxpayer. In the case
of any employee who is reemployed, including a regularly
occurring seasonal increase, in the trade or business operations of
the qualified taxpayer, this reemployment shall not be treated as
constituting commencement of employment for purposes of this
section.

(C) Except as provided in paragraph (3) of subdivision (n),
qualified wages shall not include any wages paid or incurred by
the qualified taxpayer on or after the date that the Department of
Finance’s redesignation of designated census tracts is effective,
as provided in paragraph (2) of subdivision (g), so that a census
tract is no longer a designated census tract.

(13) “Seasonal employment” means employment by a qualified
taxpayer that has regular and predictable substantial reductions in
trade or business operations.

(14) (A) “Small business” means a trade or business that has
aggregate gross receipts, less returns and allowances reportable to
this state, of less than two million dollars ($2,000,000) during the
previous taxable year.

(B) (i) For purposes of this paragraph, “gross receipts, less
returns and allowances reportable to this state,” means the sum of
the gross receipts from the production of business income, as
defined in subdivision (a) of Section 25120, and the gross receipts
from the production of nonbusiness income, as defined in
subdivision (d) of Section 25120.

(ii) In the case of any trade or business activity conducted by a
partnership or an “S” corporation, the limitations set forth in
subparagraph (A) shall be applied to the partnership or “S”
corporation and to each partner or shareholder.

begin delete

(iii) For taxpayers that are required to be included in a combined
report under Section 25101 or authorized to be included in a
combined report under Section 25101.15, the dollar amount
specified in subparagraph (A) shall apply to the aggregate gross
receipts of all taxpayers that are required to be or authorized to be
included in a combined report.

end delete

(15) An individual is “unemployed” for any period for which
the individual is all of the following:

(A) Not in receipt of wages subject to withholding under Section
13020 of the Unemployment Insurance Code for that period.

(B) Not a self-employed individual (within the meaning of
Section 401(c)(1)(B) of the Internal Revenue Code, relating to
self-employed individual) for that period.

(C) Not a registered full-time student at a high school, college,
university, or other postsecondary educational institution for that
period.

(c) The net increase in full-time employees of a qualified
taxpayer shall be determined as provided by this subdivision:

(1) (A) The net increase in full-time employees shall be
determined on an annual full-time equivalent basis by subtracting
from the amount determined in subparagraph (C) the amount
determined in subparagraph (B).

(B) The total number of full-time employees employed in the
base year by the taxpayer and by any trade or business acquired
by the taxpayer during the current taxable year.

(C) The total number of full-time employees employed in the
current taxable year by the taxpayer and by any trade or business
acquired during the current taxable year.

(2) For taxpayers who first commence doing business in this
state during the taxable year, the number of full-time employees
for the base year shall be zero.

(d) For purposes of this section:

(1) All employees of the trades or businesses that are treated as
related under Section 267, 318, or 707 of the Internal Revenue
Code shall be treated as employed by a single taxpayer.

(2) In determining whether the taxpayer has first commenced
doing business in this state during the taxable year, the provisions
of subdivision (f) of Section 17276.20, without application of
paragraph (7) of that subdivision, shall apply.

(e) (1) To be eligible for the credit allowed by this section, a
qualified taxpayer shall, upon hiring a qualified full-time employee,
request a tentative credit reservation from the Franchise Tax Board
within 30 days of complying with the Employment Development
Department’s new hire reporting requirements as provided in
Section 1088.5 of the Unemployment Insurance Code, in the form
and manner prescribed by the Franchise Tax Board.

(2) To obtain a tentative credit reservation with respect to a
qualified full-time employee, the qualified taxpayer shall provide
necessary information, as determined by the Franchise Tax Board,
including the name, social security number, the start date of
employment, the rate of pay of the qualified full-time employee,
the qualified taxpayer’s gross receipts, less returns and allowances,
for the previous taxable year, and whether the qualified full-time
employee is a resident of a targeted employment area, as defined
in former Section 7072 of the Government Code, as in effect on
December 31, 2013.

(3) The qualified taxpayer shall provide the Franchise Tax Board
an annual certification of employment with respect to each
qualified full-time employee hired in a previous taxable year, on
or before, the 15th day of the third month of the taxable year. The
certification shall include necessary information, as determined
by the Franchise Tax Board, including the name, social security
number, start date of employment, and rate of pay for each qualified
full-time employee employed by the qualified taxpayer.

(4) A tentative credit reservation provided to a taxpayer with
respect to an employee of that taxpayer shall not constitute a
determination by the Franchise Tax Board with respect to any of
the requirements of this section regarding a taxpayer’s eligibility
for the credit authorized by this section.

(f) The Franchise Tax Board shall do all of the following:

(1) Approve a tentative credit reservation with respect to a
qualified full-time employee hired during a calendar year.

(2) Determine the aggregate tentative reservation amount and
the aggregate small business tentative reservation amount for a
calendar year.

(3) A tentative credit reservation request from a qualified
taxpayer with respect to a qualified full-time employee who is a
resident of a targeted employment area, as defined in former
Section 7072 of the Government Code, as in effect on December
31, 2013, shall be expeditiously processed by the Franchise Tax
Board. The residence of a qualified full-time employee in a targeted
employment area shall have no other effect on the eligibility of an
individual as a qualified full-time employee or the eligibility of a
qualified taxpayer for the credit authorized by this section.

(4) Notwithstanding Section 19542, provide as a searchable
database on its Internet Web site, for each taxable year beginning
on or after January 1, 2014, and before January 1, begin delete 2019, end delete begin insert 2021, end insert the
employer names, amounts of tax credit claimed, and number of
new jobs created for each taxable year pursuant to this section and
Section begin delete 23623 end delete begin insert 23626 end insert .

(g) (1) The Department of Finance shall, by January 1, 2014,
and by January 1 of every fifth year thereafter, provide the
Franchise Tax Board with a list of the designated census tracts and
a list of census tracts with the lowest civilian unemployment rate.

(2) The redesignation of designated census tracts and lowest
civilian unemployment census tracts by the Department of Finance
as provided in Section 13073.5 of the Government Code shall be
effective, for purposes of this credit, one year after the date the
Department of Finance redesignates the designated census tracts.

(h) For purposes of this section:

(1) All employees of the trades or businesses that are treated as
related under Section 267, 318, or 707 of the Internal Revenue
Code shall be treated as employed by a single taxpayer.

(2) All employees of trades or businesses that are not
incorporated, and that are under common control, shall be treated
as employed by a single taxpayer.

(3) 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 to that trade or business in
that manner.

(4) Principles that apply in the case of controlled groups of
corporations, as specified in subdivision (h) of Section 23626,
shall apply with respect to determining employment.

(5) 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 (i), for any taxable year ending
after that acquisition, the employment relationship between a
qualified full-time employee and an employer shall not be treated
as terminated if the employee continues to be employed in that
trade or business.

(i) (1) If the employment of any qualified full-time 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 36 months after commencing employment with
the qualified taxpayer, whether or not consecutive, 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.

(2) Paragraph (1) shall not apply to any of the following:

(A) A termination of employment of a qualified full-time
employee who voluntarily leaves the employment of the qualified
taxpayer.

(B) A termination of employment of a qualified full-time
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 qualified taxpayer fails to offer
reemployment to that employee.

(C) A termination of employment of a qualified full-time
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.

(D) A termination of employment of a qualified full-time
employee due to a substantial reduction in the trade or business
operations of the qualified taxpayer, including reductions due to
seasonal employment.

(E) A termination of employment of a qualified full-time
employee, if that employee is replaced by other qualified full-time
employees so as to create a net increase in both the number of
employees and the hours of employment.

(F) A termination of employment of a qualified full-time
employee, when that employment is considered seasonal
employment and the qualified employee is rehired on a seasonal
basis.

(3) For purposes of paragraph (1), the employment relationship
between the qualified taxpayer and a qualified full-time 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 full-time employee continues to be
employed in that trade or business and the qualified taxpayer retains
a substantial interest in that trade or business.

(4) 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.

(j) 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.

(k) In the case where the credit allowed by this section exceeds
the “net tax,” the excess may be carried over to reduce the “net
tax” in the following year, and the succeeding four years if
necessary, until the credit is exhausted.

(l) The Franchise Tax Board may prescribe rules, guidelines,
or procedures necessary or appropriate to carry out the purposes
of this section, including any guidelines regarding the allocation
of the credit allowed under this section. Chapter 3.5 (commencing
with Section 11340) of Part 1 of Division 3 of Title 2 of the
Government Code shall not apply to any rule, guideline, or
procedure prescribed by the Franchise Tax Board pursuant to this
section.

(m) (1) Upon the effective date of this section, the Department
of Finance shall estimate the total dollar amount of credits that
will be claimed under this section with respect to each fiscal year
from the 2013-14 fiscal year to the begin delete 2018-19 end delete begin insert 2020- end insert begin insert 21 end insert fiscal year,
inclusive.

(2) The Franchise Tax Board shall annually provide to the Joint
Legislative Budget Committee, by no later than March 1, a report
of the total dollar amount of the credits claimed under this section
with respect to the relevant fiscal year. The report shall compare
the total dollar amount of credits claimed under this section with
respect to that fiscal year with the department’s estimate with
respect to that same fiscal year. If the total dollar amount of credits
claimed for the fiscal year is less than the estimate for that fiscal
year, the report shall identify options for increasing annual claims
of the credit so as to meet estimated amounts.

(n) (1) This section shall remain in effect only until December
1, 2024, and as of that date is repealed.

(2) Notwithstanding paragraph (1) of subdivision (a), this section
shall continue to be operative for taxable years beginning on or
after January 1, begin delete 2019, end delete begin insert 2021, end insert but only with respect to qualified
full-time employees who commenced employment with a qualified
taxpayer in a designated census tract or former enterprise zone in
a taxable year beginning before January 1, begin delete 2019 end delete begin insert 2021 end insert .

(3) This section shall remain operative for any qualified taxpayer
with respect to any qualified full-time employee after the
designated census tract is no longer designated or a former
enterprise zone ceases to be a former enterprise zone, as defined
in this section, for the remaining period, if any, of the 60-month
period after the original date of hiring of an otherwise qualified
full-time employee and any wages paid or incurred with respect
to those qualified full-time employees after the designated census
tract is no longer designated or a former enterprise zone ceases to
be a former enterprise zone, as defined in this section, shall be
treated as qualified wages under this section, provided the
employee satisfies any other requirements of paragraphs (10) and
(12) of subdivision (b), as if the designated census tract was still
designated and binding.

SEC. 14.  

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

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

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

(2) “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, becomes inoperative, or
is repealed.

(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 Job Training Partnership
Act (29 U.S.C. Sec. 1501 et seq.), or its successor, who is receiving,
or is eligible to receive, subsidized employment, training, or
services funded by the federal Job Training Partnership Act, or its
successor.

(II) Immediately preceding the qualified employee’s
commencement of employment with the taxpayer, was a person
eligible to be a voluntary or mandatory registrant under the Greater
Avenues for Independence Act of 1985 (GAIN) provided for
pursuant to Article 3.2 (commencing with Section 11320) of
Chapter 2 of Part 3 of Division 9 of the Welfare and Institutions
Code, or its successor.

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

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

(aa) 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
Clean Air Act.

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

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

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

(aa) Federal Supplemental Security Income benefits.

(bb) Aid to Families with Dependent Children.

(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) Priority for employment shall be provided to an individual
who is enrolled in a qualified program under the federal Job
Training Partnership Act or the Greater Avenues for Independence
Act of 1985 or who is eligible as a member of a targeted group
under the Work Opportunity Tax Credit (Section 51 of the Internal
Revenue Code), or its successor.

(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 office
or social services agency, or the local government administering
the enterprise zone, a certification which provides that a qualified
employee meets the eligibility requirements specified in clause
(iv) of subparagraph (A) of paragraph (4) of subdivision (b). The
Employment Development Department may provide preliminary
screening and referral to a certifying agency. The Employment
Development Department shall develop a form for this purpose.
The Department of Housing and Community Development shall
develop regulations governing the issuance of certificates by local
governments pursuant to subdivision (a) of Section 7086 of the
Government Code.

(2) 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 the succeeding begin delete five end delete begin insert 10 end insert taxable years, if
necessary, 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, if necessary, until the credit is exhausted, as if it were an
amount exceeding the “net tax” for the taxable year, as provided
in subdivision (i). However, the portion of any credit remaining
for carryover to taxable years beginning on or after January 1,
2014, if any, after application of this subdivision, shall be carried
over only to the succeeding begin delete five end delete begin insert 10 end insert taxable years if necessary, until
the credit is exhausted, 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) (1) Except as provided in paragraph (2), this section shall
cease to be operative for taxable years beginning on or after January
1, 2014, and shall be repealed on December 1, 2019.

(2) The section shall continue to apply with respect to qualified
employees who are employed by the qualified taxpayer within the
enterprise zone within the 60-month period immediately preceding
January 1, 2014, and qualified wages paid or incurred with respect
to those qualified employees shall continue to qualify for the credit
under this section for taxable years beginning on or after January
1, 2014, in accordance with this section, as amended by the act
adding this subdivision.

SEC. 15.  

Section 17053.75 of the Revenue and Taxation Code
is amended to read:

17053.75.  

(a) There shall be allowed as a credit against the
“net tax” (as defined by Section 17039) for the taxable year an
amount equal to five percent of the qualified wages received by
the taxpayer during the taxable year.

(b) For purposes of this section:

(1) “Qualified employee” means a taxpayer who meets both of
the following:

(A) Is described in clauses (i) and (ii) of subparagraph (A) of
paragraph (4) of subdivision (b) of Section 17053.74.

(B) Is not an employee of the federal government or of this state
or of any political subdivision of this state.

(2) (A) “Qualified wages” means “wages,” as defined in
subsection (b) of Section 3306 of the Internal Revenue Code,
attributable to services performed for an employer with respect to
whom the taxpayer is a qualified employee in an amount that does
not exceed one and one-half times the dollar limitation specified
in that subsection.

(B) “Qualified wages” does not include any compensation
received from the federal government or this state or any political
subdivision of this state.

(C) “Qualified wages” does not include any wages received on
or after the date the enterprise zone designation expires, is no
longer binding, or becomes inoperative.

(3) “Enterprise zone” means any 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) For each dollar of income received by the taxpayer in excess
of qualified wages, as defined in this section, the credit shall be
reduced by nine cents ($0.09).

(d) The amount of the credit allowed by this section in any
taxable year shall not exceed the amount of tax that would be
imposed on the taxpayer’s income attributable to employment
within the enterprise zone as if that income represented all of the
income of the taxpayer subject to tax under this part.

(e) This section shall cease to be operative for taxable years
beginning on or after January 1, 2014, and shall be repealed on
December 1, 2014.

SEC. 16.  

Section 17053.80 of the Revenue and Taxation Code,
as added by Section 3 of Chapter 10 of the Third Extraordinary
Session of the Statutes of 2009, is repealed.

SEC. 17.  

Section 17053.80 of the Revenue and Taxation Code,
as added by Section 3 of Chapter 17 of the Third Extraordinary
Session of the Statutes of 2009, is amended to read:

17053.80.  

(a) For each taxable year beginning on or after
January 1, 2009, there shall be allowed as a credit against the “net
tax,” as defined in Section 17039, three thousand dollars ($3,000)
for each net increase in qualified full-time employees, as specified
in subdivision (c), hired during the taxable year by a qualified
employer.

(b) For purposes of this section:

(1) “Acquired” includes any gift, inheritance, transfer incident
to divorce, or any other transfer, whether or not for consideration.

(2) “Qualified full-time employee” means:

(A) A qualified employee who was paid qualified wages by the
qualified employer for services of not less than an average of 35
hours per week.

(B) A qualified employee who was a salaried employee and
was paid compensation during the taxable year for full-time
employment, within the meaning of Section 515 of the Labor Code,
by the qualified employer.

(3) A “qualified employee” shall not include any of the
following:

(A) An employee certified as a qualified employee in an
enterprise zone designated in accordance with Chapter 12.8
(commencing with Section 7070) of Division 7 of Title 1 of the
Government Code.

(B) An employee certified as a qualified disadvantaged
individual in a manufacturing enhancement area designated in
accordance with Section 7073.8 of the Government Code.

(C) An employee certified as a qualified employee in a targeted
tax area designated in accordance with Section 7097 of the
Government Code.

(D) An employee certified as a qualified disadvantaged
individual or a qualified displaced employee in a local agency
military base recovery area (LAMBRA) designated in accordance
with Chapter 12.97 (commencing with Section 7105) of Division
7 of Title 1 of the Government Code.

(E) An employee whose wages are included in calculating any
other credit allowed under this part.

(4) “Qualified employer” means a taxpayer that, as of the last
day of the preceding taxable year, employed a total of 20 or fewer
employees.

(5) “Qualified wages” means wages subject to Division 6
(commencing with Section 13000) of the Unemployment Insurance
Code.

