AB 305, as amended, 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 $200,000,000 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 $40,000,000 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:
The Legislature finds and declares all of the
2following:
3(a) California is entering the sixth year of the worst economic
4recession since the Great Depression.
5(b) Due to a systemic budget problem, the state is suffering from
6chronic revenue shortfalls based in part on increasing reliance on
7revenues from personal income tax rolls.
8(c) Investment in small business ventures is a proven method
9of stimulating economic activity, creating new jobs, and generating
10revenue by expanding the tax base.
11(d) The federal New Markets Tax Credit Program, created in
122000 with bipartisan support, has been an effective means of
13stimulating state and regional economies due to its ability to
P3 1leverage federal funds to drive private investment in communities
2that would otherwise not have had access to capital. These
3investments accrue to small businesses, schools, and other
4business-related real estate projects.
5(e) As of 2010, nine states, Connecticut, Florida, Illinois,
6Kentucky, Louisiana, Mississippi, Missouri, Ohio, and Oklahoma,
7had enacted matching state programs. On average, these states
8successfully leveraged thirteen dollars ($13) in federal New
9Markets Tax Credit for every dollar of state credits initially
10allocated for the state program.
11(f) As of December 29, 2012, $261,560,076 of California’s
12small business hiring tax credit are still available.
13(g) Given the current economic climate and the lack of use of
14the state hiring tax credit, it is reasonable for the Legislature to
15search for and consider other alternatives to stimulate hiring and
16to generate economic activity to shorten the current recession and
17promote permanent economic recovery through the creation of a
18California New Markets Tax Credit Program.
19(h) There are low-income communities in the state that face
20multiple challenges in attracting private investment, including, but
21not limited to, developing and maintaining a workforce that meets
22the skill needs of local employers, an infrastructure that connects
23local businesses to external markets,
and neighborhoods that are
24not disproportionately burdened with environmental pollutants,
25including air, soil, and water contamination.
26(I)
end delete
27begin insert(i)end insert Given the ability of the California New Markets Tax Credit
28Program to stimulate private investment activity in areas that would
29otherwise not have access to investment capital, it is appropriate
30that the state consider prioritizing a portion of the California New
31Markets Tax Credit Program to encourage private investment in
32areas that face multiple challenges in attracting investment capital.
Section 17053.80 of the Revenue and Taxation Code,
34as added by Section 3 of Chapter 10 of the Third Extraordinary
35Session of the Statutes of 2009, is repealed.
Section 17053.80 of the Revenue and Taxation Code,
37as added by Section 3 of Chapter 17 of the Third Extraordinary
38Session of the Statutes of 2009, is amended to read:
(a) For each taxable year beginning on or after
40January 1, 2009, there shall be allowed as a credit against the “net
P4 1tax,” as defined in Section 17039, three thousand dollars ($3,000)
2for each net increase in qualified full-time employees, as specified
3in subdivision (c), hired during the taxable year by a qualified
4employer.
5(b) For purposes of this section:
6(1) “Acquired” includes any gift, inheritance, transfer incident
7to divorce, or any other transfer, whether or not for consideration.
8(2) “Qualified full-time employee” means:
9(A) A qualified employee who was paid qualified wages during
10the taxable year by the qualified employer for services of not less
11than an average of 35 hours per week.
12(B) A qualified employee who was a salaried employee and
13was paid compensation during the taxable year for full-time
14employment, within the meaning of Section 515 of the Labor Code,
15by the qualified employer.
16(3) A “qualified employee” shall not include any of the
17following:
18(A) An employee certified as a qualified employee in an
19enterprise zone designated in accordance with Chapter 12.8
20(commencing with Section 7070) of Division 7 of Title 1 of the
21Government Code.
22(B) An employee certified as a qualified disadvantaged
23individual in a manufacturing enhancement area designated in
24accordance with Section 7073.8 of the Government Code.
25(C) An employee certified as a qualified employee in a targeted
26tax area designated in accordance with Section 7097 of the
27Government Code.
