Amended in Senate April 24, 2013

Amended in Senate April 1, 2013

Senate BillNo. 434


Introduced bybegin delete Senatorend deletebegin insert Senatorsend insert Hillbegin insert and Wolkend insert

begin insert

(Coauthors: Assembly Members Gordon and Mullin)

end insert

February 21, 2013


An act to amend and repeal Sections 17053.34, 17053.46, 17053.47, 17053.74, 23622.7, 23622.8, 23634, and 23646 of,begin delete andend delete to add Section 41 to,begin insert and to add and repeal Sections 17053.90 and 23690 ofend insert the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.

LEGISLATIVE COUNSEL’S DIGEST

SB 434, as amended, Hill. Personal income and corporation taxes: hiring credits: enterprise zones, LAMBRAs, manufacturing enhancement areas, and targeted tax areas.

The Personal Income Tax Law and the Corporation Tax Law allow credits for hiring employees, based on qualified wages, in an enterprise zone, a LAMBRA, a manufacturing enhancement area, and a targeted tax area.

This bill would, among other things, revise the percentage of qualified wages allowed per year of employment with regard to determining the creditbegin delete amount;end deletebegin insert amount,end insert limit the application of these credits to only the qualified wages for each net increase of qualified employees, as specified, limit credit eligibilitybegin delete forend deletebegin insert with respect toend insert taxpayers that relocate to an enterprise zone, a LAMBRA, a manufacturing enhancement area, or a targeted tax area from within the state to those taxpayers that offer each employee from the previous location or locations a writtenbegin delete bona fide offer of employment in the new location;end deletebegin insert notice of transfer to the new location with comparable compensationend insertbegin insert,end insert revise the definitions of “qualified wages” and “qualified taxpayer,” cap the aggregate amount of credit allowed per taxable year for specified hiring credits, as provided, and require the Franchise Tax Board to publish specified information on its Internet Web site, as provided.

begin insert

This bill would make the credit inoperative on January 1, 2019, and, as of December 1, 2019, would repeal the credit for a taxpayer who employs a qualified employee in an enterprise zone, as specified. The bill would instead allow a credit for a taxpayer who hires a qualified full-time employee, as specified, and allow a credit for a taxpayer who, among other things, maintains a net increase in qualified full-time employees, as specified.

end insert

This bill would additionally prohibit a person from charging a contingent fee, as defined, for services rendered in connection with a tax credit relating to enterprise zones, LAMBRAs, manufacturing enhancement areas, or targeted tax areas and would impose a penalty for the violation of this prohibition, as specified. This bill would require that, upon request of the Franchise Tax Board, that a person rendering these services provide, under penalty of perjury, a written certification that a fee for those services does not include a contingent fee.

By expanding the definition of an existing crime, this bill imposes a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIII A of the California Constitution, and thus would require for passage the approval of 23 of the membership of each house of the Legislature.

This bill would take effect immediately as a tax levy.

Vote: 23. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

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

P2    1

SECTION 1.  

Section 41 is added to the Revenue and Taxation
2Code
, to read:

P3    1

41.  

(a) Notwithstanding any other law, a person shall not
2charge a contingent fee for services rendered in connection with
3a tax credit relating to an enterprise zone, a LAMBRA, a
4manufacturing enhancement area, or a targeted tax area.

5(b) For purposes of this section, “contingent fee” means any fee
6charged upon the occurrence of a contingency and includes, but
7is not limited to, a fee that is based on a percentage of the refund
8reported on a return, a fee that is based on a percentage of the taxes
9reduced, or a fee that depends upon the specific tax result attained.

10(c) A penalty shall be imposed under this section upon the
11person charging a contingent fee for services rendered in
12 connection with a tax credit relating to an enterprise zone, a
13LAMBRA, a manufacturing enhancement area, or a targeted tax
14area in an amount that is the greater of five thousand dollars
15($5,000) or 100 percent of the contingent fee charged, whether or
16not any contingent fee was actually paid or otherwise received,
17directly or indirectly, by the service provider.

18(d) (1) The penalty imposed under subdivision (c) shall be due
19and payable upon notice and demand by the Franchise Tax Board.

20(2) Article 3 (commencing with Section 19031) of Part 10.2
21shall not apply with respect to the assessment or collection of any
22penalty imposed under subdivision (c).

23(e) The Legislature finds and declares that contingent fees for
24services rendered in connection with a tax credit relating to an
25enterprise zone, a LAMBRA, a manufacturing enhancement area,
26or a targeted tax area are against public policy and any contract or
27arrangement that provides for a contingent fee is void and
28unenforceable.

29(f) Any person rendering services in connection with a tax credit
30relating to an enterprise zone, a LAMBRA, a manufacturing
31enhancement area, or a targeted tax area may be required to
32provide, upon request of the board of the Franchise Tax Board, a
33written certification, submitted under penalty of perjury, that the
34fee for those services does not include, in whole or in part, a
35contingent fee.

36(g) The Franchise Tax Board may prescribe rules, guidelines,
37or procedures necessary or appropriate to carry out the purposes
38of this section.

39(h) This section shall apply to all contracts or arrangements that
40provide for a fee for services rendered in connection with a tax
P4    1credit relating to an enterprise zone, a LAMBRA, a manufacturing
2enhancement area, or a targeted tax area on or after the effective
3date of this act.

4

SEC. 2.  

Section 17053.34 of the Revenue and Taxation Code
5 is amended to read:

6

17053.34.  

(a) (1) For each taxable year beginning on or after
7January 1, 1998, and before January 1, 2013, there shall be allowed
8a credit against the “net tax” (as defined in Section 17039) to a
9qualified taxpayer who employs a qualified employee in a targeted
10tax area during the taxable year. The credit shall be equal to the
11sum of each of the following:

12(A) Fifty percent of qualified wages in the first year of
13employment.

14(B) Forty percent of qualified wages in the second year of
15employment.

16(C) Thirty percent of qualified wages in the third year of
17employment.

18(D) Twenty percent of qualified wages in the fourth year of
19employment.

20(E) Ten percent of qualified wages in the fifth year of
21employment.

22(2) (A) For each taxable year beginning on or after January 1,
232013, and before January 1, 2019, there shall be allowed a credit
24against the “net tax,” as defined in Section 17039, to a qualified
25taxpayer who employs a qualified employee in a targeted tax area
26during the taxable year. The credit shall be equal to the sum of
27each of the following:

28(i) Ten percent of qualified wages in the first year of
29employment.

30(ii) Ten percent of qualified wages in the second year of
31employment.

32(iii) Thirty percent of qualified wages in the third year of
33employment.

34(iv) Forty percent of qualified wages in the fourth year of
35employment.

36(v) Fifty percent of qualified wages in the fifth year of
37employment.

38(B) The credit shall be allowed only with respect to qualified
39wages paid for each net increase in qualified employees. A net
P5    1increase shall be determined by subtracting from the amount
2determined in clause (i) the amount determined in clause (ii).

3(i) The total number of qualified employees employed in the
4state in the preceding taxable year by the qualified taxpayer and
5by any trade or business acquired by the qualified taxpayer during
6the preceding taxable year.

7(ii) The total number of qualified employees employed in the
8state in the current taxable year by the qualified taxpayer and by
9any trade or business acquired by the qualified taxpayer during
10the current taxable year.

11(C) If a qualified taxpayer relocated to a targeted tax area from
12within the state during the taxable year for which the credit is
13claimed, the qualified taxpayer shall be allowed a credit with
14respect to qualified wages for each net increase in qualified
15employees only if the qualified taxpayerbegin delete makesend deletebegin insert providesend insert each
16employee at the previous location or locations a written begin delete bona fide
17offer of employment at the new location.end delete
begin insert notice of transfer to the
18new location with comparable compensation. The qualified
19taxpayer shall provide self-certification with documentation when
20submitting a voucher application.end insert

21(b) For purposes of this section:

22(1) “Qualified wages” means:

23(A) That portion of wages paid or incurred by the qualified
24taxpayer during the taxable year to qualified employees that
25exceeds 200 percent of the minimum wage and does not exceed
26500 percent of the minimum wage.

27(B) Wages received during the 60-month period beginning with
28the first day the employee commences employment with the
29qualified taxpayer. Reemployment in connection with any increase,
30including a regularly occurring seasonal increase, in the trade or
31business operations of the qualified taxpayer does not constitute
32commencement of employment for purposes of this section.

33(C) Qualified wages do not include any wages paid or incurred
34by the qualified taxpayer on or after the targeted tax area expiration
35date. However, wages paid or incurred with respect to qualified
36employees who are employed by the qualified taxpayer within the
37targeted tax area within the 60-month period prior to the targeted
38tax area expiration date shall continue to qualify for the credit
39under this section after the targeted tax area expiration date, in
P6    1accordance with all provisions of this section applied as if the
2targeted tax area designation were still in existence and binding.

3(2) “Minimum wage” means the wage established by the
4Industrial Welfare Commission as provided for in Chapter 1
5(commencing with Section 1171) of Part 4 of Division 2 of the
6Labor Code.

7(3) “Targeted tax area expiration date” means the date the
8targeted tax area designation expires, is revoked, is no longer
9binding, or becomes inoperative.

10(4) (A) “Qualified employee” means an individual who meets
11all of the following requirements:

12(i) At least 90 percent of his or her services for the qualified
13taxpayer during the taxable year are directly related to the conduct
14of the qualified taxpayer’s trade or business located in a targeted
15tax area.

16(ii) Performs at least 50 percent of his or her services for the
17qualified taxpayer during the taxable year in a targeted tax area.

18(iii) Is hired by the qualified taxpayer after the date of original
19designation of the area in which services were performed as a
20targeted tax area.

21(iv) Is any of the following:

22(I) Immediately preceding the qualified employee’s
23commencement of employment with the qualified taxpayer, was
24a person eligible for services under the federal Job Training
25Partnership Act (29 U.S.C. Sec. 1501 et seq.), or its successor,
26who is receiving, or is eligible to receive, subsidized employment,
27training, or services funded by the federalbegin delete Job Training Partnership
28Act,end delete
begin insert Workforce Investment Act of 1998 (29 U.S.C. Sec. 2801 et
29seq.),end insert
or its successor.

30(II) Immediately preceding the qualified employee’s
31commencement of employment with the qualified taxpayer, was
32a person eligible to be a voluntary or mandatory registrant under
33the Greater Avenues for Independence Act of 1985 (GAIN)
34provided for pursuant to Article 3.2 (commencing with Section
3511320) of Chapter 2 of Part 3 of Division 9 of the Welfare and
36Institutions Code, or its successor.

37(III) Immediately preceding the qualified employee’s
38commencement of employment with the qualified taxpayer, was
39an economically disadvantaged individual 14 years of age or older.

P7    1(IV) Immediately preceding the qualified employee’s
2commencement of employment with the qualified taxpayer, was
3a dislocated worker who meets any of the following:

begin delete

4(aa)

end delete

5begin insert(ia)end insert Has been terminated or laid off or who has received a notice
6of termination or layoff from employment, is eligible for or has
7exhausted entitlement to unemployment insurance benefits, and
8is unlikely to return to his or her previous industry or occupation.

begin delete

9(bb)

end delete

10begin insert(end insertbegin insertib)end insert Has been terminated or has received a notice of termination
11of employment as a result of any permanent closure or any
12substantial layoff at a plant, facility, or enterprise, including an
13individual who has not received written notification but whose
14employer has made a public announcement of the closure or layoff.

begin delete

15(cc)

end delete

16begin insert(ic)end insert Is long-term unemployed and has limited opportunities for
17employment or reemployment in the same or a similar occupation
18in the area in which the individual resides, including an individual
1955 years of age or older who may have substantial barriers to
20employment by reason of age.

begin delete

21(dd)

end delete

22begin insert(id)end insert Was self-employed (including farmers and ranchers) and
23is unemployed as a result of general economic conditions in the
24community in which he or she resides or because of natural
25disasters.

begin delete

26(ee)

end delete

27begin insert(ie)end insert Was a civilian employee of the Department of Defense
28employed at a military installation being closed or realigned under
29the Defense Base Closure and Realignment Act of 1990.

begin delete

30(ff)

end delete

31begin insert(if)end insert Was an active member of the Armed Forces or National
32Guard as of September 30, 1990, and was either involuntarily
33separated or separated pursuant to a special benefits program.

begin delete

34(gg)

end delete

35begin insert(ig)end insert Is a seasonal or migrant worker who experiences chronic
36seasonal unemployment and underemployment in the agriculture
37industry, aggravated by continual advancements in technology and
38mechanization.

begin delete

39(hh)

end delete

P8    1begin insert(ih)end insert Has been terminated or laid off, or has received a notice of
2termination or layoff, as a consequence of compliance with the
3Clean Air Act.