(6) “Annual full-time equivalent” means either of the following:

(A) In the case of a full-time employee paid hourly qualified
wages, “annual full-time equivalent” means the total number of
hours worked for the taxpayer by the employee (not to exceed
2,000 hours per employee) divided by 2,000.

(B) In the case of a salaried full-time employee, “annual
full-time equivalent” means the total number of weeks worked for
the taxpayer by the employee divided by 52.

(c) The net increase in qualified full-time employees of a
qualified employer shall be determined as provided by this
subdivision:

(1) (A) The net increase in qualified full-time employees shall
be determined on an annual full-time equivalent basis by
subtracting from the amount determined in subparagraph (C) the
amount determined in subparagraph (B).

(B) The total number of qualified full-time employees employed
in the preceding taxable year by the taxpayer and by any trade or
business acquired by the taxpayer during the current taxable year.

(C) The total number of full-time employees employed in the
current taxable year by the taxpayer and by any trade or business
acquired during the current taxable year.

(2) For taxpayers who first commence doing business in this
state during the taxable year, the number of full-time employees
for the immediately preceding prior taxable year shall be zero.

(d) In the case where the credit allowed by this section exceeds
the “net tax,” the excess may be carried over to reduce the “net
tax” in the following year, and succeeding seven years if necessary,
until the credit is exhausted.

(e) Any deduction otherwise allowed under this part for qualified
wages shall not be reduced by the amount of the credit allowed
under this section.

(f) For purposes of this section:

(1) All employees of the trades or businesses that are treated as
related under either Section 267, 318, or 707 of the Internal
Revenue Code shall be treated as employed by a single taxpayer.

(2) In determining whether the taxpayer has first commenced
doing business in this state during the taxable year, the provisions
of subdivision (f) of Section 17276, without application of
paragraph (7) of that subdivision, shall apply.

(g) (1) (A) Credit under this section and Section 23623 shall
be allowed only for credits claimed on timely filed original returns
received by the Franchise Tax Board on or before the cutoff date
established by the Franchise Tax Board.

(B) For purposes of this paragraph, the cutoff date shall be the
last day of the calendar quarter within which the Franchise Tax
Board estimates it will have received timely filed original returns
claiming credits under this section and Section 23623 that
cumulatively total four hundred million dollars ($400,000,000)
for all taxable years.

(2) The date a return is received shall be determined by the
Franchise Tax Board.

(3) (A) The determinations of the Franchise Tax Board with
respect to the cutoff date, the date a return is received, and whether
a return has been timely filed for purposes of this subdivision may
not be reviewed in any administrative or judicial proceeding.

(B) Any disallowance of a credit claimed due to a determination
under this subdivision, including the application of the limitation
specified in paragraph (1), shall be treated as a mathematical error
appearing on the return. Any amount of tax resulting from such
disallowance may be assessed by the Franchise Tax Board in the
same manner as provided by Section 19051.

(4) The Franchise Tax Board shall periodically provide notice
on its Web site with respect to the amount of credit under this
section and Section 23623 claimed on timely filed original returns
received by the Franchise Tax Board.

(h) (1) The Franchise Tax Board may prescribe rules, guidelines
or procedures necessary or appropriate to carry out the purposes
of this section, including any guidelines regarding the limitation
on total credits allowable under this section and Section 23623
and guidelines necessary to avoid the application of paragraph (2)
of subdivision (f) through splitups, shell corporations, partnerships,
tiered ownership structures, or otherwise.

(2) Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code does not apply to
any standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the Franchise Tax Board
pursuant to this section.

(i) This section shall cease to be operative for taxable years
beginning on or after January 1, 2014, and shall be repealed on
December 1, 2014.

SEC. 18.  

Section 17059.2 is added to the Revenue and Taxation
Code, to read:

17059.2.  

(a) (1) For each taxable year beginning on and after
January 1, 2014, and before January 1, 2025, there shall be allowed
as a credit against the “net tax,” as defined in Section 17039, an
amount as determined by the committee pursuant to paragraph (2)
and approved pursuant to Section 18410.2.

(2) The amount of credit allocated to a taxpayer for a taxable
year pursuant to this section shall be as set forth in a written
agreement between GO-Biz and the taxpayer and shall be based
on the following factors:

(A) The number of jobs the taxpayer will create or retain in this
state.

(B) The compensation paid or proposed to be paid by the
taxpayer to its employees, including wages and fringe benefits.

(C) The amount of investment in this state by the taxpayer.

(D) The extent of unemployment begin insert or poverty end insert in the area
begin insert according to end insert begin insert the United States Census end insert in which the taxpayer’s
project or business is proposed or located.

(E) The incentives available to the taxpayer in this state,
including incentives from the state, local government, and other
entities.

(F) The incentives available to the taxpayer in other states.

(G) The duration of the proposed project and the duration the
taxpayer commits to remain in this state.

(H) The overall economic impact in this state of the taxpayer’s
project or business.

(I) The strategic importance of the taxpayer’s project or business
to the state, region, or locality.

(J) The opportunity for future growth and expansion in this state
by the taxpayer’s business.

(K) The extent to which the anticipated benefit to the state
exceeds the projected benefit to the taxpayer from the tax credit.

(3) The written agreement entered into pursuant to paragraph
(2) shall include:

(A) Terms and conditions that include a minimum compensation
level and a minimum job retention period.

(B) Provisions indicating whether the credit is to be allocated
in full upon approval or in increments based on mutually agreed
upon milestones when satisfactorily met by the taxpayer.

(C) Provisions that allow the committee to recapture the credit,
in whole or in part, if the taxpayer fails to fulfill the terms and
conditions of the written agreement.

(b) For purposes of this section:

(1) “Committee” means the California Competes Tax Credit
Committee established pursuant to Section 18410.2.

(2) “GO-Biz” means the Governor’s Office of Business and
Economic Development.

(c) For purposes of this section, GO-Biz shall do the following:

(1) Give priority to a taxpayer whose project or business is
located or proposed to be located in an area of high unemployment
or poverty.

(2) Negotiate with a taxpayer the terms and conditions of
proposed written agreements that provide the credit allowed
pursuant to this section to a taxpayer.

(3) Provide the negotiated written agreement to the committee
for its approval pursuant to Section 18410.2.

(4) Inform the Franchise Tax Board of the terms and conditions
of the written agreement upon approval of the written agreement
by the committee.

(5) Inform the Franchise Tax Board of any recapture, in whole
or in part, of a previously allocated credit upon approval of the
recapture by the committee.

(6) Post on its Internet Web site all of the following:

(A) The name of each taxpayer allocated a credit pursuant to
this section.

(B) The estimated amount of the investment by each taxpayer.

(C) The estimated number of jobs created or retained.

(D) The amount of the credit allocated to the taxpayer.

(E) The amount of the credit recaptured from the taxpayer, if
applicable.

(d) For purposes of this section, the Franchise Tax Board shall
do all of the following:

(1) (A) Except as provided in subparagraph (B), review the
books and records of all taxpayers allocated a credit pursuant to
this section to ensure compliance with the terms and conditions
of the written agreement between the taxpayer and GO-Biz.

(B) In the case of a taxpayer that is a “small business,” as
defined in Section 17053.73, review the books and records of the
taxpayer allocated a credit pursuant to this section to ensure
compliance with the terms and conditions of the written agreement
between the taxpayer and GO-Biz when, in the sole discretion of
the Franchise Tax Board, a review of those books and records is
appropriate or necessary in the best interests of the state.

(2) Notwithstanding Section 19542:

(A) Notify GO-Biz of a possible breach of the written agreement
by a taxpayer and provide detailed information regarding the basis
for that determination.

(B) Provide information to GO-Biz with respect to whether a
taxpayer is a “small business,” as defined in Section 17053.73.

(e) In the case where the credit allowed under this section
exceeds the “net tax,” as defined in Section 17039, for a taxable
year, the excess credit may be carried over to reduce the “net tax”
in the following taxable year, and succeeding five taxable years,
if necessary, until the credit has been exhausted.

(f) Any recapture, in whole or in part, of a credit approved by
the committee pursuant to Section 18410.2 shall be treated as a
mathematical error appearing on the return. Any amount of tax
resulting from that recapture shall be assessed by the Franchise
Tax Board in the same manner as provided by Section 19051. The
amount of tax resulting from the recapture shall be added to the
tax otherwise due by the taxpayer for the taxable year in which
the committee’s recapture determination occurred.

(g) (1) The aggregate amount of credit that may be allocated
in any fiscal year pursuant to this section and Section 23689 shall
be an amount equal to the sum of subparagraphs (A), (B), and (C),
less the amount specified in subparagraph (D):

(A) Thirty million dollars ($30,000,000) for the 2013-14 fiscal
year, one hundred fifty million dollars ($150,000,000) for the
2014-15 fiscal year, and two hundred million dollars
($200,000,000) for each fiscal year from 2015-16 to 2018-19,
inclusive.

(B) The unallocated credit amount, if any, from the preceding
fiscal year.

(C) The amount of any previously allocated credits that have
been recaptured.

(D) The amount estimated by the Director of Finance, in
consultation with the Franchise Tax Board and the State Board of
Equalization, to be necessary to limit the aggregation of the
estimated amount of exemptions claimed pursuant to Section
6377.1 and of the amounts estimated to be claimed pursuant to
this section and Sections 17053.73, 23626, and 23689 to no more
than seven hundred fifty million dollars ($750,000,000) for either
the current fiscal year or for any of the three succeeding fiscal
years.

(i) The Director of Finance shall notify the Chairperson of the
Joint Legislative Budget Committee of the estimated annual
allocation authorized by this paragraph. Any allocation pursuant
to these provisions shall be made no sooner than 30 days after
written notification has been provided to the Chairperson of the
Joint Legislative Budget Committee and the chairpersons of the
committees of each house of the Legislature that consider
appropriation, or not sooner than whatever lesser time the
Chairperson of the Joint Legislative Budget Committee, or his or
her designee, may determine.

(ii) In no event shall the amount estimated in this subparagraph
be less than zero dollars ($0).

(2) Each fiscal year, 25 percent of the aggregate amount of the
credit that may be allocated pursuant to this section and Section
23689 shall be reserved for small business, as defined in Section
17053.73 or 23626.

(3) Each fiscal year, no more than 20 percent of the aggregate
amount of the credit that may be allocated pursuant to this section
shall be allocated to any one taxpayer.

(h) GO-Biz may prescribe rules and regulations as necessary to
carry out the purposes of this section. Any rule or regulation
prescribed pursuant to this section may be by adoption of an
emergency regulation in accordance with Chapter 3.5 (commencing
with Section 11340) of Part 1 of Division 3 of Title 2 of the
Government Code.

(i) A written agreement between GO-Biz and a taxpayer with
respect to the credit authorized by this section shall comply with
existing law on the date the agreement is executed.

(j) (1) Upon the effective date of this section, the Department
of Finance shall estimate the total dollar amount of credits that
will be claimed under this section with respect to each fiscal year
from the 2013-14 fiscal year to the 2024-25 fiscal year, inclusive.

(2) The Franchise Tax Board shall annually provide to the Joint
Legislative Budget Committee, by no later than March 1, a report
of the total dollar amount of the credits claimed under this section
with respect to the relevant fiscal year. The report shall compare
the total dollar amount of credits claimed under this section with
respect to that fiscal year with the department’s estimate with
respect to that same fiscal year. If the total dollar amount of credits
claimed for the fiscal year is less than the estimate for that fiscal
year, the report shall identify options for increasing annual claims
of the credit so as to meet estimated amounts.

(k) This section is repealed on December 1, 2025.

SEC. 19.  

Section 17235 of the Revenue and Taxation Code is
amended to read:

17235.  

(a) There shall be allowed as a deduction the amount
of net interest received by the taxpayer before January 1, 2014, in
payment on indebtedness of a person or entity engaged in the
conduct of a trade or business located in an enterprise zone.

(b) A deduction shall not be allowed under this section unless
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) This section shall cease to be operative for taxable years
beginning on or after January 1, 2014, and shall be repealed on
December 1, 2014.

SEC. 20.  

Section 17267.2 of the Revenue and Taxation Code
is amended to read:

17267.2.  

(a) A taxpayer may elect to treat 40 percent of the
cost of any Section 17267.2 property as an expense which is not
chargeable to a capital account. Any cost so treated shall be allowed
as a deduction for the taxable year in which the taxpayer places
the Section 17267.2 property in service.

(b) In the case of a husband and wife filing separate returns for
a taxable year, the applicable amount under subdivision (a) shall
be equal to 50 percent of the percentage specified in subdivision
(a).

(c) (1) An election under this section for any taxable year shall
do both of the following:

(A) Specify the items of Section 17267.2 property to which the
election applies and the percentage of the cost of each of those
items that are to be taken into account under subdivision (a).

(B) Be made on the taxpayer’s original return of the tax imposed
by this part for the taxable year.

(2) Any election made under this section, and any specification
contained in that election, may not be revoked except with the
consent of the Franchise Tax Board.

(d) (1) For purposes of this section, “Section 17267.2 property”
means any recovery property that is:

(A) Section 1245 property (as defined in Section 1245(a)(3) of
the Internal Revenue Code).

(B) Purchased and placed in service by the taxpayer for
exclusive use in a trade or business conducted within an enterprise
zone designated pursuant to Chapter 12.8 (commencing with
Section 7070) of Division 7 of Title 1 of the Government Code.

(C) Purchased and placed in service before the date the
enterprise zone designation expires, is no longer binding, or
becomes inoperative.

(2) For purposes of paragraph (1), “purchase” means any
acquisition of property, but only if both of the following apply:

(A) The property is not acquired from a person whose
relationship to the person acquiring it would result in the
disallowance of losses under Section 267 or Section 707(b) of the
Internal Revenue Code. However, in applying Section 267(b) and
267(c) for purposes of this section, Section 267(c)(4) shall be
treated as providing that the family of an individual shall include
only the individual’s spouse, ancestors, and lineal descendants.

(B) The basis of the property in the hands of the person acquiring
it is not determined in whole or in part by reference to the adjusted
basis of that property in the hands of the person from whom it is
acquired.

(3) For purposes of this section, the cost of property does not
include that portion of the basis of the property that is determined
by reference to the basis of other property held at any time by the
person acquiring the property.

(4) This section shall not apply to estates and trusts.

(5) This section shall not apply to any property for which the
taxpayer may not make an election for the taxable year under
Section 179 of the Internal Revenue Code because of the
application of the provisions of Section 179(d) of the Internal
Revenue Code.

(6) In the case of a partnership, the percentage limitation
specified in subdivision (a) shall apply at the partnership level and
at the partner level.

(e) For purposes of this section, “taxpayer” means a person or
entity who conducts 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.

(f) Any taxpayer who elects to be subject to this section shall
not be entitled to claim for the same property, the deduction under
Section 179 of the Internal Revenue Code, relating to an election
to expense certain depreciable business assets. However, the
taxpayer may claim depreciation by any method permitted by
Section 168 of the Internal Revenue Code, commencing with the
taxable year following the taxable year in which the Section
17267.2 property is placed in service.

(g) The aggregate cost of all Section 17267.2 property that may
be taken into account under subdivision (a) for any taxable year
shall not exceed the following applicable amount for the taxable
year of the designation of the relevant enterprise zone and taxable
years thereafter:

 

	The applicable
	amount is:
Taxable year of designation	$100,000
1st taxable year thereafter	100,000
2nd taxable year thereafter	75,000
3rd taxable year thereafter	75,000
Each taxable year thereafter	50,000

 

(h) Any amounts deducted under subdivision (a) with respect
to property subject to this section that ceases to be used in the
taxpayer’s trade or business within an enterprise zone at any time
before the close of the second taxable year after the property is
placed in service shall be included in income in the taxable year
in which the property ceases to be so used.

(i) This section shall cease to be operative for taxable years
beginning on or after January 1, 2014, and shall be repealed on
December 1, 2014.

SEC. 21.  

Section 17267.6 of the Revenue and Taxation Code
is amended to read:

17267.6.  

(a) For each taxable year beginning on or after
January 1, 1998, a qualified taxpayer may elect to treat 40 percent
of the cost of any Section 17267.6 property as an expense that is
not chargeable to a capital account. Any cost so treated shall be
allowed as a deduction for the taxable year in which the qualified
taxpayer places the Section 17267.6 property in service.

(b) In the case of a husband and wife filing separate returns for
a taxable year, the applicable amount under subdivision (a) shall
be equal to 50 percent of the percentage specified in subdivision
(a).

(c) (1) An election under this section for any taxable year shall
do both of the following:

(A) Specify the items of Section 17267.6 property to which the
election applies and the percentage of the cost of each of those
items that are to be taken into account under subdivision (a).

(B) Be made on the qualified taxpayer’s original return of the
tax imposed by this part for the taxable year.

(2) Any election made under this section, and any specification
contained in that election, may not be revoked except with the
consent of the Franchise Tax Board.

