BILL NUMBER: AB 305 INTRODUCED
BILL TEXT
INTRODUCED BY Assembly Member V. Manuel Pérez
FEBRUARY 12, 2013
An act to add and repeal Sections 17053.9 and 23622.9 of, and to
repeal and amend Sections 17053.80 and 23623 of, the Revenue and
Taxation Code, relating to taxation, and making an appropriation
therefor, to take effect immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
AB 305, as introduced, V. Manuel Pérez. Income taxes: hiring
credits: investment credits.
The Personal Income Tax Law and the Corporation Tax Law allow
various credits against the taxes imposed by those laws, including a
credit in the amount of $3,000 for each full-time employee hired by a
qualified employer applicable to taxable years beginning on or after
January 1, 2009, and ending upon a cut-off date calculated based
upon an estimate by the Franchise Tax Board of claims cumulatively
totaling $400,000,000 for all taxable years, as specified. Existing
law also creates the California Tax Credit Allocation Committee,
which has specified duties in regard to low-income housing credits.
This bill would instead calculate the cut-off date for the
above-described hiring credit based upon an estimate by the Franchise
Tax Board of claims cumulatively totaling $100,000,000 for all
taxable years, as specified.
This bill would also allow a credit under both laws, in modified
conformity with a federal New Market Tax Credit, for taxable years
beginning on or after January 1, 2013, and before January 1, 2020, in
a specified amount for investments in low-income communities. The
bill would limit the total annual amount of credit allowed pursuant
to these provisions to $30,000,000 and would limit the allocation of
the credit to a cumulative total of no more than $200,000,000. This
bill would impose specified duties on the California Tax Credit
Allocation Committee with regard to the application for, and
allocation of, the credit. The bill would require the committee to
establish and impose reasonable fees upon entities that apply for the
allocation of the credit and use the revenue to defray the cost of
administering the program, as specified, thereby making an
appropriation. This bill would also appropriate $150,000 from the Tax
Credit Allocation Fee Account to the committee for purposes of
implementing the tax credit.
This bill would result in a change in state taxes for the purpose
of increasing state revenues 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.
This bill would take effect immediately as a tax levy.
Vote: 2/3. Appropriation: yes. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares all of the
following:
(a) California is entering the sixth year of the worst economic
recession since the Great Depression.
(b) Due to a systemic budget problem, the state is suffering from
chronic revenue shortfalls based in part on increasing reliance on
revenues from personal income tax rolls.
(c) Investment in small business ventures is a proven method of
stimulating economic activity, creating new jobs, and generating
revenue by expanding the tax base.
(d) The federal New Markets Tax Credit Program, created in 2000
with bipartisan support, has been an effective means of stimulating
state and regional economies due to its ability to leverage federal
funds to drive private investment in communities that would otherwise
not have had access to capital. These investments accrue to small
businesses, schools, and other business-related real estate projects.
(e) As of 2010, nine states, Connecticut, Florida, Illinois,
Kentucky, Louisiana, Mississippi, Missouri, Ohio, and Oklahoma, had
enacted matching state programs. On average, these states
successfully leveraged thirteen dollars ($13) in federal New Markets
Tax Credit for every dollar of state credits initially allocated for
the state program.
(f) As of December 29, 2012, $261,560,076 of California's small
business hiring tax credit are still available.
(g) Given the current economic climate and the lack of use of the
state hiring tax credit, it is reasonable for the Legislature to
search for and consider other alternatives to stimulate hiring and to
generate economic activity to shorten the current recession and
promote permanent economic recovery through the creation of a
California New Markets Tax Credit Program.
(h) There are low-income communities in the state that face
multiple challenges in attracting private investment, including, but
not limited to, developing and maintaining a workforce that meets the
skill needs of local employers, an infrastructure that connects
local businesses to external markets, and neighborhoods that are not
disproportionately burdened with environmental pollutants, including
air, soil, and water contamination.
(I) Given the ability of the California New Markets Tax Credit
Program to stimulate private investment activity in areas that would
otherwise not have access to investment capital, it is appropriate
that the state consider prioritizing a portion of the California New
Markets Tax Credit Program to encourage private investment in areas
that face multiple challenges in attracting investment capital.
SEC. 2. Section 17053.80 of the Revenue and Taxation Code, as
added by Section 3 of Chapter 10 of the Third Extraordinary Session
of the Statutes of 2009, is repealed.
17053.80. (a) For each taxable year beginning on or after January
1, 2009, there shall be allowed as a credit against the "net tax,"
as defined in Section 17039, three thousand dollars ($3,000) for each
net increase in qualified full-time employees, as specified in
subdivision (c), hired during the taxable year by a qualified
employer.
(b) For purposes of this section:
(1) "Acquired" includes any gift, inheritance, transfer incident
to divorce, or any other transfer, whether or not for consideration.
(2) "Qualified full-time employee" means:
(A) A qualified employee who was paid qualified wages by the
qualified employer for services of not less than an average of 35
hours per week.
(B) A qualified employee who was a salaried employee and was paid
compensation during the taxable year for full-time employment, within
the meaning of Section 515 of the Labor Code, by the qualified
employer.