4(V) Immediately preceding the qualified employee’s
5commencement of employment with the qualified taxpayer, was
6a disabled individual who is eligible for or enrolled in, or has
7completed a state rehabilitation plan or is a service-connected
8disabled veteran, veteran of the Vietnam era, or veteran who is
9recently separated from military service.

10(VI) Immediately preceding the qualified employee’s
11commencement of employment with the qualified taxpayer, was
12an ex-offender. An individual shall be treated as convicted if he
13or she was placed on probation by a state court without a finding
14of guilty.

15(VII) Immediately preceding the qualified employee’s
16commencement of employment with the qualified taxpayer, was
17a person eligible for or a recipient of any of the following:

begin delete

18(aa)

end delete

19begin insert(ia)end insert Federal Supplemental Security Income benefits.

begin delete

20(bb)

end delete

21begin insert(ib)end insert Aid to Families with Dependent Children.

begin delete

22(cc)

end delete

23begin insert(ic)end insert CalFresh benefits.

begin delete

24(dd)

end delete

25begin insert(id)end insert State and local general assistance.

26(VIII) Immediately preceding the qualified employee’s
27commencement of employment with the qualified taxpayer, was
28a member of a federally recognized Indian tribe, band, or other
29 group of Native American descent.

30(IX) Immediately preceding the qualified employee’s
31commencement of employment with the qualified taxpayer, was
32a resident of a targeted tax area.

33(X) Immediately preceding the qualified employee’s
34commencement of employment with the taxpayer, was a member
35of a targeted group as defined in Section 51(d) of the Internal
36Revenue Code, or its successor.

37(B) Priority for employment shall be provided to an individual
38who is enrolled in a qualified program under the federal Job
39Training Partnership Act or the Greater Avenues for Independence
40Act of 1985 or who is eligible as a member of a targeted group
P9    1under the Work Opportunity Tax Credit (Section 51 of the Internal
2Revenue Code), or its successor.

3(5) (A) “Qualified taxpayer” means a person or entity that meets
4both of the following:

5(i) Is engaged in a trade or business within a targeted tax area
6designated pursuant to Chapter 12.93 (commencing with Section
77097) of Division 7 of Title 1 of the Government Code.

8(ii) Is engaged in those lines of business described in Codes
92000 to 2099, inclusive; 2200 to 3999, inclusive; 4200 to 4299,
10inclusive; 4500 to 4599, inclusive; and 4700 to 5199, inclusive,
11of the Standard Industrial Classification (SIC) Manual published
12by the United States Office of Management and Budget, 1987
13edition.

14(B) In the case of any passthrough entity, the determination of
15whether a taxpayer is a qualified taxpayer under this section shall
16be made at the entity level and any credit under this section or
17Section 23634 shall be allowed to the passthrough entity and passed
18through to the partners or shareholders in accordance with
19applicable provisions of this part or Part 11 (commencing with
20Section 23001). For purposes of this subdivision, the term
21“passthrough entity” means any partnership or “S” corporation.

22(C) “Qualified taxpayer” shall not include employers that
23provide temporary help services, as described in Code 561320 of
24the North American Industry Classification System (NAICS).

25(6) “Seasonal employment” means employment by a qualified
26taxpayer that has regular and predictable substantial reductions in
27trade or business operations.

28(c) If the qualified taxpayer is allowed a credit for qualified
29wages pursuant to this section, only one credit shall be allowed to
30the taxpayer under this part with respect to those qualified wages.

31(d) The qualified taxpayer shall do both of the following:

32(1) Obtain from the Employment Development Department, as
33permitted by federal law, the local county or city Job Training
34Partnership Act administrative entity, the local county GAIN office
35or social services agency, or the local government administering
36the targeted tax area, a certification that provides that a qualified
37employee meets the eligibility requirements specified in clause
38(iv) of subparagraph (A) of paragraph (4) of subdivision (b). The
39Employment Development Department may provide preliminary
40screening and referral to a certifying agency. The Department of
P10   1Housing and Community Development shall develop regulations
2governing the issuance of certificates pursuant to subdivision (g)
3of Section 7097 of the Government Code, and shall develop forms
4for this purpose.

5(2) Retain a copy of the certification and provide it to the
6Franchise Tax Board annually.

7(e) (1) For purposes of this section:

8(A) All employees of trades or businesses, which are not
9incorporated, that are under common control shall be treated as
10employed by a single taxpayer.

11(B) The credit, if any, allowable by this section with respect to
12each trade or business shall be determined by reference to its
13proportionate share of the expense of the qualified wages giving
14rise to the credit, and shall be allocated in that manner.

15(C) Principles that apply in the case of controlled groups of
16corporations, as specified in subdivision (d) of Section 23634,
17shall apply with respect to determining employment.

18(2) If an employer acquires the major portion of a trade or
19business of another employer (hereinafter in this paragraph referred
20to as the “predecessor”) or the major portion of a separate unit of
21a trade or business of a predecessor, then, for purposes of applying
22this section (other than subdivision (f)) for any calendar year ending
23after that acquisition, the employment relationship between a
24qualified employee and an employer shall not be treated as
25terminated if the employee continues to be employed in that trade
26or business.

27(f) (1) (A) If the employment, other than seasonal employment,
28of any qualified employee, with respect to whom qualified wages
29are taken into account under subdivision (a) is terminated by the
30qualified taxpayer at any time during the first 270 days of that
31employment (whether or not consecutive) or before the close of
32the 270th calendar day after the day in which that employee
33completes 90 days of employment with the qualified taxpayer, the
34tax imposed by this part for the taxable year in which that
35employment is terminated shall be increased by an amount equal
36to the credit allowed under subdivision (a) for that taxable year
37and all prior taxable years attributable to qualified wages paid or
38incurred with respect to that employee.

39(B) If the seasonal employment of any qualified employee, with
40respect to whom qualified wages are taken into account under
P11   1subdivision (a) is not continued by the qualified taxpayer for a
2period of 270 days of employment during the 60-month period
3beginning with the day the qualified employee commences seasonal
4employment with the qualified taxpayer, the tax imposed by this
5part, for the taxable year that includes the 60th month following
6the month in which the qualified employee commences seasonal
7employment with the qualified taxpayer, shall be increased by an
8amount equal to the credit allowed under subdivision (a) for that
9taxable year and all prior taxable years attributable to qualified
10wages paid or incurred with respect to that qualified employee.

11(2) (A) Subparagraph (A) of paragraph (1) shall not apply to
12any of the following:

13(i) A termination of employment of a qualified employee who
14voluntarily leaves the employment of the qualified taxpayer.

15(ii) A termination of employment of a qualified employee who,
16before the close of the period referred to in subparagraph (A) of
17paragraph (1), becomes disabled and unable to perform the services
18of that employment, unless that disability is removed before the
19close of that period and the qualified taxpayer fails to offer
20reemployment to that employee.

21(iii) A termination of employment of a qualified employee, if
22it is determined that the termination was due to the misconduct (as
23defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of
24the California Code of Regulations) of that employee.

25(iv) A termination of employment of a qualified employee due
26to a substantial reduction in the trade or business operations of the
27qualified taxpayer.

28(v) A termination of employment of a qualified employee, if
29that employee is replaced by other qualified employees so as to
30create a net increase in both the number of employees and the
31hours of employment.

32(B) Subparagraph (B) of paragraph (1) shall not apply to any
33of the following:

34(i) A failure to continue the seasonal employment of a qualified
35employee who voluntarily fails to return to the seasonal
36employment of the qualified taxpayer.

37(ii) A failure to continue the seasonal employment of a qualified
38employee who, before the close of the period referred to in
39subparagraph (B) of paragraph (1), becomes disabled and unable
40to perform the services of that seasonal employment, unless that
P12   1disability is removed before the close of that period and the
2qualified taxpayer fails to offer seasonal employment to that
3qualified employee.

4(iii) A failure to continue the seasonal employment of a qualified
5employee, if it is determined that the failure to continue the
6seasonal employment was due to the misconduct (as defined in
7Sections 1256-30 to 1256-43, inclusive, of Title 22 of the California
8Code of Regulations) of that qualified employee.

9(iv) A failure to continue seasonal employment of a qualified
10employee due to a substantial reduction in the regular seasonal
11trade or business operations of the qualified taxpayer.

12(v) A failure to continue the seasonal employment of a qualified
13employee, if that qualified employee is replaced by other qualified
14employees so as to create a net increase in both the number of
15seasonal employees and the hours of seasonal employment.

16(C) For purposes of paragraph (1), the employment relationship
17between the qualified taxpayer and a qualified employee shall not
18be treated as terminated by reason of a mere change in the form
19of conducting the trade or business of the qualified taxpayer, if the
20qualified employee continues to be employed in that trade or
21business and the qualified taxpayer retains a substantial interest
22in that trade or business.

23(3) Any increase in tax under paragraph (1) shall not be treated
24as tax imposed by this part for purposes of determining the amount
25of any credit allowable under this part.

26(g) In the case of an estate or trust, both of the following apply:

27(1) The qualified wages for any taxable year shall be apportioned
28between the estate or trust and the beneficiaries on the basis of the
29income of the estate or trust allocable to each.

30(2) Any beneficiary to whom any qualified wages have been
31apportioned under paragraph (1) shall be treated, for purposes of
32this part, as the employer with respect to those wages.

33(h) For purposes of this section, “targeted tax area” means an
34area designated pursuant to Chapter 12.93 (commencing with
35Section 7097) of Division 7 of Title 1 of the Government Code.

36(i) In the case where the credit otherwise allowed under this
37section exceeds the “net tax” for the taxable year, that portion of
38the credit that exceeds the “net tax” may be carried over and added
39to the credit, if any, in succeeding taxable years, until the credit is
P13   1exhausted. The credit shall be applied first to the earliest taxable
2years possible.

3(j) (1) The amount of the credit otherwise allowed under this
4section and Section 17053.33, including any credit carryover from
5prior years, that may reduce the “net tax” for the taxable year shall
6not exceed the amount of tax that would be imposed on the
7qualified taxpayer’s business income attributable to the targeted
8tax area determined as if that attributable income represented all
9of the income of the qualified taxpayer subject to tax under this
10part.

11(2) Attributable income shall be that portion of the taxpayer’s
12California source business income that is apportioned to the
13targeted tax area. For that purpose, the taxpayer’s business income
14attributable to sources in this state first shall be determined in
15accordance with Chapter 17 (commencing with Section 25101) of
16Part 11. That business income shall be further apportioned to the
17targeted tax area in accordance with Article 2 (commencing with
18Section 25120) of Chapter 17 of Part 11, modified for purposes
19of this section in accordance with paragraph (3).

20(3) Business income shall be apportioned to the targeted tax
21area by multiplying the total California business income of the
22taxpayer by a fraction, the numerator of which is the property
23factor plus the payroll factor, and the denominator of which is two.
24For purposes of this paragraph:

25(A) The property factor is a fraction, the numerator of which is
26the average value of the taxpayer’s real and tangible personal
27property owned or rented and used in the targeted tax area during
28the taxable year, and the denominator of which is the average value
29of all the taxpayer’s real and tangible personal property owned or
30rented and used in this state during the taxable year.

31(B) The payroll factor is a fraction, the numerator of which is
32the total amount paid by the taxpayer in the targeted tax area during
33the taxable year for compensation, and the denominator of which
34is the total compensation paid by the taxpayer in this state during
35the taxable year.

36(4) The portion of any credit remaining, if any, after application
37of this subdivision, shall be carried over to succeeding taxable
38years, as if it were an amount exceeding the “net tax” for the
39taxable year, as provided in subdivision (h).

P14   1(5) In the event that a credit carryover is allowable under
2subdivision (h) for any taxable year after the targeted tax area
3expiration date, the targeted tax area shall be deemed to remain in
4existence for purposes of computing the limitation specified in
5this subdivision.

6(k) (1) Forbegin delete each taxable year beginning on or after January 1,
72013, and beforeend delete
begin insert the 2014 calendar year, and each calendar year
8thereafter untilend insert
January 1, 2019, the total aggregate amount of
9credits allowed pursuant to this section shall not exceed the total
10aggregate amount of credits claimed pursuant to this section in the
11begin delete taxable year beginning on or after January 1, 2012, and before
12January 1, 2013,end delete
begin insert 2013 calendar year,end insert as determined by the
13Franchise Tax Board.

14(2) Upon receipt of a timely filed original return, the Franchise
15Tax Board shall allocate the credit to the qualified taxpayer on a
16first-come-first-served basis.