(d) (1) For purposes of this section, “Section 17267.6 property”
means any recovery property that is:

(A) Section 1245 property (as defined in Section 1245(a)(3) of
the Internal Revenue Code).

(B) Purchased and placed in service by the qualified taxpayer
for exclusive use in a trade or business conducted 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.

(C) Purchased and placed in service before the date the targeted
tax area designation expires, is revoked, is no longer binding, or
becomes inoperative.

(2) For purposes of paragraph (1), “purchase” means any
acquisition of property, but only if both of the following apply:

(A) The property is not acquired from a person whose
relationship to the person acquiring it would result in the
disallowance of losses under Section 267 or Section 707(b) of the
Internal Revenue Code. However, in applying Sections 267(b) and
267(c) for purposes of this section, Section 267(c)(4) shall be
treated as providing that the family of an individual shall include
only the individual’s spouse, ancestors, and lineal descendants.

(B) The basis of the property in the hands of the person acquiring
it is not determined in whole or in part by reference to the adjusted
basis of that property in the hands of the person from whom it is
acquired.

(3) For purposes of this section, the cost of property does not
include that portion of the basis of the property that is determined
by reference to the basis of other property held at any time by the
person acquiring the property.

(4) This section shall not apply to estates and trusts.

(5) This section shall not apply to any property for which the
qualified taxpayer may not make an election for the taxable year
under Section 179 of the Internal Revenue Code because of the
application of the provisions of Section 179(d) of the Internal
Revenue Code.

(6) In the case of a partnership, the percentage limitation
specified in subdivision (a) shall apply at the partnership level and
at the partner level.

(e) (1) For purposes of this section, “qualified taxpayer” means
a person or entity that meets both of the following:

(A) 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.

(B) 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.

(2) In the case of any pass-through entity, the determination of
whether a taxpayer is a qualified taxpayer under this section shall
be made at the entity level and any deduction under this section
or Section 24356.6 shall be allowed to the pass-through entity and
passed through to the partners or shareholders in accordance with
applicable provisions of this part of Part 11 (commencing with
Section 23001). For purposes of this subparagraph, the term
“pass-through entity” means any partnership or S corporation.

(f) Any qualified taxpayer who elects to be subject to this section
shall not be entitled to claim for the same property, the deduction
under Section 179 of the Internal Revenue Code, relating to an
election to expense certain depreciable business assets. However,
the qualified taxpayer may claim depreciation by any method
permitted by Section 168 of the Internal Revenue Code,
commencing with the taxable year following the taxable year in
which the Section 17267.6 property is placed in service.

(g) The aggregate cost of all Section 17267.6 property that may
be taken into account under subdivision (a) for any taxable year
shall not exceed the following applicable amount for the taxable
year of the designation of the relevant targeted tax area and taxable
years thereafter:

 

	The applicable amount is:
Taxable year of designation	$100,000
1st taxable year thereafter	100,000
2nd taxable year thereafter	75,000
3rd taxable year thereafter	75,000
Each taxable year thereafter	50,000

 

(h) Any amounts deducted under subdivision (a) with respect
to Section 17267.6 property that ceases to be used in the qualified
taxpayer’s trade or business within a targeted tax area at any time
before the close of the second taxable year after the property is
placed in service shall be included in income in the taxable year
in which the property ceases to be so used.

(i) This section shall cease to be operative for taxable years
beginning on or after January 1, 2014, and shall be repealed on
December 1, 2014.

SEC. 22.  

Section 17268 of the Revenue and Taxation Code is
amended to read:

17268.  

(a) For each taxable year beginning on or after January
1, 1995, a taxpayer may elect to treat 40 percent of the cost of any
Section 17268 property as an expense that is not chargeable to the
capital account. Any cost so treated shall be allowed as a deduction
for the taxable year in which the taxpayer places the Section 17268
property in service.

(b) In the case of a husband or wife filing separate returns for
a taxable year in which a spouse is entitled to the deduction under
subdivision (a), the applicable amount shall be equal to 50 percent
of the amount otherwise determined under subdivision (a).

(c) (1) An election under this section for any taxable year shall
meet both of the following requirements:

(A) Specify the items of Section 17268 property to which the
election applies and the portion of the cost of each of those items
that is to be taken into account under subdivision (a).

(B) Be made on the taxpayer’s return of the tax imposed by this
part for the taxable year.

(2) Any election made under this section, and any specification
contained in that election, may not be revoked except with the
consent of the Franchise Tax Board.

(d) (1) For purposes of this section, “Section 17268 property”
means any recovery property that is each of the following:

(A) Section 1245 property (as defined in Section 1245(a)(3) of
the Internal Revenue Code).

(B) Purchased by the taxpayer for exclusive use in a trade or
business conducted within a LAMBRA.

(C) Purchased before the date the LAMBRA designation expires,
is no longer binding, or becomes inoperative.

(2) For purposes of paragraph (1), “purchase” means any
acquisition of property, but only if both of the following apply:

(A) The property is not acquired from a person whose
relationship to the person acquiring it would result in the
disallowance of losses under Section 267 or 707(b) of the Internal
Revenue Code (but, in applying Section 267(b) and Section 267(c)
of the Internal Revenue Code for purposes of this section, Section
267(c)(4) of the Internal Revenue Code shall be treated as
providing that the family of an individual shall include only his or
her spouse, ancestors, and lineal descendants).

(B) The basis of the property in the hands of the person acquiring
it is not determined by either of the following:

(i) In whole or in part by reference to the adjusted basis of the
property in the hands of the person from whom acquired.

(ii) Under Section 1014 of the Internal Revenue Code, relating
to basis of property acquired from a decedent.

(3) For purposes of this section, the cost of property does not
include that portion of the basis of the property that is determined
by reference to the basis of other property held at any time by the
person acquiring the property.

(4) This section shall not apply to estates and trusts.

(5) This section shall not apply to any property for which the
taxpayer may not make an election for the taxable year under
Section 179 of the Internal Revenue Code because of the provisions
of Section 179(d) of the Internal Revenue Code.

(6) In the case of a partnership, the dollar limitation in
subdivision (f) shall apply at the partnership level and at the partner
level.

(7) This section shall not apply to any property described in
Section 168(f) of the Internal Revenue Code, relating to property
to which Section 168 of the Internal Revenue Code does not apply.

(e) For purposes of this section:

(1) “LAMBRA” means a local agency military base recovery
area designated in accordance with the provisions of 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.

(f) The aggregate cost of all Section 17268 property that may
be taken into account under subdivision (a) for any taxable year
shall not exceed the following applicable amounts for the taxable
year of the designation of the relevant LAMBRA and taxable years
thereafter:

 

	The applicable amount is:
Taxable year of designation	$100,000
1st taxable year thereafter	100,000
2nd taxable year thereafter	75,000
3rd taxable year thereafter	75,000
Each taxable year thereafter	50,000

 

(g) This section shall apply only to property that is used
exclusively in a trade or business conducted within a LAMBRA.

(h) (1) Any amounts deducted under subdivision (a) with respect
to property that ceases to be used in the trade or business within
a LAMBRA at any time before the close of the second taxable
year after the property was placed in service shall be included in
income for that year.

(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 (e), then the amount of the deduction
previously claimed shall be added to the taxpayer’s taxable income
for the taxpayer’s second taxable year.

(i) Any taxpayer who elects to be subject to this section shall
not be entitled to claim for the same property the deduction under
Section 179 of the Internal Revenue Code, relating to an election
to expense certain depreciable business assets.

(j) This section shall cease to be operative for taxable years
beginning on or after January 1, 2014, and shall be repealed on
December 1, 2014.

SEC. 23.  

Section 17276.2 of the Revenue and Taxation Code
is amended to read:

17276.2.  

(a) The term “qualified taxpayer” as used in Section
17276.1 includes a person or entity engaged in the conduct of 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. For purposes of this subdivision,
all of the following shall apply:

(1) A net operating loss shall not be a net operating loss
carryback to any taxable year and a net operating loss for any
taxable year beginning on or after the date that the area in which
the taxpayer conducts a trade or business is designated as an
enterprise zone shall be a net operating loss carryover to each of
the 15 taxable years following the taxable year of loss.

(2) For purposes of this subdivision:

(A) “Net operating loss” means the loss determined under
Section 172 of the Internal Revenue Code, as modified by Section
17276.1, attributable to the taxpayer’s business activities within
the enterprise zone (as defined in Chapter 12.8 (commencing with
Section 7070) of Division 7 of Title 1 of the Government Code)
prior to the enterprise zone expiration date. That attributable loss
shall be determined in accordance with Chapter 17 (commencing
with Section 25101) of Part 11, modified for purposes of this
subdivision, as follows:

(i) Loss shall be apportioned to the enterprise zone by
multiplying total loss from the business by a fraction, the numerator
of which is the property factor plus the payroll factor, and the
denominator of which is two.

(ii) “The enterprise zone” shall be substituted for “this state.”

(B) A net operating loss carryover shall be a deduction only
with respect to the taxpayer’s business income attributable to the
enterprise zone as defined in Chapter 12.8 (commencing with
Section 7070) of Division 7 of Title 1 of the Government Code.

(C) Attributable income is 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 subdivision as follows:

(i) 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 clause:

(I) The property factor is a fraction, the numerator of which is
the average value of the taxpayer’s real and tangible personal
property owned or rented and used in the 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.

(II) 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.

(ii) If a loss carryover is allowable pursuant to this section for
any taxable year after the enterprise zone designation has expired,
the enterprise zone shall be deemed to remain in existence for
purposes of computing the limitation set forth in subparagraph (B)
and allowing a net operating loss deduction.

(D) “Enterprise zone expiration date” means the date the
enterprise zone designation expires, is no longer binding, or
becomes inoperative.

(3) The changes made to this subdivision by the act adding this
paragraph shall apply to taxable years beginning on or after January
1, 1998.

(b) A taxpayer who qualifies as a “qualified taxpayer” under
one or more sections shall, for the taxable year of the net operating
loss and any taxable year to which that net operating loss may be
carried, designate on the original return filed for each year the
section which applies to that taxpayer with respect to that net
operating loss. If the taxpayer is eligible to qualify under more
than one section, the designation is to be made after taking into
account subdivision (c).

(c) If a taxpayer is eligible to qualify under this section and
either Section 17276.4, 17276.5, or 17276.6 as a “qualified
taxpayer,” with respect to a net operating loss in a taxable year,
the taxpayer shall designate which section is to apply to the
taxpayer.

(d) Notwithstanding Section 17276, the amount of the loss
determined under this section or Section 17276.4, 17276.5, or
17276.6 shall be the only net operating loss allowed to be carried
over from that taxable year and the designation under subdivision
(b) shall be included in the election under Section 17276.1.

(e) This section shall cease to be operative for taxable years
beginning on or after January 1, 2014, and shall be repealed on
December 1, 2014.

SEC. 24.  

Section 17276.5 of the Revenue and Taxation Code
is amended to read:

17276.5.  

(a) For each taxable year beginning on or after
January 1, 1995, the term “qualified taxpayer” as used in Section
17276.1 includes a taxpayer engaged in the conduct of a trade or
business within a LAMBRA. For purposes of this subdivision, all
of the following shall apply:

(1) A net operating loss shall not be a net operating loss
carryback for any taxable year, and a net operating loss for any
taxable year beginning on or after the date the area in which the
taxpayer conducts a trade or business is designated a LAMBRA
shall be a net operating loss carryover to each following taxable
year that ends before the LAMBRA expiration date or to each of
the 15 taxable years following the taxable year of loss, if longer.

(2) “LAMBRA” means a local agency military base recovery
area designated in accordance with Section 7114 of the Government
Code.

(3) “Taxpayer” means a person or entity 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 and this state.
For purposes of this paragraph:

(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. The deduction shall be
allowed only if the taxpayer has a net increase in jobs in the state,
and 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.

(4) “Net operating loss” means the loss determined under
Section 172 of the Internal Revenue Code, as modified by Section
17276.1, attributable to the taxpayer’s business activities within a
LAMBRA prior to the LAMBRA expiration date. The attributable
loss shall be determined in accordance with Chapter 17
(commencing with Section 25101) of Part 11, modified for
purposes of this section as follows:

(A) Loss shall be apportioned to a LAMBRA by multiplying
total loss from the business by a fraction, the numerator of which
is the property factor plus the payroll factor, and the denominator
of which is 2.

(B) “The LAMBRA” shall be substituted for “this state.”

(5) A net operating loss carryover shall be a deduction only with
respect to the taxpayer’s business income attributable to a
LAMBRA.

(6) 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
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
subdivision as follows:

(A) Business income shall be apportioned to a LAMBRA by
multiplying 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 clause:

(i) The property factor is a fraction, the numerator of which is
the average value of the taxpayer’s real and tangible personal
property owned or rented and used in the LAMBRA during the
taxable year, and the denominator of which is the average value
of all the taxpayer’s real and tangible personal property owned or
rented and used in this state during the taxable year.

(ii) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the LAMBRA during the
taxable year for compensation, and the denominator of which is
the total compensation paid by the taxpayer in this state during the
taxable year.

(B) If a loss carryover is allowable pursuant to this section for
any taxable year after the LAMBRA designation has expired, the
LAMBRA shall be deemed to remain in existence for purposes of
computing the limitation specified in paragraph (5) and allowing
a net operating loss deduction.

(7) “LAMBRA expiration date” means the date the LAMBRA
designation expires, is no longer binding, or becomes inoperative
pursuant to Section 7110 of the Government Code.

(b) A taxpayer who qualifies as a “qualified taxpayer” under
one or more sections shall, for the taxable year of the net operating
loss and any taxable year to which that net operating loss may be
carried, designate on the original return filed for each year the
section that applies to that taxpayer with respect to that net
operating loss. If the taxpayer is eligible to qualify under more
than one section, the designation is to be made after taking into
account subdivision (c).

(c) If a taxpayer is eligible to qualify under this section and
either Section 17276.2, 17276.4, or 17276.6 as a “qualified
taxpayer,” with respect to a net operating loss in a taxable year,
the taxpayer shall designate which section is to apply to the
taxpayer.

(d) Notwithstanding Section 17276, the amount of the loss
determined under this section or Section 17276.2, 17276.4, or
17276.6 shall be the only net operating loss allowed to be carried
over from that taxable year and the designation under subdivision
(b) shall be included in the election under Section 17276.1.

(e) This section shall apply to taxable years beginning on or
after January 1, 1998.

(f) This section shall cease to be operative for taxable years
beginning on or after January 1, 2014, and shall be repealed on
December 1, 2014.

SEC. 25.  

Section 17276.6 of the Revenue and Taxation Code
is amended to read:

17276.6.  

(a) For each taxable year beginning on or after
January 1, 1998, the term “qualified taxpayer” as used in Section
17276.1 includes a person or entity that meets both of the
following:

(1) 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.

(2) 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. In the case of any pass-through entity, the determination
of whether a taxpayer is a qualified taxpayer under this section
shall be made at the entity level.

(b) For purposes of subdivision (a), all of the following shall
apply:

(1) A net operating loss shall not be a net operating loss
carryback to any taxable year and a net operating loss for any
taxable year beginning on or after the date that the area in which
the qualified taxpayer conducts a trade or business is designated
as a targeted tax area shall be a net operating loss carryover to each
of the 15 taxable years following the taxable year of loss.

(2) “Net operating loss” means the loss determined under
Section 172 of the Internal Revenue Code, as modified by Section
17276.1, attributable to the qualified taxpayer’s business activities
within the targeted tax area (as defined in Chapter 12.93
(commencing with Section 7097) of Division 7 of Title 1 of the
Government Code) prior to the targeted tax area expiration date.
That attributable loss shall be determined in accordance with
Chapter 17 (commencing with Section 25101) of Part 11, modified
for purposes of this section as follows:

(A) Loss shall be apportioned to the targeted tax area by
multiplying total loss from the business by a fraction, the numerator
of which is the property factor plus the payroll factor, and the
denominator of which is 2.

(B) “The targeted tax area” shall be substituted for “this state.”

(3) A net operating loss carryover shall be a deduction only with
respect to the qualified taxpayer’s business income attributable to
the targeted tax area as defined in Chapter 12.93 (commencing
with Section 7097) of Division 7 of Title 1 of the Government
Code.

(4) Attributable income shall be that portion of the qualified
taxpayer’s California source business income that is apportioned
to the targeted tax area. For that purpose, the qualified 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 subdivision as follows:

(A) Business income shall be apportioned to the targeted tax
area by multiplying the total 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 clause:

(i) The property factor is a fraction, the numerator of which is
the average value of the taxpayer’s real and tangible personal
property owned or rented and used in the 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.

(ii) 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.

(B) If a loss carryover is allowable pursuant to this subdivision
for any taxable year after the targeted tax area expiration date, the
targeted tax area designation shall be deemed to remain in existence
for purposes of computing the limitation specified in subparagraph
(B) and allowing a net operating loss deduction.

(5) “Targeted tax area expiration date” means the date the
targeted tax area designation expires, is revoked, is no longer
binding, or becomes inoperative.