28(D) An employee certified as a qualified disadvantaged
29individual or a qualified displaced employee in a local agency
30military base recovery area (LAMBRA) designated in accordance
31with Chapter 12.97 (commencing with Section 7105) of Division
327 of Title 1 of the Government Code.
33(E) An employee whose wages are included in calculating any
34other credit
allowed under this part.
35(4) “Qualified employer” means a taxpayer that, as of the last
36day of the preceding taxable year, employed a total of 20 or fewer
37employees.
38(5) “Qualified wages” means wages subject to Division 6
39(commencing with Section 13000) of the Unemployment Insurance
40Code.
P5 1(6) “Annual full-time equivalent” means either of the following:
2(A) In the case of a full-time employee paid hourly qualified
3wages, “annual full-time equivalent” means the total number of
4hours worked for the taxpayer by the employee (not to exceed
52,000 hours per employee) divided by 2,000.
6(B) In the case
of a salaried full-time employee, “annual
7full-time equivalent” means the total number of weeks worked for
8the taxpayer by the employee divided by 52.
9(c) The net increase in qualified full-time employees of a
10qualified employer shall be determined as provided by this
11
subdivision:
12(1) (A) The net increase in qualified full-time employees shall
13be determined on an annual full-time equivalent basis by
14subtracting from the amount determined in subparagraph (C) the
15amount determined in subparagraph (B).
16(B) The total number of qualified full-time employees employed
17in the preceding taxable year by the taxpayer and by any trade or
18business acquired by the taxpayer during the current taxable year.
19(C) The total number of full-time employees employed in the
20current taxable year by the taxpayer and by any trade or business
21acquired during the current taxable year.
22(2) For taxpayers who first
commence doing business in this
23state during the taxable year, the number of full-time employees
24for the immediately preceding prior taxable year shall be zero.
25(d) In the case where the credit allowed by this section exceeds
26the “net tax,” the excess may be carried over to reduce the “net
27tax” in the following year, and succeeding seven years if necessary,
28until the credit is exhausted.
29(e) Any deduction otherwise allowed under this part for qualified
30wages shall not be reduced by the amount of the credit allowed
31under this section.
32(f) For purposes of this section:
33(1) All employees of the trades or businesses that are treated as
34related under either
Section 267, 318, or 707 of the Internal
35Revenue Code shall be treated as employed by a single taxpayer.
36(2) In determining whether the taxpayer has first commenced
37doing business in this state during the taxable year, the provisions
38of subdivision (f) of Section 17276.20, without application of
39paragraph (7) of that subdivision, shall apply.
P6 1(g) (1) (A) Credit under this section and Section 23623 shall
2be allowed only for credits claimed on timely filed original returns
3received by the Franchise Tax Board on or before thebegin delete cutoffend deletebegin insert cut-offend insert
4 date established by the Franchise
Tax Board.
5(B) For purposes of this paragraph, thebegin delete cutoffend deletebegin insert cut-offend insert date shall
6be the last day of the calendar quarter within which the Franchise
7Tax Board estimates it will have received timely filed original
8returns claiming credits under this section and Section 23623 that
9cumulatively total two hundred million dollars ($200,000,000) for
10all taxable years.
11(2) The date a return is received shall be determined by the
12Franchise Tax Board.
13(3) (A) The determinations of the Franchise Tax Board with
14respect to thebegin delete cutoffend deletebegin insert
cut-offend insert date, the date a return is received, and
15whether a return has been timely filed for purposes of this
16subdivision may not be reviewed in any administrative or judicial
17proceeding.
18(B) Any disallowance of a credit claimed due to a determination
19under this subdivision, including the application of the limitation
20specified in paragraph (1), shall be treated as a mathematical error
21appearing on the return. Any amount of tax resulting from such
22disallowance may be assessed by the Franchise Tax Board in the
23same manner as provided by Section 19051.
24(4) The Franchise Tax Board shall periodically provide notice
25on its Internet Web site with respect to the amount of credit under
26this section and Section 23623 claimed on timely filed original
27returns
received by the Franchise Tax Board.
