Amended in Assembly July 1, 2013

Amended in Assembly June 26, 2013

Senate Bill No. 90

Introduced by begin delete Committee on Budget and Fiscal Review end delete begin insert Senators Cannella and Galgiani end insert

January 10, 2013

An act to amend Sections begin insert 6377.1, end insert 17053.73 begin delete and end delete begin insert , 17059.2, end insert 23626 begin insert , and 23689 end insert of the Revenue and Taxation Code, as added 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, begin delete Committee on Budget and Fiscal Review end delete   begin insert Cannella end insert . Economic development: taxation: begin delete credits. end delete begin insert credits: exemption. end insert

begin insert

Existing sales and use tax laws impose taxes on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state, or on the storage, use, or other consumption in this state of tangible personal property purchased from a retailer for storage, use, or other consumption in this state, and provides various exemptions from those taxes.

end insert begin insert

Existing law exempts from those taxes, on and after July 1, 2014, and before January 1, 2019, the gross receipts from the sale of, and the storage, use, or other consumption of, qualified tangible personal property purchased by a qualified person for use primarily in manufacturing, processing, refining, fabricating, or recycling of property, as specified; qualified tangible personal property purchased for use by a contractor for specified purposes, as provided; and qualified tangible personal property purchased for use by a qualified person to be used primarily in research and development, as provided, and until January 1, 2021, the gross receipts from the sale of, and the storage, use, or other consumption of, qualified tangible personal property purchased by a qualified person for those purposes for use within a designated census tract or a former enterprise zone. Existing law specifies that this exemption does not apply to local sales and use taxes, transactions and use taxes, and specified state taxes from which revenues are deposited into the Local Public Safety Fund, the Education Protection Account, the Local Revenue Fund, the Fiscal Recovery Fund, or the Local Revenue Fund 2011.

end insert begin insert

This bill would extend the application of the exemption from January 1, 2019, to July 1, 2022, and eliminate the requirement that, after January 1, 2019, the qualified tangible personal property purchased by a qualified person for those purposes for use within a designated census tract or a former enterprise zone.

end insert

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 begin delete a former enterprise zone end delete begin insert an economic development area end insert , to certain full-time employees who provide services for that taxpayer in connection with that trade or business. begin insert This bill would additionally expand the definition of “qualified wages” for qualified full-time employees within a designated pilot area, as provided. end insert

begin insert

Existing law also allows a credit against tax under both laws 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.

end insert begin insert

This bill would make specifications regarding the fiscal year allocation under these provisions of credit amounts and the taxable years for which the allocated amounts may be claimed as a credit allowed to taxpayers.

end insert begin insert

This bill would also restate the carryover period of certain tax credits that were amended by AB 93 of the 2013-14 Regular Session and the operation of existing law with respect to those carryover credits.

end insert

This bill would make the operation of begin delete these end delete begin insert its modifications and end insert revisions contingent on the enactment of begin delete Assembly Bill end delete begin insert AB end insert 93 of the 2013-14 Regular Session, as specified.

This bill would declare that it is to take effect immediately as an urgency statute.

Vote: ²⁄₃. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

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

begin insert

begin insert SECTION 1. end insert   

end insert

begin insert Section 6377.1 of the end insert begin insert Revenue and Taxation Code end insert begin insert ,
as added by Section 6 of Assembly Bill 93 of the 2013-14 Regular
Session, is amended to read: end insert

6377.1.  

(a)  begin delete (1) end delete begin delete   end delete Except as provided in subdivision (e), on or
after July 1, 2014, and before begin delete January 1, 2019 end delete begin insert July 1, 2022 end insert , there
are exempted from the taxes imposed by this part the gross receipts
from the sale of, and the storage, use, or other consumption in this
state of, any of the following:

begin delete

(A)

end delete

begin insert (1) end insert  Qualified tangible personal property purchased for use by
a qualified person to be used primarily in any stage of the
manufacturing, processing, refining, fabricating, or recycling of
tangible personal property, beginning at the point any raw materials
are received by the qualified person and introduced into the process
and ending at the point at which the manufacturing, processing,
refining, fabricating, or recycling has altered tangible personal
property to its completed form, including packaging, if required.

begin delete

(B)

end delete

begin insert (2) end insert  Qualified tangible personal property purchased for use by
a qualified person to be used primarily in research and
development.

