BILL NUMBER: AB 1560 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY AUGUST 7, 2014
AMENDED IN ASSEMBLY JULY 3, 2014
AMENDED IN ASSEMBLY APRIL 2, 2014
AMENDED IN ASSEMBLY MARCH 5, 2014
INTRODUCED BY Assembly Member Quirk-Silva
(Principal coauthors: Assembly Members Gorell, Linder, Muratsuchi,
Salas, and Wilk)
JANUARY 29, 2014
An act to amend Sections 17059.2 and 23689 of the Revenue and
Taxation Code, relating to economic development, and
declaring the urgency thereof, to take effect immediately
to take effect immediately, tax levy .
LEGISLATIVE COUNSEL'S DIGEST
AB 1560, as amended, Quirk-Silva. Income taxes: credits:
California Competes Tax Credit.
Existing law allows a credit against the taxes imposed under the
Corporation Tax Law and the Personal Income Tax Law for each taxable
year beginning on or after January 1, 2014, and before January 1,
2025, in an amount as provided in a written agreement between the
Governor's Office of Business and Economic Development and the
taxpayer, agreed upon by the California Competes Tax Credit
Committee, and based on specified factors, including the number of
jobs the taxpayer will create or retain in the state and the amount
of investment in the state by the taxpayer. Existing law limits the
aggregate amount of credits allocated to taxpayers to a specified sum
per fiscal year.
This bill would reduce this aggregate amount of credits
that may be allocated to taxpayers per fiscal year by the phased
aggregate amount allowed to taxpayers pursuant to the credit proposed
by Assembly Bill 2389 with regard to the manufacture of a new
advanced strategic aircraft, and would also authorize the
Director of Finance to increase the aggregate amount of the economic
development credits that may be allocated to taxpayers each year by
$25 million per year through 2019. These provisions would
become operative only if AB 2389 is enacted and becomes effective on
or before January 1, 2015.
This bill would declare that it is to take effect immediately as
an urgency statute.
This bill would take effect immediately as a tax levy.
Vote: 2/3 majority . Appropriation:
no. Fiscal committee: yes. State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 17059.2 of the
Revenue and Taxation Code is amended to read:
17059.2. (a) (1) For each taxable year beginning on and after
January 1, 2014, and before January 1, 2025, there shall be allowed
as a credit against the "net tax," as defined in Section 17039, an
amount as determined by the committee pursuant to paragraph (2) and
approved pursuant to Section 18410.2.
(2) The credit under this section shall be allocated by GO-Biz
with respect to the 2013-14 fiscal year through and including the
2017-18 fiscal year. The amount of credit allocated to a taxpayer
with respect to a fiscal year pursuant to this section shall be as
set forth in a written agreement between GO-Biz and the taxpayer and
shall be based on the following factors:
(A) The number of jobs the taxpayer will create or retain in this
state.
(B) The compensation paid or proposed to be paid by the taxpayer
to its employees, including wages and fringe benefits.
(C) The amount of investment in this state by the taxpayer.
(D) The extent of unemployment or poverty in the area according to
the United States Census in which the taxpayer's project or business
is proposed or located.
(E) The incentives available to the taxpayer in this state,
including incentives from the state, local government, and other
entities.
(F) The incentives available to the taxpayer in other states.
(G) The duration of the proposed project and the duration the
taxpayer commits to remain in this state.
(H) The overall economic impact in this state of the taxpayer's
project or business.
(I) The strategic importance of the taxpayer's project or business
to the state, region, or locality.
(J) The opportunity for future growth and expansion in this state
by the taxpayer's business.
(K) The extent to which the anticipated benefit to the state
exceeds the projected benefit to the taxpayer from the tax credit.
(3) The written agreement entered into pursuant to paragraph (2)
shall include:
(A) Terms and conditions that include the taxable year or years
for which the credit allocated shall be allowed, a minimum
compensation level, and a minimum job retention period.
(B) Provisions indicating whether the credit is to be allocated in
full upon approval or in increments based on mutually agreed upon
milestones when satisfactorily met by the taxpayer.
(C) Provisions that allow the committee to recapture the credit,
in whole or in part, if the taxpayer fails to fulfill the terms and
conditions of the written agreement.
(b) For purposes of this section:
(1) "Committee" means the California Competes Tax Credit Committee
established pursuant to Section 18410.2.
(2) "GO-Biz" means the Governor's Office of Business and Economic
Development.
(c) For purposes of this section, GO-Biz shall do the following:
(1) Give priority to a taxpayer whose project or business is
located or proposed to be located in an area of high unemployment or
poverty.