28(h) (1) The Franchise Tax Board may prescribe rules,
29guidelines, or procedures necessary or appropriate to carry out the
30purposes of this section, including any guidelines regarding the
31limitation on total credits allowable under this section and Section
3223623 and guidelines necessary to avoid the application of
33paragraph (2) of subdivision (f) throughbegin delete splitups,end deletebegin insert split-ups,end insert shell
34corporations, partnerships, tiered ownership structures, or
35otherwise.
36(2) Chapter 3.5 (commencing with Section 11340) of Part 1 of
37Division 3 of Title 2 of the Government Code does not
apply to
38any standard, criterion, procedure, determination, rule, notice, or
39guideline established or issued by the Franchise Tax Board
40pursuant to this section.
P7 1(i) This section shall remain in effect only until December 1 of
2the calendar year after the year of thebegin delete cutoffend deletebegin insert cut-offend insert date, and as
3of that December 1 is repealed.
Section 17053.9 is added to the Revenue and Taxation
5Code, to read:
(a) There is hereby created the California New
7Markets Tax Credit Program as provided in this section and Section
823622.9. The purpose of this program is to stimulate economic
9development, and hasten California’s economic recovery, by
10authorizing tax credits for investment in California, including, but
11not limited to, retail businesses, real property, financial institutions,
12and schools. The California Tax Credit Allocation Committee shall
13have responsibility for the administration of this program as
14provided in this section and Section 23622.9.
15(b) (1) For taxable years beginning on or after January 1, 2013,
16and before January 1, 2020, there shall be
allowed as a credit
17against the “net tax,” as defined in Section 17039, an amount
18determined in accordance with Section 45D of the Internal Revenue
19Code, as modified as set forth in this section.
20(2) This credit shall be allowed only if the taxpayer holds the
21qualified equity investment on the credit allowance date and each
22of the six following anniversary dates of that date.
23(c) Section 45D of the Internal Revenue Code is modified as
24follows:
25(1) (A) The references to “the Secretary” in Section 45D of the
26Internal Revenue Code are modified to read “the committee.”
27(B) For purposes of this section, “committee” means the
28California Tax
Credit Allocation Committee as described in
29subdivision (a) of Section 50199.7 of the Health and Safety Code,
30or any successor thereto.
31(2) Section 45D(a)(2) of the Internal Revenue Code is modified
32by substituting for “(A) 5 percent with respect to the first 3 credit
33allowance dates, and (B) 6 percent with respect to the remainder
34of the credit allowance dates.” with the following:
35(A) Zero percent with respect to the first two credit allowance
36dates.
37(B) Seven percent with respect to the third credit allowance
38date.
39(C) Eight percent with respect to the remainder of the credit
40allowance dates.
P8 1(3) The provisions of Section 45D(b) of the Internal Revenue
2Code is modified as follows:
3(A) Section 45D(b)(1) of the Internal Revenue Code is modified
4by substituting “1 year” for “5 years” and “1-year period” for
5“5-year period.”
6(B) Section 45D(b)(3) of the Internal Revenue Code is modified
7by substituting “qualified low-income community investments in
8California” for “qualified low-income community investments.”
9(4) Section 45D(d)(1)(A) of the Internal Revenue Code, relating
10to qualified low-income community investments, is modified to
11include any capital or equity investment in, or loan to, any real
12estate projectbegin insert
located in a low-income communityend insert or any operating
13business that, at the time the initial investment is made, has 250
14or less employees and is located in a low-income community. The
15begin insert real estate project orend insert operating business shall meet all other
16conditions of a qualified active low-incomebegin insert communityend insert business,
17except as modified by paragraphs (5) and (6).
18(5) The term “qualified active low-income community business,”
19as defined in Section 45D(d)(2) of the Internal Revenue Code is
20modified as follows:
21(A) Section 45D(d)(2)(A)(i) of the Internal Revenue Code is
22modified
by substituting “any low-income community in
23California” for “any low-income community.”
24(B) Section 45D(d)(2)(A)(ii) of the Internal Revenue Code is
25modified by substituting “any low-income community in
26begin delete California. ‘Substantial portion’ shall be defined as 40 percent or begin insert California.”end insert
27more of the tangible property of the entity” for “any low-income
28community.”end delete
29(C) Section 45D(d)(2)(A)(iii) of the Internal Revenue Code
30shall not apply.
