Amended in Senate September 10, 2013

Amended in Senate September 5, 2013

California Legislature—2013–14 Regular Session

Assembly Bill No. 106

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

January 10, 2013

An act to begin delete amend Sections 1091, 13073.5, 30061, and 30070 of the Government Code, to amend Sections 1231 and 13821 of the Penal Code, to amend Sections 17053.33, 17053.70, 18410.2, 23612.2, and 23633 of the Revenue and Taxation Code, and to amend Sections 1403, 18220, and 18220.1 of the Welfare and Institutions Code, relating to public finance, end delete begin insert add Chapter 12.78 (commencing with Section 7069) to Division 7 of Title 1 to the Government Code, to amend Sections 17053.46, 17053.74, end insert begin insert 23622.7, and 23646 of the Revenue and Taxation Code, and to amend Section 6 of Chapter 70 of the Statutes of 2013, relating to economic development, end insert begin delete and making an appropriation therefor, end delete to take effect immediately, begin delete bill related to the budget end delete begin insert tax levy end insert .

LEGISLATIVE COUNSEL’S DIGEST

AB 106, as amended, Committee on Budget. begin delete Public finance. end delete begin insert Economic development: taxation: credits end insert begin insert . end insert

begin insert

The Personal Income Tax Law and the Corporation Tax Law authorize various credits against the taxes imposed by those laws, including a hiring credit for qualified taxpayers who hire qualified employees, as defined, within enterprise zones and local agency military base recovery areas (LAMBRAs), subject to specified criteria and requirements. Those laws require that a taxpayer obtain a certification 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 a specified area or zone that provides that a qualified employee meets the specified eligibility requirements. Those laws are repealed on December 1, 2019.

end insert begin insert

This bill would instead make these credits inoperative on January 1, 2014. This bill would authorize any local entity, as specified, authorized to issue a certification that provides that a qualified employee, qualified disadvantaged individual, or qualified displaced employee meets specified eligibility requirements, to continue to accept applications for certification and to issue the certifications up to but no later than January 1, 2015. This bill would also make other clarifying and technical changes.

end insert begin insert

This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIII A of the California Constitution, and thus would require for passage the approval of 2⁄3 of the membership of each house of the Legislature.

end insert begin insert

This bill would take effect immediately as a tax levy.

end insert begin delete

Existing law prohibits certain public officials and employees from being financially interested in any contract made by them in their official capacity, or by any board of which they are members. An officer is not deemed to be interested in a contract entered into by a body or board of which the officer is a member if the officer has only a remote interest in the contract and other requirements are met. A remote interest is required to be publicly disclosed, and thereafter the public body may authorize, approve, or ratify the contract in question, but the officer or employee with the remote interest is disqualified from voting. A remote interest is defined to include, among others, the interest of a person who is an officer or employee of a nonprofit entity exempt from taxation pursuant to Section 501(c)(3) of the Internal Revenue Code or a nonprofit corporation. Violation of these provisions is a crime.

end delete begin delete

This bill would include in the definition of remote interest the interest of a person who is an officer or employee of a nonprofit entity exempt from taxation pursuant to Section 501(c)(5) of the Internal Revenue Code.

end delete begin delete

By expanding the scope of an existing crime, this bill would impose a state-mandated local program.

end delete begin delete

Existing law establishes in the State Treasury the Local Revenue Fund 2011, a continuously appropriated fund, and requires that moneys in the fund be allocated exclusively for public safety services, as defined. Existing law further establishes the Law Enforcement Services Account within that fund, and creates the Enhancing Law Enforcement Activities Subaccount and the Juvenile Justice Subaccount within the Law Enforcement Services Account.