17(l) (1) The Franchise Tax Board shall compile the certifications
18submitted pursuant to paragraph (2) of subdivision (d) and shall
19provide as a searchable database on its Internet Web site, for each
20taxable year beginning on or after January 1,begin delete 2013,end deletebegin insert 2014,end insert and
21before January 1, 2019, the employer names, amounts of tax credit
22claimed, and number of new jobs created for each taxable year
23pursuant to this section, Sections 17053.46, 17053.47, 17053.74,
2423622.7, 23622.8, 23634, and 23646.

25(2) The Franchise Tax Board may prescribe rules, guidelines,
26or procedures necessary or appropriate to carry out the purposes
27of this section, including any guidelines regarding the allocation
28of the credit allowed under this section.

29(m) This section shall remain in effect only until December 1,
302019, and as of that date is repealed.

31

SEC. 3.  

Section 17053.46 of the Revenue and Taxation Code
32 is amended to read:

33

17053.46.  

(a) (1) For each taxable year beginning on or after
34January 1, 1995, and before January 1, 2013, there shall be allowed
35as a credit against the “net tax” (as defined in Section 17039) to a
36qualified taxpayer for hiring a qualified disadvantaged individual
37or a qualified displaced employee during the taxable year for
38employment in the LAMBRA. The credit shall be equal to the sum
39of each of the following:

P15   1(A) Fifty percent of the qualified wages in the first year of
2employment.

3(B) Forty percent of the qualified wages in the second year of
4employment.

5(C) Thirty percent of the qualified wages in the third year of
6 employment.

7(D) Twenty percent of the qualified wages in the fourth year of
8employment.

9(E) Ten percent of the qualified wages in the fifth year of
10employment.

11(2) (A) For each taxable year beginning on or after January 1,
122013, and before January 1, 2019, there shall be allowed as a credit
13against the “net tax,” as defined in Section 17039, to a qualified
14taxpayer for hiring a qualified disadvantaged individual or a
15qualified displaced employee during the taxable year for
16employment in the LAMBRA. The credit shall be equal to the sum
17of each of the following:

18(i) Ten percent of qualified wages in the first year of
19employment.

20(ii) Ten percent of qualified wages in the second year of
21employment.

22(iii) Thirty percent of qualified wages in the third year of
23employment.

24(iv) Forty percent of qualified wages in the fourth year of
25employment.

26(v) Fifty percent of qualified wages in the fifth year of
27employment.

28(B) The credit shall be allowed only with respect to qualified
29wages paid for each net increase in qualified employees. A net
30increase shall be determined by subtracting from the amount
31determined in clause (i) the amount determined in clause (ii). For
32purposes of this subparagraph, “qualified employees” means
33qualified disadvantaged individuals and qualified displaced
34employees.

35(i) The total number of qualified employees employed in the
36state in the preceding taxable year by the qualified taxpayer and
37by any trade or business acquired by the qualified taxpayer during
38the preceding taxable year.

39(ii) The total number of qualified employees employed in the
40state in the current taxable year by the qualified taxpayer and by
P16   1any trade or business acquired by the qualified taxpayer during
2the current taxable year.

3(C) If a qualified taxpayer relocated to abegin delete targeted tax areaend delete
4begin insert LAMBRAend insert from within the state during the taxable year for which
5the credit is claimed, the qualified taxpayer shall be allowed a
6credit with respect to qualified wages for each net increase in
7qualified employees only if the qualified taxpayerbegin delete makesend deletebegin insert providesend insert
8 each employee at the previous location or locations a writtenbegin delete bona
9fide offer of employment at the new location.end delete
begin insert notice of transfer to
10the new location with comparable compensation.end insert

11(b) For purposes of this section:

12(1) “Qualified wages” means:

13(A) That portion of wages paid or incurred by the employer
14during the taxable year to qualified disadvantaged individuals or
15qualified displaced employees that exceeds 200 percent of the
16minimum wage and does not exceed 500 percent of the minimum
17wage.

18(B) The total amount of qualified wages which may be taken
19into account for purposes of claiming the credit allowed under this
20section shall not exceed two million dollars ($2,000,000) per
21taxable year.

22(C) Wages received during the 60-month period beginning with
23the first day the individual commences employment with the
24taxpayer. Reemployment in connection with any increase, including
25a regularly occurring seasonal increase, in the trade or business
26operations of the qualified taxpayer does not constitute
27commencement of employment for purposes of this section.

28(D) Qualified wages do not include any wages paid or incurred
29by the qualified taxpayer on or after the LAMBRA expiration date.
30However, wages paid or incurred with respect to qualified
31disadvantaged individuals or qualified displaced employees who
32are employed by the qualified taxpayer within the LAMBRA within
33the 60-month period prior to the LAMBRA expiration date shall
34continue to qualify for the credit under this section after the
35LAMBRA expiration date, in accordance with all provisions of
36this section applied as if the LAMBRA designation were still in
37existence and binding.

38(2) “Minimum wage” means the wage established by the
39Industrial Welfare Commission as provided for in Chapter 1
P17   1(commencing with Section 1171) of Part 4 of Division 2 of the
2Labor Code.

3(3) “LAMBRA” means a local agency military base recovery
4area designated in accordance with Section 7114 of the Government
5Code.

6(4) “Qualified disadvantaged individual” means an individual
7who satisfies all of the following requirements:

8(A) (i) At least 90 percent of whose services for the taxpayer
9during the taxable year are directly related to the conduct of the
10taxpayer’s trade or business located in a LAMBRA.

11(ii) Who performs at least 50 percent of his or her services for
12the taxpayer during the taxable year in the LAMBRA.

13(B) Who is hired by the employer after the designation of the
14area as a LAMBRA in which the individual’s services were
15primarily performed.

16(C) Who is any of the following immediately preceding the
17individual’s commencement of employment with the taxpayer:

18(i) An individual who has been determined eligible for services
19under the federalbegin delete Job Training Partnershipend deletebegin insert Workforce Investmentend insert
20 Actbegin insert of 1998end insert (29 U.S.C. Sec.begin delete 1501end deletebegin insert 2801end insert et seq.).

21(ii) Any voluntary or mandatory registrant under the Greater
22Avenues for Independence Act of 1985 as provided pursuant to
23Article 3.2 (commencing with Section 11320) of Chapter 2 of Part
243 of Division 9 of the Welfare and Institutions Code.

25(iii) An economically disadvantaged individual age 16 years or
26older.

27(iv) A dislocated worker who meets any of the following
28conditions:

29(I) Has been terminated or laid off or who has received a notice
30of termination or layoff from employment, is eligible for or has
31exhausted entitlement to unemployment insurance benefits, and
32is unlikely to return to his or her previous industry or occupation.

33(II) Has been terminated or has received a notice of termination
34of employment as a result of any permanent closure or any
35substantial layoff at a plant, facility, or enterprise, including an
36individual who has not received written notification but whose
37employer has made a public announcement of the closure or layoff.

38(III) Is long-term unemployed and has limited opportunities for
39employment or reemployment in the same or a similar occupation
40in the area in which the individual resides, including an individual
P18   155 years of age or older who may have substantial barriers to
2employment by reason of age.

3(IV) Was self-employed (including farmers and ranchers) and
4is unemployed as a result of general economic conditions in the
5community in which he or she resides or because of natural
6disasters.

7(V) Was a civilian employee of the Department of Defense
8employed at a military installation being closed or realigned under
9the Defense Base Closure and Realignment Act of 1990.

10(VI) Was an active member of the Armed Forces or National
11Guard as of September 30, 1990, and was either involuntarily
12separated or separated pursuant to a special benefits program.

13(VII) Experiences chronic seasonal unemployment and
14underemployment in the agriculture industry, aggravated by
15continual advancements in technology and mechanization.

16(VIII) Has been terminated or laid off or has received a notice
17of termination or layoff as a consequence of compliance with the
18Clean Air Act.

19(v) An individual who is enrolled in or has completed a state
20rehabilitation plan or is a service-connected disabled veteran,
21veteran of the Vietnam era, or veteran who is recently separated
22from military service.

23(vi) An ex-offender. An individual shall be treated as convicted
24if he or she was placed on probation by a state court without a
25finding of guilty.

26(vii) A recipient of:

27(I) Federal Supplemental Security Income benefits.

28(II) Aid to Families with Dependent Children.

29(III) CalFresh benefits.

30(IV) State and local general assistance.

31(viii) Is a member of a federally recognized Indian tribe, band,
32or other group of Native American descent.

33(5) “Qualified taxpayer” means a taxpayer or partnership that
34conducts a trade or business within a LAMBRA and, for the first
35two taxable years, has a net increase in jobs (defined as 2,000 paid
36 hours per employee per year) of one or more employees in the
37LAMBRA.

38(A) The net increase in the number of jobs shall be determined
39by subtracting the total number of full-time employees (defined
40as 2,000 paid hours per employee per year) the taxpayer employed
P19   1in this state in the taxable year prior to commencing business
2operations in the LAMBRA from the total number of full-time
3employees the taxpayer employed in this state during the second
4taxable year after commencing business operations in the
5LAMBRA. For taxpayers who commence doing business in this
6state with their LAMBRA business operation, the number of
7employees for the taxable year prior to commencing business
8operations in the LAMBRA shall be zero. If the taxpayer has a net
9increase in jobs in the state, the credit shall be allowed only if one
10or more full-time employees is employed within the LAMBRA.

11(B) The total number of employees employed in the LAMBRA
12shall equal the sum of both of the following:

13(i) The total number of hours worked in the LAMBRA for the
14taxpayer by employees (not to exceed 2,000 hours per employee)
15who are paid an hourly wage divided by 2,000.

16(ii) The total number of months worked in the LAMBRA for
17the taxpayer by employees who are salaried employees divided
18by 12.

19(C) In the case of a taxpayer who first commences doing
20business in the LAMBRA during the taxable year, for purposes of
21clauses (i) and (ii), respectively, of subparagraph (B), the divisors
22“2,000” and “12” shall be multiplied by a fraction, the numerator
23of which is the number of months of the taxable year that the
24taxpayer was doing business in the LAMBRA and the denominator
25of which is 12.

26(D) “Qualified taxpayer” shall not include employers that
27provide temporary help services, as described in Code 561320 of
28the North American Industry Classification System (NAICS).

29(6) “Qualified displaced employee” means an individual who
30satisfies all of the following requirements:

31(A) Any civilian or military employee of a base or former base
32who has been displaced as a result of a federal base closure act.

33(B) (i) At least 90 percent of whose services for the taxpayer
34during the taxable year are directly related to the conduct of the
35taxpayer’s trade or business located in a LAMBRA.

36(ii) Who performs at least 50 percent of his or her services for
37the taxpayer during the taxable year in a LAMBRA.

38(C) Who is hired by the employer after the designation of the
39area in which services were performed as a LAMBRA.

P20   1(7) “Seasonal employment” means employment by a qualified
2taxpayer that has regular and predictable substantial reductions in
3trade or business operations.

4(8) “LAMBRA expiration date” means the date the LAMBRA
5designation expires, is no longer binding, or becomes inoperative.

6(c) For qualified disadvantaged individuals or qualified displaced
7employees hired on or after January 1, 2001, the taxpayer shall do
8both of the following:

9(1) Obtain from the Employment Development Department, as
10permitted by federal law, the local county or city Job Training
11 Partnership Act administrative entity, the local county GAIN office
12or social services agency, or the local government administering
13the LAMBRA, a certification that provides that a qualified
14disadvantaged individual or qualified displaced employee meets
15the eligibility requirements specified in subparagraph (C) of
16paragraph (4) of subdivision (b) or subparagraph (A) of paragraph
17(6) of subdivision (b). The Employment Development Department
18may provide preliminary screening and referral to a certifying
19agency. The Department of Housing and Community Development
20shall develop regulations governing the issuance of certificates
21pursuant to Section 7114.2 of the Government Code and shall
22develop forms for this purpose.

23(2) Retain a copy of the certification and provide it to the
24Franchise Tax Board annually.

25(d) (1) For purposes of this section, both of the following apply:

26(A) All employees of trades or businesses that are under
27common control shall be treated as employed by a single employer.

28(B) The credit (if any) allowable by this section with respect to
29each trade or business shall be determined by reference to its
30proportionate share of the qualified wages giving rise to the credit.

31The regulations prescribed under this paragraph shall be based
32on principles similar to the principles that apply in the case of
33controlled groups of corporations as specified in subdivision (e)
34of Section 23622.

35(2) If an employer acquires the major portion of a trade or
36business of another employer (hereinafter in this paragraph referred
37to as the “predecessor”) or the major portion of a separate unit of
38a trade or business of a predecessor, then, for purposes of applying
39this section (other than subdivision (d)) for any calendar year
40ending after that acquisition, the employment relationship between
P21   1an employee and an employer shall not be treated as terminated if
2the employee continues to be employed in that trade or business.