(2) Negotiate with a taxpayer the terms and conditions of proposed
written agreements that provide the credit allowed pursuant to this
section to a taxpayer.
(3) Provide the negotiated written agreement to the committee for
its approval pursuant to Section 18410.2.
(4) Inform the Franchise Tax Board of the terms and conditions of
the written agreement upon approval of the written agreement by the
committee.
(5) Inform the Franchise Tax Board of any recapture, in whole or
in part, of a previously allocated credit upon approval of the
recapture by the committee.
(6) Post on its Internet Web site all of the following:
(A) The name of each taxpayer allocated a credit pursuant to this
section.
(B) The estimated amount of the investment by each taxpayer.
(C) The estimated number of jobs created or retained.
(D) The amount of the credit allocated to the taxpayer.
(E) The amount of the credit recaptured from the taxpayer, if
applicable.
(d) For purposes of this section, the Franchise Tax Board shall do
all of the following:
(1) (A) Except as provided in subparagraph (B), review the books
and records of all taxpayers allocated a credit pursuant to this
section to ensure compliance with the terms and conditions of the
written agreement between the taxpayer and GO-Biz.
(B) In the case of a taxpayer that is a "small business," as
defined in Section 17053.73, review the books and records of the
taxpayer allocated a credit pursuant to this section to ensure
compliance with the terms and conditions of the written agreement
between the taxpayer and GO-Biz when, in the sole discretion of the
Franchise Tax Board, a review of those books and records is
appropriate or necessary in the best interests of the state.
(2) Notwithstanding Section 19542:
(A) Notify GO-Biz of a possible breach of the written agreement by
a taxpayer and provide detailed information regarding the basis for
that determination.
(B) Provide information to GO-Biz with respect to whether a
taxpayer is a "small business," as defined in Section 17053.73.
(e) In the case where the credit allowed under this section
exceeds the "net tax," as defined in Section 17039, for a taxable
year, the excess credit may be carried over to reduce the "net tax"
in the following taxable year, and succeeding five taxable years, if
necessary, until the credit has been exhausted.
(f) Any recapture, in whole or in part, of a credit approved by
the committee pursuant to Section 18410.2 shall be treated as a
mathematical error appearing on the return. Any amount of tax
resulting from that recapture shall be assessed by the Franchise Tax
Board in the same manner as provided by Section 19051. The amount of
tax resulting from the recapture shall be added to the tax otherwise
due by the taxpayer for the taxable year in which the committee's
recapture determination occurred.
(g) (1) The aggregate amount of credit that may be allocated in
any fiscal year pursuant to this section and Section 23689 shall be
an amount equal to the sum of subparagraphs (A), (B), and (C), less
the amount specified in subparagraphs (D) and (E):
(E), and plus the amount specified in subparagraph (F):
(A) Thirty million dollars ($30,000,000) for the 2013-14 fiscal
year, one hundred fifty million dollars ($150,000,000) for the
2014-15 fiscal year, and two hundred million dollars ($200,000,000)
for each fiscal year from 2015-16 to 2017-18, inclusive.
(B) The unallocated credit amount, if any, from the preceding
fiscal year.
(C) The amount of any previously allocated credits that have been
recaptured.
(D) The amount estimated by the Director of Finance, in
consultation with the Franchise Tax Board and the State Board of
Equalization, to be necessary to limit the aggregation of the
estimated amount of exemptions claimed pursuant to Section 6377.1 and
of the amounts estimated to be claimed pursuant to this section and
Sections 17053.73, 23626, and 23689 to no more than seven hundred
fifty million dollars ($750,000,000) for either the current fiscal
year or the next fiscal year.
(i) The Director of Finance shall notify the Chairperson of the
Joint Legislative Budget Committee of the estimated annual allocation
authorized by this paragraph. Any allocation pursuant to these
provisions shall be made no sooner than 30 days after written
notification has been provided to the Chairperson of the Joint
Legislative Budget Committee and the chairpersons of the committees
of each house of the Legislature that consider appropriation, or not
sooner than whatever lesser time the Chairperson of the Joint
Legislative Budget Committee, or his or her designee, may determine.
(ii) In no event shall the amount estimated in this subparagraph
be less than zero dollars ($0).
(E) (i) For the 2015-16 fiscal year and each fiscal year
thereafter, the aggregate amount of credit that may be allocated
pursuant to this section and Section 23689 shall be reduced by the
amount of credit allowed to all qualified taxpayers pursuant to
subparagraph (A) or subparagraph (B) of paragraph (1) of subdivision
(c) of Section 23636.
