BILL NUMBER: SB 90 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY JUNE 26, 2013
INTRODUCED BY Committee on Budget and Fiscal Review
JANUARY 10, 2013
An act relating to the Budget Act of 2013
to amend Sections 17053.73 and 23626 of the Revenue and Taxation
Code, as ad ded by Assembly Bill 93 of the 2013-
14 Regular Session, relating to economic development, and
declaring the urgency thereof, to take effect immediately .
LEGISLATIVE COUNSEL'S DIGEST
SB 90, as amended, Committee on Budget and Fiscal Review.
Budget Act of 2013. Economic development: taxation:
credits.
The Personal Income Tax Law and the Corporation Tax Law allow
various credits against the taxes imposed by those laws, including
hiring credits within the specified economic development areas, and a
hiring credit for taxpayers, other than those allowed a credit with
respect to operating in the specified economic development areas.
This bill would, under both laws for taxable years beginning on or
after January 1, 2014, and before January 1, 2021, revise the
definitions of "qualified full-time employee," "qualified taxpayer,"
and "small business" for the credit against those taxes for portions
of the wages paid by a taxpayer, engaged in a trade or business
within a designated census tract, as defined, or a former enterprise
zone, to certain full-time employees who provide services for that
taxpayer in connection with that trade or business.
This bill would make the operation of these revisions contingent
on the enactment of Assembly Bill 93 of the 2013-14 Regular Session,
as specified.
This bill would declare that it is to take effect immediately as
an urgency statute.
This bill would express the intent of the Legislature to enact
statutory changes relating to the Budget Act of 2013.
Vote: majority 2/3 . Appropriation:
no. Fiscal committee: no yes .
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 17053.73 of the
Revenue and Taxation Code , as added by Section 13 of
Assembly Bill 93 of the 2013-14 Regular Session, is amended to read:
17053.73. (a) (1) For each taxable year beginning on or after
January 1, 2014, and before January 1, 2021, there shall be allowed
to a qualified taxpayer that hires a qualified full-time employee and
pays or incurs qualified wages attributable to work performed by the
qualified full-time employee in a designated census tract or former
enterprise zone, and that receives a tentative credit reservation for
that qualified full-time employee, a credit against the "net tax,"
as defined in Section 17039, in an amount calculated under this
section.
(2) The amount of the credit allowable under this section for a
taxable year shall be equal to the product of the tentative credit
amount for the taxable year and the applicable percentage for that
taxable year.
(3) (A) If a qualified taxpayer relocates to a designated census
tract or former enterprise zone, the qualified taxpayer shall be
allowed a credit with respect to qualified wages for each qualified
full-time employee employed within the new location only if the
qualified taxpayer provides each employee at the previous location or
locations a written offer of employment at the new location in the
designated census tract or former enterprise zone with comparable
compensation.
(B) For purposes of this paragraph, "relocates to a designated
census tract or former enterprise zone" means an increase in the
number of qualified full-time employees, employed by a qualified
taxpayer, within a designated census tract or tracts or former
enterprise zones within a 12-month period in which there is a
decrease in the number of full-time employees, employed by the
qualified taxpayer in this state, but outside of designated census
tracts or former enterprise zone.
(C) This paragraph shall not apply to a small business.
(4) The credit allowed by this section may be claimed only on a
timely filed original return of the qualified taxpayer and only with
respect to a qualified full-time employee for whom the qualified
taxpayer has received a tentative credit reservation.
(b) For purposes of this section:
(1) The "tentative credit amount" for a taxable year shall be
equal to the product of the applicable credit percentage for each
qualified full-time employee and the qualified wages paid by the
qualified taxpayer during the taxable year to that qualified
full-time employee.
(2) The "applicable percentage" for a taxable year shall be equal
to a fraction, the numerator of which is the net increase in the
total number of full-time employees employed in this state during the
taxable year, determined on an annual full-time equivalent basis, as
compared with the total number of full-time employees employed in
this state during the base year, determined on the same basis, and
the denominator of which shall be the total number of qualified
full-time employees employed in this state during the taxable year.
The applicable percentage shall not exceed 100 percent.
(3) The "applicable credit percentage" means the credit percentage
for the calendar year during which a qualified full-time employee
was first employed by the qualified taxpayer. The applicable credit
percentage for all calendar years shall be 35 percent.
(4) "Base year" means the 2013 taxable year, except in the case of
a qualified taxpayer who first hires a qualified full-time employee
in a taxable year beginning on or after January 1, 2015, the base
year means the taxable year immediately preceding the taxable year in
which a qualified full-time employee was first hired by the
qualified taxpayer.
(5) "Acquired" includes any gift, inheritance, transfer incident
to divorce, or any other transfer, whether or not for consideration.
(6) "Annual full-time equivalent" means either of the following:
(A) In the case of a full-time employee paid hourly qualified
wages, "annual full-time equivalent" means the total number of hours
worked for the qualified taxpayer by the employee, not to exceed
2,000 hours per employee, divided by 2,000.
(B) In the case of a salaried full-time employee, "annual
full-time equivalent" means the total number of weeks worked for the
qualified taxpayer by the employee divided by 52.
(7) "Designated census tract" means a census tract within the
state that is determined by the Department of Finance to have a
civilian unemployment rate that is within the top 25 percent of all
census tracts within the state and has a poverty rate within the top
25 percent of all census tracts within the state, as prescribed in
Section 13073.5 of the Government Code.