3(e) (1) (A) If the employment, other than seasonal employment,
4of any employee, with respect to whom qualified wages are taken
5into account under subdivision (a), is terminated by the taxpayer
6at any time during the first 270 days of that employment (whether
7or not consecutive) or before the close of the 270th calendar day
8after the day in which that employee completes 90 days of
9employment with the taxpayer, the tax imposed by this part for
10the taxable year in which that employment is terminated shall be
11increased by an amount (determined under those regulations) equal
12to the credit allowed under subdivision (a) for that taxable year
13and all prior taxable years attributable to qualified wages paid or
14incurred with respect to that employee.

15(B) If the seasonal employment of any qualified disadvantaged
16individual, with respect to whom qualified wages are taken into
17account under subdivision (a), is not continued by the qualified
18taxpayer for a period of 270 days of employment during the
1960-month period beginning with the day the qualified
20disadvantaged individual commences seasonal employment with
21the qualified taxpayer, the tax imposed by this part, for the taxable
22year that includes the 60th month following the month in which
23the qualified disadvantaged individual commences seasonal
24employment with the qualified taxpayer, shall be increased by an
25amount equal to the credit allowed under subdivision (a) for that
26taxable year and all prior taxable years attributable to qualified
27wages paid or incurred with respect to that qualified disadvantaged
28individual.

29(2) (A) Subparagraph (A) of paragraph (1) shall not apply to
30any of the following:

31(i) A termination of employment of an employee who voluntarily
32leaves the employment of the taxpayer.

33(ii) A termination of employment of an individual who, before
34the close of the period referred to in subparagraph (A) of paragraph
35(1), becomes disabled to perform the services of that employment,
36unless that disability is removed before the close of that period
37and the taxpayer fails to offer reemployment to that individual.

38(iii) A termination of employment of an individual, if it is
39determined that the termination was due to the misconduct (as
P22   1defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of
2the California Code of Regulations) of that individual.

3(iv) A termination of employment of an individual due to a
4substantial reduction in the trade or business operations of the
5taxpayer.

6(v) A termination of employment of an individual, if that
7individual is replaced by other qualified employees so as to create
8a net increase in both the number of employees and the hours of
9employment.

10(B) Subparagraph (B) of paragraph (1) shall not apply to any
11of the following:

12(i) A failure to continue the seasonal employment of a qualified
13disadvantaged individual who voluntarily fails to return to the
14seasonal employment of the qualified taxpayer.

15(ii) A failure to continue the seasonal employment of a qualified
16disadvantaged individual who, before the close of the period
17referred to in subparagraph (B) of paragraph (1), becomes disabled
18and unable to perform the services of that seasonal employment,
19unless that disability is removed before the close of that period
20and the qualified taxpayer fails to offer seasonal employment to
21that individual.

22(iii) A failure to continue the seasonal employment of a qualified
23disadvantaged individual, if it is determined that the failure to
24continue the seasonal employment was due to the misconduct (as
25defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of
26the California Code of Regulations) of that qualified disadvantaged
27individual.

28(iv) A failure to continue seasonal employment of a qualified
29disadvantaged individual due to a substantial reduction in the
30regular seasonal trade or business operations of the qualified
31taxpayer.

32(v) A failure to continue the seasonal employment of a qualified
33disadvantaged individual, if that individual is replaced by other
34qualified displaced employees so as to create a net increase in both
35the number of seasonal employees and the hours of seasonal
36employment.

37(C) For purposes of paragraph (1), the employment relationship
38between the taxpayer and an employee shall not be treated as
39terminated by reason of a mere change in the form of conducting
40the trade or business of the taxpayer, if the employee continues to
P23   1be employed in that trade or business and the taxpayer retains a
2substantial interest in that trade or business.

3(3) Any increase in tax under paragraph (1) shall not be treated
4as tax imposed by this part for purposes of determining the amount
5of any credit allowable under this part.

6(4) At the close of the second taxable year, if the taxpayer has
7not increased the number of its employees as determined by
8paragraph (5) of subdivision (b), then the amount of the credit
9previously claimed shall be added to the taxpayer’s net tax for the
10taxpayer’s second taxable year.

11(f) In the case of an estate or trust, both of the following apply:

12(1) The qualified wages for any taxable year shall be apportioned
13between the estate or trust and the beneficiaries on the basis of the
14income of the estate or trust allocable to each.

15(2) Any beneficiary to whom any qualified wages have been
16apportioned under paragraph (1) shall be treated (for purposes of
17this part) as the employer with respect to those wages.

18(g) The credit shall be reduced by the credit allowed under
19Section 17053.7. The credit shall also be reduced by the federal
20credit allowed under Section 51 of the Internal Revenue Code.

21In addition, any deduction otherwise allowed under this part for
22the wages or salaries paid or incurred by the taxpayer upon which
23the credit is based shall be reduced by the amount of the credit,
24prior to any reduction required by subdivision (h) or (i).

25(h) In the case where the credit otherwise allowed under this
26section exceeds the “net tax” for the taxable year, that portion of
27the credit that exceeds the “net tax” may be carried over and added
28to the credit, if any, in succeeding years, until the credit is
29exhausted. The credit shall be applied first to the earliest taxable
30years possible.

31(i) (1) The amount of credit otherwise allowed under this section
32and Section 17053.45, including prior year credit carryovers, that
33may reduce the “net tax” for the taxable year shall not exceed the
34amount of tax that would be imposed on the taxpayer’s business
35income attributed to a LAMBRA determined as if that attributed
36income represented all of the net income of the taxpayer subject
37to tax under this part.

38(2) Attributable income shall be that portion of the taxpayer’s
39California source business income that is apportioned to the
40LAMBRA. For that purpose, the taxpayer’s business income that
P24   1is attributable to sources in this state first shall be determined in
2accordance with Chapter 17 (commencing with Section 25101) of
3Part 11. That business income shall be further apportioned to the
4LAMBRA in accordance with Article 2 (commencing with Section
525120) of Chapter 17 of Part 11, modified for purposes of this
6 section in accordance with paragraph (3).

7(3) Income shall be apportioned to a LAMBRA by multiplying
8the total California business income of the taxpayer by a fraction,
9the numerator of which is the property factor plus the payroll factor,
10and the denominator of which is two. For purposes of this
11paragraph:

12(A) The property factor is a fraction, the numerator of which is
13the average value of the taxpayer’s real and tangible personal
14property owned or rented and used in the LAMBRA during the
15taxable year, and the denominator of which is the average value
16of all the taxpayer’s real and tangible personal property owned or
17rented and used in this state during the taxable year.

18(B) The payroll factor is a fraction, the numerator of which is
19the total amount paid by the taxpayer in the LAMBRA during the
20taxable year for compensation, and the denominator of which is
21the total compensation paid by the taxpayer in this state during the
22taxable year.

23(4) The portion of any credit remaining, if any, after application
24of this subdivision, shall be carried over to succeeding taxable
25years, as if it were an amount exceeding the “net tax” for the
26taxable year, as provided in subdivision (h).

27(j) If the taxpayer is allowed a credit pursuant to this section for
28qualified wages paid or incurred, only one credit shall be allowed
29to the taxpayer under this part with respect to any wage consisting
30in whole or in part of those qualified wages.

31(k) (1) Forbegin delete each taxable year beginning on or after January 1,
322013, and beforeend delete
begin insert the 2014 calendar year, and each calendar year
33thereafter untilend insert
January 1, 2019, the total aggregate amount of
34credits allowed pursuant to this section shall not exceed the total
35aggregate amount of credits claimed pursuant to this section in the
36begin delete taxable year beginning on or after January 1, 2012, and before
37January 1, 2013,end delete
begin insert 2013 calendar year,end insert as determined by the
38Franchise Tax Board.

P25   1(2) Upon receipt of a timely filed original return, the Franchise
2Tax Board shall allocate the credit to the qualified taxpayer on a
3first-come-first-served basis.

4(l) (1) The Franchise Tax Board shall compile the certifications
5submitted pursuant to paragraph (2) of subdivision (c) and shall
6provide as a searchable database on its Internet Web site, for each
7taxable year beginning on or after January 1,begin delete 2013,end deletebegin insert 2014,end insert and
8before January 1, 2019, the employer names, amounts of tax credit
9claimed, and number of new jobs created for each taxable year
10pursuant to this section, Sections 17053.34, 17053.47, 17053.74,
1123622.7, 23622.8, 23634, and 23646.

12(2) The Franchise Tax Board may prescribe rules, guidelines,
13or procedures necessary or appropriate to carry out the purposes
14of this section, including any guidelines regarding the allocation
15of the credit allowed under this section.

16(m) This section shall remain in effect only until December 1,
172019, and as of that date is repealed.

18

SEC. 4.  

Section 17053.47 of the Revenue and Taxation Code
19 is amended to read:

20

17053.47.  

(a) (1) For each taxable year beginning on or after
21January 1, 1998, and before January 1, 2013, there shall be allowed
22a credit against the “net tax” (as defined in Section 17039) to a
23qualified taxpayer for hiring a qualified disadvantaged individual
24during the taxable year for employment in the manufacturing
25enhancement area. The credit shall be equal to the sum of each of
26the following:

27(A) Fifty percent of the qualified wages in the first year of
28employment.

29(B) Forty percent of the qualified wages in the second year of
30employment.

31(C) Thirty percent of the qualified wages in the third year of
32employment.

33(D) Twenty percent of the qualified wages in the fourth year of
34employment.

35(E) Ten percent of the qualified wages in the fifth year of
36employment.

37(2) (A) For each taxable year beginning on or after January 1,
382013, and before January 1, 2019, there shall be allowed as a credit
39against the “net tax,” as defined in Section 17039, to a qualified
40taxpayer for hiring a qualified disadvantaged individual during the
P26   1taxable year for employment in the manufacturing enhancement
2area. The credit shall be equal to the sum of each of the following:

3(i) Ten percent of qualified wages in the first year of
4employment.

5(ii) Ten percent of qualified wages in the second year of
6employment.

7(iii) Thirty percent of qualified wages in the third year of
8employment.

9(iv) Forty percent of qualified wages in the fourth year of
10employment.

11(v) Fifty percent of qualified wages in the fifth year of
12employment.

13(B) The credit shall be allowed only with respect to qualified
14wages paid for each net increase in qualified employees. A net
15increase shall be determined by subtracting from the amount
16determined in clause (i) the amount determined in clause (ii). For
17purposes of this subparagraph, “qualified employee” means
18qualified disadvantaged individual.

19(i) The total number of qualified employees employed in the
20state in the preceding taxable year by the qualified taxpayer and
21by any trade or business acquired by the qualified taxpayer during
22the preceding taxable year.

23(ii) The total number of qualified employees employed in the
24state in the current taxable year by the qualified taxpayer and by
25any trade or business acquired by the qualified taxpayer during
26the current taxable year.

27(C) If a qualified taxpayer relocated to abegin delete targeted taxend delete
28begin insert manufacturing enhancementend insert area from within the state during the
29taxable year for which the credit is claimed, the qualified taxpayer
30shall be allowed a credit with respect to qualified wages for each
31net increase in qualified employees only if the qualified taxpayer
32begin delete makesend deletebegin insert providesend insert each employee at the previous location or locations
33a writtenbegin delete bona fide offer of employment at the new location.end deletebegin insert notice
34of transfer to the new location with comparable compensation.
35The qualified taxpayer shall provide self-certification with
36documentation when submitting a voucher application.end insert

37(b) For purposes of this section:

38(1) “Qualified wages” means:

39(A) That portion of wages paid or incurred by the qualified
40taxpayer during the taxable year to qualified disadvantaged
P27   1individuals that exceeds 200 percent of the minimum wage and
2does not exceed 500 percent of the minimum wage.

3(B) The total amount of qualified wages which may be taken
4into account for purposes of claiming the credit allowed under this
5section shall not exceed two million dollars ($2,000,000) per
6taxable year.

7(C) Wages received during the 60-month period beginning with
8the first day the qualified disadvantaged individual commences
9employment with the qualified taxpayer. Reemployment in
10connection with any increase, including a regularly occurring
11seasonal increase, in the trade or business operations of the taxpayer
12does not constitute commencement of employment for purposes
13of this section.

14(D) Qualified wages do not include any wages paid or incurred
15by the qualified taxpayer on or after the manufacturing
16enhancement area expiration date. However, wages paid or incurred
17with respect to qualified employees who are employed by the
18qualified taxpayer within the manufacturing enhancement area
19within the 60-month period prior to the manufacturing enhancement
20area expiration date shall continue to qualify for the credit under
21this section after the manufacturing enhancement area expiration
22date, in accordance with all provisions of this section applied as
23if the manufacturing enhancement area designation were still in
24existence and binding.