(c) A taxpayer who qualifies as a “qualified taxpayer” under
one or more sections shall, for the taxable year of the net operating
loss and any taxable year to which that net operating loss may be
carried, designate on the original return filed for each year the
section that applies to that taxpayer with respect to that net
operating loss. If the taxpayer is eligible to qualify under more
than one section, the designation is to be made after taking into
account subdivision (d).

(d) If a taxpayer is eligible to qualify under this section and
either Section 17276.2, 17276.4, or 17276.5 as a “qualified
taxpayer,” with respect to a net operating loss in a taxable year,
the taxpayer shall designate which section is to apply to the
taxpayer.

(e) Notwithstanding Section 17276, the amount of the loss
determined under this section or Section 17276.2, 17276.4, or
17276.5 shall be the only net operating loss allowed to be carried
over from that taxable year and the designation under subdivision
(c) shall be included in the election under Section 17276.1.

(f) This section shall apply to taxable years beginning on or
after January 1, 1998.

(g) This section shall cease to be operative for taxable years
beginning on or after January 1, 2014, and shall be repealed on
December 1, 2014.

SEC. 26.  

Section 18410.2 is added to the Revenue and Taxation
Code, to read:

18410.2.  

(a) The California Competes Tax Credit Committee
is hereby established. The committee shall consist of the Treasurer,
the Director of Finance, and the Director of the Governor’s Office
of Business and Economic Development, or their designated
representatives, and one appointee each from the Senate and the
Assembly.

(b) For purposes of Sections 17059.2 and 23689, the California
Competes Tax Credit Committee shall do all of the following:

(1) Approve or reject any written agreement for a tax credit
allocation by resolution at a duly noticed public meeting held in
accordance with the Bagley-Keene Open Meeting Act (Article 9
(commencing with Section 11120) of Chapter 1 of Part 1 of
Division 3 of Title 2 of the Government Code), but only after
receipt of the fully executed written agreement between the
taxpayer and the Governor’s Office of Business and Economic
Development.

(2) Approve or reject any recommendation to recapture, in whole
or in part, a tax credit allocation by resolution at a duly noticed
public meeting held in accordance with the Bagley-Keene Open
Meeting Act (Article 9 (commencing with Section 11120) of
Chapter 1 of Part 1 of Division 3 of Title 2 of the Government
Code), but only after receipt of the recommendation from the
Governor’s Office of Business and Economic Development
pursuant to the terms of the fully executed written agreement.

SEC. 27.  

Section 19136.8 of the Revenue and Taxation Code
is amended to read:

19136.8.  

(a) No addition to tax shall be made under Section
19136 with respect to any underpayment of an installment to the
extent that the underpayment was created or increased by the
disallowance of a credit under subdivision (g) of Section 17053.80.

(b) No addition to tax shall be made under Section 19142 with
respect to any underpayment of an installment to the extent that
the underpayment was created or increased by the disallowance
of a credit under subdivision (g) of Section 23623.

(c) The Franchise Tax Board shall adopt procedures, forms, and
instructions necessary to implement this section in a reasonable
manner.

(d) This section shall cease to be operative for taxable years
beginning on or after January 1, 2014, and shall be repealed on
December 1, 2014.

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 before January 1, 2014.

(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 as it read on the
effective date of the act amending this section.

(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 succeeding begin delete five end delete begin insert 10 end insert taxable years if
necessary, until the credit is exhausted. The credit shall be applied
first to the earliest taxable years possible.

(e) Any taxpayer that 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 if necessary, until the credit is exhausted, as if it were an
amount exceeding the “tax” for the taxable year, as provided in
subdivision (d). However, the portion of any credit remaining for
carryover to taxable years beginning on January 1, 2014, if any,
after application of this subdivision, shall be carried over only to
the succeeding begin delete five end delete begin insert 10 end insert taxable years if necessary, until the credit
is exhausted, as if it were an amount exceeding the “tax” for the
taxable year, as provided in subdivision (d).

(g) The amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 1998.

(h) This section is repealed on December 1, 2014.

SEC. 29.  

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

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

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

(2) “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, becomes inoperative, or
is repealed.

(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 Job Training Partnership
Act (29 U.S.C. Sec. 1501 et seq.), or its successor, who is receiving,
or is eligible to receive, subsidized employment, training, or
services funded by the federal Job Training Partnership Act, or its
successor.

(II) Immediately preceding the qualified employee’s
commencement of employment with the taxpayer, was a person
eligible to be a voluntary or mandatory registrant under the Greater
Avenues for Independence Act of 1985 (GAIN) provided for
pursuant to Article 3.2 (commencing with Section 11320) of
Chapter 2 of Part 3 of Division 9 of the Welfare and Institutions
Code, or its successor.

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

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

(aa) 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
Clean Air Act.

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

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

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

(aa) Federal Supplemental Security Income benefits.

(bb) Aid to Families with Dependent Children.

(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) Priority for employment shall be provided to an individual
who is enrolled in a qualified program under the federal Job
Training Partnership Act or the Greater Avenues for Independence
Act of 1985 or who is eligible as a member of a targeted group
under the Work Opportunity Tax Credit (Section 51 of the Internal
Revenue Code), or its successor.

(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 office
or social services agency, or the local government administering
the enterprise zone, a certification that provides that a qualified
employee meets the eligibility requirements specified in clause
(iv) of subparagraph (A) of paragraph (4) of subdivision (b). The
Employment Development Department may provide preliminary
screening and referral to a certifying agency. The Employment
Development Department shall develop a form for this purpose.
The Department of Housing and Community Development shall
develop regulations governing the issuance of certificates by local
governments pursuant to subdivision (a) of Section 7086 of the
Government Code.

(2) 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 the succeeding begin delete five end delete begin insert 10 end insert taxable years, if necessary,
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, if necessary, until the credit is exhausted, as if it were an
amount exceeding the “tax” for the taxable year, as provided in
subdivision (i). However, the portion of any credit remaining for
carryover to taxable years beginning on or after January 1, 2014,
if any, after application of this subdivision, shall be carried over
only to the succeeding begin delete five end delete begin insert 10 end insert taxable years if necessary, until the
credit is exhausted, 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) (1) Except as provided in paragraph (2), this section shall
cease to be operative for taxable years beginning on or after January
1, 2014, and shall be repealed on December 1, 2019.

(2) The section shall continue to apply with respect to qualified
employees who are employed by the qualified taxpayer within the
enterprise zone within the 60-month period immediately preceding
January 1, 2014, and qualified wages paid or incurred with respect
to those qualified employees shall continue to qualify for the credit
under this section for taxable years beginning on or after January
1, 2014, in accordance with this section, as amended by the act
adding this subdivision.

SEC. 30.  

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, becomes inoperative, or is repealed.

(5) “Qualified disadvantaged individual” means an individual
who satisfies all of the following requirements:

(A) (i) At least 90 percent of whose services for the 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:

(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 the succeeding begin delete five end delete begin insert 10 end insert taxable years, if necessary,
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, if necessary, until the credit is exhausted, as if it were an
amount exceeding the “tax” for the taxable year, as provided in
subdivision (g). However, the portion of any credit remaining for
carryover to taxable years beginning on or after January 1, 2014,
if any, after application of this subdivision, shall be carried over
only to the succeeding begin delete five end delete begin insert 10 end insert taxable years if necessary, until the
credit is exhausted, 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
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) (1) Except as provided in paragraph (2), this section shall
cease to be operative for taxable years beginning on or after January
1, 2014, and shall be repealed on December 1, 2019.

(2) The section shall continue to apply with respect to qualified
employees who are employed by the qualified taxpayer within the
manufacturing enhancement area within the 60-month period
immediately preceding January 1, 2014, and qualified wages paid
or incurred with respect to those qualified employees shall continue
to qualify for the credit under this section for taxable years
beginning on or after January 1, 2014, in accordance with this
section, as amended by the act adding this subdivision.

SEC. 31.  

Section 23623 of the Revenue and Taxation Code,
as added by Section 8 of Chapter 10 of the Third Extraordinary
Session of the Statutes of 2009, is repealed.

SEC. 32.  

Section 23623 of the Revenue and Taxation Code,
as added by Section 8 of Chapter 17 of the Third Extraordinary
Session of the Statutes of 2009, is amended to read:

23623.  

(a) For each taxable year beginning on or after January
1, 2009, there shall be allowed as a credit against the “tax,” as
defined in Section 23036, three thousand dollars ($3,000) for each
net increase in qualified full-time employees, as specified in
subdivision (c), hired during the taxable year by a qualified
employer.

(b) For purposes of this section:

(1) “Acquired” includes any gift, inheritance, transfer incident
to divorce, or any other transfer, whether or not for consideration.

(2) “Qualified full-time employee” means:

(A) A qualified employee who was paid qualified wages during
the taxable year by the qualified employer for services of not less
than an average of 35 hours per week.

(B) A qualified employee who was a salaried employee and
was paid compensation during the taxable year for full-time
employment, within the meaning of Section 515 of the Labor Code,
by the qualified employer.

(3) A “qualified employee” shall not include any of the
following:

(A) An employee certified as a qualified employee in an
enterprise zone designated in accordance with Chapter 12.8
(commencing with Section 7070) of Division 7 of Title 1 of the
Government Code.

(B) An employee certified as a qualified disadvantaged
individual in a manufacturing enhancement area designated in
accordance with Section 7073.8 of the Government Code.

(C) An employee certified as a qualified employee in a targeted
tax area designated in accordance with Section 7097 of the
Government Code.

(D) An employee certified as a qualified disadvantaged
individual or a qualified displaced employee in a local agency
military base recovery area (LAMBRA) designated in accordance
with Chapter 12.97 (commencing with Section 7105) of Division
7 of Title 1 of the Government Code.

(E) An employee whose wages are included in calculating any
other credit allowed under this part.

(4) “Qualified employer” means a taxpayer that, as of the last
day of the preceding taxable year, employed a total of 20 or fewer
employees.

(5) “Qualified wages” means wages subject to Division 6
(commencing with Section 13000) of the Unemployment Insurance
Code.

(6) “Annual full-time equivalent” means either of the following:

(A) In the case of a full-time employee paid hourly qualified
wages, “annual full-time equivalent” means the total number of
hours worked for the taxpayer by the employee (not to exceed
2,000 hours per employee) divided by 2,000.

(B) In the case of a salaried full-time employee, “annual
full-time equivalent” means the total number of weeks worked for
the taxpayer by the employee divided by 52.

(c) The net increase in qualified full-time employees of a
qualified employer shall be determined as provided by this
subdivision:

(1) (A) The net increase in qualified full-time employees shall
be determined on an annual full-time equivalent basis by
subtracting from the amount determined in subparagraph (C) the
amount determined in subparagraph (B).

(B) The total number of qualified full-time employees employed
in the preceding taxable year by the taxpayer and by any trade or
business acquired by the taxpayer during the current taxable year.

(C) The total number of full-time employees employed in the
current taxable year by the taxpayer and by any trade or business
acquired during the current taxable year.

(2) For taxpayers who first commence doing business in this
state during the taxable year, the number of full-time employees
for the immediately preceding prior taxable year shall be zero.

(d) In the case where the credit allowed by this section exceeds
the “tax,” the excess may be carried over to reduce the “tax” in
the following year, and succeeding seven years if necessary, until
the credit is exhausted.

(e) Any deduction otherwise allowed under this part for qualified
wages shall not be reduced by the amount of the credit allowed
under this section.

(f) For purposes of this section:

(1) All employees of the trades or businesses that are treated as
related under either Section 267, 318, or 707 of the Internal
Revenue Code shall be treated as employed by a single taxpayer.

(2) In determining whether the taxpayer has first commenced
doing business in this state during the taxable year, the provisions
of subdivision (f) of Section 17276, without application of
paragraph (7) of that subdivision, shall apply.

(g) (1) (A) Credit under this section and Section 17053.80 shall
be allowed only for credits claimed on timely filed original returns
received by the Franchise Tax Board on or before the cutoff date
established by the Franchise Tax Board.

(B) For purposes of this paragraph, the cutoff date shall be the
last day of the calendar quarter within which the Franchise Tax
Board estimates it will have received timely filed original returns
claiming credits under this section and Section 17053.80 that
cumulatively total four hundred million dollars ($400,000,000)
for all taxable years.

(2) The date a return is received shall be determined by the
Franchise Tax Board.

(3) (A) The determinations of the Franchise Tax Board with
respect to the cutoff date, the date a return is received, and whether
a return has been timely filed for purposes of this subdivision may
not be reviewed in any administrative or judicial proceeding.

(B) Any disallowance of a credit claimed due to a determination
under this subdivision, including the application of the limitation
specified in paragraph (1), shall be treated as a mathematical error
appearing on the return. Any amount of tax resulting from such
disallowance may be assessed by the Franchise Tax Board in the
same manner as provided by Section 19051.

(4) The Franchise Tax Board shall periodically provide notice
on its Web site with respect to the amount of credit under this
section and Section 17053.80 claimed on timely filed original
returns received by the Franchise Tax Board.

(h) (1) The Franchise Tax Board may prescribe rules, guidelines
or procedures necessary or appropriate to carry out the purposes
of this section, including any guidelines regarding the limitation
on total credits allowable under this section and Section 17053.80
and guidelines necessary to avoid the application of paragraph (2)
of subdivision (f) through splitups, shell corporations, partnerships,
tiered ownership structures, or otherwise.

(2) Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code does not apply to
any standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the Franchise Tax Board
pursuant to this section.

(i) This section shall cease to be operative for taxable years
beginning on or after January 1, 2014, and shall be repealed on
December 1, 2014.

SEC. 33.  

Section 23626 is added to the Revenue and Taxation
Code, to read:

23626.  

(a) (1) For each taxable year beginning on or after
January 1, 2014, and before January 1, begin delete 2019, end delete begin insert 2021, end insert there shall be
allowed to a qualified taxpayer that hires a qualified full-time
employee and pays or incurs qualified wages attributable to work
performed by the qualified full-time employee in a designated
census tract or former enterprise zone, and that receives a tentative
credit reservation for that qualified full-time employee, a credit
against the “tax,” as defined by Section 23036, in an amount
calculated under this section.

(2) The amount of the credit allowable under this section for a
taxable year shall be equal to the product of the tentative credit
amount for the taxable year and the applicable percentage for the
taxable year.

(3) (A) If a qualified taxpayer relocates to a designated census
tract or former enterprise zone, the qualified taxpayer shall be
allowed a credit with respect to qualified wages for each qualified
full-time employee who is employed within the new location only
if the qualified taxpayer provides each employee at the previous
location or locations a written offer of employment at the new
location in the designated census tract or former enterprise zone
with comparable compensation.

(B) For purposes of this paragraph, “relocates to a designated
census tract or former enterprise zone” means an increase in the
number of qualified full-time employees, employed by a qualified
taxpayer, within a designated census tract or tracts or former
enterprise zones within a 12-month period in which there is a
decrease in the number of full-time employees, employed by the
qualified taxpayer in this state, but outside of designated census
tracts or former enterprise zone.

(C) This paragraph shall not apply to a small business.

(4) The credit allowed by this section may only be claimed on
a timely filed original return of the qualified taxpayer and only
with respect to a qualified full-time employee for whom the
qualified taxpayer has received a tentative credit reservation.

(b) For purposes of this section:

(1) The “tentative credit amount” for a taxable year shall be
equal to the product of the applicable credit percentage for each
qualified full-time employee and the qualified wages paid by the
qualified taxpayer during the taxable year to that qualified full-time
employee.

(2) The “applicable percentage” for a taxable year shall be equal
to a fraction, the numerator of which is the net increase in the total
number of full-time employees employed in this state during the
taxable year, determined on an annual full-time equivalent basis,
as compared with the total number of full-time employees
employed in this state during the base year, determined on the
same basis, and the denominator of which shall be the total number
of qualified full-time employees employed in this state during the
taxable year. The applicable percentage shall not exceed 100
percent.

(3) The “applicable credit percentage” means the credit
percentage for the calendar year during which a qualified full-time
employee was first employed by the qualified taxpayer. The
applicable credit percentage for all calendar years shall be 35
percent.

(4) “Base year” means the 2013 taxable year, or in the case of
a qualified taxpayer who first hires a qualified full-time employee
in a taxable year beginning on or after January 2015, the taxable
year immediately preceding the taxable year in which the qualified
full-time employee was hired.

(5) “Acquired” includes any gift, inheritance, transfer incident
to divorce, or any other transfer, whether or not for consideration.

(6) “Annual full-time equivalent” means either of the following:

(A) In the case of a full-time employee paid hourly qualified
wages, “annual full-time equivalent” means the total number of
hours worked for the qualified taxpayer by the employee (not to
exceed 2,000 hours per employee) divided by 2,000.

(B) In the case of a salaried full-time employee, “annual
full-time equivalent” means the total number of weeks worked for
the qualified taxpayer by the employee divided by 52.