(3) A "qualified employee" shall not include any of the following:
(A) An employee certified as a qualified employee in an enterprise
zone designated in accordance with Chapter 12.8 (commencing with
Section 7070) of Division 7 of Title 1 of the Government Code.
(B) An employee certified as a qualified disadvantaged individual
in a manufacturing enhancement area designated in accordance with
Section 7073.8 of the Government Code.
(C) An employee certified as a qualified employee in a targeted
tax area designated in accordance with Section 7097 of the Government
Code.
(D) An employee certified as a qualified disadvantaged individual
or a qualified displaced employee in a local agency military base
recovery area (LAMBRA) designated in accordance with Chapter 12.97
(commencing with Section 7105) of Division 7 of Title 1 of the
Government Code.
(E) An employee whose wages are included in calculating any other
credit allowed under this part.
(4) "Qualified employer" means a taxpayer that, as of the last day
of the preceding taxable year, employed a total of 20 or fewer
employees.
(5) "Qualified wages" means wages subject to Division 6
(commencing with Section 13000) of the Unemployment Insurance Code.
(6) "Annual full-time equivalent" means either of the following:
(A) In the case of a full-time employee paid hourly qualified
wages, "annual full-time equivalent" means the total number of hours
worked for the taxpayer by the employee (not to exceed 2,000 hours
per employee) divided by 2,000.
(B) In the case of a salaried full-time employee, "annual
full-time equivalent" means the total number of weeks worked for the
taxpayer by the employee divided by 52.
(c) The net increase in qualified full-time employees of a
qualified employer shall be determined as provided by this
subdivision:
(1) (A) The net increase in qualified full-time employees shall be
determined on an annual full-time equivalent basis by subtracting
from the amount determined in subparagraph (C) the amount determined
in subparagraph (B).
(B) The total number of qualified full-time employees employed in
the preceding taxable year by the taxpayer and by any trade or
business acquired by the taxpayer during the current taxable year.
(C) The total number of full-time employees employed in the
current taxable year by the taxpayer and by any trade or business
acquired during the current taxable year.
(2) For taxpayers who first commence doing business in this state
during the taxable year, the number of full-time employees for the
immediately preceding prior taxable year shall be zero.
(d) In the case where the credit allowed by this section exceeds
the "net tax," the excess may be carried over to reduce the "net tax"
in the following year, and succeeding seven years if necessary,
until the credit is exhausted.
(e) Any deduction otherwise allowed under this part for qualified
wages shall not be reduced by the amount of the credit allowed under
this section.
(f) For purposes of this section:
(1) All employees of the trades or businesses that are treated as
related under either Section 267, 318, or 707 of the Internal Revenue
Code shall be treated as employed by a single taxpayer.
(2) In determining whether the taxpayer has first commenced doing
business in this state during the taxable year, the provisions of
subdivision (f) of Section 17276, without application of paragraph
(7) of that subdivision, shall apply.
(g) (1) (A) Credit under this section and Section 23623 shall be
allowed only for credits claimed on timely filed original returns
received by the Franchise Tax Board on or before the cut-off date
established by the Franchise Tax Board.
(B) For purposes of this paragraph, the cut-off date shall be the
last day of the calendar quarter within which the Franchise Tax Board
estimates it will have received timely filed original returns
claiming credits under this section and Section 23623 that
cumulatively total four hundred million dollars ($400,000,000) for
all taxable years.
(2) The date a return is received shall be determined by the
Franchise Tax Board.
(3) (A) The determinations of the Franchise Tax Board with respect
to the cut-off date, the date a return is received, and whether a
return has been timely filed for purposes of this subdivision may not
be reviewed in any administrative or judicial proceeding
(B) Any disallowance of a credit claimed due to a determination
under this subdivision, including the application of the limitation
specified in paragraph (1), shall be treated as a mathematical error
appearing on the return. Any amount of tax resulting from such
disallowance may be assessed by the Franchise Tax Board in the same
manner as provided by Section 19051.
(4) The Franchise Tax Board shall periodically provide notice on
its Web site with respect to the amount of credit under this section
and Section 23623 claimed on timely filed original returns received
by the Franchise Tax Board.
(h) (1) The Franchise Tax Board may prescribe rules, guidelines or
procedures necessary or appropriate to carry out the purposes of
this section, including any guidelines regarding the limitation on
total credits allowable under this section and Section 23623 and
guidelines necessary to avoid the application of paragraph (2) of
subdivision (f) through split-ups, shell corporations, partnerships,
tiered ownership structures, or otherwise.
(2) Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code does not apply to any
standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the Franchise Tax Board pursuant
to this section.
(i) This section shall remain in effect only until December 1 of
the calendar year after the year of the cut-off date, and as of that
December 1 is repealed.
SEC. 3. Section 17053.80 of the Revenue and Taxation Code, as
added by Section 3 of Chapter 17 of the Third Extraordinary Session
of the Statutes of 2009, is amended to read:
17053.80. (a) For each taxable year beginning on or after January
1, 2009, there shall be allowed as a credit against the "net tax,"
as defined in Section 17039, three thousand dollars ($3,000) for each
net increase in qualified full-time employees, as specified in
subdivision (c), hired during the taxable year by a qualified
employer.
(b) For purposes of this section:
(1) "Acquired" includes any gift, inheritance, transfer incident
to divorce, or any other transfer, whether or not for consideration.