25(2) “Minimum wage” means the wage established by the
26Industrial Welfare Commission as provided for in Chapter 1
27(commencing with Section 1171) of Part 4 of Division 2 of the
28Labor Code.

29(3) “Manufacturing enhancement area” means an area designated
30pursuant to Section 7073.8 of the Government Code according to
31the procedures of Chapter 12.8 (commencing with Section 7070)
32of Division 7 of Title 1 of the Government Code.

33(4) “Manufacturing enhancement area expiration date” means
34the date the manufacturing enhancement area designation expires,
35is no longer binding, or becomes inoperative.

36(5) “Qualified disadvantaged individual” means an individual
37who satisfies all of the following requirements:

38(A) (i) At least 90 percent of whose services for the qualified
39taxpayer during the taxable year are directly related to the conduct
P28   1of the qualified taxpayer’s trade or business located in a
2manufacturing enhancement area.

3(ii) Who performs at least 50 percent of his or her services for
4the qualified taxpayer during the taxable year in the manufacturing
5enhancement area.

6(B) Who is hired by the qualified taxpayer after the designation
7of the area as a manufacturing enhancement area in which the
8individual’s services were primarily performed.

9(C) Who is any of the following immediately preceding the
10individual’s commencement of employment with the qualified
11taxpayer:

12(i) An individual who has been determined eligible for services
13under the federalbegin delete Job Training Partnershipend deletebegin insert Workforce Investmentend insert
14 Actbegin insert of 1998end insert (29 U.S.C. Sec. begin delete1501end deletebegin insert 2801end insert et seq.), or its successor.

15(ii) Any voluntary or mandatory registrant under the Greater
16Avenues for Independence Act of 1985, or its successor, as
17provided pursuant to Article 3.2 (commencing with Section 11320)
18of Chapter 2 of Part 3 of Division 9 of the Welfare and Institutions
19Code.

20(iii) Any individual who has been certified eligible by the
21Employment Development Department under the federal Targeted
22Jobs Tax Credit Program, or its successor, whether or not this
23program is in effect.

24(6) (A) “Qualified taxpayer” means any taxpayer engaged in
25a trade or business within a manufacturing enhancement area
26designated pursuant to Section 7073.8 of the Government Code
27and who meets all of the following requirements:

28(i) Is engaged in those lines of business described in Codes 0211
29to 0291, inclusive, Code 0723, or in Codes 2011 to 3999, inclusive,
30of the Standard Industrial Classification (SIC) Manual published
31by the United States Office of Management and Budget, 1987
32edition.

33(ii) At least 50 percent of the qualified taxpayer’s workforce
34hired after the designation of the manufacturing enhancement area
35is composed of individuals who, at the time of hire, are residents
36of the county in which the manufacturing enhancement area is
37located.

38(iii) Of this percentage of local hires, at least 30 percent shall
39be qualified disadvantaged individuals.

P29   1(B) “Qualified taxpayer” shall not include employers that
2provide temporary help services, as described in Code 561320 of
3the North American Industry Classification System (NAICS).

4(7) “Seasonal employment” means employment by a qualified
5taxpayer that has regular and predictable substantial reductions in
6trade or business operations.

7(c) (1) For purposes of this section, all of the following apply:

8(A) All employees of trades or businesses that are under
9common control shall be treated as employed by a single qualified
10taxpayer.

11(B) The credit (if any) allowable by this section with respect to
12each trade or business shall be determined by reference to its
13proportionate share of the expense of the qualified wages giving
14rise to the credit and shall be allocated in that manner.

15(C) Principles that apply in the case of controlled groups of
16corporations, as specified in subdivision (d) of Section 23622.7,
17shall apply with respect to determining employment.

18(2) If a qualified taxpayer acquires the major portion of a trade
19or business of another employer (hereinafter in this paragraph
20referred to as the “predecessor”) or the major portion of a separate
21unit of a trade or business of a predecessor, then, for purposes of
22applying this section (other than subdivision (d)) for any calendar
23year ending after that acquisition, the employment relationship
24between a qualified disadvantaged individual and a qualified
25taxpayer shall not be treated as terminated if the qualified
26disadvantaged individual continues to be employed in that trade
27or business.

28(d) (1) (A) If the employment, other than seasonal employment,
29of any qualified disadvantaged individual, with respect to whom
30qualified wages are taken into account under subdivision (b) is
31terminated by the qualified taxpayer at any time during the first
32270 days of that employment (whether or not consecutive) or before
33the close of the 270th calendar day after the day in which that
34qualified disadvantaged individual completes 90 days of
35employment with the qualified taxpayer, the tax imposed by this
36part for the taxable year in which that employment is terminated
37shall be increased by an amount equal to the credit allowed under
38subdivision (a) for that taxable year and all prior taxable years
39attributable to qualified wages paid or incurred with respect to that
40qualified disadvantaged individual.

P30   1(B) If the seasonal employment of any qualified disadvantaged
2individual, with respect to whom qualified wages are taken into
3account under subdivision (a) is not continued by the qualified
4taxpayer for a period of 270 days of employment during the
560-month period beginning with the day the qualified
6disadvantaged individual commences seasonal employment with
7the qualified taxpayer, the tax imposed by this part, for the taxable
8year that includes the 60th month following the month in which
9the qualified disadvantaged individual commences seasonal
10employment with the qualified taxpayer, shall be increased by an
11amount equal to the credit allowed under subdivision (a) for that
12taxable year and all prior taxable years attributable to qualified
13wages paid or incurred with respect to that qualified disadvantaged
14individual.

15(2) (A) Subparagraph (A) of paragraph (1) does not apply to
16any of the following:

17(i) A termination of employment of a qualified disadvantaged
18individual who voluntarily leaves the employment of the qualified
19taxpayer.

20(ii) A termination of employment of a qualified disadvantaged
21individual who, before the close of the period referred to in
22subparagraph (A) of paragraph (1), becomes disabled to perform
23the services of that employment, unless that disability is removed
24before the close of that period and the taxpayer fails to offer
25reemployment to that individual.

26(iii) A termination of employment of a qualified disadvantaged
27individual, if it is determined that the termination was due to the
28misconduct (as defined in Sections 1256-30 to 1256-43, inclusive,
29of Title 22 of the California Code of Regulations) of that individual.

30(iv) A termination of employment of a qualified disadvantaged
31individual due to a substantial reduction in the trade or business
32operations of the qualified taxpayer.

33(v) A termination of employment of a qualified disadvantaged
34individual, if that individual is replaced by other qualified
35disadvantaged individuals so as to create a net increase in both the
36number of employees and the hours of employment.

37(B) Subparagraph (B) of paragraph (1) shall not apply to any
38of the following:

P31   1(i) A failure to continue the seasonal employment of a qualified
2disadvantaged individual who voluntarily fails to return to the
3seasonal employment of the qualified taxpayer.

4(ii) A failure to continue the seasonal employment of a qualified
5disadvantaged individual who, before the close of the period
6referred to in subparagraph (B) of paragraph (1), becomes disabled
7and unable to perform the services of that seasonal employment,
8unless that disability is removed before the close of that period
9and the qualified taxpayer fails to offer seasonal employment to
10that qualified disadvantaged individual.

11(iii) A failure to continue the seasonal employment of a qualified
12disadvantaged individual, if it is determined that the failure to
13continue the seasonal employment was due to the misconduct (as
14defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of
15the California Code of Regulations) of that qualified disadvantaged
16individual.

17(iv) A failure to continue seasonal employment of a qualified
18disadvantaged individual due to a substantial reduction in the
19regular seasonal trade or business operations of the qualified
20taxpayer.

21(v) A failure to continue the seasonal employment of a qualified
22disadvantaged individual, if that qualified disadvantaged individual
23is replaced by other qualified disadvantaged individuals so as to
24create a net increase in both the number of seasonal employees
25and the hours of seasonal employment.

26(C) For purposes of paragraph (1), the employment relationship
27between the qualified taxpayer and a qualified disadvantaged
28individual shall not be treated as terminated by reason of a mere
29change in the form of conducting the trade or business of the
30qualified taxpayer, if the qualified disadvantaged individual
31continues to be employed in that trade or business and the qualified
32taxpayer retains a substantial interest in that trade or business.

33(3) Any increase in tax under paragraph (1) shall not be treated
34as tax imposed by this part for purposes of determining the amount
35of any credit allowable under this part.

36(e) In the case of an estate or trust, both of the following apply:

37(1) The qualified wages for any taxable year shall be apportioned
38between the estate or trust and the beneficiaries on the basis of the
39income of the estate or trust allocable to each.

P32   1(2) Any beneficiary to whom any qualified wages have been
2apportioned under paragraph (1) shall be treated (for purposes of
3this part) as the employer with respect to those wages.

4(f) The credit shall be reduced by the credit allowed under
5Section 17053.7. The credit shall also be reduced by the federal
6credit allowed under Section 51 of the Internal Revenue Code.

7In addition, any deduction otherwise allowed under this part for
8the wages or salaries paid or incurred by the qualified taxpayer
9upon which the credit is based shall be reduced by the amount of
10the credit, prior to any reduction required by subdivision (g) or
11(h).

12(g) In the case where the credit otherwise allowed under this
13section exceeds the “net tax” for the taxable year, that portion of
14the credit that exceeds the “net tax” may be carried over and added
15to the credit, if any, in succeeding years, until the credit is
16exhausted. The credit shall be applied first to the earliest taxable
17years possible.

18(h) (1) The amount of credit otherwise allowed under this
19section, including prior year credit carryovers, that may reduce
20the “net tax” for the taxable year shall not exceed the amount of
21tax that would be imposed on the qualified taxpayer’s business
22income attributed to a manufacturing enhancement area determined
23as if that attributed income represented all of the net income of the
24qualified taxpayer subject to tax under this part.

25(2) Attributable income shall be that portion of the taxpayer’s
26California source business income that is apportioned to the
27manufacturing enhancement area. For that purpose, the taxpayer’s
28business income that is attributable to sources in this state first
29shall be determined in accordance with Chapter 17 (commencing
30with Section 25101) of Part 11. That business income shall be
31further apportioned to the manufacturing enhancement area in
32accordance with Article 2 (commencing with Section 25120) of
33Chapter 17 of Part 11, modified for purposes of this section in
34accordance with paragraph (3).

35(3) Income shall be apportioned to a manufacturing enhancement
36area by multiplying the total California business income of the
37taxpayer by a fraction, the numerator of which is the property
38factor plus the payroll factor, and the denominator of which is two.
39For purposes of this paragraph:

P33   1(A) The property factor is a fraction, the numerator of which is
2the average value of the taxpayer’s real and tangible personal
3property owned or rented and used in the manufacturing
4enhancement area during the taxable year, and the denominator
5of which is the average value of all the taxpayer’s real and tangible
6personal property owned or rented and used in this state during
7the taxable year.

8(B) The payroll factor is a fraction, the numerator of which is
9the total amount paid by the taxpayer in the manufacturing
10enhancement area during the taxable year for compensation, and
11the denominator of which is the total compensation paid by the
12taxpayer in this state during the taxable year.

13(4) The portion of any credit remaining, if any, after application
14of this subdivision, shall be carried over to succeeding taxable
15years, as if it were an amount exceeding the “net tax” for the
16taxable year, as provided in subdivision (g).

17(i) If the taxpayer is allowed a credit pursuant to this section for
18qualified wages paid or incurred, only one credit shall be allowed
19to the taxpayer under this part with respect to any wage consisting
20in whole or in part of those qualified wages.

21(j) The qualified taxpayer shall do both of the following:

22(1) Obtain from the Employment Development Department, as
23permitted by federal law, the local county or city Job Training
24Partnership Act administrative entity, the local county GAIN office
25or social services agency, or the local government administering
26the manufacturing enhancement area, a certification that provides
27that a qualified disadvantaged individual meets the eligibility
28requirements specified in paragraph (5) of subdivision (b). The
29Employment Development Department may provide preliminary
30screening and referral to a certifying agency. The Department of
31Housing and Community Development shall develop regulations
32governing the issuance of certificates pursuant to subdivision (d)
33of Section 7086 of the Government Code and shall develop forms
34for this purpose.

35(2) Retain a copy of the certification and provide it to the
36Franchise Tax Board annually.

37(k) (1) Forbegin delete each taxable year beginning on or after January 1,
382013, and beforeend delete
begin insert the 2014 calendar year, and each calendar year
39thereafter, untilend insert
January 1, 2019, the total aggregate amount of
40credits allowed pursuant to this section shall not exceed the total
P34   1aggregate amount of credits claimed pursuant to this section in the
2begin delete taxable year beginning on or after January 1, 2012, and before
3January 1, 2013,end delete
begin insert 2013 calendar year,end insert as determined by the
4Franchise Tax Board.