(7) “Designated census tract” means a census tract within the
state that is determined by the Department of Finance to have a
civilian unemployment rate that is within the top 25 percent of all
census tracts within the state and has a poverty rate within the top
25 percent of all census tracts within the state, as prescribed in
Section 13073.5 of the Government Code.

(8) “Former enterprise zone” means an enterprise zone
designated as of December 31, 2011, and any expansion of an
enterprise zone prior to December 31, 2012, under former Chapter
12.8 (commencing with former Section 7070) of Division 7 of
Title 1 of the Government Code, as in effect on December 31,
2012, excluding any census tract within an enterprise zone that is
identified by the Department of Finance pursuant to Section
13073.5 of the Government Code as a census tract within the lowest
quartile of census tracts with the lowest civilian unemployment
and poverty.

(9) “Minimum wage” means the wage established pursuant to
Chapter 1 (commencing with Section 1171) of Part 4 of Division
2 of the Labor Code.

(10) (A) “Qualified full-time employee” means an individual
who meets all of the following requirements:

(i) Performs at least 50 percent of his or her services for the
qualified taxpayer during the taxable year in a designated census
tract or former enterprise zone.

(ii) Receives starting wages that are at least 150 percent of the
minimum wage.

(iii) Is hired by the qualified taxpayer on or after January 1,
2014.

(iv) Is hired by the qualified taxpayer after the date the
Department of Finance determines that the census tract referred
to in clause (i) is a designated census tract or that the census tracts
within a former enterprise zone are not census tracts with the lowest
civilian unemployment and poverty.

(v) Satisfies either of the following conditions:

(I) Is paid qualified wages by the qualified taxpayer for services
not less than an average of 35 hours per week.

(II) Is a salaried employee and was paid compensation during
the taxable year for full-time employment, within the meaning of
Section 515 of the Labor Code, by the qualified taxpayer.

(vii) Upon commencement of employment with the qualified
taxpayer, satisfies any of the following conditions:

(I) Was unemployed for the six months immediately preceding
employment with the qualified taxpayer. In the case of an
individual who completed a program of study at a college,
university, or other postsecondary educational institution, received
a baccalaureate, postgraduate, or professional degree, and was
unemployed for the six months immediately preceding employment
with the qualified taxpayer, that individual must have completed
that program of study at least 12 months prior to the individual’s
commencement of employment with the qualified taxpayer.

(II) Is a veteran that had not been employed since separation
from service in the Armed Forces of the United States.

(III) Was a recipient of the credit allowed under Section 32 of
the Internal Revenue Code, relating to earned income, as applicable
for federal purposes, for the previous taxable year.

begin insert

(IV) Was an ex-offender, within the meaning of Section 23622.7.

end insert

(B) An individual may only be considered a qualified full-time
employee for the period of time commencing with the date the
individual is first employed by the qualified taxpayer and ending
60 months thereafter.

(11) (A) “Qualified taxpayer” means a corporation engaged in
a trade or business within designated census tract or former
enterprise zone that, during the taxable year, pays or incurs
qualified wages.

(B) In the case of any pass-thru 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 17053.73 shall be allowed to the pass-thru entity and
passed through to the partners and shareholders in accordance with
applicable provisions of this part or Part 10 (commencing with
Section 17001). For purposes of this subdivision, the term
“pass-thru entity” means any partnership or “S” corporation.

(C) “Qualified taxpayer” shall not include any of the following:

(i) Employers that provide temporary help services, as described
in Code 561320 of the North American Industry Classification
System (NAICS) published by the United States Office of
Management and Budget, 2012 edition.

(ii) Employers that provide retail trade services, as described
in Sector 44-45 of the North American Industry Classification
System (NAICS) published by the United States Office of
Management and Budget, 2012 edition.

(iii) Employers that are primarily engaged in providing food
services, as described in Code 711110, 722511, 722513, 722514,
or 722515 of the North American Industry Classification System
(NAICS) published by the United States Office of Management
and Budget, 2012 edition.

(iv) Employers that are primarily engaged in services as
described in Code 713210, 721120, or 722410 of the North
American Industry Classification System (NAICS) published by
the United States Office of Management and Budget, 2012 edition.

(D) Subparagraph (C) shall not apply to a taxpayer that is a
“small business.”

(12) “Qualified wages” means those wages that meet all of the
following requirements:

(A) That portion of wages paid or incurred by the qualified
taxpayer during the taxable year to each qualified full-time
employee that exceeds 150 percent of minimum wage, but does
not exceed 350 percent of the minimum wage.

(B) Wages paid or incurred during the 60-month period
beginning with the first day the qualified full-time employee
commences employment with the qualified taxpayer. In the case
of any employee who is reemployed, including regularly occurring
seasonal increase, in the trade or business operations of the
qualified taxpayer, this reemployment shall not be treated as
constituting commencement of employment for purposes of this
section.

(C) Except as provided in paragraph (3) of subdivision (m),
qualified wages shall not include any wages paid or incurred by
the qualified taxpayer on or after the date that the Department of
Finance’s redesignation of designated census tracts is effective,
as provided in paragraph (2) of subdivision (g), so that a census
tract is no longer determined to be a designated census tract.

(13) “Seasonal employment” means employment by a qualified
taxpayer that has regular and predictable substantial reductions in
trade or business operations.

(14) (A) “Small business” means a trade or business that has
aggregate gross receipts, less returns and allowances reportable to
this state, of less than two million dollars ($2,000,000) during the
previous taxable year.

(B) (i) For purposes of this paragraph, “gross receipts, less
returns and allowances reportable to this state,” means the sum of
the gross receipts from the production of business income, as
defined in subdivision (a) of Section 25120, and the gross receipts
from the production of nonbusiness income, as defined in
subdivision (d) of Section 25120.

(ii) In the case of any trade or business activity conducted by a
partnership or an “S” corporation, the limitations set forth in
subparagraph (A) shall be applied to the partnership or “S”
corporation and to each partner or shareholder.

(iii) For taxpayers that are required to be included in a combined
report under Section 25101 or authorized to be included in a
combined report under Section 25101.15, the dollar amount
specified in subparagraph (A) shall apply to the aggregate gross
receipts of all taxpayers that are required to be or authorized to be
included in a combined report.

(15) An individual is “unemployed” for any period for which
the individual is all of the following:

(A) Not in receipt of wages subject to withholding under Section
13020 of the Unemployment Insurance Code for that period.

(B) Not a self-employed individual (within the meaning of
Section 401(c)(1)(B) of the Internal Revenue Code, relating to
self-employed individual) for that period.

(C) Not a registered full-time student at a high school, college,
university, or other postsecondary educational institution for that
period.

(c) The net increase in full-time employees of a qualified
taxpayer shall be determined as provided by this subdivision:

(1) (A) The net increase in full-time employees shall be
determined on an annual full-time equivalent basis by subtracting
from the amount determined in subparagraph (C) the amount
determined in subparagraph (B).

(B) The total number of full-time employees employed in the
base year by the taxpayer and by any trade or business acquired
by the taxpayer during the current taxable year.

(C) The total number of full-time employees employed in the
current taxable year by the taxpayer and by any trade or business
acquired during the current taxable year.

(2) For taxpayers who first commence doing business in this
state during the taxable year, the number of full-time employees
for the base year shall be zero.

(d) For purposes of this section:

(1) All employees of the trades or businesses that are treated as
related under Section 267, 318, or 707 of the Internal Revenue
Code shall be treated as employed by a single taxpayer.

(2) In determining whether the taxpayer has first commenced
doing business in this state during the taxable year, the provisions
of subdivision (g) of Section 24416.20, without application of
paragraph (7) of that subdivision, shall apply.

(e) (1) To be eligible for the credit allowed by this section, a
qualified taxpayer shall, upon hiring a qualified full-time employee,
request a tentative credit reservation from the Franchise Tax Board
within 30 days of complying with the Employment Development
Department’s new hire reporting requirement as provided in
Section 1088.5 of the Unemployment Insurance Code, in the form
and manner prescribed by the Franchise Tax Board.

(2) To obtain a tentative credit reservation with respect to a
qualified full-time employee, the qualified taxpayer shall provide
necessary information, as determined by the Franchise Tax Board,
including the name, the social security number, the start date of
employment, the rate of pay of the qualified full-time employee,
the qualified taxpayer’s gross receipts, less returns and allowances,
for the previous taxable year, and whether the qualified full-time
employee is a resident of a targeted employment area, as defined
in former Section 7072 of the Government Code, as in effect on
December 31, 2013.

(3) The qualified taxpayer shall provide the Franchise Tax Board
an annual certification of employment with respect to each
qualified full-time employee hire in a previous taxable year, on or
before the 15th day of the third month of the taxable year. The
certification shall include necessary information, as determined
by the Franchise Tax Board, including the name, social security
number, start date of employment, and rate of pay for each qualified
full-time employee employed by the qualified taxpayer.

(4) A tentative credit reservation provided to a taxpayer with
respect to an employee of that taxpayer shall not constitute a
determination by the Franchise Tax Board with respect to any of
the requirements of this section regarding a taxpayer’s eligibility
for the credit authorized by this section.

(f) The Franchise Tax Board shall do all of the following:

(1) Approve a tentative credit reservation with respect to a
qualified full-time employee hired during a calendar year.

(2) Determine the aggregate tentative reservation amount and
the aggregate small business tentative reservation amount for a
calendar year.

(3) A tentative credit reservation request from a qualified
taxpayer with respect to a qualified full-time employee who is a
resident of a targeted employment area, as defined in former
Section 7072 of the Government Code, as in effect on December
31, 2013, shall be expeditiously processed by the Franchise Tax
Board. The residence of a qualified full-time employee in a targeted
employment area shall have no other effect on the eligibility of an
individual as a qualified full-time employee or the eligibility of a
qualified taxpayer for the credit authorized by this section.

(4) Notwithstanding Section 19542, provide as a
begin delete searchabledatabase end delete begin insert searchable database end insert on its Internet Web site,
for each taxable year beginning on or after January 1, 2014, and
before January 1, begin delete 2019, end delete begin insert 2021, end insert the employer names, amounts of
tax credit claimed, and number of new jobs created for each taxable
year pursuant to this section and Section 17053.73.

(g) (1) The Department of Finance shall, by January 1, 2014,
and by January 1 of every fifth year thereafter, provide the
Franchise Tax Board with a list of the designated census tracts and
a list of census tracts with the lowest civilian unemployment rate.

(2) The redesignation of designated census tracts and lowest
civilian unemployment census tracts by the Department of Finance
as provided in Section 13073.5 of the Government Code shall be
effective, for purposes of this credit, one year after the date that
the Department of Finance redesignates the designated census
tracts.

(h) (1) For purposes of this section:

(A) All employees of the trades or businesses that are treated
as related under Section 267, 318, or 707 of the Internal Revenue
Code shall be treated as employed by a single qualified taxpayer.

(B) 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.

(C) 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.

(D) If a qualified taxpayer acquires the major portion of a trade
or business of another taxpayer, 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 for any taxable year ending after that
acquisition, the employment relationship between a qualified
full-time employee and a qualified taxpayer shall not be treated
as terminated if the employee continues to be employed in that
trade or business.

(2) For purposes of this subdivision, “controlled group of
corporations” means a controlled group of corporations as defined
in Section 1563(a) of the Internal Revenue Code, except that:

(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
subsections (a)(4) and (e)(3)(C) of Section 1563 of the Internal
Revenue Code.

(3) Rules similar to the rules provided in Sections 46(e) and
46(h) of the Internal Revenue Code, as in effect on November 4,
1990, shall apply to both of the following:

(A) An organization to which Section 593 of the Internal
Revenue Code applies.

(B) A regulated investment company or a real estate investment
trust subject to taxation under this part.

(i) (1) If the employment of any qualified full-time 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 36 months after commencing employment with
the qualified taxpayer, whether or not consecutive, 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.

(2) Paragraph (1) shall not apply to any of the following:

(A) A termination of employment of a qualified full-time
employee who voluntarily leaves the employment of the qualified
taxpayer.

(B) A termination of employment of a qualified full-time
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 qualified taxpayer fails to offer
reemployment to that employee.

(C) A termination of employment of a qualified full-time
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.

(D) A termination of employment of a qualified full-time
employee due to a substantial reduction in the trade or business
operations of the qualified taxpayer, including reductions due to
seasonal employment.

(E) A termination of employment of a qualified full-time
employee, if that employee is replaced by other qualified full-time
employees so as to create a net increase in both the number of
employees and the hours of employment.

(F) A termination of employment of a qualified full-time
employee, when that employment is considered seasonal
employment and the qualified employee is rehired on a seasonal
basis.

(3) For purposes of paragraph (1), the employment relationship
between the qualified taxpayer and a qualified full-time 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 full-time employee continues to be
employed in that trade or business and the qualified taxpayer retains
a substantial interest in that trade or business.

(4) 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.

(j) In the case where the credit allowed by this section exceeds
the “tax,” the excess may be carried over to reduce the “tax” in
the following year, and the succeeding four years if necessary,
until exhausted.

(k) The Franchise Tax Board may prescribe rules, guidelines,
or procedures necessary or appropriate to carry out the purposes
of this section, including any guidelines regarding the allocation
of the credit allowed under this section. Chapter 3.5 (commencing
with Section 11340) of Part 1 of Division 3 of Title 2 of the
Government Code shall not apply to any rule, guideline, or
procedure prescribed by the Franchise Tax Board pursuant to this
section.

(l) (1) Upon the effective date of this section, the Department
of Finance shall estimate the total dollar amount of credits that
will be claimed under this section with respect to each fiscal year
from the 2013-14 fiscal year to the begin delete 2018-19 end delete begin insert 2020 end insert begin insert -21 end insert fiscal year,
inclusive.

(2) The Franchise Tax Board shall annually provide to the Joint
Legislative Budget Committee, by no later than March 1, a report
of the total dollar amount of the credits claimed under this section
with respect to the relevant fiscal year. The report shall compare
the total dollar amount of credits claimed under this section with
respect to that fiscal year with the department’s estimate with
respect to that same fiscal year. If the total dollar amount of credits
claimed for the fiscal year is less than the estimate for that fiscal
year, the report shall identify options for increasing annual claims
of the credit so as to meet estimated amounts.

(m) (1) This section shall remain in effect only until December
1, 2024, and as of that date is repealed.

(2) Notwithstanding paragraph (1) of subdivision (a), this section
shall continue to be operative for taxable years beginning on or
after January 1, begin delete 2019, end delete begin insert 2021, end insert but only with respect to qualified
full-time employees who commenced employment with a qualified
taxpayer in a designated census tract or former enterprise zone in
a taxable year beginning before January 1, begin delete 2019 end delete begin insert 2021 end insert .

(3) This section shall remain operative for any qualified taxpayer
with respect to any qualified full-time employee after the
designated census tract is no longer designated or a former
enterprise zone ceases to be a former enterprise zone, as defined
in this section, for the remaining period, if any, of the 60-month
period after the original date of hiring of an otherwise qualified
full-time employee and any wages paid or incurred with respect
to those qualified full-time employees after the designated census
tract is no longer designated or a former enterprise zone ceases to
be a former enterprise zone, ad defined in this section, shall be
treated as qualified wages under this section, provided the
employee satisfies any other requirements of paragraphs (10) and
(12) of subdivision (b), as if the designated census tract was still
designated and binding.

SEC. 34.  

Section 23633 of the Revenue and Taxation Code is
amended to read:

23633.  

(a) For each taxable year beginning on or after January
1, 1998, and before January 1, 2014, 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 qualified taxpayer in connection
with the qualified taxpayer’s purchase of qualified property before
January 1, 2014.

(b) For purposes of this section:

(1) “Qualified property” means property that meets all of the
following requirements:

(A) Is any of the following:

(i) Machinery and machinery parts used for fabricating,
processing, assembling, and manufacturing.

(ii) Machinery and machinery parts used for the production of
renewable energy resources.

(iii) Machinery and machinery parts used for either of the
following:

(I) Air pollution control mechanisms.

(II) Water pollution control mechanisms.

(iv) Data-processing and communications equipment, such as
computers, computer-automated drafting systems, copy machines,
telephone systems, and faxes.

(v) Motion picture manufacturing equipment central to
production and postproduction, such as cameras, audio recorders,
and digital image and sound processing equipment.

(B) The total cost of qualified property purchased and placed
in service in any taxable year that may be taken into account by
any qualified taxpayer for purposes of claiming this credit shall
not exceed twenty million dollars ($20,000,000).

(C) The qualified property is used by the qualified taxpayer
exclusively in a targeted tax area.

(D) The qualified property is purchased and placed in service
before the date the targeted tax area designation expires, is revoked,
is no longer binding, or becomes inoperative.

(2) (A) “Qualified taxpayer” means a corporation that meets
both of the following:

(i) Is engaged in a trade or business within a targeted tax area
designated pursuant to Chapter 12.93 (commencing with Section
7097) of Division 7 of Title 1 of the Government Code.