31(D) The following shall apply in lieu of the provisions of Section
3245D(d)(2)(C) of the Internal
Revenue Code, relating to qualified
33active low-income community business: “A ‘qualified active
34low-income community business’ shall include an operating
35business that, at the time the initial investment is made, has 250
36or less employees and is located in a low-income community. The
37operating business shall meet all other conditions of a qualified
38active low-income business, except as modified by this paragraph
39and paragraph (6).”
P9 1(6) Section 45D(e)(1) of the Internal Revenue Code is modified
2to add the following: When the United States Census Bureau
3discontinues using the decennial census to report median family
4income on a census tract basis, census block group data shall be
5used based on the American Community Survey.
6(7) The following shall apply in lieu of the provisions of
Section
7begin delete 45(D)(f)(1)end deletebegin insert 45D(f)(1)end insert of the Internal Revenue Code, relating to
8national limitation on amount of investments designated: “The
9aggregate amount of credit that may bebegin delete allowedend deletebegin insert allocatedend insert
in any
10calendar year pursuant to this section and Section 23622.9 shall
11be forty million dollars ($40,000,000). The committee shall limit
12the allocation of credits permitted under this section and Section
1323622.9 to a cumulative total of no more than two hundred million
14dollars ($200,000,000).”
15(8) Section 45D(g)(3) of the Internal Revenue Code, relating
16to recapture event, is modified by adding the following:
17“Notwithstanding the provisions of this paragraph, a recapture
18event shall not have occurred and an investment shall be considered
19held by a community development entity upon its sale or
20repayment, provided the qualified community development entity
21reinvests an amount equal to the capital returned to or recovered
22by the qualified community development entity from the original
23investment, exclusive of any
profits realized, in another qualified
24low-income community investment within 12 months of the receipt
25of that capital. A qualified community development entity shall
26not be required to reinvest capital returned from a qualified
27low-income community investment after the sixth anniversary of
28the issuance of the qualified equity investment, the proceeds of
29which were used to make the qualified low-income community
30investment, and the qualified low-income community investment
31shall be considered held by the qualified community development
32entity through the seventh anniversary of the issuance of the
33qualified equity investment.”
34(9) Section 45D(i) of the Internal Revenue Code, relating to
35regulations, shall not apply.
36(d) (1) The committee shall adopt
guidelines necessary or
37appropriate to carry out the purposes of this section. The guidelines
38shall not disqualify a low-income community investment for the
39single reason that public or private incentives, loans, equity
40investments, technical assistance, or other forms of support have
P10 1been or continue to be provided. The adoption of the guidelines
2shall not be subject to the rulemaking provisions of the
3Administrative Procedure Act of Chapter 3.5 (commencing with
4Section 11340) of Part 1 of Division 3 of Title 2 of the Government
5Code.
6(2) The committee shall establish and impose reasonable fees
7upon entities that apply for the allocation pursuant to subdivision
8(d) and use the revenue to defray the cost of administering the
9program. The committee shall establish the fees in a manner that
10ensures that (A) the total amount collected
equals the amount
11reasonably necessary to defray thebegin delete commission’send deletebegin insert committee’send insert costs
12in performing its administrative duties under this section, and (B)
13the amount paid by each entity reasonably corresponds with the
14value of the services provided to the entity.
15(3) In developing guidelines the committee shall adopt an
16allocation process that does all of the following:
17(A) Creates an equitable distribution process that ensures that
18low-income communities across the state have an opportunity to
19benefit from the program.
20(B) Sets minimum organizational
capacity standards that
21applicants must meet in order to receive an allocation of credits.
22(C) Requires annual reporting by each community development
23begin delete organizationend deletebegin insert entityend insert that receives an allocation. The report shall
24include, but is not limited to, the impact the credit had on the
25low-income community, the amount of moneys used, and the types
26of activities funded through the equity investment. The reporting
27period shall be for a period of eight years following the allocation
28of credits.