5(2) Upon receipt of a timely filed original return, the Franchise
6Tax Board shall allocate the credit to the qualified taxpayer on a
7first-come-first-served basis.

8(l) (1) The Franchise Tax Board shall compile the certifications
9submitted pursuant to paragraph (2) of subdivision (j) and shall
10provide as a searchable database on its Internet Web site, for each
11taxable year beginning on or after January 1,begin delete 2013,end deletebegin insert 2014,end insert and
12before January 1, 2019, the employer names, amounts of tax credit
13claimed, and number of new jobs created for each taxable year
14pursuant to this section, Sections 17053.34, 17053.46, 17053.74,
1523622.7, 23622.8, 23634, and 23646.

16(2) The Franchise Tax Board may prescribe rules, guidelines,
17or procedures necessary or appropriate to carry out the purposes
18of this section, including any guidelines regarding the allocation
19of the credit allowed under this section.

20(m) This section shall remain in effect only until December 1,
212019, and as of that date is repealed.

begin delete
22

SEC. 5.  

Section 17053.74 of the Revenue and Taxation Code
23 is amended to read:

24

17053.74.  

(a) (1) For taxable years beginning before January
251, 2013, there shall be allowed a credit against the “net tax” (as
26defined in Section 17039) to a taxpayer who employs a qualified
27employee in an enterprise zone during the taxable year. The credit
28shall be equal to the sum of each of the following:

29(A) Fifty percent of qualified wages in the first year of
30employment.

31(B) Forty percent of qualified wages in the second year of
32employment.

33(C) Thirty percent of qualified wages in the third year of
34employment.

35(D) Twenty percent of qualified wages in the fourth year of
36employment.

37(E) Ten percent of qualified wages in the fifth year of
38employment.

39(2) (A) For each taxable year beginning on or after January 1,
402013, and before January 1, 2019, there shall be allowed as a credit
P35   1against the “net tax,” as defined in Section 17039, to a taxpayer
2who employs a qualified employee in an enterprise zone during
3the taxable year shall be equal to the sum of each of the following:

4(i) Ten percent of qualified wages in the first year of
5employment.

6(ii) Ten percent of qualified wages in the second year of
7employment.

8(iii) Thirty percent of qualified wages in the third year of
9employment.

10(iv) Forty percent of qualified wages in the fourth year of
11employment.

12(v) Fifty percent of qualified wages in the fifth year of
13employment.

14(B) The credit shall be allowed only with respect to qualified
15wages paid for each net increase in qualified employees. A net
16increase shall be determined by subtracting from the amount
17determined in clause (i) the amount determined in clause (ii).

18(i) The total number of qualified employees employed in the
19state in the preceding taxable year by the taxpayer and by any trade
20or business acquired by the taxpayer during the preceding taxable
21year.

22(ii) The total number of qualified employees employed in the
23state in the current taxable year by the taxpayer and by any trade
24or business acquired by the taxpayer during the current taxable
25year.

26(C) If a taxpayer relocated to a targeted tax area from within
27the state during the taxable year for which the credit is claimed,
28the taxpayer shall be allowed a credit with respect to qualified
29wages for each net increase in qualified employees only if the
30taxpayer makes each employee at the previous location or locations
31a written bona fide offer of employment at the new location.

32(b) For purposes of this section:

33(1) “Qualified wages” means:

34(A) (i) Except as provided in clause (ii), that portion of wages
35paid or incurred by the taxpayer during the taxable year to qualified
36employees that exceeds 200 percent of the minimum wage and
37does not exceed 500 percent of the minimum wage.

38(ii) For up to 1,350 qualified employees who are employed by
39the taxpayer in the Long Beach Enterprise Zone in aircraft
40manufacturing activities described in Codes 3721 to 3728,
P36   1inclusive, and Code 3812 of the Standard Industrial Classification
2(SIC) Manual published by the United States Office of
3Management and Budget, 1987 edition, “qualified wages” means
4that portion of hourly wages that does not exceed 202 percent of
5the minimum wage.

6(B) Wages received during the 60-month period beginning with
7the first day the employee commences employment with the
8taxpayer. Reemployment in connection with any increase, including
9a regularly occurring seasonal increase, in the trade or business
10operations of the taxpayer does not constitute commencement of
11employment for purposes of this section.

12(C) Qualified wages do not include any wages paid or incurred
13by the taxpayer on or after the zone expiration date. However,
14wages paid or incurred with respect to qualified employees who
15are employed by the taxpayer within the enterprise zone within
16the 60-month period prior to the zone expiration date shall continue
17to qualify for the credit under this section after the zone expiration
18date, in accordance with all provisions of this section applied as
19if the enterprise zone designation were still in existence and
20binding.

21(2) “Minimum wage” means the wage established by the
22Industrial Welfare Commission as provided for in Chapter 1
23(commencing with Section 1171) of Part 4 of Division 2 of the
24Labor Code.

25(3) “Zone expiration date” means the date the enterprise zone
26designation expires, is no longer binding, or becomes inoperative.

27(4) (A) “Qualified employee” means an individual who meets
28all of the following requirements:

29(i) At least 90 percent of whose services for the taxpayer during
30the taxable year are directly related to the conduct of the taxpayer’s
31trade or business located in an enterprise zone.

32(ii) Performs at least 50 percent of his or her services for the
33taxpayer during the taxable year in an enterprise zone.

34(iii) Is hired by the taxpayer after the date of original designation
35of the area in which services were performed as an enterprise zone.

36(iv) Is any of the following:

37(I) Immediately preceding the qualified employee’s
38commencement of employment with the taxpayer, was a person
39eligible for services under the federal Job Training Partnership
40Act (29 U.S.C. Sec. 1501 et seq.), or its successor, who is receiving,
P37   1or is eligible to receive, subsidized employment, training, or
2services funded by the federal Job Training Partnership Act, or its
3successor.

4(II) Immediately preceding the qualified employee’s
5commencement of employment with the taxpayer, was a person
6eligible to be a voluntary or mandatory registrant under the Greater
7Avenues for Independence Act of 1985 (GAIN) provided for
8pursuant to Article 3.2 (commencing with Section 11320) of
9Chapter 2 of Part 3 of Division 9 of the Welfare and Institutions
10Code, or its successor.

11(III) Immediately preceding the qualified employee’s
12commencement of employment with the taxpayer, was an
13economically disadvantaged individual 14 years of age or older.

14(IV) Immediately preceding the qualified employee’s
15commencement of employment with the taxpayer, was a dislocated
16worker who meets any of the following:

17(aa) Has been terminated or laid off or who has received a notice
18of termination or layoff from employment, is eligible for or has
19exhausted entitlement to unemployment insurance benefits, and
20is unlikely to return to his or her previous industry or occupation.

21(bb) Has been terminated or has received a notice of termination
22of employment as a result of any permanent closure or any
23substantial layoff at a plant, facility, or enterprise, including an
24individual who has not received written notification but whose
25employer has made a public announcement of the closure or layoff.

26(cc) Is long-term unemployed and has limited opportunities for
27employment or reemployment in the same or a similar occupation
28in the area in which the individual resides, including an individual
2955 years of age or older who may have substantial barriers to
30employment by reason of age.

31(dd) Was self-employed (including farmers and ranchers) and
32is unemployed as a result of general economic conditions in the
33community in which he or she resides or because of natural
34disasters.

35(ee) Was a civilian employee of the Department of Defense
36employed at a military installation being closed or realigned under
37the Defense Base Closure and Realignment Act of 1990.

38(ff) Was an active member of the armed forces or National
39Guard as of September 30, 1990, and was either involuntarily
40separated or separated pursuant to a special benefits program.

P38   1(gg) Is a seasonal or migrant worker who experiences chronic
2seasonal unemployment and underemployment in the agriculture
3industry, aggravated by continual advancements in technology and
4mechanization.

5(hh) Has been terminated or laid off, or has received a notice
6of termination or layoff, as a consequence of compliance with the
7Clean Air Act.

8(V) Immediately preceding the qualified employee’s
9commencement of employment with the taxpayer, was a disabled
10individual who is eligible for or enrolled in, or has completed a
11state rehabilitation plan or is a service-connected disabled veteran,
12veteran of the Vietnam era, or veteran who is recently separated
13from military service.

14(VI) Immediately preceding the qualified employee’s
15 commencement of employment with the taxpayer, was an
16ex-offender. An individual shall be treated as convicted if he or
17she was placed on probation by a state court without a finding of
18guilt.

19(VII) Immediately preceding the qualified employee’s
20commencement of employment with the taxpayer, was a person
21eligible for or a recipient of any of the following:

22(aa) Federal Supplemental Security Income benefits.

23(bb) Aid to Families with Dependent Children.

24(cc) CalFresh benefits.

25(dd) State and local general assistance.

26(VIII) Immediately preceding the qualified employee’s
27commencement of employment with the taxpayer, was a member
28 of a federally recognized Indian tribe, band, or other group of
29Native American descent.

30(IX) Immediately preceding the qualified employee’s
31commencement of employment with the taxpayer, was a resident
32of a targeted employment area, as defined in Section 7072 of the
33Government Code.

34(X) An employee who qualified the taxpayer for the enterprise
35zone hiring credit under former Section 17053.8 or the program
36area hiring credit under former Section 17053.11.

37(XI) Immediately preceding the qualified employee’s
38commencement of employment with the taxpayer, was a member
39of a targeted group, as defined in Section 51(d) of the Internal
40Revenue Code, or its successor.

P39   1(B) Priority for employment shall be provided to an individual
2who is enrolled in a qualified program under the federal Job
3Training Partnership Act or the Greater Avenues for Independence
4Act of 1985 or who is eligible as a member of a targeted group
5under the Work Opportunity Tax Credit (Section 51 of the Internal
6Revenue Code), or its successor.

7(5) (a) “Taxpayer” means a person or entity engaged in a trade
8or business within an enterprise zone designated pursuant to
9Chapter 12.8 (commencing with Section 7070) of the Government
10Code.

11(b) “Taxpayer” shall not include employers that provide
12temporary help services, as described in Code 561320 of the North
13 American Industry Classification System (NAICS).

14(6) “Seasonal employment” means employment by a taxpayer
15that has regular and predictable substantial reductions in trade or
16business operations.

17(c) The taxpayer shall do both of the following:

18(1) Obtain from the Employment Development Department, as
19permitted by federal law, the local county or city Job Training
20Partnership Act administrative entity, the local county GAIN office
21or social services agency, or the local government administering
22the enterprise zone, a certification which provides that a qualified
23employee meets the eligibility requirements specified in clause
24(iv) of subparagraph (A) of paragraph (4) of subdivision (b). The
25Employment Development Department may provide preliminary
26screening and referral to a certifying agency. The Employment
27Development Department shall develop a form for this purpose.
28The Department of Housing and Community Development shall
29develop regulations governing the issuance of certificates by local
30governments pursuant to subdivision (a) of Section 7086 of the
31Government Code.

32(2) Retain a copy of the certification and provide it to the
33Franchise Tax Board annually.

34(d) (1) For purposes of this section:

35(A) All employees of trades or businesses, which are not
36incorporated, that are under common control shall be treated as
37employed by a single taxpayer.

38(B) The credit, if any, allowable by this section with respect to
39each trade or business shall be determined by reference to its
P40   1proportionate share of the expense of the qualified wages giving
2rise to the credit, and shall be allocated in that manner.

3(C) Principles that apply in the case of controlled groups of
4corporations, as specified in subdivision (d) of Section 23622.7,
5shall apply with respect to determining employment.

6(2) If an employer acquires the major portion of a trade or
7business of another employer (hereinafter in this paragraph referred
8to as the “predecessor”) or the major portion of a separate unit of
9a trade or business of a predecessor, then, for purposes of applying
10this section (other than subdivision (e)) for any calendar year
11ending after that acquisition, the employment relationship between
12a qualified employee and an employer shall not be treated as
13terminated if the employee continues to be employed in that trade
14or business.

15(e) (1) (A) If the employment, other than seasonal employment,
16of any qualified employee, with respect to whom qualified wages
17are taken into account under subdivision (a), is terminated by the
18taxpayer at any time during the first 270 days of that employment
19(whether or not consecutive) or before the close of the 270th
20calendar day after the day in which that employee completes 90
21days of employment with the taxpayer, the tax imposed by this
22part for the taxable year in which that employment is terminated
23shall be increased by an amount equal to the credit allowed under
24subdivision (a) for that taxable year and all prior taxable years
25attributable to qualified wages paid or incurred with respect to that
26employee.