(8) "Former enterprise zone" means an enterprise zone designated
as of December 31, 2011, and any expansion of an enterprise zone
prior to December 31, 2012, under former Chapter 12.8 (commencing
with former Section 7070) of Division 7 of Title 1 of the Government
Code, as in effect on December 31, 2012, excluding any census tract
within an enterprise zone that is identified by the Department of
Finance pursuant to Section 13073.5 of the Government Code as a
census tract within the lowest quartile of census tracts with the
lowest civilian unemployment and poverty.
(9) "Minimum wage" means the wage established pursuant to Chapter
1 (commencing with Section 1171) of Part 4 of Division 2 of the Labor
Code.
(10) (A) "Qualified full-time employee" means an individual who
meets all of the following requirements:
(i) Performs at least 50 percent of his or her services for the
qualified taxpayer during the taxable year in a designated census
tract or former enterprise zone.
(ii) Receives starting wages that are at least 150 percent of the
minimum wage.
(iii) Is hired by the qualified taxpayer on or after January 1,
2014.
(iv) Is hired by the qualified taxpayer after the date the
Department of Finance determines that the census tract referred to in
clause (i) is a designated census tract or that the census tracts
within a former enterprise zone are not census tracts with the lowest
civilian unemployment and poverty.
(v) Satisfies either of the following conditions:
(I) Is paid qualified wages by the qualified taxpayer for services
not less than an average of 35 hours per week.
(II) Is a salaried employee and was paid compensation during the
taxable year for full-time employment, within the meaning of Section
515 of the Labor Code, by the qualified taxpayer.
(vi) Upon commencement of employment with the qualified taxpayer,
satisfies any of the following conditions:
(I) Was unemployed for the six months immediately preceding
employment with the qualified taxpayer. In the case of an individual
that completed a program of study at a college, university, or other
postsecondary educational institution, received a baccalaureate,
postgraduate, or professional degree, and was unemployed for the six
months immediately preceding employment with the qualified taxpayer,
that individual must have completed that program of study at least 12
months prior to the individual's commencement of employment with the
qualified taxpayer.
(II) Is a veteran that had not been employed since separation from
service in the Armed Forces of the United States.
(III) Was a recipient of the credit allowed under Section 32 of
the Internal Revenue Code, relating to earned income, as applicable
for federal purposes, for the previous taxable year.
(IV) Was an ex-offender, within the meaning of Section 17053.74.
(V) Is a recipient of CalWORKs or General Assistance.
(B) An individual may be considered a qualified full-time employee
only for the period of time commencing with the date the individual
is first employed by the qualified taxpayer and ending 60 months
thereafter.
(11) (A) "Qualified taxpayer" means a person or entity engaged in
a trade or business within a designated census tract or former
enterprise zone that, during the taxable year, pays or incurs
qualified wages.
(B) In the case of any pass-thru entity, the determination of
whether a taxpayer is a qualified taxpayer under this section shall
be made at the entity level and any credit under this section or
Section 23626 shall be allowed to the pass-thru entity and passed
through to the partners and shareholders in accordance with
applicable provisions of this part or Part 11 (commencing with
Section 23001). For purposes of this subdivision, the term "pass-thru
entity" means any partnership or "S" corporation.
(C) "Qualified taxpayers" shall not include any of the following:
(i) Employers that provide temporary help services, as described
in Code 561320 of the North American Industry Classification System
(NAICS) published by the United States Office of Management and
Budget, 2012 Edition.
(ii) Employers that provide retail trade services, as described in
Sector 44-45 of the North American Industry Classification System
(NAICS) published by the United States Office of Management and
Budget, 2012 Edition.
(iii) Employers that are primarily engaged in providing food
services, as described in Code 711110, 722511, 722513, 722514, or
722515 of the North American Industry Classification System (NAICS)
published by the United States Office of Management and Budget, 2012
edition.
(iv) Employers that are primarily engaged in services as described
in Code 713210, 721120, or 722410 of the North American Industry
Classification System (NAICS) published by the United States Office
of Management and Budget, 2012 edition.
(v) (I) An employer that is a sexually oriented business.
(II) For purposes of this clause:
(aa) "Sexually oriented business" means a nightclub, bar,
restaurant, or similar commercial enterprise that provides for an
audience of two or more individuals live nude entertainment or live
nude performances where the nudity is a function of everyday business
operations and where nudity is a planned and intentional part of the
entertainment or performance.
(ab) "Nude" means clothed in a manner that leaves uncovered or
visible, through less than fully opaque clothing, any portion of the
genitals or, in the case of a female, any portion of the breasts
below the top of the areola of the breasts.
(D) Subparagraph (C) shall not apply to a taxpayer that is a
"small business."
(12) "Qualified wages" means those wages that meet all of the
following requirements:
(A) That portion of wages paid or incurred by the qualified
taxpayer during the taxable year to each qualified full-time employee
that exceeds 150 percent of minimum wage, but does not exceed 350
percent of minimum wage.
(B) Wages paid or incurred during the 60-month period beginning
with the first day the qualified full-time employee commences
employment with the qualified taxpayer. In the case of any employee
who is reemployed, including a regularly occurring seasonal increase,
in the trade or business operations of the qualified taxpayer, this
reemployment shall not be treated as constituting commencement of
employment for purposes of this section.
(C) Except as provided in paragraph (3) of subdivision (n),
qualified wages shall not include any wages paid or incurred by the
qualified taxpayer on or after the date that the Department of
Finance's redesignation of designated census tracts is effective, as
provided in paragraph (2) of subdivision (g), so that a census tract
is no longer a designated census tract.
(13) "Seasonal employment" means employment by a qualified
taxpayer that has regular and predictable substantial reductions in
trade or business operations.