29(D) Provides for an annual return of unused credits so that they
30may be reallocated to other community development entities.
31(E) Requires the committee to annually reserve the following:
32(i) At least 15 percent of the tax credits for community
33development entities that target businesses located in low-income
34communities facing disproportionate environmental pollution.
35(ii) At least 15 percent of the tax credits for community
36development entities that target rural areas, including businesses
37providing equipment or supplies to agricultural producers, packers,
38handlers, and processors.
39(iii) At least 20 percent of the tax credits for community
40development entities that target businesses in inner-city areas.
P11 1(4) The committee shall
annually report on its Internet Web site
2the information provided by low-income community development
3entities and on the geographic distribution of the credits.
4(e) This section shall remain in effect only until December 1,
52020, and as of that date is repealed.
Section 23622.9 is added to the Revenue and Taxation
7Code, to read:
(a) There is hereby created the California New
9Markets Tax Credit Program as provided in this section and Section
1017053.9. The purpose of this program is to stimulate economic
11development, and hasten California’s economic recovery, by
12authorizing tax credits for investment in California, including, but
13not limited to, retail businesses, real property, financial institutions,
14and schools. The California Tax Credit Allocation Committee shall
15have responsibility for the administration of this program as
16provided in this section and Section 17053.9.
17(b) (1) For taxable years beginning on or after January 1, 2013,
18and before January 1, 2020, there
shall be allowed as a credit
19against the “tax,” as defined in Section 23036, an amount
20determined in accordance with Section 45D of the Internal Revenue
21Code, as modified as set forth in this section.
22(2) This credit shall be allowed only if the taxpayer holds the
23qualified equity investment on the credit allowance date and each
24of the six following anniversary dates of that date.
25(c) Section 45D of the Internal Revenue Code is modified as
26follows:
27(1) (A) The references to “the Secretary” in Section 45D of the
28Internal Revenue Code are modified to read “the committee.”
29(B) For purposes of this section, “committee” means the
30California
Tax Credit Allocation Committee as described in
31subdivision (a) of Section 50199.7 of the Health and Safety Code,
32or any successor thereto.
33(2) Section 45D(a)(2) of the Internal Revenue Code is modified
34by substituting for “(A) 5 percent with respect to the first 3 credit
35allowance dates, and (B) 6 percent with respect to the remainder
36of the credit allowance dates.” with the following:
37(A) Zero percent with respect to the first two credit allowance
38dates.
39(B) Seven percent with respect to the third credit allowance
40date.
P12 1(C) Eight percent with respect to the remainder of the credit
2allowance dates.
3(3) The provisions of Section 45D(b) of the Internal Revenue
4Code is modified as follows:
5(A) Section 45D(b)(1) of the Internal Revenue Code is modified
6by substituting “1 year” for “5 years” and “1-year period” for
7“5-year period.”
8(B) Section 45D(b)(3) of the Internal Revenue Code is modified
9by substituting “qualified low-income community investments in
10California” for “qualified low-income community investments.”
11(4) Section 45D(d)(1)(A) of the Internal Revenue Code, relating
12to qualified low-income community investments, is modified to
13include any capital or equity investment in, or loan to, any real
14estate projectbegin insert
located in a low-income communityend insert or any operating
15business that, at the time the initial investment is made, has 250
16or less employees and is located in a low-income community. The
17begin insert real estate project orend insert operating business shall meet all other
18conditions of a qualified active low-incomebegin insert communityend insert business,
19except as modified by paragraphs (5) and (6).
20(5) The term “qualified active low-income community business,”
21as defined in Section 45D(d)(2) of the Internal Revenue Code is
22modified as follows:
23(A) Section 45D(d)(2)(A)(i) of the Internal Revenue Code is
24modified
by substituting “any low-income community in
25California” for “any low-income community.”
26(B) Section 45D(d)(2)(A)(ii) of the Internal Revenue Code is
27modified by substituting “any low-income community in
28begin delete California. ‘Substantial portion’ shall be defined as 40 percent or begin insert California.”end insert
29more of the tangible property of the entity” for “any low-income
30community.”end delete
31(C) Section 45D(d)(2)(A)(iii) of the Internal Revenue Code
32shall not apply.