27(B) If the seasonal employment of any qualified employee, with
28respect to whom qualified wages are taken into account under
29subdivision (a), is not continued by the taxpayer for a period of
30270 days of employment during the 60-month period beginning
31with the day the qualified employee commences seasonal
32employment with the taxpayer, the tax imposed by this part, for
33the taxable year that includes the 60th month following the month
34in which the qualified employee commences seasonal employment
35with the taxpayer, shall be increased by an amount equal to the
36credit allowed under subdivision (a) for that taxable year and all
37prior taxable years attributable to qualified wages paid or incurred
38with respect to that qualified employee.

39(2) (A) Subparagraph (A) of paragraph (1) shall not apply to
40any of the following:

P41   1(i) A termination of employment of a qualified employee who
2voluntarily leaves the employment of the taxpayer.

3(ii) A termination of employment of a qualified employee who,
4before the close of the period referred to in paragraph (1), becomes
5disabled and unable to perform the services of that employment,
6unless that disability is removed before the close of that period
7and the taxpayer fails to offer reemployment to that employee.

8(iii) A termination of employment of a qualified employee, if
9it is determined that the termination was due to the misconduct (as
10defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of
11the California Code of Regulations) of that employee.

12(iv) A termination of employment of a qualified employee due
13to a substantial reduction in the trade or business operations of the
14taxpayer.

15(v) A termination of employment of a qualified employee, if
16that employee is replaced by other qualified employees so as to
17create a net increase in both the number of employees and the
18hours of employment.

19(B) Subparagraph (B) of paragraph (1) shall not apply to any
20of the following:

21(i) A failure to continue the seasonal employment of a qualified
22employee who voluntarily fails to return to the seasonal
23employment of the taxpayer.

24(ii) A failure to continue the seasonal employment of a qualified
25employee who, before the close of the period referred to in
26subparagraph (B) of paragraph (1), becomes disabled and unable
27to perform the services of that seasonal employment, unless that
28disability is removed before the close of that period and the
29taxpayer fails to offer seasonal employment to that qualified
30employee.

31(iii) A failure to continue the seasonal employment of a qualified
32employee, if it is determined that the failure to continue the
33seasonal employment was due to the misconduct (as defined in
34Sections 1256-30 to 1256-43, inclusive, of Title 22 of the California
35Code of Regulations) of that qualified employee.

36(iv) A failure to continue seasonal employment of a qualified
37employee due to a substantial reduction in the regular seasonal
38trade or business operations of the taxpayer.

39(v) A failure to continue the seasonal employment of a qualified
40employee, if that qualified employee is replaced by other qualified
P42   1employees so as to create a net increase in both the number of
2seasonal employees and the hours of seasonal employment.

3(C) For purposes of paragraph (1), the employment relationship
4between the taxpayer and a qualified employee shall not be treated
5as terminated by reason of a mere change in the form of conducting
6the trade or business of the taxpayer, if the qualified employee
7continues to be employed in that trade or business and the taxpayer
8retains a substantial interest in that trade or business.

9(3) Any increase in tax under paragraph (1) shall not be treated
10as tax imposed by this part for purposes of determining the amount
11of any credit allowable under this part.

12(f) In the case of an estate or trust, both of the following apply:

13(1) The qualified wages for any taxable year shall be apportioned
14between the estate or trust and the beneficiaries on the basis of the
15 income of the estate or trust allocable to each.

16(2) Any beneficiary to whom any qualified wages have been
17apportioned under paragraph (1) shall be treated, for purposes of
18this part, as the employer with respect to those wages.

19(g) For purposes of this section, “enterprise zone” means an
20area designated as an enterprise zone pursuant to Chapter 12.8
21(commencing with Section 7070) of Division 7 of Title 1 of the
22Government Code.

23(h) The credit allowable under this section shall be reduced by
24the credit allowed under Sections 17053.10, 17053.17, and
2517053.46 claimed for the same employee. The credit shall also be
26reduced by the federal credit allowed under Section 51 of the
27Internal Revenue Code.

28In addition, any deduction otherwise allowed under this part for
29the wages or salaries paid or incurred by the taxpayer upon which
30the credit is based shall be reduced by the amount of the credit,
31prior to any reduction required by subdivision (i) or (j).

32(i) In the case where the credit otherwise allowed under this
33section exceeds the “net tax” for the taxable year, that portion of
34the credit that exceeds the “net tax” may be carried over and added
35to the credit, if any, in succeeding taxable years, until the credit is
36exhausted. The credit shall be applied first to the earliest taxable
37years possible.

38(j) (1) The amount of the credit otherwise allowed under this
39section and Section 17053.70, including any credit carryover from
40prior years, that may reduce the “net tax” for the taxable year shall
P43   1not exceed the amount of tax which would be imposed on the
2taxpayer’s business income attributable to the enterprise zone
3determined as if that attributable income represented all of the
4income of the taxpayer subject to tax under this part.

5(2) Attributable income shall be that portion of the taxpayer’s
6California source business income that is apportioned to the
7enterprise zone. For that purpose, the taxpayer’s business income
8attributable to sources in this state first shall be determined in
9accordance with Chapter 17 (commencing with Section 25101) of
10Part 11. That business income shall be further apportioned to the
11enterprise zone in accordance with Article 2 (commencing with
12Section 25120) of Chapter 17 of Part 11, modified for purposes
13of this section in accordance with paragraph (3).

14(3) Business income shall be apportioned to the enterprise zone
15by multiplying the total California business income of the taxpayer
16by a fraction, the numerator of which is the property factor plus
17the payroll factor, and the denominator of which is two. For
18purposes of this paragraph:

19(A) The property factor is a fraction, the numerator of which is
20the average value of the taxpayer’s real and tangible personal
21property owned or rented and used in the enterprise zone during
22the taxable year, and the denominator of which is the average value
23of all the taxpayer’s real and tangible personal property owned or
24rented and used in this state during the taxable year.

25(B) The payroll factor is a fraction, the numerator of which is
26the total amount paid by the taxpayer in the enterprise zone during
27the taxable year for compensation, and the denominator of which
28is the total compensation paid by the taxpayer in this state during
29the taxable year.

30(4) The portion of any credit remaining, if any, after application
31of this subdivision, shall be carried over to succeeding taxable
32years, as if it were an amount exceeding the “net tax” for the
33taxable year, as provided in subdivision (i).

34(k) The changes made to this section by Chapter 609 by the
35Statutes of 1997 shall apply to taxable years beginning on or after
36January 1, 1997.

37(l) The Franchise Tax Board shall compile the certifications
38submitted pursuant to paragraph (2) of subdivision (c) and shall
39provide as a searchable database on its Internet Web site, for each
40taxable year beginning on or after January 1, 2013, and before
P44   1January 1, 2019, the employer names, amounts of tax credit
2claimed, and number of new jobs created for each taxable year
3pursuant to this section, Sections 17053.34, 17053.46, 17053.47,
423622.7, 23622.8, 23634, and 23646.

5(m) This section shall remain in effect only until December 1,
62019, and as of that date is repealed.

7

SEC. 6.  

Section 23622.7 of the Revenue and Taxation Code
8 is amended to read:

9

23622.7.  

(a) (1) For taxable years before January 1, 2013,
10there shall be allowed a credit against the “tax” (as defined by
11Section 23036) to a taxpayer who employs a qualified employee
12in an enterprise zone during the taxable year. The credit shall be
13equal to the sum of each of the following:

14(A) Fifty percent of qualified wages in the first year of
15employment.

16(B) Forty percent of qualified wages in the second year of
17employment.

18(C) Thirty percent of qualified wages in the third year of
19employment.

20(D) Twenty percent of qualified wages in the fourth year of
21employment.

22(E) Ten percent of qualified wages in the fifth year of
23employment.

24(2) (A) For each taxable year beginning on or after January 1,
252013, and before January 1, 2019, there shall be allowed as a credit
26against the “net tax,” as defined in Section 23036, to a taxpayer
27who employs a qualified employee in an enterprise zone during
28the taxable year shall be equal to the sum of each of the following:

29(i) Ten percent of qualified wages in the first year of
30employment.

31(ii) Ten percent of qualified wages in the second year of
32employment.

33(iii) Thirty percent of qualified wages in the third year of
34employment.

35(iv) Forty percent of qualified wages in the fourth year of
36employment.

37(v) Fifty percent of qualified wages in the fifth year of
38employment.

39(B) The credit shall be allowed only with respect to qualified
40wages paid for each net increase in qualified employees. A net
P45   1increase shall be determined by subtracting from the amount
2determined in clause (i) the amount determined in clause (ii).

3(i) The total number of qualified employees employed in the
4state in the preceding taxable year by the taxpayer and by any trade
5 or business acquired by the taxpayer during the preceding taxable
6year.

7(ii) The total number of qualified employees employed in the
8state in the current taxable year by the taxpayer and by any trade
9or business acquired by the taxpayer during the current taxable
10year.

11(C) If a taxpayer relocated to a targeted tax area from within
12the state during the taxable year for which the credit is claimed,
13the taxpayer shall be allowed a credit with respect to qualified
14wages for each net increase in qualified employees only if the
15taxpayer makes each employee at the previous location or locations
16 a written bona fide offer of employment at the new location.

17(b) For purposes of this section:

18(1) “Qualified wages” means:

19(A) (i) Except as provided in clause (ii), that portion of wages
20paid or incurred by the taxpayer during the taxable year to qualified
21employees that exceeds 200 percent of the minimum wage and
22does not exceed 500 percent of the minimum wage.

23(ii) For up to 1,350 qualified employees who are employed by
24the taxpayer in the Long Beach Enterprise Zone in aircraft
25manufacturing activities described in Codes 3721 to 3728,
26 inclusive, and Code 3812 of the Standard Industrial Classification
27(SIC) Manual published by the United States Office of
28Management and Budget, 1987 edition, “qualified wages” means
29that portion of hourly wages that does not exceed 202 percent of
30the minimum wage.

31(B) Wages received during the 60-month period beginning with
32the first day the employee commences employment with the
33taxpayer. Reemployment in connection with any increase, including
34a regularly occurring seasonal increase, in the trade or business
35operations of the taxpayer does not constitute commencement of
36 employment for purposes of this section.

37(C) Qualified wages do not include any wages paid or incurred
38by the taxpayer on or after the zone expiration date. However,
39wages paid or incurred with respect to qualified employees who
40are employed by the taxpayer within the enterprise zone within
P46   1the 60-month period prior to the zone expiration date shall continue
2to qualify for the credit under this section after the zone expiration
3date, in accordance with all provisions of this section applied as
4if the enterprise zone designation were still in existence and
5binding.

6(2) “Minimum wage” means the wage established by the
7Industrial Welfare Commission as provided for in Chapter 1
8(commencing with Section 1171) of Part 4 of Division 2 of the
9Labor Code.

10(3) “Zone expiration date” means the date the enterprise zone
11 designation expires, is no longer binding, or becomes inoperative.

12(4) (A) “Qualified employee” means an individual who meets
13all of the following requirements:

14(i) At least 90 percent of whose services for the taxpayer during
15the taxable year are directly related to the conduct of the taxpayer’s
16trade or business located in an enterprise zone.

17(ii) Performs at least 50 percent of his or her services for the
18taxpayer during the taxable year in an enterprise zone.

19(iii) Is hired by the taxpayer after the date of original designation
20of the area in which services were performed as an enterprise zone.

21(iv) Is any of the following:

22(I) Immediately preceding the qualified employee’s
23commencement of employment with the taxpayer, was a person
24eligible for services under the federal Job Training Partnership
25Act (29 U.S.C. Sec. 1501 et seq.), or its successor, who is receiving,
26or is eligible to receive, subsidized employment, training, or
27services funded by the federal Job Training Partnership Act, or its
28successor.

29(II) Immediately preceding the qualified employee’s
30commencement of employment with the taxpayer, was a person
31eligible to be a voluntary or mandatory registrant under the Greater
32Avenues for Independence Act of 1985 (GAIN) provided for
33pursuant to Article 3.2 (commencing with Section 11320) of
34Chapter 2 of Part 3 of Division 9 of the Welfare and Institutions
35Code, or its successor.

36(III) Immediately preceding the qualified employee’s
37 commencement of employment with the taxpayer, was an
38economically disadvantaged individual 14 years of age or older.

P47   1(IV) Immediately preceding the qualified employee’s
2commencement of employment with the taxpayer, was a dislocated
3worker who meets any of the following:

4(aa) Has been terminated or laid off or who has received a notice
5of termination or layoff from employment, is eligible for or has
6exhausted entitlement to unemployment insurance benefits, and
7is unlikely to return to his or her previous industry or occupation.

8(bb) Has been terminated or has received a notice of termination
9of employment as a result of any permanent closure or any
10substantial layoff at a plant, facility, or enterprise, including an
11individual who has not received written notification but whose
12employer has made a public announcement of the closure or layoff.

13(cc) Is long-term unemployed and has limited opportunities for
14employment or reemployment in the same or a similar occupation
15in the area in which the individual resides, including an individual
1655 years of age or older who may have substantial barriers to
17employment by reason of age.