begin delete

(C)

end delete

begin insert (3) end insert  Qualified tangible personal property purchased for use by
a qualified person to be used primarily to maintain, repair, measure,
or test any qualified tangible personal property described in
begin delete subparagraph (A) or (B) end delete begin insert paragraph (1) or (2) end insert .

begin delete

(D)

end delete

begin insert (4) end insert  Qualified tangible personal property purchased for use by
a contractor purchasing that property for use in the performance
of a construction contract for the qualified person, that will use
that property as an integral part of the manufacturing, processing,
refining, fabricating, or recycling process, or as a research or
storage facility for use in connection with those processes.

begin delete

(2) Except as provided in subdivision (e), on or after July 1,
2014, and before July 1, 2021, there are exempted from the taxes
imposed by this part the gross receipts from the sale of, and the
storage, use, or other consumption in this state of qualified tangible
personal property purchased for use within a designated census
tract, as defined in paragraph (7) of subdivision (b) of Section
17053.73 and paragraph (7) of subdivision (b) of Section 23626,
or a former enterprise zone, as defined in paragraph (8) of
subdivision (b) of Section 17053.73 and paragraph (8) of
subdivision (b) of Section 23626, by any of the following:

(A) A qualified person to be used primarily in any stage of the
manufacturing, processing, refining, fabricating, or recycling of
tangible personal property, beginning at the point any raw materials
are received by the qualified person and introduced into the process
and ending at the point at which the manufacturing, processing,
refining, fabricating, or recycling has altered tangible personal
property to its completed form, including packaging, if required.

(B) A qualified person to be used primarily in research and
development.

(C) A qualified person to be used primarily to maintain, repair,
measure, or test any qualified tangible personal property described
in subparagraph (A) or (B).

(D) A contractor purchasing that property for use in the
performance of a construction contract for the qualified person,
that will use that property as an integral part of the manufacturing,
processing, refining, fabricating, or recycling process, or as a
research or storage facility for use in connection with those
processes.

end delete

(b) For purposes of this section:

(1) “Fabricating” means to make, build, create, produce, or
assemble components or tangible personal property to work in a
new or different manner.

(2) “Manufacturing” means the activity of converting or
conditioning tangible personal property by changing the form,
composition, quality, or character of the property for ultimate sale
at retail or use in the manufacturing of a product to be ultimately
sold at retail. Manufacturing includes any improvements to tangible
personal property that result in a greater service life or greater
functionality than that of the original property.

(3) “Primarily” means 50 percent or more of the time.

(4) “Process” means the period beginning at the point at which
any raw materials are received by the qualified person and
introduced into the manufacturing, processing, refining, fabricating,
or recycling activity of the qualified person and ending at the point
at which the manufacturing, processing, refining, fabricating, or
recycling activity of the qualified person has altered tangible
personal property to its completed form, including packaging, if
required. Raw materials shall be considered to have been
introduced into the process when the raw materials are stored on
the same premises where the qualified person’s manufacturing,
processing, refining, fabricating, or recycling activity is conducted.
Raw materials that are stored on premises other than where the
qualified person’s manufacturing, processing, refining, fabricating,
or recycling activity is conducted shall not be considered to have
been introduced into the manufacturing, processing, refining,
fabricating, or recycling process.

(5) “Processing” means the physical application of the materials
and labor necessary to modify or change the characteristics of
tangible personal property.

(6) (A) “Qualified person” means a person that is primarily
engaged in those lines of business described in Codes 3111 to
3399, inclusive, 541711, or 541712 of the North American Industry
Classification System (NAICS) published by the United States
Office of Management and Budget (OMB), 2012 edition.

(B) Notwithstanding subparagraph (A), “qualified person” shall
not include either of the following:

(i) An apportioning trade or business that is required to apportion
its business income pursuant to subdivision (b) of Section 25128.

(ii) A trade or business conducted wholly within this state that
would be required to apportion its business income pursuant to
subdivision (b) of Section 25128 if it were subject to apportionment
pursuant to Section 25101.

(7) (A) “Qualified tangible personal property” includes, but is
not limited to, all of the following:

(i) Machinery and equipment, including component parts and
contrivances such as belts, shafts, moving parts, and operating
structures.