(2) "Qualified full-time employee" means:
(A) A qualified employee who was paid qualified wages during
the taxable year by the qualified employer for services of not
less than an average of 35 hours per week.
(B) A qualified employee who was a salaried employee and was paid
compensation during the taxable year for full-time employment, within
the meaning of Section 515 of the Labor Code, by the qualified
employer.
(3) A "qualified employee" shall not include any of the following:
(A) An employee certified as a qualified employee in an enterprise
zone designated in accordance with Chapter 12.8 (commencing with
Section 7070) of Division 7 of Title 1 of the Government Code.
(B) An employee certified as a qualified disadvantaged individual
in a manufacturing enhancement area designated in accordance with
Section 7073.8 of the Government Code.
(C) An employee certified as a qualified employee in a targeted
tax area designated in accordance with Section 7097 of the Government
Code.
(D) An employee certified as a qualified disadvantaged individual
or a qualified displaced employee in a local agency military base
recovery area (LAMBRA) designated in accordance with Chapter 12.97
(commencing with Section 7105) of Division 7 of Title 1 of the
Government Code.
(E) An employee whose wages are included in calculating any other
credit allowed under this part.
(4) "Qualified employer" means a taxpayer that, as of the last day
of the preceding taxable year, employed a total of 20 or fewer
employees.
(5) "Qualified wages" means wages subject to Division 6
(commencing with Section 13000) of the Unemployment Insurance Code.
(6) "Annual full-time equivalent" means either of the following:
(A) In the case of a full-time employee paid hourly qualified
wages, "annual full-time equivalent" means the total number of hours
worked for the taxpayer by the employee (not to exceed 2,000 hours
per employee) divided by 2,000.
(B) In the case of a salaried full-time employee, "annual
full-time equivalent" means the total number of weeks worked for the
taxpayer by the employee divided by 52.
(c) The net increase in qualified full-time employees of a
qualified employer shall be determined as provided by this
subdivision:
(1) (A) The net increase in qualified full-time employees shall be
determined on an annual full-time equivalent basis by subtracting
from the amount determined in subparagraph (C) the amount determined
in subparagraph (B).
(B) The total number of qualified full-time employees employed in
the preceding taxable year by the taxpayer and by any trade or
business acquired by the taxpayer during the current taxable year.
(C) The total number of full-time employees employed in the
current taxable year by the taxpayer and by any trade or business
acquired during the current taxable year.
(2) For taxpayers who first commence doing business in this state
during the taxable year, the number of full-time employees for the
immediately preceding prior taxable year shall be zero.
(d) In the case where the credit allowed by this section exceeds
the "net tax," the excess may be carried over to reduce the "net tax"
in the following year, and succeeding seven years if necessary,
until the credit is exhausted.
(e) Any deduction otherwise allowed under this part for qualified
wages shall not be reduced by the amount of the credit allowed under
this section.
(f) For purposes of this section:
(1) All employees of the trades or businesses that are treated as
related under either Section 267, 318, or 707 of the Internal Revenue
Code shall be treated as employed by a single taxpayer.
(2) In determining whether the taxpayer has first commenced doing
business in this state during the taxable year, the provisions of
subdivision (f) of Section 17276 17276.20
, without application of paragraph (7) of that subdivision,
shall apply.
(g) (1) (A) Credit under this section and Section 23623 shall be
allowed only for credits claimed on timely filed original returns
received by the Franchise Tax Board on or before the cut-off date
established by the Franchise Tax Board.
(B) For purposes of this paragraph, the cut-off date shall be the
last day of the calendar quarter within which the Franchise Tax Board
estimates it will have received timely filed original returns
claiming credits under this section and Section 23623 that
cumulatively total four one hundred
million dollars ($400,000,000) ($100,000,000)
for all taxable years.
(2) The date a return is received shall be determined by the
Franchise Tax Board.
(3) (A) The determinations of the Franchise Tax Board with respect
to the cut-off date, the date a return is received, and whether a
return has been timely filed for purposes of this subdivision may not
be reviewed in any administrative or judicial proceeding .
(B) Any disallowance of a credit claimed due to a determination
under this subdivision, including the application of the limitation
specified in paragraph (1), shall be treated as a mathematical error
appearing on the return. Any amount of tax resulting from such
disallowance may be assessed by the Franchise Tax Board in the same
manner as provided by Section 19051.
(4) The Franchise Tax Board shall periodically provide notice on
its Internet Web site with respect to the amount of credit
under this section and Section 23623 claimed on timely filed
original returns received by the Franchise Tax Board.
(h) (1) The Franchise Tax Board may prescribe rules, guidelines
, or procedures necessary or appropriate to carry out the
purposes of this section, including any guidelines regarding the
limitation on total credits allowable under this section and Section
23623 and guidelines necessary to avoid the application of paragraph
(2) of subdivision (f) through split-ups, shell corporations,
partnerships, tiered ownership structures, or otherwise.
(2) Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code does not apply to any
standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the Franchise Tax Board pursuant
to this section.
(i) This section shall remain in effect only until December 1 of
the calendar year after the year of the cut-off date, and as of that
December 1 is repealed.
SEC. 4. Section 17053.9 is added to the Revenue and Taxation Code,
to read:
17053.9. (a) There is hereby created the California New Markets
Tax Credit Program as provided in this section and Section 23622.9.