(14) (A) "Small business" means a trade or business that has
aggregate gross receipts, less returns and allowances reportable to
this state, of less than two million dollars ($2,000,000) during the
previous taxable year.
(B) (i) For purposes of this paragraph, "gross receipts, less
returns and allowances reportable to this state," means the sum of
the gross receipts from the production of business income, as defined
in subdivision (a) of Section 25120, and the gross receipts from the
production of nonbusiness income, as defined in subdivision (d) of
Section 25120.
(ii) In the case of any trade or business activity conducted by a
partnership or an "S" corporation, the limitations set forth in
subparagraph (A) shall be applied to the partnership or "S"
corporation and to each partner or shareholder.
(C) (i) "Small business" shall not include a sexually oriented
business.
(ii) For purposes of this subparagraph:
(I) "Sexually oriented business" means a nightclub, bar,
restaurant, or similar commercial enterprise that provides for an
audience of two or more individuals live nude entertainment or live
nude performances where the nudity is a function of everyday business
operations and where nudity is a planned and intentional part of the
entertainment or performance.
(II) "Nude" means clothed in a manner that leaves uncovered or
visible, through less than fully opaque clothing, any portion of the
genitals or, in the case of a female, any portion of the breasts
below the top of the areola of the breasts.
(15) An individual is "unemployed" for any period for which the
individual is all of the following:
(A) Not in receipt of wages subject to withholding under Section
13020 of the Unemployment Insurance Code for that period.
(B) Not a self-employed individual (within the meaning of Section
401(c)(1)(B) of the Internal Revenue Code, relating to self-employed
individual) for that period.
(C) Not a registered full-time student at a high school, college,
university, or other postsecondary educational institution for that
period.
(c) The net increase in full-time employees of a qualified
taxpayer shall be determined as provided by this subdivision:
(1) (A) The net increase in full-time employees shall be
determined on an annual full-time equivalent basis by subtracting
from the amount determined in subparagraph (C) the amount determined
in subparagraph (B).
(B) The total number of full-time employees employed in the base
year by the taxpayer and by any trade or business acquired by the
taxpayer during the current taxable year.
(C) The total number of full-time employees employed in the
current taxable year by the taxpayer and by any trade or business
acquired during the current taxable year.
(2) For taxpayers who first commence doing business in this state
during the taxable year, the number of full-time employees for the
base year shall be zero.
(d) For purposes of this section:
(1) All employees of the trades or businesses that are treated as
related under Section 267, 318, or 707 of the Internal Revenue Code
shall be treated as employed by a single taxpayer.
(2) In determining whether the taxpayer has first commenced doing
business in this state during the taxable year, the provisions of
subdivision (f) of Section 17276.20, without application of paragraph
(7) of that subdivision, shall apply.
(e) (1) To be eligible for the credit allowed by this section, a
qualified taxpayer shall, upon hiring a qualified full-time employee,
request a tentative credit reservation from the Franchise Tax Board
within 30 days of complying with the Employment Development
Department's new hire reporting requirements as provided in Section
1088.5 of the Unemployment Insurance Code, in the form and manner
prescribed by the Franchise Tax Board.
(2) To obtain a tentative credit reservation with respect to a
qualified full-time employee, the qualified taxpayer shall provide
necessary information, as determined by the Franchise Tax Board,
including the name, social security number, the start date of
employment, the rate of pay of the qualified full-time employee, the
qualified taxpayer's gross receipts, less returns and allowances, for
the previous taxable year, and whether the qualified full-time
employee is a resident of a targeted employment area, as defined in
former Section 7072 of the Government Code, as in effect on December
31, 2013.
(3) The qualified taxpayer shall provide the Franchise Tax Board
an annual certification of employment with respect to each qualified
full-time employee hired in a previous taxable year, on or before,
the 15th day of the third month of the taxable year. The
certification shall include necessary information, as determined by
the Franchise Tax Board, including the name, social security number,
start date of employment, and rate of pay for each qualified
full-time employee employed by the qualified taxpayer.
(4) A tentative credit reservation provided to a taxpayer with
respect to an employee of that taxpayer shall not constitute a
determination by the Franchise Tax Board with respect to any of the
requirements of this section regarding a taxpayer's eligibility for
the credit authorized by this section.
(f) The Franchise Tax Board shall do all of the following:
(1) Approve a tentative credit reservation with respect to a
qualified full-time employee hired during a calendar year.
(2) Determine the aggregate tentative reservation amount and the
aggregate small business tentative reservation amount for a calendar
year.
(3) A tentative credit reservation request from a qualified
taxpayer with respect to a qualified full-time employee who is a
resident of a targeted employment area, as defined in former Section
7072 of the Government Code, as in effect on December 31, 2013, shall
be expeditiously processed by the Franchise Tax Board. The residence
of a qualified full-time employee in a targeted employment area
shall have no other effect on the eligibility of an individual as a
qualified full-time employee or the eligibility of a qualified
taxpayer for the credit authorized by this section.
(4) Notwithstanding Section 19542, provide as a searchable
database on its Internet Web site, for each taxable year beginning on
or after January 1, 2014, and before January 1, 2021, the employer
names, amounts of tax credit claimed, and number of new jobs created
for each taxable year pursuant to this section and Section 23626.
(g) (1) The Department of Finance shall, by January 1, 2014, and
by January 1 of every fifth year thereafter, provide the Franchise
Tax Board with a list of the designated census tracts and a list of
census tracts with the lowest civilian unemployment rate.
(2) The redesignation of designated census tracts and lowest
civilian unemployment census tracts by the Department of Finance as
provided in Section 13073.5 of the Government Code shall be
effective, for purposes of this credit, one year after the date the
Department of Finance redesignates the designated census tracts.