(ii) Is engaged in those lines of business described in Codes
2000 to 2099, inclusive; 2200 to 3999, inclusive; 4200 to 4299,
inclusive; 4500 to 4599, inclusive; and 4700 to 5199, inclusive,
of the Standard Industrial Classification (SIC) Manual published
by the United States Office of Management and Budget, 1987
edition.

(B) In the case of any pass-through entity, the determination of
whether a taxpayer is a qualified taxpayer under this section shall
be made at the entity level and any credit under this section or
Section 17053.33 shall be allowed to the pass-through entity and
passed through to the partners or shareholders in accordance with
applicable provisions of this part or Part 10 (commencing with
Section 17001). For purposes of this subparagraph, the term
“pass-through entity” means any partnership or S corporation.

(3) “Targeted tax area” means the area designated pursuant to
Chapter 12.93 (commencing with Section 7097) of Division 7 of
Title 1 of the Government Code.

(c) If the qualified taxpayer is allowed a credit for qualified
property pursuant to this section, only one credit shall be allowed
to the taxpayer under this part with respect to that qualified
property.

(d) If the qualified taxpayer has purchased property upon which
a use tax has been paid or incurred, the credit provided by this
section shall be allowed only if qualified property of a comparable
quality and price is not timely available for purchase in this state.

(e) 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 succeeding begin delete five end delete begin insert 10 end insert taxable years, if necessary,
until the credit is exhausted. The credit shall be applied first to the
earliest taxable years possible.

(f) Any qualified taxpayer who elects to be subject to this section
shall not be entitled to increase the basis of the qualified property
as otherwise required by Section 164(a) of the Internal Revenue
Code with respect to sales or use tax paid or incurred in connection
with the qualified taxpayer’s purchase of qualified property.

(g) (1) The amount of credit otherwise allowed under this
section and Section 23634, including any credit carryover from
prior years, that may reduce the “tax” for the taxable year shall
not exceed the amount of tax that would be imposed on the
qualified taxpayer’s business income attributable to the targeted
tax area determined as if that attributable income represented all
of the income of the qualified taxpayer subject to tax under this
part.

(2) Attributable income shall be that portion of the taxpayer’s
California source business income that is apportioned to the
targeted tax area. For that purpose, the taxpayer’s business income
attributable to sources in this state first shall be determined in
accordance with Chapter 17 (commencing with Section 25101).
That business income shall be further apportioned to the targeted
tax area in accordance with Article 2 (commencing with Section
25120) of Chapter 17, modified for purposes of this section in
accordance with paragraph (3).

(3) Business income shall be apportioned to the targeted tax
area by multiplying the total California business income of the
taxpayer by a fraction, the numerator of which is the property
factor plus the payroll factor, and the denominator of which is two.
For purposes of this paragraph:

(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer’s real and tangible personal
property owned or rented and used in the targeted tax area during
the taxable year and the denominator of which is the average value
of all the taxpayer’s real and tangible personal property owned or
rented and used in this state during the taxable year.

(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the targeted tax area during
the taxable year for compensation, and the denominator of which
is the total compensation paid by the taxpayer in this state during
the taxable year.

(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, if necessary, until the credit is exhausted, as if it were an
amount exceeding the “tax” for the taxable year, as provided in
subdivision (e). However, the portion of any credit remaining for
carryover to taxable years beginning on or after January 1, 2014,
if any, after application of this subdivision, shall be carried over
only to the succeeding begin delete five end delete begin insert 10 end insert taxable years if necessary, until the
credit is exhausted, as if it were an amount exceeding the “tax”
for the taxable year, as provided in subdivision (e).

(5) In the event that a credit carryover is allowable under
subdivision (e) for any taxable year after the targeted tax area
designation has expired, has been revoked, is no longer binding,
or has become inoperative, the targeted tax area shall be deemed
to remain in existence for purposes of computing the limitation
specified in this subdivision.

(h) The changes made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 1998.

(i) This section is repealed on December 1, 2014.

SEC. 35.  

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, becomes inoperative, or is repealed.

(4) (A) “Qualified employee” means an individual who meets
all of the following requirements:

(i) At least 90 percent of his or her services for the qualified
taxpayer during the taxable year are directly related to the conduct
of the qualified taxpayer’s trade or business located in a targeted
tax area.

(ii) Performs at least 50 percent of his or her services for the
qualified taxpayer during the taxable year in a targeted tax area.

(iii) Is hired by the qualified taxpayer after the date of original
designation of the area in which services were performed as a
targeted tax area.

(iv) Is any of the following:

(I) Immediately preceding the qualified employee’s
commencement of employment with the qualified taxpayer, was
a person eligible for services under the federal Job Training
Partnership Act (29 U.S.C. Sec. 1501 et seq.), or its successor,
who is receiving, or is eligible to receive, subsidized employment,
training, or services funded by the federal Job Training Partnership
Act, or its successor.

(II) Immediately preceding the qualified employee’s
commencement of employment with the qualified taxpayer, was
a person eligible to be a voluntary or mandatory registrant under
the Greater Avenues for Independence Act of 1985 (GAIN)
provided for pursuant to Article 3.2 (commencing with Section
11320) of Chapter 2 of Part 3 of Division 9 of the Welfare and
Institutions Code, or its successor.

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

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

(aa) 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
Clean Air Act.

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

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

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

(aa) Federal Supplemental Security Income benefits.

(bb) Aid to Families with Dependent Children.

(cc) CalFresh benefits.

(dd) State and local general assistance.

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

(IX) Immediately preceding the qualified employee’s
commencement of employment with the qualified taxpayer, was
a resident of a targeted tax area.

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

(B) Priority for employment shall be provided to an individual
who is enrolled in a qualified program under the federal Job
Training Partnership Act or the Greater Avenues for Independence
Act of 1985 or who is eligible as a member of a targeted group
under the Work Opportunity Tax Credit (Section 51 of the Internal
Revenue Code), or its successor.

(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
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 the succeeding begin delete five end delete begin insert 10 end insert taxable years, if necessary,
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, if necessary, until the credit is exhausted, as if it were an
amount exceeding the “tax” for the taxable year, as provided in
subdivision (i). However, the portion of any credit remaining for
carryover to taxable years beginning on or after January 1, 2014,
if any, after application of this subdivision, shall be carried over
only to the succeeding begin delete five end delete begin insert 10 end insert taxable years if necessary, until the
credit is exhausted, as if it were an amount exceeding the “tax”
for the taxable year, as provided in subdivision (i).

(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) (1) Except as provided in paragraph (2), this section shall
cease to be operative for taxable years beginning on or after January
1, 2014, and shall be repealed on December 1, 2019.

(2) The section shall continue to apply with respect to qualified
employees who are employed by the qualified taxpayer within the
targeted tax area within the 60-month period immediately preceding
January 1, 2014, and qualified wages paid or incurred with respect
to those qualified employees shall continue to qualify for the credit
under this section for taxable years beginning on or after January
1, 2014, in accordance with this section, as amended by the act
adding this subdivision.

SEC. 36.  

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, and before January 1, 2014, 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 before January 1, 2014, 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 succeeding begin delete five end delete begin insert 10 end insert 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 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, if necessary, until the credit is exhausted, as if it were an
amount exceeding the “tax” for the taxable year, as provided in
subdivision (d). However, the portion of any credit remaining for
carryover to taxable years beginning on or after January 1, 2014,
if any, after application of this subdivision, shall be carried over
only to the succeeding begin delete five end delete begin insert 10 end insert taxable years, if necessary, until the
credit is exhausted, as if it were an amount exceeding the “tax”
for the taxable year, as provided in subdivision (d).

(g) (1) If the qualified property is disposed of or no longer used
by the taxpayer in the LAMBRA, at any time before the close of
the second taxable year after the property is placed in service, the
amount of the credit previously claimed, with respect to that
property, shall be added to the taxpayer’s tax liability in the taxable
year of that disposition or nonuse.

(2) At the close of the second taxable year, if the taxpayer has
not increased the number of its employees as determined by
paragraph (2) of subdivision (b), then the amount of the credit
previously claimed shall be added to the taxpayer’s tax for the
taxpayer’s second taxable year.

(h) If the taxpayer is allowed a credit for qualified property
pursuant to this section, only one credit shall be allowed to the
taxpayer under this part with respect to that qualified property.

(i) The amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 1998.

(j) This section is repealed on December 1, 2014.

SEC. 37.  

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 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 employer
during the taxable year to qualified disadvantaged individuals or
qualified displaced employees that does not exceed 150 percent
of the minimum wage.

(B) The total amount of qualified wages which may be taken
into account for purposes of claiming the credit allowed under this
section shall not exceed two million dollars ($2,000,000) per
taxable year.

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

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

(2) “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) An economically disadvantaged individual 16 years of age
or older.

(iv) A dislocated worker who meets any of the following
conditions:

(I) Has been terminated or laid off or who has received a notice
of termination or layoff from employment, is eligible for or has
exhausted entitlement to unemployment insurance benefits, and
is unlikely to return to his or her previous industry or occupation.

(II) Has been terminated or has received a notice of termination
of employment as a result of any permanent closure or any
substantial layoff at a plant, facility, or enterprise, including an
individual who has not received written notification but whose
employer has made a public announcement of the closure or layoff.

(III) Is long-term unemployed and has limited opportunities for
employment or reemployment in the same or a similar occupation
in the area in which the individual resides, including an individual
55 years of age or older who may have substantial barriers to
employment by reason of age.

(IV) Was self-employed (including farmers and ranchers) and
is unemployed as a result of general economic conditions in the
community in which he or she resides or because of natural
disasters.

(V) Was a civilian employee of the Department of Defense
employed at a military installation being closed or realigned under
the Defense Base Closure and Realignment Act of 1990.

(VI) Was an active member of the Armed Forces or National
Guard as of September 30, 1990, and was either involuntarily
separated or separated pursuant to a special benefits program.

(VII) Experiences chronic seasonal unemployment and
underemployment in the agriculture industry, aggravated by
continual advancements in technology and mechanization.

(VIII) Has been terminated or laid off or has received a notice
of termination or layoff as a consequence of compliance with the
Clean Air Act.

(v) An individual who is enrolled in or has completed a state
rehabilitation plan or is a service-connected disabled veteran,
veteran of the Vietnam era, or veteran who is recently separated
from military service.

(vi) An ex-offender. An individual shall be treated as convicted
if he or she was placed on probation by a state court without a
finding of guilty.

(vii) A recipient of:

(I) Federal Supplemental Security Income benefits.

(II) Aid to Families with Dependent Children.

(III) CalFresh benefits.

(IV) State and local general assistance.

(viii) 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, becomes inoperative, or
is repealed.

(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 from the Employment Development Department, as
permitted by federal law, the administrative entity of the local
county or city for the federal Job Training Partnership Act, or its
successor, the local county GAIN office or social services agency,
or the local government administering the LAMBRA, a
certification that provides that a qualified disadvantaged individual
or qualified displaced employee meets the eligibility requirements
specified in subparagraph (C) of paragraph (4) of subdivision (b)
or subparagraph (A) of paragraph (6) of subdivision (b). The
Employment Development Department may provide preliminary
screening and referral to a certifying agency. The Department of
Housing and Community Development shall develop regulations
governing the issuance of certificates pursuant to Section 7114.2
of the Government Code and shall develop forms for this purpose.

(2) 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) 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.

(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 days of that employment
(whether or not consecutive) or before the close of the 270th
calendar day after the day in which that employee completes 90
days of employment with the taxpayer, the tax imposed by this
part for the taxable year in which that employment is terminated
shall be increased by an amount equal to the credit allowed under
subdivision (a) for that taxable year and all prior income years
attributable to qualified wages paid or incurred with respect to that
employee.

(B) If the seasonal employment of any qualified disadvantaged
individual, with respect to whom qualified wages are taken into
account under subdivision (a) is not continued by the qualified
taxpayer for a period of 270 days of employment during the
60-month period beginning with the day the qualified
disadvantaged individual commences seasonal employment with
the qualified taxpayer, the tax imposed by this part, for the taxable
year that includes the 60th month following the month in which
the qualified disadvantaged individual commences seasonal
employment with the qualified taxpayer, shall be increased by an
amount equal to the credit allowed under subdivision (a) for that
taxable year and all prior taxable years attributable to qualified
wages paid or incurred with respect to that qualified disadvantaged
individual.

(2) (A) Subparagraph (A) of paragraph (1) shall not apply to
any of the following:

(i) A termination of employment of an employee who voluntarily
leaves the employment of the taxpayer.

(ii) A termination of employment of an individual who, before
the close of the period referred to in paragraph (1), becomes
disabled to perform the services of that employment, unless that
disability is removed before the close of that period and the
taxpayer fails to offer reemployment to that individual.

(iii) A termination of employment of an individual, if it is
determined that the termination was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of
the California Code of Regulations) of that individual.

(iv) A termination of employment of an individual due to a
substantial reduction in the trade or business operations of the
taxpayer.

(v) A termination of employment of an individual, if that
individual is replaced by other qualified employees so as to create
a net increase in both the number of employees and the hours of
employment.

(B) Subparagraph (B) of paragraph (1) shall not apply to any
of the following:

(i) A failure to continue the seasonal employment of a qualified
disadvantaged individual who voluntarily fails to return to the
seasonal employment of the qualified taxpayer.

(ii) A failure to continue the seasonal employment of a qualified
disadvantaged individual who, before the close of the period
referred to in subparagraph (B) of paragraph (1), becomes disabled
and unable to perform the services of that seasonal employment,
unless that disability is removed before the close of that period
and the qualified taxpayer fails to offer seasonal employment to
that qualified disadvantaged individual.

(iii) A failure to continue the seasonal employment of a qualified
disadvantaged individual, if it is determined that the failure to
continue the seasonal employment was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of
the California Code of Regulations) of that individual.

(iv) A failure to continue seasonal employment of a qualified
disadvantaged individual due to a substantial reduction in the
regular seasonal trade or business operations of the qualified
taxpayer.

(v) A failure to continue the seasonal employment of a qualified
disadvantaged individual, if that individual is replaced by other
qualified disadvantaged individuals so as to create a net increase
in both the number of seasonal employees and the hours of seasonal
employment.

(C) For purposes of paragraph (1), the employment relationship
between the taxpayer and an employee shall not be treated as
terminated by either of the following:

(i) A transaction to which Section 381(a) of the Internal Revenue
Code applies, if the employee continues to be employed by the
acquiring corporation.

(ii) A mere change in the form of conducting the trade or
business of the taxpayer, if the employee continues to be employed
in that trade or business and the taxpayer retains a substantial
interest in that trade or business.

(3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount
of any credit allowable under this part.

(4) At the close of the second taxable year, if the taxpayer has
not increased the number of its employees as determined by
paragraph (5) of subdivision (b), then the amount of the credit
previously claimed shall be added to the taxpayer’s tax for the
taxpayer’s second taxable year.

(f) 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 succeeding begin delete five end delete begin insert 10 end insert taxable 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, if necessary, until the credit is exhausted, as if it were an
amount exceeding the “tax” for the taxable year, as provided in
subdivision (h). However, the portion of any credit remaining for
carryover to taxable years beginning on or after January 1, 2014,
if any, after application of this subdivision, shall be carried over
only to the succeeding begin delete five end delete begin insert 10 end insert taxable years, if necessary, until the
credit is exhausted, 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) (1) Except as provided in paragraph (2), this section shall
cease to be operative for taxable years beginning on or after January
1, 2014, and shall be repealed on December 1, 2019.

(2) The section shall continue to apply with respect to qualified
employees who are employed by the qualified taxpayer within the
LAMBRA within the 60-month period immediately preceding
January 1, 2014, and qualified wages paid or incurred with respect
to those qualified employees shall continue to qualify for the credit
under this section for taxable years beginning on or after January
1, 2014, in accordance with this section, as amended by the act
adding this subdivision.

SEC. 38.  

Section 23689 is added to the Revenue and Taxation
Code, to read:

23689.  

(a) (1) For each taxable year beginning on and after
January 1, 2014, and before January 1, 2025, there shall be allowed
as a credit against the “tax,” as defined in Section 23036, an amount
as determined by the committee pursuant to paragraph (2) and
approved pursuant to Section 18410.2.

(2) The amount of credit allocated to a taxpayer for a taxable
year pursuant to this section shall be as set forth in a written
agreement between GO-Biz and the taxpayer and shall be based
on the following factors:

(A) The number of jobs the taxpayer will create or retain in this
state.

(B) The compensation paid or proposed to be paid by the
taxpayer to its employees, including wages and fringe benefits.

(C) The amount of investment in this state by the taxpayer.

(D) The extent of unemployment begin insert or poverty end insert in the area
begin insert according to end insert begin insert the United States Census end insert in which the taxpayer’s
project or business is proposed or located.

(E) The incentives available to the taxpayer in the state,
including incentives from the state, local government and other
entities.

(F) The incentives available to the taxpayer in other states.

(G) The duration of the proposed project and the duration the
taxpayer commits to remain in this state.