end delete begin delete

Existing law allocates specified funds from the Enhancing Law Enforcement Activities Subaccount to local governments, including to cities and counties that charge fees to a city, special district, community college district, college, or university for the booking or detention of a person arrested and brought to a detention facility of the city or county. Existing law also allocates moneys in the subaccount for county sheriffs’ departments, California Multi-Jurisdictional Methamphetamine Enforcement Teams, Multi-Agency Gang Enforcement Consortium, Sexual Assault Felony Enforcement Teams, High Technology Theft Apprehension and Prosecution Program, Gang Violence Suppression Program, Central Valley and Central Coast Rural Crime Prevention Programs, jail construction and operation, criminal prosecution, juvenile justice plans, habitual truants, runaways, and children at risk of being wards of the court or under juvenile supervision or supervision of the county probation department.

end delete begin delete

This bill would, subsequent to the allocation made to cities and counties that charge fees to a city, special district, community college district, college, or university for the booking or detention of a person arrested and brought to a detention facility of the city or county, revise the percentages of the remaining funds to be allocated for the other above-mentioned purposes from the Enhancing Law Enforcement Activities Subaccount.

end delete begin delete

Under existing law counties are authorized to establish a Community Corrections Performance Incentives Fund (CCPIF) to receive moneys related to the placement of felons under probation supervision, mandatory supervision, and postrelease community supervision. Programs funded through a CCPIF are required to identify and track specific outcome-based measures and report its findings to the Administrative Office of the Courts (AOC). The AOC then provides quarterly statistical information to the Department of Finance that includes, among other things, the number of felony convictions in the county and the number of felons who would have been subject to specified sentencing provisions had felony probation not been granted.

end delete begin delete

This bill would remove from the AOC’s quarterly statistical information the number of felons who would have been subject to those sentencing provisions had felony probation not been granted.

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The Personal Income Tax Law and the Corporation Tax Law allow a credit in an amount equal to the amount of sales or use tax paid in connection with qualified property that is purchased and placed in service before the date the enterprise zone or targeted tax area designation expires, is no longer binding, or becomes inoperative. Existing law repeals these provisions on December 1, 2014.

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This bill would instead require the qualified property to be placed in service in the enterprise zone or the targeted tax area before January 1, 2015, and would repeal those provisions on December 1, 2015. The bill would also make clarifying changes to those provisions.

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Existing law requires the Population Research Unit to, among other things, determine the census tracts that are within the highest quartile of census tracts with the highest civilian unemployment, and to sort the census tracts by the respective civilian unemployment rate of each in ascending order, or from the lowest, 0%, to the highest, 100%, as specified.

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This bill would make clarifying changes to those provisions.

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Existing law established the California Competes Tax Credit Committee, which consists of the Treasurer, the Director of Finance, the Director of the Governor’s Office of Business and Economic Development, and one appointee each from the Senate and Assembly.

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This bill would provide that the Director of the Governor’s Office of Business and Economic Development is the chair. The bill would prohibit a member of the Legislature from being appointed to the committee.

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Under existing law and until January 1, 2014, California is subject to an interstate compact for juveniles and that compact requires California, among other things, to appoint a commissioner to the Interstate Commission for Juveniles and to create a State Council for Interstate Juvenile Supervision.

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This bill would extend the duration of the compact until January 1, 2016.

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The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

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This bill would provide that no reimbursement is required by this act for a specified reason.

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The bill would appropriate $100,000 from the General Fund to the Governor’s Office of Economic Development to provide staff support for the California Competes Tax Credit Committee.

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This bill would declare that it is to take effect immediately as a bill providing for appropriations related to the Budget Bill.

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

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

begin insert

begin insert SECTION 1. end insert   

end insert

begin insert Chapter 12.78 (commencing with Section 7069)
is added to Division 7 of Title 1 of the end insert begin insert Government Code end insert begin insert , to read: end insert

begin insert

 

Chapter   begin insert 12.78. end insert Certification for Enterprise Zones,
Targeted Tax Areas, and Local Agency Military Base
Recovery Areas Hiring Credits