The purpose of this program is to stimulate economic development, and
hasten California's economic recovery, by authorizing tax credits
for investment in California, including, but not limited to, retail
businesses, real property, financial institutions, and schools. The
California Tax Credit Allocation Committee shall have responsibility
for the administration of this program as provided in this section
and Section 23622.9.
(b) (1) For taxable years beginning on or after January 1, 2013,
and before January 1, 2020, there shall be allowed as a credit
against the "net tax," as defined in Section 17039, an amount
determined in accordance with Section 45D of the Internal Revenue
Code, as modified as set forth in this section.
(2) This credit shall be allowed only if the taxpayer holds the
qualified equity investment on the credit allowance date and each of
the six following anniversary dates of that date.
(c) Section 45D of the Internal Revenue Code is modified as
follows:
(1) (A) The references to "the Secretary" in Section 45D of the
Internal Revenue Code are modified to read "the committee."
(B) For purposes of this section, "committee" means the California
Tax Credit Allocation Committee as described in subdivision (a) of
Section 50199.7 of the Health and Safety Code, or any successor
thereto.
(2) Section 45D(a)(2) of the Internal Revenue Code is modified by
substituting for "(A) 5 percent with respect to the first 3 credit
allowance dates, and (B) 6 percent with respect to the remainder of
the credit allowance dates." with the following:
(A) Zero percent with respect to the first two credit allowance
dates.
(B) Seven percent with respect to the third credit allowance date.
(C) Eight percent with respect to the remainder of the credit
allowance dates.
(3) The provisions of Section 45D(b) of the Internal Revenue Code
is modified as follows:
(A) Section 45D(b)(1) of the Internal Revenue Code is modified by
substituting "1 year" for "5 years" and "1-year period" for "5-year
period."
(B) Section 45D(b)(3) of the Internal Revenue Code is modified by
substituting "qualified low-income community investments in
California" for "qualified low-income community investments."
(4) The following shall apply in lieu of the provisions of Section
45D(c)(2) of the Internal Revenue Code, relating to special rules
for certain organizations: "A domestic corporation or partnership
shall be deemed a 'qualified community development entity' if it has
entered into an allocation agreement with the Community Development
Financial Institutions Fund of the United States Department of the
Treasury with respect to credits authorized by Section 45D of the
Internal Revenue Code, as amended, and if the allocation agreement
includes the state within its service area.
(5) Section 45D(d)(1)(A) of the Internal Revenue Code, relating to
qualified low-income community investments, is modified to include
any capital or equity investment in, or loan to, any real estate
project in a low-income community.
(6) The term "qualified active low-income community business," as
defined in Section 45D(d)(2) of the Internal Revenue Code is modified
as follows:
(A) Section 45D(d)(2)(A)(i) of the Internal Revenue Code is
modified by substituting "any low-income community in California" for
"any low-income community."
(B) Section 45D(d)(2)(A)(ii) of the Internal Revenue Code is
modified by substituting "any low-income community in California.
'Substantial portion' shall be defined as 40 percent or more of the
tangible property of the entity" for "any low-income community."
(C) Section 45D(d)(2)(A)(iii) of the Internal Revenue Code shall
not apply.
(D) The following shall apply in lieu of the provisions of Section
45D(d)(2)(C) of the Internal Revenue Code, relating to qualified
active low-income community business: "A 'qualified active low-income
community business' shall include startup businesses."
(7) Section 45D(e)(1) of the Internal Revenue Code is modified to
add the following: When the United States Census Bureau discontinues
using the decennial census to report median family income on a census
tract basis, census block group data shall be used based on the
American Community Survey.
(8) The following shall apply in lieu of the provisions of Section
45(D)(f)(1) of the Internal Revenue Code, relating to national
limitation on amount of investments designated: "The aggregate amount
of credit that may be allowed in any calendar year pursuant to this
section and Section 23622.9 shall be thirty million dollars
($30,000,000). The committee shall limit the allocation of credits
permitted under this section and Section 23622.9 to a cumulative
total of no more than two hundred million dollars ($200,000,000)."
(9) Section 45D(g)(3) of the Internal Revenue Code, relating to
recapture event, is modified by adding the following:
"Notwithstanding the provisions of this paragraph, a recapture event
shall not have occurred and an investment shall be considered held by
a community development entity upon its sale or repayment, provided
the qualified community development entity reinvests an amount equal
to the capital returned to or recovered by the qualified community
development entity from the original investment, exclusive of any
profits realized, in another qualified low-income community
investment within 12 months of the receipt of that capital. A
qualified community development entity shall not be required to
reinvest capital returned from a qualified low-income community
investment after the sixth anniversary of the issuance of the
qualified equity investment, the proceeds of which were used to make
the qualified low-income community investment, and the qualified
low-income community investment shall be considered held by the
qualified community development entity through the seventh
anniversary of the issuance of the qualified equity investment."
(10) Section 45D(i) of the Internal Revenue Code, relating to
regulations, shall not apply.
(d) (1) The committee shall adopt guidelines necessary or
appropriate to carry out the purposes of this section. The adoption
of the guidelines shall not be subject to the rulemaking provisions
of the Administrative Procedure Act of Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code.