(h) For purposes of this section:
(1) All employees of the trades or businesses that are treated as
related under Section 267, 318, or 707 of the Internal Revenue Code
shall be treated as employed by a single taxpayer.
(2) All employees of trades or businesses that are not
incorporated, and that are under common control, shall be treated as
employed by a single taxpayer.
(3) The credit, if any, allowable by this section with respect to
each trade or business shall be determined by reference to its
proportionate share of the expense of the qualified wages giving rise
to the credit, and shall be allocated to that trade or business in
that manner.
(4) Principles that apply in the case of controlled groups of
corporations, as specified in subdivision (h) of Section 23626, shall
apply with respect to determining employment.
(5) If an employer acquires the major portion of a trade or
business of another employer, hereinafter in this paragraph referred
to as the predecessor, or the major portion of a separate unit of a
trade or business of a predecessor, then, for purposes of applying
this section, other than subdivision (i), for any taxable year ending
after that acquisition, the employment relationship between a
qualified full-time employee and an employer shall not be treated as
terminated if the employee continues to be employed in that trade or
business.
(i) (1) If the employment of any qualified full-time employee,
with respect to whom qualified wages are taken into account under
subdivision (a), is terminated by the qualified taxpayer at any time
during the first 36 months after commencing employment with the
qualified taxpayer, whether or not consecutive, the tax imposed by
this part for the taxable year in which that employment is terminated
shall be increased by an amount equal to the credit allowed under
subdivision (a) for that taxable year and all prior taxable years
attributable to qualified wages paid or incurred with respect to that
employee.
(2) Paragraph (1) shall not apply to any of the following:
(A) A termination of employment of a qualified full-time employee
who voluntarily leaves the employment of the qualified taxpayer.
(B) A termination of employment of a qualified full-time employee
who, before the close of the period referred to in paragraph (1),
becomes disabled and unable to perform the services of that
employment, unless that disability is removed before the close of
that period and the qualified taxpayer fails to offer reemployment to
that employee.
(C) A termination of employment of a qualified full-time employee,
if it is determined that the termination was due to the misconduct,
as defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of
the California Code of Regulations, of that employee.
(D) A termination of employment of a qualified full-time employee
due to a substantial reduction in the trade or business operations of
the qualified taxpayer, including reductions due to seasonal
employment.
(E) A termination of employment of a qualified full-time employee,
if that employee is replaced by other qualified full-time employees
so as to create a net increase in both the number of employees and
the hours of employment.
(F) A termination of employment of a qualified full-time employee,
when that employment is considered seasonal employment and the
qualified employee is rehired on a seasonal basis.
(3) For purposes of paragraph (1), the employment relationship
between the qualified taxpayer and a qualified full-time employee
shall not be treated as terminated by reason of a mere change in the
form of conducting the trade or business of the qualified taxpayer,
if the qualified full-time employee continues to be employed in that
trade or business and the qualified taxpayer retains a substantial
interest in that trade or business.
(4) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
(j) In the case of an estate or trust, both of the following
apply:
(1) The qualified wages for any taxable year shall be apportioned
between the estate or trust and the beneficiaries on the basis of the
income of the estate or trust allocable to each.
(2) Any beneficiary to whom any qualified wages have been
apportioned under paragraph (1) shall be treated, for purposes of
this part, as the employer with respect to those wages.
(k) In the case where the credit allowed by this section exceeds
the "net tax," the excess may be carried over to reduce the "net tax"
in the following year, and the succeeding four years if necessary,
until the credit is exhausted.
(l) The Franchise Tax Board may prescribe rules, guidelines, or
procedures necessary or appropriate to carry out the purposes of this
section, including any guidelines regarding the allocation of the
credit allowed under this section. Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code shall not apply to any rule, guideline, or procedure prescribed
by the Franchise Tax Board pursuant to this section.
(m) (1) Upon the effective date of this section, the Department of
Finance shall estimate the total dollar amount of credits that will
be claimed under this section with respect to each fiscal year from
the 2013-14 fiscal year to the 2020- 21 fiscal year, inclusive.
(2) The Franchise Tax Board shall annually provide to the Joint
Legislative Budget Committee, by no later than March 1, a report of
the total dollar amount of the credits claimed under this section
with respect to the relevant fiscal year. The report shall compare
the total dollar amount of credits claimed under this section with
respect to that fiscal year with the department's estimate with
respect to that same fiscal year. If the total dollar amount of
credits claimed for the fiscal year is less than the estimate for
that fiscal year, the report shall identify options for increasing
annual claims of the credit so as to meet estimated amounts.
(n) (1) This section shall remain in effect only until December 1,
2024, and as of that date is repealed.
(2) Notwithstanding paragraph (1) of subdivision (a), this section
shall continue to be operative for taxable years beginning on or
after January 1, 2021, but only with respect to qualified full-time
employees who commenced employment with a qualified taxpayer in a
designated census tract or former enterprise zone in a taxable year
beginning before January 1, 2021.
(3) This section shall remain operative for any qualified taxpayer
with respect to any qualified full-time employee after the
designated census tract is no longer designated or a former
enterprise zone ceases to be a former enterprise zone, as defined in
this section, for the remaining period, if any, of the 60-month
period after the original date of hiring of an otherwise qualified
full-time employee and any wages paid or incurred with respect to
those qualified full-time employees after the designated census tract
is no longer designated or a former enterprise zone ceases to be a
former enterprise zone, as defined in this section, shall be treated
as qualified wages under this section, provided the employee
satisfies any other requirements of paragraphs (10) and (12) of
subdivision (b), as if the designated census tract was still
designated and binding.