 

begin insert 7069. end insert   

Notwithstanding the repeal of Chapter 12.8 (commencing
with Section 7070), Chapter 12.93 (commencing with Section
7097), and Chapter 12.97 (commencing with Section 7105) of the
Government Code by Chapter 69 of the Statutes of 2013, a local
entity formerly authorized by one or more of those chapters of the
Government Code to issue a certification that provides that a
qualified employee, qualified disadvantaged individual, or qualified
displaced employee meets the specified eligibility requirements
under Section 17053.34, 17053.46, 17053.47, 17053.74, 23622.7,
23622.8, 23634, or 23646 of the Revenue and Taxation Code may
continue to accept applications for the certification and to issue
the certifications up to but no later than January 1, 2015.

end insert

begin insert

begin insert SEC. 2. end insert   

end insert

begin insert Section 17053.46 of the end insert begin insert Revenue and Taxation Code end insert
begin insert is amended to read: end insert

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 10 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 10 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 begin delete for taxable years beginning on or after end delete begin insert on end insert
January 1, 2014, and shall be repealed on December 1, 2019. begin insert A
credit shall not be allowed under this section with respect to an
employee who first commences employment with a qualified
taxpayer on or after January 1, 2014. end insert

(2)  begin delete The end delete begin insert This end insert section shall continue to apply with respect to
qualified begin insert disadvantaged individuals or qualified displaced end insert
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 begin insert disadvantaged individuals or qualified displaced end insert
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.

begin insert

begin insert SEC. 3. end insert   

end insert

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

17053.74.  

(a) There shall be allowed a credit against the “net
tax” (as defined in Section 17039) to a taxpayer who employs a
qualified employee in an enterprise zone during the taxable year.
The credit shall be equal to the sum of each of the following:

(1) Fifty percent of qualified wages in the first year of
employment.

(2) Forty percent of qualified wages in the second year of
employment.

(3) Thirty percent of qualified wages in the third year of
employment.

(4) Twenty percent of qualified wages in the fourth year of
employment.

(5) Ten percent of qualified wages in the fifth year of
employment.

(b) For purposes of this section:

(1) “Qualified wages” means:

(A) (i) Except as provided in clause (ii), that portion of wages
paid or incurred by the taxpayer during the taxable year to qualified
employees that does not exceed 150 percent of the minimum wage.

(ii) For up to 1,350 qualified employees who are employed by
the taxpayer in the Long Beach Enterprise Zone in aircraft
manufacturing activities described in Codes 3721 to 3728,
inclusive, and Code 3812 of the Standard Industrial Classification
(SIC) Manual published by the United States Office of
Management and Budget, 1987 edition, “qualified wages” means
that portion of hourly wages that does not exceed 202 percent of
the minimum wage.

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

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

(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 10 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 10 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 begin delete for taxable years beginning on or after end delete begin insert on end insert
January 1, 2014, and shall be repealed on December 1, 2019. begin insert A
credit shall not be allowed under this section with respect to an
employee who first commences employment with a taxpayer on or
after January 1, 2014. end insert

(2)  begin delete The end delete begin insert This end insert section shall continue to apply with respect to
qualified employees who are employed by the begin delete qualified end delete 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.

begin insert

begin insert SEC. 4. end insert   

end insert

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

23622.7.  

(a) There shall be allowed a credit against the “tax”
(as defined by Section 23036) to a taxpayer who employs a
qualified employee in an enterprise zone during the taxable year.
The credit shall be equal to the sum of each of the following:

(1) Fifty percent of qualified wages in the first year of
employment.

(2) Forty percent of qualified wages in the second year of
employment.

(3) Thirty percent of qualified wages in the third year of
employment.

(4) Twenty percent of qualified wages in the fourth year of
employment.

(5) Ten percent of qualified wages in the fifth year of
employment.

(b) For purposes of this section:

(1) “Qualified wages” means:

(A) (i) Except as provided in clause (ii), that portion of wages
paid or incurred by the taxpayer during the taxable year to qualified
employees that does not exceed 150 percent of the minimum wage.

(ii) For up to 1,350 qualified employees who are employed by
the taxpayer in the Long Beach Enterprise Zone in aircraft
manufacturing activities described in Codes 3721 to 3728,
inclusive, and Code 3812 of the Standard Industrial Classification
(SIC) Manual published by the United States Office of
Management and Budget, 1987 edition, “qualified wages” means
that portion of hourly wages that does not exceed 202 percent of
the minimum wage.