(2) The committee shall establish and impose reasonable fees upon
entities that apply for the allocation pursuant to subdivision (d)
and use the revenue to defray the cost of administering the program.
The committee shall establish the fees in a manner that ensures that
(A) the total amount collected equals the amount reasonably necessary
to defray the commission's costs in performing its administrative
duties under this section, and (B) the amount paid by each entity
reasonably corresponds with the value of the services provided to the
entity.
(3) In developing guidelines the committee shall adopt an
allocation process that does all of the following:
(A) Creates an equitable distribution process that ensures that
low-income communities across the state have an opportunity to
benefit from the program.
(B) Sets minimum organizational capacity standards that applicants
must meet in order to receive an allocation of credits.
(C) Requires annual reporting by each community development
organization that receives an allocation. The report shall include,
but is not limited to, the impact the credit had on the low-income
community, the amount of moneys used, and the types of activities
funded through the equity investment. The reporting period shall be
for a period of eight years following the allocation of credits.
(D) Provides for an annual return of unused credits so that they
may be reallocated to other community development entities.
(E) Requires the committee to annually reserve the following:
(i) At least 15 percent of the tax credits for community
development entities that target businesses located in low-income
communities facing disproportionate environmental pollution.
(ii) At least 15 percent of the tax credits for community
development entities that target rural areas, including businesses
providing equipment or supplies to agricultural producers, packers,
handlers, and processors.
(iii) At least 20 percent of the tax credits for community
development entities that target businesses in inner-city areas.
(4) The committee shall annually report on its Internet Web site
the information provided by low-income community development entities
and on the geographic distribution of the credits.
(e) This section shall remain in effect only until December 1,
2020, and as of that date is repealed.
SEC. 5. Section
23622.9 is added to the Revenue and Taxation Code, to read:
23622.9. (a) There is hereby created the California New Markets
Tax Credit Program as provided in this section and Section 17053.9.
The purpose of this program is to stimulate economic development, and
hasten California's economic recovery, by authorizing tax credits
for investment in California, including, but not limited to, retail
businesses, real property, financial institutions, and schools. The
California Tax Credit Allocation Committee shall have responsibility
for the administration of this program as provided in this section
and Section 17053.9.
(b) (1) For taxable years beginning on or after January 1, 2013,
and before January 1, 2020, there shall be allowed as a credit
against the "tax," as defined in Section 23036, an amount determined
in accordance with Section 45D of the Internal Revenue Code, as
modified as set forth in this section.
(2) This credit shall be allowed only if the taxpayer holds the
qualified equity investment on the credit allowance date and each of
the six following anniversary dates of that date.
(c) Section 45D of the Internal Revenue Code is modified as
follows:
(1) (A) The references to "the Secretary" in Section 45D of the
Internal Revenue Code are modified to read "the committee."
(B) For purposes of this section, "committee" means the California
Tax Credit Allocation Committee as described in subdivision (a) of
Section 50199.7 of the Health and Safety Code, or any successor
thereto.
(2) Section 45D(a)(2) of the Internal Revenue Code is modified by
substituting for "(A) 5 percent with respect to the first 3 credit
allowance dates, and (B) 6 percent with respect to the remainder of
the credit allowance dates." with the following
(A) Zero percent with respect to the first two credit allowance
dates.
(B) Seven percent with respect to the third credit allowance date.
(C) Eight percent with respect to the remainder of the credit
allowance dates.
(3) The provisions of Section 45D(b) of the Internal Revenue Code
is modified as follows:
(A) Section 45D(b)(1) of the Internal Revenue Code is modified by
substituting "1 year" for "5 years" and "1-year period" for "5-year
period."
(B) Section 45D(b)(3) of the Internal Revenue Code is modified by
substituting "qualified low-income community investments in
California" for "qualified low-income community investments."
(4) The following shall apply in lieu of the provisions of Section
45D(c)(2) of the Internal Revenue Code, relating to special rules
for certain organizations: "A domestic corporation or partnership
shall be deemed a 'qualified community development entity' if it has
entered into an allocation agreement with the Community Development
Financial Institutions Fund of the United States Department of the
Treasury with respect to credits authorized by Section 45D of the
Internal Revenue Code, as amended, and if the allocation agreement
includes the state within its service area.
(5) Section 45D(d)(1)(A) of the Internal Revenue Code, relating to
qualified low-income community investments, is modified to include
any capital or equity investment in, or loan to, any real estate
project in a low-income community.
(6) The term "qualified active low-income community business," as
defined in Section 45D(d)(2) of the Internal Revenue Code is modified
as follows:
(A) Section 45D(d)(2)(A)(i) of the Internal Revenue Code is
modified by substituting "any low-income community in California" for
"any low-income community."
(B) Section 45D(d)(2)(A)(ii) of the Internal Revenue Code is
modified by substituting "any low-income community in California.
'Substantial portion' shall be defined as 40 percent or more of the
tangible property of the entity" for "any low-income community."
(C) Section 45D(d)(2)(A)(iii) of the Internal Revenue Code shall
not apply.
(D) The following shall apply in lieu of the provisions of Section
45D(d)(2)(C) of the Internal Revenue Code, relating to qualified
active low-income community business: "A 'qualified active low-income
community business' shall include startup businesses."