(ii) If the amount available per fiscal year pursuant to this
section and Section 23689 is less than the aggregate amount of credit
allowed to qualified taxpayers pursuant to subparagraph (A) or
subparagraph (B) of paragraph (1) of subdivision (c) of Section
23636, the aggregate amount allowed pursuant to Section 23636 shall
not be reduced and, in addition to the reduction required by clause
(i), the aggregate amount of credit that may be allocated pursuant to
this section and Section 23689 for the next fiscal year shall be
reduced by the amount of that deficit.
(iii) It is the intent of the Legislature that the reductions
specified in this subparagraph of the aggregate amount of credit that
may be allocated pursuant to this section and Section 23689 shall
continue if the repeal dates of the credits allowed by this section
and Section 23689 are removed or extended.
(F) In addition to the other amounts determined pursuant this
paragraph, the Director of Finance may increase the aggregate amount
by up to twenty-five million dollars ($25,000,000) per year through
2019. The amount of any increase made pursuant to this subparagraph,
when combined with any increase made pursuant to subparagraph (F) of
paragraph (1) of subdivision (g) of Section 23689, shall not exceed
twenty-five million dollars ($25,000,000) per year through 2019.
(G) It is the intent of the Legislature that the Director of
Finance increase the aggregate amount under subparagraph (F) in order
to mitigate the reduction of the amount available due to the credit
allowed to all qualified taxpayers pursuant to subparagraph (A) or
(B) of paragraph (1) of subdivision (c) of Section 23636.
(2) Each fiscal year, 25 percent of the aggregate amount of the
credit that may be allocated pursuant to this section and Section
23689 shall be reserved for small business, as defined in Section
17053.73 or 23626.
(3) Each fiscal year, no more than 20 percent of the aggregate
amount of the credit that may be allocated pursuant to this section
shall be allocated to any one taxpayer.
(h) GO-Biz may prescribe rules and regulations as necessary to
carry out the purposes of this section. Any rule or regulation
prescribed pursuant to this section may be by adoption of an
emergency regulation in accordance with Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code.
(i) A written agreement between GO-Biz and a taxpayer with respect
to the credit authorized by this section shall comply with existing
law on the date the agreement is executed.
(j) (1) Upon the effective date of this section, the Department of
Finance shall estimate the total dollar amount of credits that will
be claimed under this section with respect to each fiscal year from
the 2013-14 fiscal year to the 2024-25 fiscal year, inclusive.
(2) The Franchise Tax Board shall annually provide to the Joint
Legislative Budget Committee, by no later than March 1, a report of
the total dollar amount of the credits claimed under this section
with respect to the relevant fiscal year. The report shall compare
the total dollar amount of credits claimed under this section with
respect to that fiscal year with the department's estimate with
respect to that same fiscal year. If the total dollar amount of
credits claimed for the fiscal year is less than the estimate for
that fiscal year, the report shall identify options for increasing
annual claims of the credit so as to meet estimated amounts.
(k) This section is repealed on December 1, 2025.
SEC. 2. Section 23689 of the Revenue
and Taxation Code is amended to read:
23689. (a) (1) For each taxable year beginning on and after
January 1, 2014, and before January 1, 2025, there shall be allowed
as a credit against the "tax," as defined in Section 23036, an amount
as determined by the committee pursuant to paragraph (2) and
approved pursuant to Section 18410.2.
(2) The credit under this section shall be allocated by GO-Biz
with respect to the 2013-14 fiscal year through and including the
2017-18 fiscal year. The amount of credit allocated to a taxpayer
with respect to a fiscal year pursuant to this section shall be as
set forth in a written agreement between GO-Biz and the taxpayer and
shall be based on the following factors:
(A) The number of jobs the taxpayer will create or retain in this
state.
(B) The compensation paid or proposed to be paid by the taxpayer
to its employees, including wages and fringe benefits.
(C) The amount of investment in this state by the taxpayer.
(D) The extent of unemployment or poverty in the area according to
the United States Census in which the taxpayer's project or business
is proposed or located.
(E) The incentives available to the taxpayer in the state,
including incentives from the state, local government and other
entities.
(F) The incentives available to the taxpayer in other states.
(G) The duration of the proposed project and the duration the
taxpayer commits to remain in this state.
(H) The overall economic impact in this state of the taxpayer's
project or business.
(I) The strategic importance of the taxpayer's project or business
to the state, region, or locality.
(J) The opportunity for future growth and expansion in this state
by the taxpayer's business.