SEC. 2. Section 23626 of the Revenue
and Taxation Code , as added by Section 33 of Assembly
Bill 93 of the 2013-14 Regular Session, is amended to read:
23626. (a) (1) For each taxable year beginning on or after
January 1, 2014, and before January 1, 2021, there shall be allowed
to a qualified taxpayer
that hires a qualified full-time employee and pays or incurs
qualified wages attributable to work performed by the qualified
full-time employee in a designated census tract or former enterprise
zone, and that receives a tentative credit reservation for that
qualified full-time employee, a credit against the "tax," as defined
by Section 23036, in an amount calculated under this section.
(2) The amount of the credit allowable under this section for a
taxable year shall be equal to the product of the tentative credit
amount for the taxable year and the applicable percentage for the
taxable year.
(3) (A) If a qualified taxpayer relocates to a designated census
tract or former enterprise zone, the qualified taxpayer shall be
allowed a credit with respect to qualified wages for each qualified
full-time employee who is employed within the new location only if
the qualified taxpayer provides each employee at the previous
location or locations a written offer of employment at the new
location in the designated census tract or former enterprise zone
with comparable compensation.
(B) For purposes of this paragraph, "relocates to a designated
census tract or former enterprise zone" means an increase in the
number of qualified full-time employees, employed by a qualified
taxpayer, within a designated census tract or tracts or former
enterprise zones within a 12-month period in which there is a
decrease in the number of full-time employees, employed by the
qualified taxpayer in this state, but outside of designated census
tracts or former enterprise zone.
(C) This paragraph shall not apply to a small business.
(4) The credit allowed by this section may only be claimed on a
timely filed original return of the qualified taxpayer and only with
respect to a qualified full-time employee for whom the qualified
taxpayer has received a tentative credit reservation.
(b) For purposes of this section:
(1) The "tentative credit amount" for a taxable year shall be
equal to the product of the applicable credit percentage for each
qualified full-time employee and the qualified wages paid by the
qualified taxpayer during the taxable year to that qualified
full-time employee.
(2) The "applicable percentage" for a taxable year shall be equal
to a fraction, the numerator of which is the net increase in the
total number of full-time employees employed in this state during the
taxable year, determined on an annual full-time equivalent basis, as
compared with the total number of full-time employees employed in
this state during the base year, determined on the same basis, and
the denominator of which shall be the total number of qualified
full-time employees employed in this state during the taxable year.
The applicable percentage shall not exceed 100 percent.
(3) The "applicable credit percentage" means the credit percentage
for the calendar year during which a qualified full-time employee
was first employed by the qualified taxpayer. The applicable credit
percentage for all calendar years shall be 35 percent.
(4) "Base year" means the 2013 taxable year, or in the case of a
qualified taxpayer who first hires a qualified full-time employee in
a taxable year beginning on or after January 2015, the taxable year
immediately preceding the taxable year in which the qualified
full-time employee was hired.
(5) "Acquired" includes any gift, inheritance, transfer incident
to divorce, or any other transfer, whether or not for consideration.
(6) "Annual full-time equivalent" means either of the following:
(A) In the case of a full-time employee paid hourly qualified
wages, "annual full-time equivalent" means the total number of hours
worked for the qualified taxpayer by the employee (not to exceed
2,000 hours per employee) divided by 2,000.
(B) In the case of a salaried full-time employee, "annual
full-time equivalent" means the total number of weeks worked for the
qualified taxpayer by the employee divided by 52.
(7) "Designated census tract" means a census tract within the
state that is determined by the Department of Finance to have a
civilian unemployment rate that is within the top 25 percent of all
census tracts within the state and has a poverty rate within the top
25 percent of all census tracts within the state, as prescribed in
Section 13073.5 of the Government Code.
(8) "Former enterprise zone" means an enterprise zone designated
as of December 31, 2011, and any expansion of an enterprise zone
prior to December 31, 2012, under former Chapter 12.8 (commencing
with former Section 7070) of Division 7 of Title 1 of the Government
Code, as in effect on December 31, 2012, excluding any census tract
within an enterprise zone that is identified by the Department of
Finance pursuant to Section 13073.5 of the Government Code as a
census tract within the lowest quartile of census tracts with the
lowest civilian unemployment and poverty.
(9) "Minimum wage" means the wage established pursuant to Chapter
1 (commencing with Section 1171) of Part 4 of Division 2 of the Labor
Code.
(10) (A) "Qualified full-time employee" means an individual who
meets all of the following requirements:
(i) Performs at least 50 percent of his or her services for the
qualified taxpayer during the taxable year in a designated census
tract or former enterprise zone.
(ii) Receives starting wages that are at least 150 percent of the
minimum wage.
(iii) Is hired by the qualified taxpayer on or after January 1,
2014.
(iv) Is hired by the qualified taxpayer after the date the
Department of Finance determines that the census tract referred to in
clause (i) is a designated census tract or that the census tracts
within a former enterprise zone are not census tracts with the lowest
civilian unemployment and poverty.
(v) Satisfies either of the following conditions:
(I) Is paid qualified wages by the qualified taxpayer for services
not less than an average of 35 hours per week.
(II) Is a salaried employee and was paid compensation during the
taxable year for full-time employment, within the meaning of Section
515 of the Labor Code, by the qualified taxpayer.
(vii)
(vi) Upon commencement of employment with the qualified
taxpayer, satisfies any of the following conditions:
(I) Was unemployed for the six months immediately preceding
employment with the qualified taxpayer. In the case of an individual
who completed a program of study at a college, university, or other
postsecondary educational institution, received a baccalaureate,
postgraduate, or professional degree, and was unemployed for the six
months immediately preceding employment with the qualified taxpayer,
that individual must have completed that program of study at least 12
months prior to the individual's commencement of employment with the
qualified taxpayer.