(ii) Equipment or devices used or required to operate, control,
regulate, or maintain the machinery, including, but not limited to,
computers, data-processing equipment, and computer software,
together with all repair and replacement parts with a useful life of
one or more years therefor, whether purchased separately or in
conjunction with a complete machine and regardless of whether
the machine or component parts are assembled by the qualified
person or another party.

(iii) Tangible personal property used in pollution control that
meets standards established by this state or any local or regional
governmental agency within this state.

(iv) Special purpose buildings and foundations used as an
integral part of the manufacturing, processing, refining, fabricating,
or recycling process, or that constitute a research or storage facility
used during those processes. Buildings used solely for warehousing
purposes after completion of those processes are not included.

(B) “Qualified tangible personal property” shall not include any
of the following:

(i) Consumables with a useful life of less than one year.

(ii) Furniture, inventory, and equipment used in the extraction
process, or equipment used to store finished products that have
completed the manufacturing, processing, refining, fabricating, or
recycling process.

(iii) Tangible personal property used primarily in administration,
general management, or marketing.

(8) “Refining” means the process of converting a natural
resource to an intermediate or finished product.

(9) “Research and development” means those activities that are
described in Section 174 of the Internal Revenue Code or in any
regulations thereunder.

(10) “Useful life” for tangible personal property that is treated
as having a useful life of one or more years for state income or
franchise tax purposes shall be deemed to have a useful life of one
or more years for purposes of this section. “Useful life” for tangible
personal property that is treated as having a useful life of less than
one year for state income or franchise tax purposes shall be deemed
to have a useful life of less than one year for purposes of this
section.

(c) An exemption shall not be allowed under this section unless
the purchaser furnishes the retailer with an exemption certificate,
completed in accordance with any instructions or regulations as
the board may prescribe, and the retailer retains the exemption
certificate in its records and furnishes it to the board upon request.

(d) (1)    Notwithstanding the Bradley-Burns Uniform Local
Sales and Use Tax Law (Part 1.5 (commencing with Section 7200))
and the Transactions and Use Tax Law (Part 1.6 (commencing
with Section 7251)), the exemption established by this section
shall not apply with respect to any tax levied by a county, city, or
district pursuant to, or in accordance with, either of those laws.

(2) Notwithstanding subdivision (a), the exemption established
by this section shall not apply with respect to any tax levied
pursuant to Section 6051.2, 6051.5, 6201.2, or 6201.5, pursuant
to Section 35 of Article XIII of the California Constitution, or any
tax levied pursuant to Section 6051 or 6201 that is deposited in
the State Treasury to the credit of the Local Revenue Fund 2011
pursuant to Section 6051.15 or 6201.15.

(e) (1) The exemption provided by this section shall not apply
to either of the following:

(A) Any tangible personal property purchased during any
calendar year that exceeds two hundred million dollars
($200,000,000) of purchases of qualified tangible personal property
for which an exemption is claimed by a qualified person under
this section. For purposes of this subparagraph, in the case of a
qualified person that is 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 aggregate of all purchases of
qualified personal property for which an exemption is claimed
pursuant to this section by all persons that are required or
authorized to be included in a combined report shall not exceed
two hundred million dollars ($200,000,000) in any calendar year.

(B) The sale or storage, use, or other consumption of property
that, within one year from the date of purchase, is removed from
California, converted from an exempt use under subdivision (a)
to some other use not qualifying for exemption, or used in a manner
not qualifying for exemption.

(2) If a purchaser certifies in writing to the seller that the tangible
personal property purchased without payment of the tax will be
used in a manner entitling the seller to regard the gross receipts
from the sale as exempt from the sales tax, and the purchase
exceeds the two-hundred-million-dollar ($200,000,000) limitation
described in subparagraph (A) of paragraph (1), or within one year
from the date of purchase, the purchaser removes that property
from California, converts that property for use in a manner not
qualifying for the exemption, or uses that property in a manner
not qualifying for the exemption, the purchaser shall be liable for
payment of sales tax, with applicable interest, as if the purchaser
were a retailer making a retail sale of the tangible personal property
at the time the tangible personal property is so purchased, removed,
converted, or used, and the cost of the tangible personal property
to the purchaser shall be deemed the gross receipts from that retail
sale.

(f) This section shall apply to leases of qualified tangible
personal property classified as “continuing sales” and “continuing
purchases” in accordance with Sections 6006.1 and 6010.1. The
exemption established by this section shall apply to the rentals
payable pursuant to the lease, provided the lessee is a qualified
person and the tangible personal property is used in an activity
described in subdivision (a).