(H) The overall economic impact in this state of the taxpayer’s
project or business.

(I) The strategic importance of the taxpayer’s project or business
to the state, region, or locality.

(J) The opportunity for future growth and expansion in this state
by the taxpayer’s business.

(K) The extent to which the anticipated benefit to the state
exceeds the projected benefit to the taxpayer from the tax credit.

(3) The written agreement entered into pursuant to paragraph
(2) shall include:

(A) Terms and conditions that include a minimum compensation
level and a minimum job retention period.

(B) Provisions indicating whether the credit is to be allocated
in full upon approval or in increments based on mutually agreed
upon milestones when satisfactorily met by the taxpayer.

(C) Provisions that allow the committee to recapture the credit,
in whole or in part, if the taxpayer fails to fulfill the terms and
conditions of the written agreement.

(b) For purposes of this section:

(1) “Committee” means the California Competes Tax Credit
Committee established pursuant to Section 18410.2.

(2) “GO-Biz” means the Governor’s Office of Business and
Economic Development.

(c) For purposes of this section, GO-Biz shall do the following:

(1) Give priority to a taxpayer whose project or business is
located or proposed to be located in an area of high unemployment
or poverty.

(2) Negotiate with a taxpayer the terms and conditions of
proposed written agreements that provide the credit allowed
pursuant to this section to a taxpayer.

(3) Provide the negotiated written agreement to the committee
for its approval pursuant to Section 18410.2.

(4) Inform the Franchise Tax Board of the terms and conditions
of the written agreement upon approval of the written agreement
by the committee.

(5) Inform the Franchise Tax Board of any recapture, in whole
or in part, of a previously allocated credit upon approval of the
recapture by the committee.

(6) Post on its Internet Web site all of the following:

(A) The name of each taxpayer allocated a credit pursuant to
this section.

(B) The estimated amount of the investment by each taxpayer.

(C) The estimated number of jobs created or retained.

(D) The amount of the credit allocated to the taxpayer.

(E) The amount of the credit recaptured from the taxpayer, if
applicable.

(d) For purposes of this section, the Franchise Tax Board shall
do all of the following:

(1) (A) Except as provided in subparagraph (B), review the
books and records of all taxpayers allocated a credit pursuant to
this section to ensure compliance with the terms and conditions
of the written agreement between the taxpayer and GO-Biz.

(B) In the case of a taxpayer that is a “small business,” as
defined in Section 23626, review the books and records of the
taxpayer allocated a credit pursuant to this section to ensure
compliance with the terms and conditions of the written agreement
between the taxpayers and GO-Biz when, in the sole discretion of
the Franchise Tax Board, a review of those books and records is
appropriate or necessary in the best interests of the state.

(2) Notwithstanding Section 19542:

(A) Notify GO-Biz of a possible breach of the written agreement
by a taxpayer and provide detailed information regarding the basis
for that determination.

(B) Provide information to GO-Biz with respect to whether a
taxpayer is a “small business,” as defined in Section 23626.

(e) In the case where the credit allowed under this section
exceeds the “tax,” as defined in Section 23036, for a taxable year,
the excess credit may be carried over to reduce the “tax” in the
following taxable year, and succeeding five taxable years, if
necessary, until the credit has been exhausted.

(f) Any recapture, in whole or in part, of a credit approved by
the committee pursuant to Section 18410.2 shall be treated as a
mathematical error appearing on the return. Any amount of tax
resulting from that recapture shall be assessed by the Franchise
Tax Board in the same manner as provided by Section 19051. The
amount of tax resulting from the recapture shall be added to the
tax otherwise due by the taxpayer for the taxable year in which
the committee’s recapture determination occurred.

(g) (1) The aggregate amount of credit that may be allocated
in any fiscal year pursuant to this section and Section 17059.2 shall
be an amount equal to the sum of subparagraphs (A), (B), and (C),
less the amount specified in subparagraph (D):

(A) Thirty million dollars ($30,000,000) for the 2013-14 fiscal
year, one hundred fifty million dollars ($150,000,000) for the
2014-15 fiscal year, and two hundred million dollars
($200,000,000) for each fiscal year from 2015-16 to 2018-19,
inclusive.

(B) The unallocated credit amount, if any, from the preceding
fiscal year.

(C) The amount of any previously allocated credits that have
been recaptured.

(D) The amount estimated by the Director of Finance, in
consultation with the Franchise Tax Board and the State Board of
Equalization, to be necessary to limit the aggregation of the
estimated amount of exemptions claimed pursuant to Section
6377.1 and of the amounts estimated to be claimed pursuant to
this section and Sections 17053.73, begin delete 23626, and 23689 end delete begin insert 17059.2,
and 23626 end insert to no more than seven hundred fifty million dollars
($750,000,000) for either the current fiscal year or for any of the
three succeeding fiscal years.

(i) The Director of Finance shall notify the Chairperson of the
Joint Legislative Budget Committee of the estimated annual
allocation authorized by this paragraph. Any allocation pursuant
to these provisions shall be made no sooner than 30 days after
written notification has been provided to the Chairperson of the
Joint Legislative Budget Committee and the chairpersons of the
committees of each house of the Legislature that consider
appropriation, or not sooner than whatever lesser time the
Chairperson of the Joint Legislative Budget Committee, or his or
her designee, may determine.

(ii) In no event shall the amount estimated in this subparagraph
be less than zero dollars ($0).

(2) Each fiscal year, 25 percent of the aggregate amount of the
credit that may be allocated pursuant to this section and Section
17059.2 shall be reserved for “small business,” as defined in
Section 17053.73 or 23626.

(3) Each fiscal year, no more than 20 percent of the aggregate
amount of the credit that shall be allocated pursuant to this section
may be allocated to any one taxpayer.

(h) GO-Biz may prescribe rules and regulations as necessary to
carry out the purposes of this section. Any rule or regulation
prescribed pursuant to this section may be by adoption of an
emergency regulation in accordance with Chapter 3.5 (commencing
with Section 11340) of Part 1 of Division 3 of Title 2 of the
Government Code.

begin insert

(i) (1) A written agreement between GO-Biz and a taxpayer
with respect to the credit authorized by this section shall not
restrict, broaden, or otherwise alter the ability of the taxpayer to
assign that credit or any portion thereof in accordance with Section
23663.

end insert begin delete

(i)

end delete

begin insert (2) end insert  A written agreement between GO-Biz and a taxpayer with
respect to the credit authorized by this section must comply with
existing law on the date the agreement is executed.

(j) (1) Upon the effective date of this section, the Department
of Finance shall estimate the total dollar amount of credits that
will be claimed under this section with respect to each fiscal year
from the 2013-14 fiscal year to the 2024-25 fiscal year, inclusive.

(2) The Franchise Tax Board shall annually provide to the Joint
Legislative Budget Committee, by no later than March 1, a report
of the total dollar amount of the credits claimed under this section
with respect to the relevant fiscal year. The report shall compare
the total dollar amount of credits claimed under this section with
respect to that fiscal year with the department’s estimate with
respect to that same fiscal year. If the total dollar amount of credits
claimed for the fiscal year is less than the estimate for that fiscal
year, the report shall identify options for increasing annual claims
of the credit so as to meet estimated amounts.

(k) This section is repealed on December 1, 2025.

SEC. 39.  

Section 24356.6 of the Revenue and Taxation Code
is amended to read:

24356.6.  

(a) For each taxable year beginning on or after
January 1, 1998, a qualified taxpayer may elect to treat 40 percent
of the cost of any Section 24356.6 property as an expense that is
not chargeable to a capital account. Any cost so treated shall be
allowed as a deduction for the taxable year in which the qualified
taxpayer places the Section 24356.6 property in service.

(b) (1) An election under this section for any taxable year shall
do both of the following:

(A) Specify the items of Section 24356.6 property to which the
election applies and the percentage of the cost of each of those
items that are to be taken into account under subdivision (a).

(B) Be made on the qualified taxpayer’s original return of the
tax imposed by this part for the taxable year.

(2) Any election made under this section, and any specification
contained in that election, may not be revoked except with the
consent of the Franchise Tax Board.

(c) (1) For purposes of this section, “Section 24356.6 property”
means any recovery property that is:

(A) Section 1245 property (as defined in Section 1245 (a)(3) of
the Internal Revenue Code).

(B) Purchased and placed in service by the qualified taxpayer
for exclusive use in a trade or business conducted 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.

(C) Purchased and placed in service before the date the targeted
tax area designation expires, is revoked, is no longer binding, or
becomes inoperative.

(2) For purposes of paragraph (1), “purchase” means any
acquisition of property, but only if all of the following apply:

(A) The property is not acquired from a person whose
relationship to the person acquiring it would result in the
disallowance of losses under Section 267 or 707(b) of the Internal
Revenue Code. However, in applying Sections 267(b) and 267(c)
for purposes of this section, Section 267(c)(4) shall be treated as
providing that the family of an individual shall include only the
individual’s spouse, ancestors, and lineal descendants.

(B) The property is not acquired by one member of an affiliated
group from another member of the same affiliated group.

(C) The basis of the property in the hands of the person acquiring
it is not determined in whole or in part by reference to the adjusted
basis of that property in the hands of the person from who it is
acquired.

(3) For purposes of this section, the cost of property does not
include that portion of the basis of that property that is determined
by reference to the basis of other property held at any time by the
person acquiring that property.

(4) This section shall not apply to any property for which the
qualified taxpayer may not make an election under Section 179 of
the Internal Revenue Code because of the application of the
provisions of Section 179(d) of the Internal Revenue Code.

(5) For purposes of subdivision (b), both of the following apply:

(A) All members of an affiliated group shall be treated as one
qualified taxpayer.

(B) The qualified taxpayer shall apportion the dollar limitation
contained in subdivision (f) among the members of the affiliated
group in whatever manner the board shall prescribe.

(6) For purposes of paragraphs (2) and (5), “affiliated group”
means “affiliated group” as defined in Section 1504 of the Internal
Revenue Code, except that, for these purposes, the phrase “more
than 50 percent” shall be substituted for the phrase “at least 80
percent” each place it appears in Section 1504(a) of the Internal
Revenue Code.

(d) (1) For purposes of this section, “qualified taxpayer” means
a corporation that meets both of the following:

(A) Is engaged in conducting 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.

(B) 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.

(2) In the case of any pass-through entity, the determination of
whether a taxpayer is a qualified taxpayer under this section shall
be made at the entity level and any deduction under this section
or Section 17267.6 shall be allowed to the pass-through entity and
passed through to the partners or shareholders in accordance with
applicable provisions of this part or Part 10 (commencing with
Section 17001). For purposes of this subparagraph, the term
“pass-through entity” means any partnership or S corporation.

(e) Any qualified taxpayer who elects to be subject to this
section shall not be entitled to claim additional depreciation
pursuant to Section 24356 with respect to any property that
constitutes Section 24356.6 property. However, the qualified
taxpayer may claim depreciation by any method permitted by
Section 24349 commencing with the taxable year following the
taxable year in which Section 24356.6 property is placed in service.

(f) The aggregate cost of all Section 24356.6 property that may
be taken into account under subdivision (a) for any taxable year
shall not exceed the following applicable amount for the taxable
year of the designation of the relevant targeted tax area and taxable
years thereafter:

 

	The applicable amount is:
Taxable year of designation	$100,000
1st taxable year thereafter	100,000
2nd taxable year thereafter	75,000
3rd taxable year thereafter	75,000
Each taxable year thereafter	50,000

 

(g) Any amounts deducted under subdivision (a) with respect
to Section 24356.6 property that ceases to be used in the qualified
taxpayer’s trade or business within a targeted tax area at any time
before the close of the second taxable year after the property is
placed in service shall be included in income in the taxable year
in which the property ceases to be so used.

(h) This section shall cease to be operative for taxable years
beginning on or after January 1, 2014, and shall be repealed on
December 1, 2014.

SEC. 40.  

Section 24356.7 of the Revenue and Taxation Code
is amended to read:

24356.7.  

(a) A taxpayer may elect to treat 40 percent of the
cost of any Section 24356.7 property as an expense that is not
chargeable to a capital account. Any cost so treated shall be allowed
as a deduction for the taxable year in which the taxpayer places
the Section 24356.7 property in service.

(b) (1) An election under this section for any taxable year shall
do both of the following:

(A) Specify the items of Section 24356.7 property to which the
election applies and the percentage of the cost of each of those
items that are to be taken into account under subdivision (a).

(B) Be made on the taxpayer’s original return of the tax imposed
by this part for the taxable year.

(2) Any election made under this section, and any specification
contained in that election, may not be revoked except with the
consent of the Franchise Tax Board.

(c) (1) For purposes of this section, “Section 24356.7 property”
means any recovery property that is:

(A) Section 1245 property (as defined in Section 1245(a)(3) of
the Internal Revenue Code).

(B) Purchased and placed in service by the taxpayer for
exclusive use in a trade or business conducted within an enterprise
zone designated pursuant to Chapter 12.8 (commencing with
Section 7070) of Division 7 of Title 1 of the Government Code.

(C) Purchased and placed in service before the date the
enterprise zone designation expires, is no longer binding, or
becomes inoperative.

(2) For purposes of paragraph (1), “purchase” means any
acquisition of property, but only if all of the following apply:

(A) The property is not acquired from a person whose
relationship to the person acquiring it would result in the
disallowance of losses under Sections 24427 through 24429.
However, in applying Sections 24428 and 24429 for purposes of
this section, subdivision (d) of Section 24429 shall be treated as
providing that the family of an individual shall include only his or
her spouse, ancestors, and lineal descendants.

(B) The property is not acquired by one member of an affiliated
group from another member of the same affiliated group.

(C) The basis of the property in the hands of the person acquiring
it is not determined in whole or in part by reference to the adjusted
basis of that property in the hands of the person from whom it is
acquired.

(3) For purposes of this section, the cost of property does not
include that portion of the basis of that property that is determined
by reference to the basis of other property held at any time by the
person acquiring that property.

(4) This section shall not apply to any property for which the
taxpayer could not make a federal election under Section 179 of
the Internal Revenue Code because of the application of the
provisions of Section 179(d) of the Internal Revenue Code.

(5) For purposes of subdivision (b) of this section, both of the
following apply:

(A) All members of an affiliated group shall be treated as one
taxpayer.

(B) The taxpayer shall apportion the dollar limitation contained
in subdivision (f) among the members of the affiliated group in
whatever manner the board shall prescribe.

(6) For purposes of paragraphs (2) and (5), “affiliated group”
means “affiliated group” as defined in Section 1504 of the Internal
Revenue Code, except that, for these purposes, the phrase “more
than 50 percent” shall be substituted for the phrase “at least 80
percent” each place it appears in Section 1504(a) of the Internal
Revenue Code.

(d) For purposes of this section, “taxpayer” means a bank or
corporation that conducts 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.

(e) Any taxpayer who elects to be subject to this section shall
not be entitled to claim additional depreciation pursuant to Section
24356 with respect to any property that constitutes Section 24356.7
property. However, the taxpayer may claim depreciation by any
method permitted by Section 24349 commencing with the taxable
year following the taxable year in which Section 24356.7 property
is placed in service.

(f) The aggregate cost of all Section 24356.7 property that may
be taken into account under subdivision (a) for any taxable years
shall not exceed the following applicable amount for the taxable
year of the designation of the relevant enterprise zone and taxable
years thereafter:

 

	The applicable
	amount is:
Taxable year of designation	$100,000
1st taxable year thereafter	100,000
2nd taxable year thereafter	75,000
3rd taxable year thereafter	75,000
Each taxable year thereafter	50,000

 

(g) Any amounts deducted under subdivision (a) with respect
to Section 24356.7 property that ceases to be used in the taxpayer’s
trade or business within an enterprise zone at any time before the
close of the second taxable year after the property is placed in
service shall be included in income in the taxable year in which
the property ceases to be so used.

(h) This section shall cease to be operative for taxable years
beginning on or after January 1, 2014, and shall be repealed on
December 1, 2014.

SEC. 41.  

Section 24356.8 of the Revenue and Taxation Code
is amended to read:

24356.8.  

(a) For each taxable year beginning on or after
January 1, 1995, a taxpayer may elect to treat 40 percent of the
cost of any Section 24356.8 property as an expense that is not
chargeable to the capital account. Any cost so treated shall be
allowed as a deduction for the taxable year in which the taxpayer
places the Section 24356.8 property in service.

(b) (1) An election under this section for any taxable year shall
meet both of the following requirements:

(A) Specify the items of Section 24356.8 property to which the
election applies and the portion of the cost of each of those items
that is to be taken into account under subdivision (a).

(B) Be made on the taxpayer’s return of the tax imposed by this
part for the taxable year.

(2) Any election made under this section, and any specification
contained in that election, may not be revoked except with the
consent of the Franchise Tax Board.

(c) (1) For purposes of this section, “Section 24356.8 property”
means any recovery property that is:

(A) Section 1245 property (as defined in Section 1245(a)(3) of
the Internal Revenue Code).