33(D) The following shall apply in lieu of the provisions of Section
3445D(d)(2)(C) of the Internal Revenue
Code, relating to qualified
35active low-income community business: “A ‘qualified active
36low-income community business’ shall include an operating
37business that, at the time the initial investment is made, has 250
38or less employees and is located in a low-income community. The
39operating business shall meet all other conditions of a qualified
P13 1active low-income business, except as modified by this paragraph
2and paragraph (6).”
3(6) Section 45D(e)(1) of the Internal Revenue Code is modified
4to add the following: When the United States Census Bureau
5discontinues using the decennial census to report median family
6income on a census tract basis, census block group data shall be
7used based on the American Community Survey.
8(7) The following shall apply in lieu of the provisions of Section
9
45(D)(f)(1) of the Internal Revenue Code, relating to national
10limitation on amount of investments designated: “The aggregate
11
amount of credit that may bebegin delete allowedend deletebegin insert allocatedend insert in any calendar
12year pursuant to this section and Section 17053.9 shall be forty
13million dollars ($40,000,000). The committee shall limit the
14allocation of credits permitted under this section and Section
1517053.9 to a cumulative total of no more than two hundred million
16dollars ($200,000,000).”
17(8) Section 45D(g)(3) of the Internal Revenue Code, relating
18to recapture event, is modified by adding the following:
19“Notwithstanding the provisions of this paragraph, a recapture
20event shall not have occurred and an investment shall be considered
21held by a community development entity upon its sale or
22repayment,
provided the qualified community development entity
23reinvests an amount equal to the capital returned to or recovered
24by the qualified community development entity from the original
25investment, exclusive of any profits realized, in another qualified
26low-income community investment within 12 months of the receipt
27of that capital. A qualified community development entity shall
28not be required to reinvest capital returned from a qualified
29low-income community investment after the sixth anniversary of
30the issuance of the qualified equity investment, the proceeds of
31which were used to make the qualified low-income community
32investment, and the qualified low-income community investment
33shall be considered held by the qualified community development
34entity through the seventh anniversary of the issuance of the
35qualified equity investment.”
36(9) Section 45D(i) of the Internal Revenue Code, relating to
37regulations, shall not apply.
38(d) (1) The committee shall adopt guidelines necessary or
39appropriate to carry out the purposes of this section. The guidelines
40shall not disqualify a low-income community investment for the
P14 1single reason that public or private incentives, loans, equity
2investments, technical assistance, or other forms of support have
3been or continue to be provided. The adoption of the guidelines
4shall not be subject to the rulemaking provisions of the
5Administrative Procedure Act of Chapter 3.5 (commencing with
6Section 11340) of Part 1 of Division 3 of Title 2 of the Government
7Code.
8(2) The committee shall establish and impose reasonable fees
9upon entities that apply
for the allocation pursuant to subdivision
10(d) and use the revenue to defray the cost of administering the
11program. The committee shall establish the fees in a manner that
12ensures that (A) the total amount collected equals the amount
13reasonably necessary to defray thebegin delete commission’send deletebegin insert committee’send insert costs
14in performing its administrative duties under this section, and (B)
15the amount paid by each entity reasonably corresponds with the
16value of the services provided to the entity.
17(3) In developing guidelines the committee shall adopt an
18allocation process that does all of the following:
19(A) Creates an equitable
distribution process that ensures that
20low-income communities across the state have an opportunity to
21benefit from the program.
22(B) Sets minimum organizational capacity standards that
23applicants must meet in order to receive an allocation of credits.
24(C) Requires annual reporting by each community development
25begin delete organizationend deletebegin insert entityend insert that receives an allocation. The report shall
26include, but is not limited to, the impact the credit had on the
27low-income community, the amount of moneys used, and the types
28of activities funded through the equity investment. The reporting
29period shall be for a period of eight years
following the allocation
30of credits.
31(D) Provides for an annual return of unused credits so that they
32may be reallocated to other community development entities.