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

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

(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 10 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 10 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 begin delete for taxable years beginning on or after end delete begin insert on end insert
January 1, 2014, and shall be repealed on December 1, 2019. begin insert A
credit shall not be allowed under this section with respect to an
employee who first commences employment with a taxpayer on or
after January 1, 2014. end insert

(2)  begin delete The end delete begin insert This end insert section shall continue to apply with respect to
qualified employees who are employed by the begin delete qualified end delete 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.

begin insert

begin insert SEC. 5. end insert   

end insert

begin insert Section 23646 of the end insert begin insert Revenue and Taxation Code end insert begin insert is
amended to read: end insert

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 10 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 10 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 begin delete for taxable years beginning on or after end delete begin insert on end insert
January 1, 2014, and shall be repealed on December 1, 2019. begin insert A
credit shall not be allowed under this section with respect to an
employee who first commences employment with a qualified
taxpayer on or after January 1, 2014. end insert

(2)  begin delete The end delete begin insert This end insert section shall continue to apply with respect to
qualified begin insert disadvantaged individuals or qualified displaced end insert
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 begin insert disadvantaged individuals or qualified displaced end insert
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.

begin insert

begin insert SEC. 6. end insert   

end insert

begin insert Section 6 of Chapter 70 of the Statutes of 2013 is
amended to read: end insert

Sec. 6.  

(a) (1) For purposes of applying Sections 17053.33,
17053.34, 17053.45, 17053.46, 17053.47, 17053.70, 17053.74,
23612.2, 23622.7, 23622.8, 23633, 23634, 23645, and 23646 of
the Revenue and Taxation Code, as amended by Assembly Bill
93 of the 2013-14 Regular Session, the revision of the carryover
period of the credit under each of those sections to a period of 10
begin delete years end delete begin insert years, with the 10-year carryover period commencing with
the first taxable year beginning on or after January 1, 2014, end insert applies
to credits under those sections and carryovers of credits under
those sections that are available for carryover to the taxable year
beginning on or after January 1, 2014. The carryover period for
hiring credits earned under Section 17053.34, 17053.46, 17053.47,
17053.74, 23622.7, 23622.8, 23634, and 23646 of the Revenue
and Taxation Code in taxable years beginning on or after January
1, 2014, is also 10 taxable years, beginning with the taxable year
after the taxable year the credit is earned.

(2) Notwithstanding the repeal of Sections 17053.33, 17053.34,
17053.45, 17053.46, 17053.47, 17053.70, 17053.74, 23612.2,
23622.7, 23622.8, 23633, 23634, 23645, and 23646 of the Revenue
and Taxation Code by amendments made by Assembly Bill 93 of
the 2013-14 Regular Session, pursuant to subdivision (d) of Section
17039 of the Revenue and Taxation Code and subdivision (f) of
Section 23036 of the Revenue and Taxation Code, any remaining
carryover from a credit under those sections is allowed to be carried
over under the provisions of those sections as they read
immediately prior to the repeal.

(b) The Legislature finds and declares that, for purposes of
proper implementation of the amendments made by Assembly Bill
93 of the 2013-14 Regular Session to Sections 17053.33, 17053.34,
17053.45, 17053.46, 17053.47, 17053.70, 17053.74, 23612.2,
23622.7, 23622.8, 23633, 23634, 23645, and 23646 of the Revenue
and Taxation Code, this section does both of the following:

(1) Clarifies the changes made by Assembly Bill 93 of the
2013-14 Regular Session with respect to the carryover periods of
each of those provisions of the Revenue and Taxation Code.

(2) Reiterates the application of existing law regarding the
continuing availability of carryover credits after repeal of each of
those provisions of the Revenue and Taxation Code.

begin insert

begin insert SEC. 7. end insert   

end insert begin insert

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

end insert

All matter omitted in this version of the bill appears in the bill as amended in the Senate, September 5, 2013. (JR11)