(g) (1) Upon the effective date of this section, the Department
of Finance shall estimate the total dollar amount of exemptions
that will be taken for each calendar year, or any portion thereof,
for which this section provides an exemption.

(2) No later than each March 1 next following a calendar year
for which this section provides an exemption, the board shall
provide to the Joint Legislative Budget Committee a report of the
total dollar amount of exemptions taken under this section for the
immediately preceding calendar year. The report shall compare
the total dollar amount of exemptions taken under this section for
that calendar year with the department’s estimate for that same
calendar year. If that total dollar amount taken is less than the
estimate for that calendar year, the report shall identify options for
increasing exemptions taken so as to meet estimated amounts.

(h) This section is repealed on January 1, begin delete 2019 end delete begin insert 2023 end insert .

begin delete SECTION 1. end delete
begin insert SEC. 2. end insert   

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 begin delete former enterprise zone end delete begin insert economic development area end insert , 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 begin delete former enterprise zone end delete begin insert end insert begin insert economic development area end insert , 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 begin delete former
enterprise zone end delete begin insert end insert begin insert economic development area end insert with comparable
compensation.

(B) For purposes of this paragraph, “relocates to a designated
census tract or begin delete former enterprise zone” end delete begin insert economic development
area” end insert means an increase in the number of qualified full-time
employees, employed by a qualified taxpayer, within a designated
census tract or tracts or begin delete former enterprise zones end delete begin insert economic
development areas end insert 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 begin delete former enterprise zone end delete begin insert economic development areas end insert .

(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.

begin delete

(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.

end delete begin insert

(8) “Economic development area” means either of the following:

end insert begin insert

(A) A former enterprise zone. For purposes of this section,
“former enterprise zone” means an enterprise zone designated
and in effect as of December 31, 2011, any enterprise zone
designated during 2012, and any revision of an enterprise zone
prior to June 30, 2013, under former Chapter 12.8 (commencing
with 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.

end insert begin insert

(B) A local agency military base recovery area designated as
of the effective date of the act adding this subparagraph, in
accordance with Section 7114 of the Government Code.

end insert

(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 begin delete former enterprise zone end delete begin insert economic development area end insert .

(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 begin delete that had not been employed since separation end delete
begin insert who separated end insert from service in the Armed Forces of the United
States begin insert within the 12 months preceding commencement of
employment with the qualified taxpayer end insert .

(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.

begin delete

(IV) Was an ex-offender, within the meaning of Section
17053.74.

end delete begin delete

(V) Is a recipient of CalWORKs or General Assistance.

end delete begin insert

(IV) Is an ex-offender previously convicted of a felony.

end insert begin insert

(V) Is a recipient of either CalWORKs, in accordance with
Article 2 (commencing with Section 11250) of Chapter 2 of Part
3 of Division 9 of the Welfare and Institutions Code, or general
assistance, in accordance with Section 17000.5 of the Welfare and
Institutions Code.

end insert

(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 begin delete former
enterprise zone end delete begin insert economic development area end insert 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)  begin delete That end delete begin insert (i) end insert begin insert   end insert begin insert Except as provided in clause (ii), that end insert 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.

begin insert

(ii) (I) In the case of a qualified employee employed in a
designated pilot area, that portion of wages paid or incurred by
the qualified taxpayer during the taxable year to each qualified
full-time employee that exceeds ten dollars ($10) per hour or an
equivalent amount for salaried employees.

end insert begin insert

(II) For purposes of this clause:

end insert begin insert

(aa) “Designated pilot area” means an area designated as a
designated pilot area by the Governor’s Office of Business and
Economic Development.

end insert begin insert

(ab) Areas that may be designated as a designated pilot area
are limited to areas within a designated census tract or an
economic development area with average wages less than the
statewide average wages, based on information from the Labor
Market Division of the Employment Development Department,
and areas within a designated census tract or an economic
development area based on high poverty or high unemployment.

end insert begin insert

(ac) The total number of designated pilot areas that may be
designated is limited to five, one or more of which must be an area
within five or fewer designated census tracts within a single county
based on high poverty or high unemployment or an area within
an economic development area based on high poverty or high
unemployment.