33(E) Requires the committee to annually reserve the following:
34(i) At least 15 percent of the tax credits for community
35development entities that target businesses located in low-income
36communities facing disproportionate environmental pollution.
37(ii) At least 15 percent of the tax credits for community
38development entities that target rural areas, including businesses
39providing equipment or supplies to agricultural producers, packers,
40handlers, and processors.
P15 1(iii) At least 20 percent of the tax credits for community
2development entities that target businesses in inner-city areas.
3(4) The committee shall annually report on its Internet Web site
4the information provided by low-income community development
5entities and on the geographic distribution of the credits.
6(e) This section shall remain in effect only until December 1,
72020, and as of that date is repealed.
Section 23623 of the Revenue and Taxation Code, as
9added by Section 8 of Chapter 10 of the Third Extraordinary
10Session of the Statutes of 2009, is repealed.
Section 23623 of the Revenue and Taxation Code, as
12added by Section 8 of Chapter 17 of the Third Extraordinary
13Session of the Statutes of 2009, is amended to read:
(a) For each taxable year beginning on or after January
151, 2009, there shall be allowed as a credit against the “tax,” as
16defined in Section 23036, three thousand dollars ($3,000) for each
17net increase in qualified full-time employees, as specified in
18subdivision (c), hired during the taxable year by a qualified
19employer.
20(b) For purposes of this section:
21(1) “Acquired” includes any gift, inheritance, transfer incident
22to divorce, or any other transfer, whether or not for consideration.
23(2) “Qualified full-time employee” means:
24(A) A qualified employee who was paid qualified wages during
25the taxable year by the qualified employer for services of not less
26than an average of 35 hours per week.
27(B) A qualified employee who was a salaried employee and
28was paid compensation during the taxable year for full-time
29employment, within the meaning of Section 515 of the Labor Code,
30by the qualified employer.
31(3) A “qualified employee” shall not include any of the
32following:
33(A) An employee certified as a qualified employee in an
34enterprise zone designated in accordance with Chapter 12.8
35(commencing with Section 7070) of Division 7 of Title 1 of the
36Government Code.
37(B) An employee certified as a qualified disadvantaged
38individual in a manufacturing enhancement area designated in
39accordance with Section 7073.8 of the Government Code.
P16 1(C) An employee certified as a qualified employee in a targeted
2tax area designated in accordance with Section 7097 of the
3Government Code.
4(D) An employee certified as a qualified disadvantaged
5individual or a qualified displaced employee in a local agency
6military base recovery area (LAMBRA) designated in accordance
7with Chapter 12.97 (commencing with Section 7105) of Division
87 of Title 1 of the Government Code.
9(E) An employee whose wages are included in calculating any
10other credit
allowed under this part.
11(4) “Qualified employer” means a taxpayer that, as of the last
12day of the preceding taxable year, employed a total of 20 or fewer
13employees.
14(5) “Qualified wages” means wages subject to Division 6
15(commencing with Section 13000) of the Unemployment Insurance
16Code.
17(6) “Annual full-time equivalent” means either of the following:
18(A) In the case of a full-time employee paid hourly qualified
19wages, “annual full-time equivalent” means the total number of
20hours worked for the taxpayer by the employee (not to exceed
212,000 hours per employee) divided by 2,000.
22(B) In the case
of a salaried full-time employee, “annual
23full-time equivalent” means the total number of weeks worked for
24the taxpayer by the employee divided by 52.
25(c) The net increase in qualified full-time employees of a
26qualified employer shall be determined as provided by this
27subdivision:
28(1) (A) The net increase in qualified full-time employees shall
29be determined on an annual full-time equivalent basis by
30subtracting from the amount determined in subparagraph (C) the
31amount determined in subparagraph (B).
32(B) The total number of qualified full-time employees employed
33in the preceding taxable year by the taxpayer and by any trade or
34business acquired by the taxpayer during the current taxable year.
35(C) The total number of full-time employees employed in the
36current taxable year by the taxpayer and by any trade or business
37acquired during the current taxable year.
38(2) For taxpayers who first commence doing business in this
39state during the taxable year, the number of full-time employees
40for the immediately preceding prior taxable year shall be zero.