(K) The extent to which the anticipated benefit to the state
exceeds the projected benefit to the taxpayer from the tax credit.
(3) The written agreement entered into pursuant to paragraph (2)
shall include:
(A) Terms and conditions that include the taxable year or years
for which the credit allocated shall be allowed, a minimum
compensation level, and a minimum job retention period.
(B) Provisions indicating whether the credit is to be allocated in
full upon approval or in increments based on mutually agreed upon
milestones when satisfactorily met by the taxpayer.
(C) Provisions that allow the committee to recapture the credit,
in whole or in part, if the taxpayer fails to fulfill the terms and
conditions of the written agreement.
(b) For purposes of this section:
(1) "Committee" means the California Competes Tax Credit Committee
established pursuant to Section 18410.2.
(2) "GO-Biz" means the Governor's Office of Business and Economic
Development.
(c) For purposes of this section, GO-Biz shall do the following:
(1) Give priority to a taxpayer whose project or business is
located or proposed to be located in an area of high unemployment or
poverty.
(2) Negotiate with a taxpayer the terms and conditions of proposed
written agreements that provide the credit allowed pursuant to this
section to a taxpayer.
(3) Provide the negotiated written agreement to the committee for
its approval pursuant to Section 18410.2.
(4) Inform the Franchise Tax Board of the terms and conditions of
the written agreement upon approval of the written agreement by the
committee.
(5) Inform the Franchise Tax Board of any recapture, in whole or
in part, of a previously allocated credit upon approval of the
recapture by the committee.
(6) Post on its Internet Web site all of the following:
(A) The name of each taxpayer allocated a credit pursuant to this
section.
(B) The estimated amount of the investment by each taxpayer.
(C) The estimated number of jobs created or retained.
(D) The amount of the credit allocated to the taxpayer.
(E) The amount of the credit recaptured from the taxpayer, if
applicable.
(d) For purposes of this section, the Franchise Tax Board shall do
all of the following:
(1) (A) Except as provided in subparagraph (B), review the books
and records of all taxpayers allocated a credit pursuant to this
section to ensure compliance with the terms and conditions of the
written agreement between the taxpayer and GO-Biz.
(B) In the case of a taxpayer that is a "small business," as
defined in Section 23626, review the books and records of the
taxpayer allocated a credit pursuant to this section to ensure
compliance with the terms and conditions of the written agreement
between the taxpayers and GO-Biz when, in the sole discretion of the
Franchise Tax Board, a review of those books and records is
appropriate or necessary in the best interests of the state.
(2) Notwithstanding Section 19542:
(A) Notify GO-Biz of a possible breach of the written agreement by
a taxpayer and provide detailed information regarding the basis for
that determination.
(B) Provide information to GO-Biz with respect to whether a
taxpayer is a "small business," as defined in Section 23626.
(e) In the case where the credit allowed under this section
exceeds the "tax," as defined in Section 23036, for a taxable year,
the excess credit may be carried over to reduce the "tax" in the
following taxable year, and succeeding five taxable years, if
necessary, until the credit has been exhausted.
(f) Any recapture, in whole or in part, of a credit approved by
the committee pursuant to Section 18410.2 shall be treated as a
mathematical error appearing on the return. Any amount of tax
resulting from that recapture shall be assessed by the Franchise Tax
Board in the same manner as provided by Section 19051. The amount of
tax resulting from the recapture shall be added to the tax otherwise
due by the taxpayer for the taxable year in which the committee's
recapture determination occurred.
(g) (1) The aggregate amount of credit that may be allocated in
any fiscal year pursuant to this section and Section 17059.2 shall be
an amount equal to the sum of subparagraphs (A), (B), and (C), less
the amount specified in subparagraphs (D) and (E):
(E), and plus the amount specified in subparagraph (F):
(A) Thirty million dollars ($30,000,000) for the 2013-14 fiscal
year, one hundred fifty million dollars ($150,000,000) for the
2014-15 fiscal year, and two hundred million dollars ($200,000,000)
for each fiscal year from 2015-16 to 2017-18, inclusive.
(B) The unallocated credit amount, if any, from the preceding
fiscal year.
(C) The amount of any previously allocated credits that have been
recaptured.
(D) The amount estimated by the Director of Finance, in
consultation with the Franchise Tax Board and the State Board of
Equalization, to be necessary to limit the aggregation of the
estimated amount of exemptions claimed pursuant to Section 6377.1 and
of the amounts estimated to be claimed pursuant to this section and
Sections 17053.73, 17059.2, and 23626 to no more than seven hundred
fifty million dollars ($750,000,000) for either the current fiscal
year or the next fiscal year.