end insert begin insert

(ad) The designation of a designated pilot area shall be
applicable for a period of four calendar years, commencing with
the first calendar year for which the designation of a designated
pilot area is effective. The applicable period of a designated pilot
area may be extended, in the sole discretion of the Governor’s
Office of Business and Economic Development, for an additional
period of up to three calendar years. The applicable period, and
any extended period, shall not extend beyond December 31, 2020.

end insert begin insert

(III) The designation of an area as a designated pilot area and
the extension of the applicable period of a designated pilot area
shall be at the sole discretion of the Governor’s Office of Business
and Economic Development and shall not be subject to
administrative appeal or judicial review.

end insert

(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 begin delete former enterprise zone end delete begin insert end insert begin insert economic
development area end insert 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 begin delete a former
enterprise zone end delete begin insert an economic development area end insert ceases to be begin delete a
former enterprise zone end delete begin insert an end insert begin insert economic development area end insert , 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 begin delete a former enterprise zone end delete begin insert an end insert
begin insert economic development area end insert ceases to be begin delete a former enterprise zone end delete
begin insert an end insert begin insert economic development area end insert , 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 begin insert or the economic development area was
still in existence end insert .

begin insert

begin insert SEC. 3. end insert   

end insert

begin insert Section 17059.2 of the end insert begin insert Revenue and Taxation Code end insert begin insert ,
as added by Section 18 of Assembly Bill 93 of the 2013-14 Regular
Session, is amended to read: end insert

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 begin insert credit under this section shall be allocated by GO-Biz
with respect to the 2013-14 fiscal year through and including the
2017- end insert begin insert 18 fiscal year. The end insert amount of credit allocated to a taxpayer
begin delete for a taxable end delete begin insert with respect to a fiscal end insert 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 begin insert the taxable year or years
for which the credit allocated shall be allowed, end insert a minimum
compensation level begin insert , end insert 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 subparagraph (D):

(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 begin delete 2018-19 end delete
begin insert 2017- end insert begin insert 18 end insert , 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 begin delete for any of the three succeeding fiscal
years end delete begin insert the next fiscal year end insert .

(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).

(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.

begin delete SEC. 2. end delete
begin insert SEC. 4. end insert   

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 begin delete former enterprise zone end delete begin insert end insert begin insert economic development area end insert , 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 begin delete former enterprise zone end delete begin insert end insert begin insert economic development area end insert , 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 begin delete former enterprise zone end delete begin insert economic development are end insert begin insert a end insert with
comparable compensation.

(B) For purposes of this paragraph, “relocates to a designated
census tract or begin delete former enterprise zone” end delete begin insert end insert begin insert economic development
area end insert begin insert ” end insert means an increase in the number of qualified full-time
employees, employed by a qualified taxpayer, within a designated
census tract or tracts or begin delete former enterprise zones end delete begin insert economic
development areas end insert 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 begin delete former enterprise zone end delete begin insert economic development areas end insert .

(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.

begin delete

(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.

end delete begin insert

(8) “Economic development area” means either of the following:

end insert begin insert

(A) A former enterprise zone. For purposes of this section,
“former enterprise zone” means an enterprise zone designated
and in effect as of December 31, 2011, any enterprise zone
designated during 2012, and any revision of an enterprise zone
prior to June 30, 2013, under former Chapter 12.8 (commencing
with 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.

end insert begin insert

(B) A local agency military base recovery area designated as
of the effective date of the act adding this subparagraph, in
accordance with Section 7114 of the Government Code.

end insert

(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 begin delete former enterprise zone end delete begin insert economic development area end insert .

(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 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 begin delete that had not been employed since separation end delete
begin insert who separated end insert from service in the Armed Forces of the United
States begin insert within the 12 months preceding commencement of
employment with the qualified taxpayer end insert .

(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.

begin delete

(IV) Was an ex-offender, within the meaning of Section 23622.7.

end delete begin delete

(V) Is a recipient of CalWORKs or General Assistance.

end delete begin insert

(IV) Is an ex-offender previously convicted of a felony.

end insert begin insert

(V) Is a recipient of either CalWORKs, in accordance with
Article 2 (commencing with Section 11250) of Chapter 2 of Part
3 of Division 9 of the Welfare and Institutions Code, or general
assistance, in accordance with Section 17000.5 of the Welfare and
Institutions Code.