(7) Section 45D(e)(1) of the Internal Revenue Code is modified to
add the following: When the United States Census Bureau discontinues
using the decennial census to report median family income on a census
tract basis, census block group data shall be used based on the
American Community Survey.
(8) The following shall apply in lieu of the provisions of Section
45(D)(f)(1) of the Internal Revenue Code, relating to national
limitation on amount of investments designated: "The aggregate amount
of credit that may be allowed in any calendar year pursuant to this
section and Section 17053.9 shall be thirty million dollars
($30,000,000). The committee shall limit the allocation of credits
permitted under this section and Section 17053.9 to a cumulative
total of no more than two hundred million dollars ($200,000,000)."
(9) Section 45D(g)(3) of the Internal Revenue Code, relating to
recapture event, is modified by adding the following:
"Notwithstanding the provisions of this paragraph, a recapture event
shall not have occurred and an investment shall be considered held by
a community development entity upon its sale or repayment, provided
the qualified community development entity reinvests an amount equal
to the capital returned to or recovered by the qualified community
development entity from the original investment, exclusive of any
profits realized, in another qualified low-income community
investment within 12 months of the receipt of that capital. A
qualified community development entity shall not be required to
reinvest capital returned from a qualified low-income community
investment after the sixth anniversary of the issuance of the
qualified equity investment, the proceeds of which were used to make
the qualified low-income community investment, and the qualified
low-income community investment shall be considered held by the
qualified community development entity through the seventh
anniversary of the issuance of the qualified equity investment."
(10) Section 45D(i) of the Internal Revenue Code, relating to
regulations, shall not apply.
(d) (1) The committee shall adopt guidelines necessary or
appropriate to carry out the purposes of this section. The adoption
of the guidelines shall not be subject to the rulemaking provisions
of the Administrative Procedure Act of Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code.
(2) The committee shall establish and impose reasonable fees upon
entities that apply for the allocation pursuant to subdivision (d)
and use the revenue to defray the cost of administering the program.
The committee shall establish the fees in a manner that ensures that
(A) the total amount collected equals the amount reasonably necessary
to defray the commission's costs in performing its administrative
duties under this section, and (B) the amount paid by each entity
reasonably corresponds with the value of the services provided to the
entity.
(3) In developing guidelines the committee shall adopt an
allocation process that does all of the following:
(A) Creates an equitable distribution process that ensures that
low-income communities across the state have an opportunity to
benefit from the program.
(B) Sets minimum organizational capacity standards that applicants
must meet in order to receive an allocation of credits.
(C) Requires annual reporting by each community development
organization that receives an allocation. The report shall include,
but is not limited to, the impact the credit had on the low-income
community, the amount of moneys used, and the types of activities
funded through the equity investment. The reporting period shall be
for a period of eight years following the allocation of credits.
(D) Provides for an annual return of unused credits so that they
may be reallocated to other community development entities.
(E) Requires the committee to annually reserve the following:
(i) At least 15 percent of the tax credits for community
development entities that target businesses located in low-income
communities facing disproportionate environmental pollution.
(ii) At least 15 percent of the tax credits for community
development entities that target rural areas, including businesses
providing equipment or supplies to agricultural producers, packers,
handlers, and processors.
(iii) At least 20 percent of the tax credits for community
development entities that target businesses in inner-city areas.
(4) The committee shall annually report on its Internet Web site
the information provided by low-income community development entities
and on the geographic distribution of the credits.
(e) This section shall remain in effect only until December 1,
2020, and as of that date is repealed.
SEC. 6. Section 23623 of the Revenue and Taxation Code, as added
by Section 8 of Chapter 10 of the Third Extraordinary Session of the
Statutes of 2009, is repealed.
23623. (a) For each taxable year beginning on or after January 1,
2009, there shall be allowed as a credit against the "tax," as
defined in Section 23036, three thousand dollars ($3,000) for each
net increase in qualified full-time employees, as specified in
subdivision (c), hired during the taxable year by a qualified
employer.
(b) For purposes of this section:
(1) "Acquired" includes any gift, inheritance, transfer incident
to divorce, or any other transfer, whether or not for consideration.
(2) "Qualified full-time employee" means:
(A) A qualified employee who was paid qualified wages during the
taxable year by the qualified employer for services of not less than
an average of 35 hours per week.
(B) A qualified employee who was a salaried employee and was paid
compensation during the taxable year for full-time employment, within
the meaning of Section 515 of the Labor Code, by the qualified
employer.
(3) A "qualified employee" shall not include any of the following:
(A) An employee certified as a qualified employee in an enterprise
zone designated in accordance with Chapter 12.8 (commencing with
Section 7070) of Division 7 of Title 1 of the Government Code.
(B) An employee certified as a qualified disadvantaged individual
in a manufacturing enhancement area designated in accordance with
Section 7073.8 of the Government Code.
(C) An employee certified as a qualified employee in a targeted
tax area designated in accordance with Section 7097 of the Government
Code.
(D) An employee certified as a qualified disadvantaged individual
or a qualified displaced employee in a local agency military base
recovery area (LAMBRA) designated in accordance with Chapter 12.97
(commencing with Section 7105) of Division 7 of Title 1 of the
Government Code.