(II) Is a veteran that had not been employed since separation from
service in the Armed Forces of the United States.
(III) Was a recipient of the credit allowed under Section 32 of
the Internal Revenue Code, relating to earned income, as applicable
for federal purposes, for the previous taxable year.
(IV) Was an ex-offender, within the meaning of Section 23622.7.
(V) Is a recipient of CalWORKs or General Assistance.
(B) An individual may only be considered a qualified full-time
employee for the period of time commencing with the date the
individual is first employed by the qualified taxpayer and ending 60
months thereafter.
(11) (A) "Qualified taxpayer" means a corporation engaged in a
trade or business within designated census tract or former enterprise
zone that, during the taxable year, pays or incurs qualified wages.
(B) In the case of any pass-thru entity, the determination of
whether a taxpayer is a qualified taxpayer under this section shall
be made at the entity level and any credit under this section or
Section 17053.73 shall be allowed to the pass-thru entity and passed
through to the partners and shareholders in accordance with
applicable provisions of this part or Part 10 (commencing with
Section 17001). For purposes of this subdivision, the term "pass-thru
entity" means any partnership or "S" corporation.
(C) "Qualified taxpayer" shall not include any of the following:
(i) Employers that provide temporary help services, as described
in Code 561320 of the North American Industry Classification System
(NAICS) published by the United States Office of Management and
Budget, 2012 edition.
(ii) Employers that provide retail trade services, as described in
Sector 44-45 of the North American Industry Classification System
(NAICS) published by the United States Office of Management and
Budget, 2012 edition.
(iii) Employers that are primarily engaged in providing food
services, as described in Code 711110, 722511, 722513, 722514, or
722515 of the North American Industry Classification System (NAICS)
published by the United States Office of Management and Budget, 2012
edition.
(iv) Employers that are primarily engaged in services as described
in Code 713210, 721120, or 722410 of the North American Industry
Classification System (NAICS) published by the United States Office
of Management and Budget, 2012 edition.
(v) (I) An employer that is a sexually oriented business.
(II) For purposes of this clause:
(aa) "Sexually oriented business" means a nightclub, bar,
restaurant, or similar commercial enterprise that provides for an
audience of two or more individuals live nude entertainment or live
nude performances where the nudity is a function of everyday business
operations and where nudity is a planned and intentional part of the
entertainment or performance.
(ab) "Nude" means clothed in a manner that leaves uncovered or
visible, through less than fully opaque clothing, any portion of the
genitals or, in the case of a female, any portion of the breasts
below the top of the areola of the breasts.
(D) Subparagraph (C) shall not apply to a taxpayer that is a
"small business."
(12) "Qualified wages" means those wages that meet all of the
following requirements:
(A) That portion of wages paid or incurred by the qualified
taxpayer during the taxable year to each qualified full-time employee
that exceeds 150 percent of minimum wage, but does not exceed 350
percent of the minimum wage.
(B) Wages paid or incurred during the 60-month period beginning
with the first day the qualified full-time employee commences
employment with the qualified taxpayer. In the case of any employee
who is reemployed, including regularly occurring seasonal increase,
in the trade or business operations of the qualified taxpayer, this
reemployment shall not be treated as constituting commencement of
employment for purposes of this section.
(C) Except as provided in paragraph (3) of subdivision (m),
qualified wages shall not include any wages paid or incurred by the
qualified taxpayer on or after the date that the Department of
Finance's redesignation of designated census tracts is effective, as
provided in paragraph (2) of subdivision (g), so that a census tract
is no longer determined to be a designated census tract.
(13) "Seasonal employment" means employment by a qualified
taxpayer that has regular and predictable substantial reductions in
trade or business operations.
(14) (A) "Small business" means a trade or business that has
aggregate gross receipts, less returns and allowances reportable to
this state, of less than two million dollars ($2,000,000) during the
previous taxable year.
(B) (i) For purposes of this paragraph, "gross receipts, less
returns and allowances reportable to this state," means the sum of
the gross receipts from the production of business income, as defined
in subdivision (a) of Section 25120, and the gross receipts from the
production of nonbusiness income, as defined in subdivision (d) of
Section 25120.
(ii) In the case of any trade or business activity conducted by a
partnership or an "S" corporation, the limitations set forth in
subparagraph (A) shall be applied to the partnership or "S"
corporation and to each partner or shareholder.
(iii) For taxpayers that are required to be included in a combined
report under Section 25101 or authorized to be included in a
combined report under Section 25101.15, the dollar amount specified
in subparagraph (A) shall apply to the aggregate gross receipts of
all taxpayers that are required to be or authorized to be included in
a combined report.
(C) (i) "Small business" shall not include a sexually oriented
business.
(ii) For purposes of this subparagraph:
(I) "Sexually oriented business" means a nightclub, bar,
restaurant, or similar commercial enterprise that provides for an
audience of two or more individuals live nude entertainment or live
nude performances where the nudity is a function of everyday business
operations and where nudity is a planned and intentional part of the
entertainment or performance.
(II) "Nude" means clothed in a manner that leaves uncovered or
visible, through less than fully opaque clothing, any portion of the
genitals or, in the case of a female, any portion of the breasts
below the top of the areola of the breasts.
(15) An individual is "unemployed" for any period for which the
individual is all of the following:
(A) Not in receipt of wages subject to withholding under Section
13020 of the Unemployment Insurance Code for that period.