end insert

(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 begin delete former
enterprise zone end delete begin insert economic development area end insert 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)  begin delete That end delete begin insert (i) end insert begin insert   end insert begin insert Except as provided in clause (ii), that end insert 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.

begin insert

(ii) (I) In the case of a qualified employee employed in a
designated pilot area, that portion of wages paid or incurred by
the qualified taxpayer during the taxable year to each qualified
full-time employee that exceeds ten dollars ($10) per hour or an
equivalent amount for salaried employees.

end insert begin insert

(II) For purposes of this clause:

end insert begin insert

(aa) “Designated pilot area” means an area designated as a
designated pilot area by the Governor’s Office of Business and
Economic Development.

end insert begin insert

(ab) Areas that may be designated as a designated pilot area
are limited to areas within a designated census tract or an
economic development area with average wages less than the
statewide average wages, based on information from the Labor
Market Division of the Employment Development Department,
and areas within a designated census tract or an economic
development area based on high poverty or high unemployment.

end insert begin insert

(ac) The total number of designated pilot areas that may be
designated is limited to five, one or more of which must be an area
within five or fewer designated census tracts within a single county
based on high poverty or high unemployment or an area within
an economic development area based on high poverty or high
unemployment.

end insert begin insert

(ad) The designation of a designated pilot area shall be
applicable for a period of four calendar years, commencing with
the first calendar year for which the designation of a designated
pilot area is effective. The applicable period of a designated pilot
area may be extended, in the sole discretion of the Governor’s
Office of Business and Economic Development, for an additional
period of up to three calendar years. The applicable period, and
any extended period, shall not extend beyond December 31, 2020.

end insert begin insert

(III) The designation of an area as a designated pilot area and
the extension of the applicable period of a designated pilot area
shall be at the sole discretion of the Governor’s Office of Business
and Economic Development and shall not be subject to
administrative appeal or judicial review.

end insert

(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 begin delete former enterprise zone end delete begin insert end insert begin insert economic
development area end insert 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 begin delete a former
enterprise zone end delete begin insert an economic development area end insert ceases to be begin delete a
former enterprise zone end delete begin insert an end insert begin insert economic development area end insert , 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 begin delete a former enterprise zone end delete begin insert an end insert
begin insert economic development area end insert ceases to be begin delete a former enterprise zone,
ad end delete begin insert an economic development area, as end insert 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 begin insert or the economic development area was
still in existence end insert .

begin insert

begin insert SEC. 5. end insert   

end insert

begin insert Section 23689 of the end insert begin insert Revenue and Taxation Code end insert begin insert , as
added by Section 38 of Assembly Bill 93 of the 2013-14 Regular
Session, is amended to read: end insert

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 begin insert credit under this section shall be allocated by GO-Biz
with respect to the 2013-14 fiscal year through and including the
2017- end insert begin insert 18 fiscal year. The end insert amount of credit allocated to a taxpayer
begin delete for a taxable end delete begin insert with respect to a fiscal end insert 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 begin insert the taxable year or years
for which the credit allocated shall be allowed, end insert a minimum
compensation level begin insert , end insert 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 subparagraph (D):

(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 begin delete 2018-19 end delete
begin insert 2017- end insert begin insert 18 end insert , 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 begin delete for any of the three succeeding fiscal
years end delete begin insert the next fiscal year end insert .

(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).

(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.

begin insert

begin insert SEC. 6. end insert   

end insert

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

begin insert

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

end insert begin insert

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

end insert begin insert

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

end insert begin insert

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

end insert

begin delete SEC. 3. end delete
begin insert SEC. 7. end insert   

begin insert Section 1 of this bill that amends Section 6377.1 of the
Revenue and Taxation Code, as added by Assembly Bill 93 of the
2013-14 Regular Session, end insert Section begin delete 1 end delete begin insert 2 end insert 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, begin insert Section 3 of
this bill that amends Section 17059.2 of the Revenue and Taxation
Code, as added by Assembly Bill 93 of the 2013-14 Regular
Session, Section 4 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, end insert and Section begin delete 2 end delete begin insert 5 end insert of this bill that amends
Section begin delete 23626 end delete begin insert 23689 end insert 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 begin delete 1 and 2 end delete begin insert 1, 2, 3, 4, and 5 end insert of this bill are subject to Section
47 of Assembly Bill 93 of the 2013-14 Regular Session.

begin delete SEC. 4. end delete
begin insert SEC. 8. end insert   

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.