(E) An employee whose wages are included in calculating any other
credit allowed under this part.
(4) "Qualified employer" means a taxpayer that, as of the last day
of the preceding taxable year, employed a total of 20 or fewer
employees.
(5) "Qualified wages" means wages subject to Division 6
(commencing with Section 13000) of the Unemployment Insurance Code.
(6) "Annual full-time equivalent" means either of the following:
(A) In the case of a full-time employee paid hourly qualified
wages, "annual full-time equivalent" means the total number of hours
worked for the taxpayer by the employee (not to exceed 2,000 hours
per employee) divided by 2,000.
(B) In the case of a salaried full-time employee, "annual
full-time equivalent" means the total number of weeks worked for the
taxpayer by the employee divided by 52.
(c) The net increase in qualified full-time employees of a
qualified employer shall be determined as provided by this
subdivision:
(1) (A) The net increase in qualified full-time employees shall be
determined on an annual full-time equivalent basis by subtracting
from the amount determined in subparagraph (C) the amount determined
in subparagraph (B).
(B) The total number of qualified full-time employees employed in
the preceding taxable year by the taxpayer and by any trade or
business acquired by the taxpayer during the current taxable year.
(C) The total number of full-time employees employed in the
current taxable year by the taxpayer and by any trade or business
acquired during the current taxable year.
(2) For taxpayers who first commence doing business in this state
during the taxable year, the number of full-time employees for the
immediately preceding prior taxable year shall be zero.
(d) In the case where the credit allowed by this section exceeds
the "tax," the excess may be carried over to reduce the "tax" in the
following year, and succeeding seven years if necessary, until the
credit is exhausted.
(e) Any deduction otherwise allowed under this part for qualified
wages shall not be reduced by the amount of the credit allowed under
this section.
(f) For purposes of this section:
(1) All employees of the trades or businesses that are treated as
related under either Section 267, 318, or 707 of the Internal Revenue
Code shall be treated as employed by a single taxpayer.
(2) In determining whether the taxpayer has first commenced doing
business in this state during the taxable year, the provisions of
subdivision (f) of Section 17276, without application of paragraph
(7) of that subdivision, shall apply.
(g) (1) (A) Credit under this section and Section 17053.80 shall
be allowed only for credits claimed on timely filed original returns
received by the Franchise Tax Board on or before the cut-off date
established by the Franchise Tax Board.
(B) For purposes of this paragraph, the cut-off date shall be the
last day of the calendar quarter within which the Franchise Tax Board
estimates it will have received timely filed original returns
claiming credits under this section and Section 17053.80 that
cumulatively total four hundred million dollars ($400,000,000) for
all taxable years.
(2) The date a return is received shall be determined by the
Franchise Tax Board.
(3) (A) The determinations of the Franchise Tax Board with respect
to the cut-off date, the date a return is received, and whether a
return has been timely filed for purposes of this subdivision may not
be reviewed in any administrative or judicial proceeding.
(B) Any disallowance of a credit claimed due to a determination
under this subdivision, including the application of the limitation
specified in paragraph (1), shall be treated as a mathematical error
appearing on the return. Any amount of tax resulting from such
disallowance may be assessed by the Franchise Tax Board in the same
manner as provided by Section 19051.
(4) The Franchise Tax Board shall periodically provide notice on
its Web site with respect to the amount of credit under this section
and Section 17053.80 claimed on timely filed original returns
received by the Franchise Tax Board.
(h) (1) The Franchise Tax Board may prescribe rules, guidelines or
procedures necessary or appropriate to carry out the purposes of
this section, including any guidelines regarding the limitation on
total credits allowable under this section and Section 17053.80 and
guidelines necessary to avoid the application of paragraph (2) of
subdivision (f) through split-ups, shell corporations, partnerships,
tiered ownership structures, or otherwise.
(2) Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code does not apply to any
standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the Franchise Tax Board pursuant
to this section.
(i) This section shall remain in effect only until December 1 of
the calendar year after the year of the cut-off date, and as of that
December 1 is repealed.
SEC. 7. Section 23623 of the Revenue and Taxation Code, as added
by Section 8 of Chapter 17 of the Third Extraordinary Session of the
Statutes of 2009, is amended to read:
23623. (a) For each taxable year beginning on or after January 1,
2009, there shall be allowed as a credit against the "tax," as
defined in Section 23036, three thousand dollars ($3,000) for each
net increase in qualified full-time employees, as specified in
subdivision (c), hired during the taxable year by a qualified
employer.
(b) For purposes of this section:
(1) "Acquired" includes any gift, inheritance, transfer incident
to divorce, or any other transfer, whether or not for consideration.
(2) "Qualified full-time employee" means:
(A) A qualified employee who was paid qualified wages during the
taxable year by the qualified employer for services of not less than
an average of 35 hours per week.
(B) A qualified employee who was a salaried employee and was paid
compensation during the taxable year for full-time employment, within
the meaning of Section 515 of the Labor Code, by the qualified
employer.
(3) A "qualified employee" shall not include any of the following:
(A) An employee certified as a qualified employee in an enterprise
zone designated in accordance with Chapter 12.8 (commencing with
Section 7070) of Division 7 of Title 1 of the Government Code.