(B) Not a self-employed individual (within the meaning of Section
401(c)(1)(B) of the Internal Revenue Code, relating to self-employed
individual) for that period.
(C) Not a registered full-time student at a high school, college,
university, or other postsecondary educational institution for that
period.
(c) The net increase in full-time employees of a qualified
taxpayer shall be determined as provided by this subdivision:
(1) (A) The net increase in full-time employees shall be
determined on an annual full-time equivalent basis by subtracting
from the amount determined in subparagraph (C) the amount determined
in subparagraph (B).
(B) The total number of full-time employees employed in the base
year by the taxpayer and by any trade or business acquired by the
taxpayer during the current taxable year.
(C) The total number of full-time employees employed in the
current taxable year by the taxpayer and by any trade or business
acquired during the current taxable year.
(2) For taxpayers who first commence doing business in this state
during the taxable year, the number of full-time employees for the
base year shall be zero.
(d) For purposes of this section:
(1) All employees of the trades or businesses that are treated as
related under Section 267, 318, or 707 of the Internal Revenue Code
shall be treated as employed by a single taxpayer.
(2) In determining whether the taxpayer has first commenced doing
business in this state during the taxable year, the provisions of
subdivision (g) of Section 24416.20, without application of paragraph
(7) of that subdivision, shall apply.
(e) (1) To be eligible for the credit allowed by this section, a
qualified taxpayer shall, upon hiring a qualified full-time employee,
request a tentative credit reservation from the Franchise Tax Board
within 30 days of complying with the Employment Development
Department's new hire reporting requirement as provided in Section
1088.5 of the Unemployment Insurance Code, in the form and manner
prescribed by the Franchise Tax Board.
(2) To obtain a tentative credit reservation with respect to a
qualified full-time employee, the qualified taxpayer shall provide
necessary information, as determined by the Franchise Tax Board,
including the name, the social security number, the start date of
employment, the rate of pay of the qualified full-time employee, the
qualified taxpayer's gross receipts, less returns and allowances, for
the previous taxable year, and whether the qualified full-time
employee is a resident of a targeted employment area, as defined in
former Section 7072 of the Government Code, as in effect on December
31, 2013.
(3) The qualified taxpayer shall provide the Franchise Tax Board
an annual certification of employment with respect to each qualified
full-time employee hire in a previous taxable year, on or before the
15th day of the third month of the taxable year. The certification
shall include necessary information, as determined by the Franchise
Tax Board, including the name, social security number, start date of
employment, and rate of pay for each qualified full-time employee
employed by the qualified taxpayer.
(4) A tentative credit reservation provided to a taxpayer with
respect to an employee of that taxpayer shall not constitute a
determination by the Franchise Tax Board with respect to any of the
requirements of this section regarding a taxpayer's eligibility for
the credit authorized by this section.
(f) The Franchise Tax Board shall do all of the following:
(1) Approve a tentative credit reservation with respect to a
qualified full-time employee hired during a calendar year.
(2) Determine the aggregate tentative reservation amount and the
aggregate small business tentative reservation amount for a calendar
year.
(3) A tentative credit reservation request from a qualified
taxpayer with respect to a qualified full-time employee who is a
resident of a targeted employment area, as defined in former Section
7072 of the Government Code, as in effect on December 31, 2013, shall
be expeditiously processed by the Franchise Tax Board. The residence
of a qualified full-time employee in a targeted employment area
shall have no other effect on the eligibility of an individual as a
qualified full-time employee or the eligibility of a qualified
taxpayer for the credit authorized by this section.
(4) Notwithstanding Section 19542, provide as a searchable
database on its Internet Web site, for each taxable year beginning on
or after January 1, 2014, and before January 1, 2021, the employer
names, amounts of tax credit claimed, and number of new jobs created
for each taxable year pursuant to this section and Section 17053.73.
(g) (1) The Department of Finance shall, by January 1, 2014, and
by January 1 of every fifth year thereafter, provide the Franchise
Tax Board with a list of the designated census tracts and a list of
census tracts with the lowest civilian unemployment rate.
(2) The redesignation of designated census tracts and lowest
civilian unemployment census tracts by the Department of Finance as
provided in Section 13073.5 of the Government Code shall be
effective, for purposes of this credit, one year after the date that
the Department of Finance redesignates the designated census tracts.
(h) (1) For purposes of this section:
(A) All employees of the trades or businesses that are treated as
related under Section 267, 318, or 707 of the Internal Revenue Code
shall be treated as employed by a single qualified taxpayer.
(B) All employees of all corporations that are members of the same
controlled group of corporations shall be treated as employed by a
single qualified taxpayer.
(C) The credit, if any, allowable by this section to each member
shall be determined by reference to its proportionate share of the
expense of the qualified wages giving rise to the credit, and shall
be allocated in that manner.
(D) If a qualified taxpayer acquires the major portion of a trade
or business of another taxpayer, hereinafter in this paragraph
referred to as the predecessor, or the major portion of a separate
unit of a trade or business of a predecessor, then, for purposes of
applying this section for any taxable year ending after that
acquisition, the employment relationship between a qualified
full-time employee and a qualified taxpayer shall not be treated as
terminated if the employee continues to be employed in that trade or
business.
(2) For purposes of this subdivision, "controlled group of
corporations" means a controlled group of corporations as defined in
Section 1563(a) of the Internal Revenue Code, except that:
(A) "More than 50 percent" shall be substituted for "at least 80
percent" each place it appears in Section 1563(a)(1) of the Internal
Revenue Code.