(i) The Director of Finance shall notify the Chairperson of the
Joint Legislative Budget Committee of the estimated annual allocation
authorized by this paragraph. Any allocation pursuant to these
provisions shall be made no sooner than 30 days after written
notification has been provided to the Chairperson of the Joint
Legislative Budget Committee and the chairpersons of the committees
of each house of the Legislature that consider appropriation, or not
sooner than whatever lesser time the Chairperson of the Joint
Legislative Budget Committee, or his or her designee, may determine.
(ii) In no event shall the amount estimated in this subparagraph
be less than zero dollars ($0).
(E) (i) For the 2015-16 fiscal year and each fiscal year
thereafter, the aggregate amount of credit that may be allocated
pursuant to this section and Section 17059.2 shall be reduced by the
amount of credit allowed to all qualified taxpayers pursuant to
subparagraph (A) or subparagraph (B) of paragraph (1) of subdivision
(c) of Section 23636.
(ii) If the amount available per fiscal year pursuant to this
section and Section 17059.2 is less than the aggregate amount allowed
to qualified taxpayers pursuant to subparagraph (A) or subparagraph
(B) of paragraph (1) of subdivision (c) of Section 23636, the
aggregate amount allowed pursuant to Section 23636 shall not be
reduced and, in addition to the reduction required by clause (i), the
aggregate amount available pursuant to this section and Section
17059.2 for the next fiscal year shall be reduced by the amount of
that deficit.
(iii) It is the intent of the Legislature that the reductions
specified in this subparagraph of the aggregate amount of credit that
may be allocated pursuant to this section and Section 17059.2 shall
continue if the repeal dates of the credits allowed by this section
and Section 17059.2 are removed or extended.
(F) In addition to the other amounts determined pursuant to this
paragraph, the Director of Finance may increase the aggregate amount
by up to twenty-five million dollars ($25,000,000) per year through
2019. The amount of any increase made pursuant to this subparagraph,
when combined with any increase made pursuant to subparagraph (F) of
paragraph (1) of subdivision (g) of Section 17059.2, shall not exceed
twenty-five million dollars ($25,000,000) per year through 2019.
(G) It is the intent of the Legislature that the Director of
Finance increase the aggregate amount under subparagraph (F) in order
to mitigate the reduction of the amount available due to the credit
allowed to all qualified taxpayers pursuant to subparagraph (A) or
(B) of paragraph (1) of subdivision (c).
(2) Each fiscal year, 25 percent of the aggregate amount of the
credit that may be allocated pursuant to this section and Section
17059.2 shall be reserved for "small business," as defined in Section
17053.73 or 23626.
(3) Each fiscal year, no more than 20 percent of the aggregate
amount of the credit that shall be allocated pursuant to this section
may be allocated to any one taxpayer.
(h) GO-Biz may prescribe rules and regulations as necessary to
carry out the purposes of this section. Any rule or regulation
prescribed pursuant to this section may be by adoption of an
emergency regulation in accordance with Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code.
(i) (1) A written agreement between GO-Biz and a taxpayer with
respect to the credit authorized by this section shall not restrict,
broaden, or otherwise alter the ability of the taxpayer to assign
that credit or any portion thereof in accordance with Section 23663.
(2) A written agreement between GO-Biz and a taxpayer with respect
to the credit authorized by this section must comply with existing
law on the date the agreement is executed.
(j) (1) Upon the effective date of this section, the Department of
Finance shall estimate the total dollar amount of credits that will
be claimed under this section with respect to each fiscal year from
the 2013-14 fiscal year to the 2024-25 fiscal year, inclusive.
(2) The Franchise Tax Board shall annually provide to the Joint
Legislative Budget Committee, by no later than March 1, a report of
the total dollar amount of the credits claimed under this section
with respect to the relevant fiscal year. The report shall compare
the total dollar amount of credits claimed under this section with
respect to that fiscal year with the department's estimate with
respect to that same fiscal year. If the total dollar amount of
credits claimed for the fiscal year is less than the estimate for
that fiscal year, the report shall identify options for increasing
annual claims of the credit so as to meet estimated amounts.
(k) This section is repealed on December 1, 2025.
SEC. 3. This act provides for a tax levy within
the meaning of Article IV of the Constitution and shall go into
immediate effect. All matter omitted in this version of the
bill appears in the bill as amended in the Assembly, July 3, 2014.
(JR11)