(B) An employee certified as a qualified disadvantaged individual
in a manufacturing enhancement area designated in accordance with
Section 7073.8 of the Government Code.
(C) An employee certified as a qualified employee in a targeted
tax area designated in accordance with Section 7097 of the Government
Code.
(D) An employee certified as a qualified disadvantaged individual
or a qualified displaced employee in a local agency military base
recovery area (LAMBRA) designated in accordance with Chapter 12.97
(commencing with Section 7105) of Division 7 of Title 1 of the
Government Code.
(E) An employee whose wages are included in calculating any other
credit allowed under this part.
(4) "Qualified employer" means a taxpayer that, as of the last day
of the preceding taxable year, employed a total of 20 or fewer
employees.
(5) "Qualified wages" means wages subject to Division 6
(commencing with Section 13000) of the Unemployment Insurance Code.
(6) "Annual full-time equivalent" means either of the following:
(A) In the case of a full-time employee paid hourly qualified
wages, "annual full-time equivalent" means the total number of hours
worked for the taxpayer by the employee (not to exceed 2,000 hours
per employee) divided by 2,000.
(B) In the case of a salaried full-time employee, "annual
full-time equivalent" means the total number of weeks worked for the
taxpayer by the employee divided by 52.
(c) The net increase in qualified full-time employees of a
qualified employer shall be determined as provided by this
subdivision:
(1) (A) The net increase in qualified full-time employees shall be
determined on an annual full-time equivalent basis by subtracting
from the amount determined in subparagraph (C) the amount determined
in subparagraph (B).
(B) The total number of qualified full-time employees employed in
the preceding taxable year by the taxpayer and by any trade or
business acquired by the taxpayer during the current taxable year.
(C) The total number of full-time employees employed in the
current taxable year by the taxpayer and by any trade or business
acquired during the current taxable year.
(2) For taxpayers who first commence doing business in this state
during the taxable year, the number of full-time employees for the
immediately preceding prior taxable year shall be zero.
(d) In the case where the credit allowed by this section exceeds
the "tax," the excess may be carried over to reduce the "tax" in the
following year, and succeeding seven years if necessary, until the
credit is exhausted.
(e) Any deduction otherwise allowed under this part for qualified
wages shall not be reduced by the amount of the credit allowed under
this section.
(f) For purposes of this section:
(1) All employees of the trades or businesses that are treated as
related under either Section 267, 318, or 707 of the Internal Revenue
Code shall be treated as employed by a single taxpayer.
(2) In determining whether the taxpayer has first commenced doing
business in this state during the taxable year, the provisions of
subdivision (f) (g) of Section
17276 24416.20 , without application of
paragraph (7) of that subdivision, shall apply.
(g) (1) (A) Credit under this section and Section 17053.80 shall
be allowed only for credits claimed on timely filed original returns
received by the Franchise Tax Board on or before the cut-off date
established by the Franchise Tax Board.
(B) For purposes of this paragraph, the cut-off date shall be the
last day of the calendar quarter within which the Franchise Tax Board
estimates it will have received timely filed original returns
claiming credits under this section and Section 17053.80 that
cumulatively total four one hundred
million dollars ($400,000,000) ($100,000,000)
for all taxable years.
(2) The date a return is received shall be determined by the
Franchise Tax Board.
(3) (A) The determinations of the Franchise Tax Board with respect
to the cut-off date, the date a return is received, and whether a
return has been timely filed for purposes of this subdivision may not
be reviewed in any administrative or judicial proceeding.
(B) Any disallowance of a credit claimed due to a determination
under this subdivision, including the application of the limitation
specified in paragraph (1), shall be treated as a mathematical error
appearing on the return. Any amount of tax resulting from such
disallowance may be assessed by the Franchise Tax Board in the same
manner as provided by Section 19051.
(4) The Franchise Tax Board shall periodically provide notice on
its Internet Web site with respect to the amount of credit
under this section and Section 17053.80 claimed on timely filed
original returns received by the Franchise Tax Board.
(h) (1) The Franchise Tax Board may prescribe rules,
guidelines guidelines, or procedures necessary
or appropriate to carry out the purposes of this section, including
any guidelines regarding the limitation on total credits allowable
under this section and Section 17053.80 and guidelines necessary to
avoid the application of paragraph (2) of subdivision (f) through
split-ups, shell corporations, partnerships, tiered ownership
structures, or otherwise.
(2) Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code does not apply to any
standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the Franchise Tax Board pursuant
to this section.
(i) This section shall remain in effect only until December 1 of
the calendar year after the year of the cut-off date, and as of that
December 1 is repealed.
SEC. 8. Notwithstanding Section 50199.9 of the Health and Safety
Code, or any other law, the sum of one hundred fifty thousand dollars
($150,000) is hereby appropriated from the Tax Credit Allocation Fee
Account to the California Tax Credit Allocation Committee for
purposes of implementing the California New Markets Tax Credit
Program as provided in Sections 17053.9 and 23622.9 of the Revenue
and Taxation Code. The appropriated funds shall remain in the Tax
Credit Allocation Fee Account until such time as the funds are
required for purposes of implementing this new program, and shall be
available for expenditure only until January 1, 2020. It is the
intent of the Legislature that these appropriated funds shall be
reimbursed by the application fees collected by the committee for
this new program.
SEC. 9. This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.