(B) Purchased by the taxpayer for exclusive use in a trade or
business conducted within a LAMBRA.

(C) Purchased before the date the LAMBRA designation expires,
is no longer binding, or becomes inoperative.

(2) For purposes of paragraph (1), “purchase” means any
acquisition of property, but only if all of the following apply:

(A) The property is not acquired from a person whose
relationship to the person acquiring it would result in the
disallowance of losses under Section 267 or 707(b) of the Internal
Revenue Code (but, in applying Sections 267(b) and 267(c) of the
Internal Revenue Code for purposes of this section, Section
267(c)(4) of the Internal Revenue Code shall be treated as
providing that the family of an individual shall include only his or
her spouse, ancestors, and lineal descendants).

(B) The property is not acquired by one component member of
an affiliated group from another component member of the same
affiliated group.

(C) The basis of the property in the hands of the person acquiring
it is not determined in whole or in part by reference to the adjusted
basis of that property in the hands of the person from whom
acquired.

(3) For purposes of this section, the cost of property does not
include so much of the basis of that property as is determined by
reference to the basis of other property held at any time by the
person acquiring that property.

(4) This section shall not apply to any property for which the
taxpayer may not make an election for the taxable year under
Section 179 of the Internal Revenue Code because of the provisions
of Section 179(d) of the Internal Revenue Code.

(5) For purposes of subdivision (b), both of the following apply:

(A) All members of an affiliated group shall be treated as one
taxpayer.

(B) The taxpayer shall apportion the dollar limitation contained
in subdivision (f) among the component members of the affiliated
group in whatever manner the board shall by regulations prescribe.

(6) For purposes of paragraphs (2) and (5), “affiliated group”
has the meaning assigned to it by Section 1504 of the Internal
Revenue Code, except that, for these purposes, the phrase “more
than 50 percent” shall be substituted for the phrase “at least 80
percent” each place it appears in Section 1504(a) of the Internal
Revenue Code.

(7) This section shall not apply to any property described in
Section 168(f) of the Internal Revenue Code.

(8) In the case of an S corporation, the dollar limitation
contained in subdivision (f) shall be applied at the entity level and
at the shareholder level.

(d) For purposes of this section:

(1) “LAMBRA” means a local agency military base recovery
area designated in accordance with the provisions of 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 who are salaried employees divided
by 12.

(C) In the case of a 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.

(e) Any taxpayer who elects to be subject to this section shall
not be entitled to claim additional depreciation pursuant to Section
24356 with respect to any property that constitutes Section 24356.8
property.

(f) The aggregate cost of all Section 24356.8 property that may
be taken into account under subdivision (a) for any taxable year
shall not exceed the following applicable amounts for the taxable
year of the designation of the relevant LAMBRA and taxable years
thereafter:

 

	The applicable amount is:
Taxable year of designation	$100,000
1st taxable year thereafter	100,000
2nd taxable year thereafter	75,000
3rd taxable year thereafter	75,000
Each taxable year thereafter	50,000

 

(g) This section shall apply only to property that is used
exclusively in a trade or business conducted within a LAMBRA.

(h) (1) Any amounts deducted under subdivision (a) with respect
to property that ceases to be used in the trade or business within
a LAMBRA at any time before the close of the second taxable
year after the property was placed in service shall be included in
income for that year.

(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 (d), then the amount of the deduction
previously claimed shall be added to the taxpayer’s net income
for the taxpayer’s second taxable year.

(i) Any taxpayer who elects to be subject to this section shall
not be entitled to claim for the same property the deduction under
Section 179 of the Internal Revenue Code, relating to an election
to expense certain depreciable business assets.

(j) This section shall cease to be operative for taxable years
beginning on or after January 1, 2014, and shall be repealed on
December 1, 2014.

SEC. 42.  

Section 24384.5 of the Revenue and Taxation Code
is amended to read:

24384.5.  

(a) There shall be allowed as a deduction the amount
of net interest received by the taxpayer before January 1, 2014, in
payment of indebtedness of a person or entity engaged in a trade
or business located in an enterprise zone.

(b) A deduction shall not be allowed under this section unless
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) This section shall cease to be operative for taxable years
beginning on or after January 1, 2014, and shall be repealed on
December 1, 2014.

SEC. 43.  

Section 24416.2 of the Revenue and Taxation Code
is amended to read:

24416.2.  

(a) The term “qualified taxpayer” as used in Section
24416.1 includes a corporation engaged in the conduct of 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. For purposes of this subdivision,
all of the following shall apply:

(1) A net operating loss shall not be a net operating loss
carryback for any taxable year and a net operating loss for any
taxable year beginning on or after the date that the area in which
the taxpayer conducts a trade or business is designated as an
enterprise zone shall be a net operating loss carryover to each of
the 15 taxable years following the taxable year of loss.

(2) For purposes of this subdivision:

(A) “Net operating loss” means the loss determined under
Section 172 of the Internal Revenue Code, as modified by Section
24416.1, attributable to the taxpayer’s business activities within
the enterprise zone (as defined in Chapter 12.8 (commencing with
Section 7070) of Division 7 of Title 1 of the Government Code)
prior to the enterprise zone expiration date. That attributable loss
shall be determined in accordance with Chapter 17 (commencing
with Section 25101), modified for purposes of this subdivision as
follows:

(i) Loss shall be apportioned to the enterprise zone by
multiplying total loss from the business by a fraction, the numerator
of which is the property factor plus the payroll factor, and the
denominator of which is two.

(ii) “The enterprise zone” shall be substituted for “this state.”

(B) A net operating loss carryover shall be a deduction only
with respect to the taxpayer’s business income attributable to the
enterprise zone as defined in Chapter 12.8 (commencing with
Section 7070) of Division 7 of Title 1 of the Government Code.

(C) Attributable income is 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 subdivision
as follows:

(i) 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 clause:

(I) The property factor is a fraction, the numerator of which is
the average value of the taxpayer’s real and tangible personal
property owned or rented and used in the 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.

(II) 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.

(ii) If a loss carryover is allowable pursuant to this section for
any taxable year after the enterprise zone designation has expired,
the enterprise zone shall be deemed to remain in existence for
purposes of computing the limitation set forth in subparagraph (B)
and allowing a net operating loss deduction.

(D) “Enterprise zone expiration date” means the date the
enterprise zone designation expires, is no longer binding, or
becomes inoperative.

(3) The changes made to this subdivision by the act adding this
paragraph shall apply to taxable years beginning on or after January
1, 1998.

(b) A taxpayer who qualifies as a “qualified taxpayer” under
one or more sections shall, for the taxable year of the net operating
loss and any taxable year to which that net operating loss may be
carried, designate on the original return filed for each year the
section which applies to that taxpayer with respect to that net
operating loss. If the taxpayer is eligible to qualify under more
than one section, the designation is to be made after taking into
account subdivision (c).

(c) If a taxpayer is eligible to qualify under this section and
either Section 24416.4, 24416.5, or 24416.6 as a “qualified
taxpayer,” with respect to a net operating loss in a taxable year,
the taxpayer shall designate which section is to apply to the
taxpayer.

(d) Notwithstanding Section 24416, the amount of the loss
determined under this section, or Section 24416.4, 24416.5, or
24416.6 shall be the only net operating loss allowed to be carried
over from that taxable year and the designation under subdivision
(b) shall be included in the election under Section 24416.1.

(e) This section shall cease to be operative for taxable years
beginning on or after January 1, 2014, and shall be repealed on
December 1, 2014.

SEC. 44.  

Section 24416.5 of the Revenue and Taxation Code
is amended to read:

24416.5.  

(a) For each taxable year beginning on or after
January 1, 1995, the term “qualified taxpayer” as used in Section
24416.1 includes a taxpayer engaged in the conduct of a trade or
business within a LAMBRA. For purposes of this subdivision, all
of the following shall apply:

(1) A net operating loss shall not be a net operating loss
carryback for any taxable year and, except as provided in
subparagraph (B), a net operating loss for any taxable year
beginning on or after the date the area in which the taxpayer
conducts a trade or business is designated a LAMBRA shall be a
net operating loss carryover to each following taxable year that
ends before the LAMBRA expiration date or to each of the 15
taxable years following the taxable year of loss, if longer.

(2) In the case of a financial institution to which Section 585,
586, or 593 of the Internal Revenue Code applies, a net operating
loss for any taxable year beginning on or after January 1, 1984,
shall be a net operating loss carryover to each of the five years
following the taxable year of the loss. Subdivision (b) of Section
24416.1 shall not apply.

(3) “LAMBRA” means a local agency military base recovery
area designated in accordance with Section 7114 of the Government
Code.

(4) “Taxpayer” means a bank or 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
and this state. For purposes of this paragraph, all of the following
shall apply:

(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. The deduction shall be
allowed only if the taxpayer has a net increase in jobs in the state,
and if one or more full-time employees are 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 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.

(5) “Net operating loss” means the loss determined under
Section 172 of the Internal Revenue Code, as modified by Section
24416.1, attributable to the taxpayer’s business activities within a
LAMBRA prior to the LAMBRA expiration date. The attributable
loss shall be determined in accordance with Chapter 17
(commencing with Section 25101), modified for purposes of this
section as follows:

(A) Loss shall be apportioned to a LAMBRA by multiplying
total loss from the business by a fraction, the numerator of which
is the property factor plus the payroll factor, and the denominator
of which is 2.

(B) “The LAMBRA” shall be substituted for “this state.”

(6) A net operating loss carryover shall be a deduction only with
respect to the taxpayer’s business income attributable to a
LAMBRA.

(7) 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
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 as follows:

(A) Business income shall be apportioned to a LAMBRA by
multiplying 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 clause:

(i) The property factor is a fraction, the numerator of which is
the average value of the taxpayer’s real and tangible personal
property owned or rented and used in the LAMBRA during the
taxable year, and the denominator of which is the average value
of all the taxpayer’s real and tangible personal property owned or
rented and used in this state during the taxable year.

(ii) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the LAMBRA during the
taxable year for compensation, and the denominator of which is
the total compensation paid by the taxpayer in this state during the
taxable year.

(B) If a loss carryover is allowable pursuant to this section for
any taxable year after the LAMBRA designation has expired, the
LAMBRA shall be deemed to remain in existence for purposes of
computing the limitation specified in subparagraph (D) and
allowing a net operating loss deduction.

(8) “LAMBRA expiration date” means the date the LAMBRA
designation expires, is no longer binding, or becomes inoperative
pursuant to Section 7110 of the Government Code.

(b) A taxpayer who qualifies as a “qualified taxpayer” under
one or more sections shall, for the taxable year of the net operating
loss and any taxable year to which that net operating loss may be
carried, designate on the original return filed for each year the
section that applies to that taxpayer with respect to that net
operating loss. If the taxpayer is eligible to qualify under more
than one section, the designation is to be made after taking into
account subdivision (c).

(c) If a taxpayer is eligible to qualify under this section and
either Section 24416.2, 24416.4, or 24416.6 as a “qualified
taxpayer,” with respect to a net operating loss in a taxable year,
the taxpayer shall designate which section is to apply to the
taxpayer.

(d) Notwithstanding Section 24416, the amount of the loss
determined under this section or Section 24416.2, 24416.4, or
24416.6 shall be the only net operating loss allowed to be carried
over from that taxable year and the designation under subdivision
(b) shall be included in the election under Section 24416.1.

(e) This section shall apply to taxable years beginning on and
after January 1, 1998.

(f) This section shall cease to be operative for taxable years
beginning on or after January 1, 2014, and shall be repealed on
December 1, 2014.

SEC. 45.  

Section 24416.6 of the Revenue and Taxation Code
is amended to read:

24416.6.  

(a) For each taxable year beginning on or after
January 1, 1998, the term “qualified taxpayer” as used in Section
24416.1 includes a corporation that meets both of the following:

(1) Is engaged in the conduct of 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.

(2) 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. In the case of any pass-through entity, the determination
of whether a taxpayer is a qualified taxpayer shall be made at the
entity level.

(b) For purposes of subdivision (a), all of the following shall
apply:

(1) A net operating loss shall not be a net operating loss
carryback for any taxable year and a net operating loss for any
taxable year beginning on or after the date that the area in which
the qualified taxpayer conducts a trade or business is designated
as a targeted tax area shall be a net operating loss carryover to each
of the 15 taxable years following the taxable year of loss.

(2) “Net operating loss” means the loss determined under
Section 172 of the Internal Revenue Code, as modified by Section
24416.1, attributable to the qualified taxpayer’s business activities
within the targeted tax area (as defined in Chapter 12.93
(commencing with Section 7097) of Division 7 of Title 1 of the
Government Code) prior to the targeted tax area expiration date.
That attributable loss shall be determined in accordance with
Chapter 17 (commencing with Section 25101), modified for
purposes of this section as follows:

(A) Loss shall be apportioned to the targeted tax area by
multiplying total loss from the business by a fraction, the numerator
of which is the property factor plus the payroll factor, and the
denominator of which is 2.

(B) “The targeted tax area” shall be substituted for “this state.”

(3) A net operating loss carryover shall be a deduction only with
respect to the qualified taxpayer’s business income attributable to
the targeted tax area as defined in Chapter 12.93 (commencing
with Section 7097) of Division 7 of Title 1 of the Government
Code.

(4) Attributable income is 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 subdivision
as follows:

(A) 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 clause:

(i) The property factor is a fraction, the numerator of which is
the average value of the taxpayer’s real and tangible personal
property owned or rented and used in the 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.

(ii) 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.

(B) If a loss carryover is allowable pursuant to this subdivision
for any taxable year after the targeted tax area expiration date, the
targeted tax area designation shall be deemed to remain in existence
for purposes of computing the limitation specified in subparagraph
(B) and allowing a net operating loss deduction.

(5) “Targeted tax area expiration date” means the date the
targeted tax area designation expires, is revoked, is no longer
binding, or becomes inoperative.

(c) A taxpayer who qualifies as a “qualified taxpayer” under
one or more sections shall, for the taxable year of the net operating
loss and any taxable year to which that net operating loss may be
carried, designate on the original return filed for each year the
section that applies to that taxpayer with respect to that net
operating loss. If the taxpayer is eligible to qualify under more
than one section, the designation is to be made after taking into
account subdivision (e).

(d) If a taxpayer is eligible to qualify under this section and
either Section 24416.2, 24416.4, or 24416.5 as a “qualified
taxpayer,” with respect to a net operating loss in a taxable year,
the taxpayer shall designate which section is to apply to the
taxpayer.

(e) Notwithstanding Section 24416, the amount of the loss
determined under this section or Section 24416.2, 24416.4, or
24416.5 shall be the only net operating loss allowed to be carried
over from that taxable year and the designation under subdivision
(c) shall be included in the election under Section 24416.1.

(f) This section shall apply to taxable years beginning on or
after January 1, 1998.

(g) This section shall cease to be operative for taxable years
beginning on or after January 1, 2014, and shall be repealed on
December 1, 2014.

SEC. 46.  

There is hereby appropriated up to six hundred
thousand dollars ($600,000) from the General Fund for allocation
to the committee and departments that are required to administer
this act by the Director of Finance in furtherance of the objectives
of this act. An allocation of funds approved by the Director of
Finance under this item shall become effective no sooner than 30
days after the director files written notification thereof with the
Chairperson of the Joint Legislative Budget Committee and the
chairpersons of the fiscal committees in each house of the
Legislature, or no sooner than any lesser time the chairperson of
the joint committee, or his or her designee, may in each instance
determine.

SEC. 47.  

(a) Sections 6377.1, 17053.73, 17059.2, 18410.2,
23636, and 23689 of the Revenue and Taxation Code, added by
this act, should not remain effective and operative if the repeal of
Sections 17053.33, 17053.34, 17053.45, 17053.46, 17053.47,
17053.70, 17053.74, 17053.75, 17053.80, 17235, 17267.2, 17267.6,
17268, 17276.2, 17276.5, 17276.6, 19136.8, 23612.2, 23622.7,
23622.8, 23623, 23633, 23634, 23645, 23646, 24356.6, 24356.7,
24356.8, 24384.5, 24416.2, 24416.5, and 24416.6, as provided for
in this act, is determined by a court to be invalid and, as a result,
those sections remain effective and operative.

(b) The provisions of Sections 17059.2 and 23689 are severable.
If any provision of Section 17059.2 or Section 23689, or the
application of either section, is held invalid, that invalidity shall
not affect other provisions or applications that can be given effect
without the invalid provision or application.

SEC. 48.  

This act is an urgency statute necessary for the
immediate preservation of the public peace, health, or safety within
the meaning of Article IV of the Constitution and shall go into
immediate effect. The facts constituting the necessity are:

In order to ensure the public good by providing certainty
regarding the incentives available for attracting and retaining jobs
in economically distressed areas of the state, it is necessary that
this act take effect immediately.

---

CORRECTIONS:

Heading--Amended Line--Page 1.

Text--Pages 15, 73, 74, 79, 80, 83, 117, 118, 119, and 130.

---