P17 1(d) In the case where the credit allowed by this section exceeds
2the “tax,” the excess may be carried over to reduce the “tax” in
3the following year, and succeeding seven years if necessary, until
4the credit is exhausted.
5(e) Any deduction otherwise allowed under this part for qualified
6wages shall not be
reduced by the amount of the credit allowed
7under this section.
8(f) For purposes of this section:
9(1) All employees of the trades or businesses that are treated as
10related under either Section 267, 318, or 707 of the Internal
11Revenue Code shall be treated as employed by a single taxpayer.
12(2) In determining whether the taxpayer has first commenced
13doing business in this state during the taxable year, the provisions
14of subdivision (g) of Section 24416.20, without application of
15paragraph (7) of that subdivision, shall apply.
16(g) (1) (A) Credit under this section and Section 17053.80 shall
17be allowed only for credits
claimed on timely filed original returns
18received by the Franchise Tax Board on or before thebegin delete cutoffend deletebegin insert cut-offend insert
19 date established by the Franchise Tax Board.
20(B) For purposes of this paragraph, thebegin delete cutoffend deletebegin insert cut-offend insert date shall
21be the last day of the calendar quarter within which the Franchise
22Tax Board estimates it will have received timely filed original
23returns claiming credits under this section and Section 17053.80
24that cumulatively total two hundred million dollars ($200,000,000)
25for all taxable years.
26(2) The date a return is received shall be determined by the
27Franchise Tax Board.
28(3) (A) The determinations of the Franchise Tax Board with
29respect to thebegin delete cutoffend deletebegin insert cut-offend insert date, the date a return is received, and
30whether a return has been timely filed for purposes of this
31subdivision may not be reviewed in any administrative or judicial
32proceeding.
33(B) Any disallowance of a credit claimed due to a determination
34under this subdivision, including the application of the limitation
35specified in paragraph (1), shall be treated as a mathematical
error
36appearing on the return. Any amount of tax resulting from such
37disallowance may be assessed by the Franchise Tax Board in the
38same manner as provided by Section 19051.
39(4) The Franchise Tax Board shall periodically provide notice
40on its Internet Web site with respect to the amount of credit under
P18 1this section and Section 17053.80 claimed on timely filed original
2returns received by the Franchise Tax Board.
3(h) (1) The Franchise Tax Board may prescribe rules,
4guidelines, or procedures necessary or appropriate to carry out the
5purposes of this section, including any guidelines regarding the
6limitation on total credits allowable under this section and Section
717053.80 and guidelines necessary to avoid the application of
8paragraph (2) of subdivision (f)
throughbegin delete splitups,end deletebegin insert split-ups,end insert shell
9corporations, partnerships, tiered ownership structures, or
10otherwise.
11(2) Chapter 3.5 (commencing with Section 11340) of Part 1 of
12Division 3 of Title 2 of the Government Code does not apply to
13any standard, criterion, procedure, determination, rule, notice, or
14guideline established or issued by the Franchise Tax Board
15pursuant to this section.
16(i) This section shall remain in effect only until December 1 of
17the calendar year after the year of thebegin delete cutoffend deletebegin insert
cut-offend insert date, and as
18of that December 1 is repealed.
Notwithstanding Section 50199.9 of the Health and
20Safety Code, or any other law, the sum of one hundred fifty
21thousand dollars ($150,000) is hereby appropriated from the Tax
22Credit Allocation Fee Account to the California Tax Credit
23Allocation Committee for purposes of implementing the California
24New Markets Tax Credit Program as provided in Sections 17053.9
25and 23622.9 of the Revenue and Taxation Code. The appropriated
26funds shall remain in the Tax Credit Allocation Fee Account until
27such time as the funds are required for purposes of implementing
28this new program, and shall be available for expenditure only until
29January 1, 2020. It is the intent of the Legislature that these
30appropriated funds shall be
reimbursed by the application fees
31collected by the committee for this new program.
This act provides for a tax levy within the meaning of
33Article IV of the Constitution and shall go into immediate effect.
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