(B) The determination shall be made without regard to subsections
(a)(4) and (e)(3)(C) of Section 1563 of the Internal Revenue Code.
(3) Rules similar to the rules provided in Sections 46(e) and 46
(h) of the Internal Revenue Code, as in effect on November 4, 1990,
shall apply to both of the following:
(A) An organization to which Section 593 of the Internal Revenue
Code applies.
(B) A regulated investment company or a real estate investment
trust subject to taxation under this part.
(i) (1) If the employment of any qualified full-time employee,
with respect to whom qualified wages are taken into account under
subdivision (a), is terminated by the qualified taxpayer at any time
during the first 36 months after commencing employment with the
qualified taxpayer, whether or not consecutive, the tax imposed by
this part for the taxable year in which that employment is terminated
shall be increased by an amount equal to the credit allowed under
subdivision (a) for that taxable year and all prior taxable years
attributable to qualified wages paid or incurred with respect to that
employee.
(2) Paragraph (1) shall not apply to any of the following:
(A) A termination of employment of a qualified full-time employee
who voluntarily leaves the employment of the qualified taxpayer.
(B) A termination of employment of a qualified full-time employee
who, before the close of the period referred to in paragraph (1),
becomes disabled and unable to perform the services of that
employment, unless that disability is removed before the close of
that period and the qualified taxpayer fails to offer reemployment to
that employee.
(C) A termination of employment of a qualified full-time employee,
if it is determined that the termination was due to the misconduct,
as defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of
the California Code of Regulations, of that employee.
(D) A termination of employment of a qualified full-time employee
due to a substantial reduction in the trade or business operations of
the qualified taxpayer, including reductions due to seasonal
employment.
(E) A termination of employment of a qualified full-time employee,
if that employee is replaced by other qualified full-time employees
so as to create a net increase in both the number of employees and
the hours of employment.
(F) A termination of employment of a qualified full-time employee,
when that employment is considered seasonal employment and the
qualified employee is rehired on a seasonal basis.
(3) For purposes of paragraph (1), the employment relationship
between the qualified taxpayer and a qualified full-time employee
shall not be treated as terminated by reason of a mere change in the
form of conducting the trade or business of the qualified taxpayer,
if the qualified full-time employee continues to be employed in that
trade or business and the qualified taxpayer retains a substantial
interest in that trade or business.
(4) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
(j) In the case where the credit allowed by this section exceeds
the "tax," the excess may be carried over to reduce the "tax" in the
following year, and the succeeding four years if necessary, until
exhausted.
(k) The Franchise Tax Board may prescribe rules, guidelines, or
procedures necessary or appropriate to carry out the purposes of this
section, including any guidelines regarding the allocation of the
credit allowed under this section. Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code shall not apply to any rule, guideline, or procedure prescribed
by the Franchise Tax Board pursuant to this section.
(l) (1) Upon the effective date of this section, the Department of
Finance shall estimate the total dollar amount of credits that will
be claimed under this section with respect to each fiscal year from
the 2013-14 fiscal year to the 2020 -21 fiscal year, inclusive.
(2) The Franchise Tax Board shall annually provide to the Joint
Legislative Budget Committee, by no later than March 1, a report of
the total dollar amount of the credits claimed under this section
with respect to the relevant fiscal year. The report shall compare
the total dollar amount of credits claimed under this section with
respect to that fiscal year with the department's estimate with
respect to that same fiscal year. If the total dollar amount of
credits claimed for the fiscal year is less than the estimate for
that fiscal year, the report shall identify options for increasing
annual claims of the credit so as to meet estimated amounts.
(m) (1) This section shall remain in effect only until December 1,
2024, and as of that date is repealed.
(2) Notwithstanding paragraph (1) of subdivision (a), this section
shall continue to be operative for taxable years beginning on or
after January 1, 2021, but only with respect to qualified full-time
employees who commenced employment with a qualified taxpayer in a
designated census tract or former enterprise zone in a taxable year
beginning before January 1, 2021.
(3) This section shall remain operative for any qualified taxpayer
with respect to any qualified full-time employee after the
designated census tract is no longer designated or a former
enterprise zone ceases to be a former enterprise zone, as defined in
this section, for the remaining period, if any, of the 60-month
period after the original date of hiring of an otherwise qualified
full-time employee and any wages paid or incurred with respect to
those qualified full-time employees after the designated census tract
is no longer designated or a former enterprise zone ceases to be a
former enterprise zone, ad defined in this section, shall be treated
as qualified wages under this section, provided the employee
satisfies any other requirements of paragraphs (10) and (12) of
subdivision (b), as if the designated census tract was still
designated and binding.
SEC. 3. Section 1 of this bill that amends Section
17053.73 of the Revenue and Taxation Code, as added by Assembly Bill
93 of the 2013-14 Regular Session, and Section 2 of
this bill that amends Section 23626 of the
Revenue and Taxation Code, as added by Assembly Bill 93 of the
2013-14 Regular Session, shall become operative only if Assembly Bill
93 of the 2013-14 Regular Session is chaptered and becomes
operative. The effect and operation of Sections 1 and 2 of this bill
are subject to Section 47 of Assembly Bill 93 of the 2013-
14 Regular Session.
SEC. 4. This act is an urgency statute necessary
for the immediate preservation of the public peace, health, or safety
within the meaning of Article IV of the Constitution and shall go
into immediate effect. The facts constituting the necessity are:
In order to ensure the public good by providing certainty
regarding the incentives available for attracting and retaining jobs
in economically distressed areas of the state, it is necessary that
this act take effect immediately.
SECTION 1. It is the intent of the Legislature
to enact statutory changes relating to the Budget Act of 2013.