18(dd) Was self-employed (including farmers and ranchers) and
19is unemployed as a result of general economic conditions in the
20community in which he or she resides or because of natural
21disasters.

22(ee) Was a civilian employee of the Department of Defense
23employed at a military installation being closed or realigned under
24the Defense Base Closure and Realignment Act of 1990.

25(ff) Was an active member of the armed forces or National
26Guard as of September 30, 1990, and was either involuntarily
27separated or separated pursuant to a special benefits program.

28(gg) Is a seasonal or migrant worker who experiences chronic
29seasonal unemployment and underemployment in the agriculture
30industry, aggravated by continual advancements in technology and
31mechanization.

32(hh) Has been terminated or laid off, or has received a notice
33of termination or layoff, as a consequence of compliance with the
34Clean Air Act.

35(V) Immediately preceding the qualified employee’s
36commencement of employment with the taxpayer, was a disabled
37individual who is eligible for or enrolled in, or has completed a
38state rehabilitation plan or is a service-connected disabled veteran,
39veteran of the Vietnam era, or veteran who is recently separated
40from military service.

P48   1(VI) Immediately preceding the qualified employee’s
2commencement of employment with the taxpayer, was an
3ex-offender. An individual shall be treated as convicted if he or
4she was placed on probation by a state court without a finding of
5guilt.

6(VII) Immediately preceding the qualified employee’s
7commencement of employment with the taxpayer, was a person
8eligible for or a recipient of any of the following:

9(aa) Federal Supplemental Security Income benefits.

10(bb) Aid to Families with Dependent Children.

11(cc) CalFresh benefits.

12(dd) State and local general assistance.

13(VIII) Immediately preceding the qualified employee’s
14commencement of employment with the taxpayer, was a member
15of a federally recognized Indian tribe, band, or other group of
16Native American descent.

17(IX) Immediately preceding the qualified employee’s
18commencement of employment with the taxpayer, was a resident
19of a targeted employment area (as defined in Section 7072 of the
20Government Code).

21(X) An employee who qualified the taxpayer for the enterprise
22zone hiring credit under former Section 23622 or the program area
23hiring credit under former Section 23623.

24(XI) Immediately preceding the qualified employee’s
25commencement of employment with the taxpayer, was a member
26of a targeted group, as defined in Section 51(d) of the Internal
27Revenue Code, or its successor.

28(B) Priority for employment shall be provided to an individual
29who is enrolled in a qualified program under the federal Job
30Training Partnership Act or the Greater Avenues for Independence
31Act of 1985 or who is eligible as a member of a targeted group
32under the Work Opportunity Tax Credit (Section 51 of the Internal
33Revenue Code), or its successor.

34(5) (a) “Taxpayer” means a corporation engaged in a trade or
35business within an enterprise zone designated pursuant to Chapter
3612.8 (commencing with Section 7070) of Division 7 of Title 1 of
37the Government Code.

38(b) “Taxpayer” shall not include employers that provide
39temporary help services, as described in Code 561320 of the North
40American Industry Classification System (NAICS).

P49   1(6) “Seasonal employment” means employment by a taxpayer
2that has regular and predictable substantial reductions in trade or
3business operations.

4(c) The taxpayer shall do both of the following:

5(1) Obtain from the Employment Development Department, as
6permitted by federal law, the local county or city Job Training
7Partnership Act administrative entity, the local county GAIN office
8or social services agency, or the local government administering
9the enterprise zone, a certification that provides that a qualified
10employee meets the eligibility requirements specified in clause
11(iv) of subparagraph (A) of paragraph (4) of subdivision (b). The
12Employment Development Department may provide preliminary
13screening and referral to a certifying agency. The Employment
14Development Department shall develop a form for this purpose.
15The Department of Housing and Community Development shall
16develop regulations governing the issuance of certificates by local
17governments pursuant to subdivision (a) of Section 7086 of the
18Government Code.

19(2) Retain a copy of the certification and provide it to the
20Franchise Tax Board annually.

21(d) (1) For purposes of this section:

22(A) All employees of all corporations which are members of
23the same controlled group of corporations shall be treated as
24employed by a single taxpayer.

25(B) The credit, if any, allowable by this section to each member
26shall be determined by reference to its proportionate share of the
27expense of the qualified wages giving rise to the credit, and shall
28be allocated in that manner.

29(C) For purposes of this subdivision, “controlled group of
30corporations” means “controlled group of corporations” as defined
31in Section 1563(a) of the Internal Revenue Code, except that:

32(i) “More than 50 percent” shall be substituted for “at least 80
33percent” each place it appears in Section 1563(a)(1) of the Internal
34Revenue Code.

35(ii) The determination shall be made without regard to
36subsections (a)(4) and (e)(3)(C) of Section 1563 of the Internal
37Revenue Code.

38(2) If an employer acquires the major portion of a trade or
39business of another employer (hereinafter in this paragraph referred
40to as the “predecessor”) or the major portion of a separate unit of
P50   1a trade or business of a predecessor, then, for purposes of applying
2this section (other than subdivision (e)) for any calendar year
3ending after that acquisition, the employment relationship between
4a qualified employee and an employer shall not be treated as
5terminated if the employee continues to be employed in that trade
6or business.

7(e) (1) (A) If the employment, other than seasonal employment,
8of any qualified employee with respect to whom qualified wages
9are taken into account under subdivision (a) is terminated by the
10taxpayer at any time during the first 270 days of that employment,
11whether or not consecutive, or before the close of the 270th
12calendar day after the day in which that employee completes 90
13days of employment with the taxpayer, the tax imposed by this
14part for the taxable year in which that employment is terminated
15shall be increased by an amount equal to the credit allowed under
16subdivision (a) for that taxable year and all prior taxable years
17attributable to qualified wages paid or incurred with respect to that
18employee.

19(B) If the seasonal employment of any qualified employee, with
20respect to whom qualified wages are taken into account under
21subdivision (a) is not continued by the taxpayer for a period of
22270 days of employment during the 60-month period beginning
23with the day the qualified employee commences seasonal
24employment with the taxpayer, the tax imposed by this part, for
25the taxable year that includes the 60th month following the month
26in which the qualified employee commences seasonal employment
27with the taxpayer, shall be increased by an amount equal to the
28credit allowed under subdivision (a) for that taxable year and all
29prior taxable years attributable to qualified wages paid or incurred
30with respect to that qualified employee.

31(2) (A) Subparagraph (A) of paragraph (1) shall not apply to
32any of the following:

33(i) A termination of employment of a qualified employee who
34voluntarily leaves the employment of the taxpayer.

35(ii) A termination of employment of a qualified employee who,
36before the close of the period referred to in subparagraph (A) of
37paragraph (1), becomes disabled and unable to perform the services
38of that employment, unless that disability is removed before the
39close of that period and the taxpayer fails to offer reemployment
40to that employee.

P51   1(iii) A termination of employment of a qualified employee, if
2it is determined that the termination was due to the misconduct (as
3defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of
4the California Code of Regulations) of that employee.

5(iv) A termination of employment of a qualified employee due
6to a substantial reduction in the trade or business operations of the
7taxpayer.

8(v) A termination of employment of a qualified employee, if
9that employee is replaced by other qualified employees so as to
10create a net increase in both the number of employees and the
11hours of employment.

12(B) Subparagraph (B) of paragraph (1) shall not apply to any
13of the following:

14(i) A failure to continue the seasonal employment of a qualified
15employee who voluntarily fails to return to the seasonal
16employment of the taxpayer.

17(ii) A failure to continue the seasonal employment of a qualified
18employee who, before the close of the period referred to in
19subparagraph (B) of paragraph (1), becomes disabled and unable
20to perform the services of that seasonal employment, unless that
21disability is removed before the close of that period and the
22taxpayer fails to offer seasonal employment to that qualified
23employee.

24(iii) A failure to continue the seasonal employment of a qualified
25employee, if it is determined that the failure to continue the
26seasonal employment was due to the misconduct (as defined in
27Sections 1256-30 to 1256-43, inclusive, of Title 22 of the California
28Code of Regulations) of that qualified employee.

29(iv) A failure to continue seasonal employment of a qualified
30employee due to a substantial reduction in the regular seasonal
31trade or business operations of the taxpayer.

32(v) A failure to continue the seasonal employment of a qualified
33employee, if that qualified employee is replaced by other qualified
34employees so as to create a net increase in both the number of
35seasonal employees and the hours of seasonal employment.

36(C) For purposes of paragraph (1), the employment relationship
37between the taxpayer and a qualified employee shall not be treated
38as terminated by either of the following:

P52   1(i) By a transaction to which Section 381(a) of the Internal
2Revenue Code applies, if the qualified employee continues to be
3employed by the acquiring corporation.

4(ii) By reason of a mere change in the form of conducting the
5trade or business of the taxpayer, if the qualified employee
6continues to be employed in that trade or business and the taxpayer
7retains a substantial interest in that trade or business.

8(3) Any increase in tax under paragraph (1) shall not be treated
9as tax imposed by this part for purposes of determining the amount
10of any credit allowable under this part.

11(f) Rules similar to the rules provided in Section 46(e) and (h)
12of the Internal Revenue Code shall apply to both of the following:

13(1) An organization to which Section 593 of the Internal
14Revenue Code applies.

15(2) A regulated investment company or a real estate investment
16trust subject to taxation under this part.

17(g) For purposes of this section, “enterprise zone” means an
18area designated as an enterprise zone pursuant to Chapter 12.8
19(commencing with Section 7070) of Division 7 of Title 1 of the
20Government Code.

21(h) The credit allowable under this section shall be reduced by
22the credit allowed under Sections 23623.5, 23625, and 23646
23claimed for the same employee. The credit shall also be reduced
24by the federal credit allowed under Section 51 of the Internal
25Revenue Code.

26In addition, any deduction otherwise allowed under this part for
27the wages or salaries paid or incurred by the taxpayer upon which
28the credit is based shall be reduced by the amount of the credit,
29prior to any reduction required by subdivision (i) or (j).

30(i) In the case where the credit otherwise allowed under this
31section exceeds the “tax” for the taxable year, that portion of the
32credit that exceeds the “tax” may be carried over and added to the
33credit, if any, in succeeding taxable years, until the credit is
34exhausted. The credit shall be applied first to the earliest taxable
35years possible.

36(j) (1) The amount of the credit otherwise allowed under this
37section and Section 23612.2, including any credit carryover from
38prior years, that may reduce the “tax” for the taxable year shall
39not exceed the amount of tax which would be imposed on the
40taxpayer’s business income attributable to the enterprise zone
P53   1determined as if that attributable income represented all of the
2income of the taxpayer subject to tax under this part.

3(2) Attributable income shall be that portion of the taxpayer’s
4California source business income that is apportioned to the
5enterprise zone. For that purpose, the taxpayer’s business
6attributable to sources in this state first shall be determined in
7accordance with Chapter 17 (commencing with Section 25101).
8That business income shall be further apportioned to the enterprise
9zone in accordance with Article 2 (commencing with Section
1025120) of Chapter 17, modified for purposes of this section in
11accordance with paragraph (3).

12(3) Business income shall be apportioned to the enterprise zone
13by multiplying the total California business income of the taxpayer
14by a fraction, the numerator of which is the property factor plus
15the payroll factor, and the denominator of which is two. For
16purposes of this paragraph:

17(A) The property factor is a fraction, the numerator of which is
18the average value of the taxpayer’s real and tangible personal
19property owned or rented and used in the enterprise zone during
20the income year, and the denominator of which is the average value
21of all the taxpayer’s real and tangible personal property owned or
22rented and used in this state during the income year.

23(B) The payroll factor is a fraction, the numerator of which is
24the total amount paid by the taxpayer in the enterprise zone during
25the income year for compensation, and the denominator of which
26is the total compensation paid by the taxpayer in this state during
27the income year.

28(4) The portion of any credit remaining, if any, after application
29of this subdivision, shall be carried over to succeeding taxable
30years, as if it were an amount exceeding the “tax” for the taxable
31year, as provided in subdivision (i).

32(k) The changes made to this section by Chapter 609 by the
33Statutes of 1997 shall apply to taxable years on or after January
341, 1997.

35(l) The Franchise Tax Board shall compile the certifications
36submitted pursuant to paragraph (2) of subdivision (c) and shall
37provide as a searchable database on its Internet Web site, for each
38taxable year beginning on or after January 1, 2013, and before
39January 1, 2019, the employer names, amounts of tax credit
40claimed, and number of new jobs created for each taxable year
P54   1pursuant to this section, Sections 17053.34, 17053.45, 17053.46,
217053.47, 23622.8, 23634, and 23646.

3(m) This section shall remain in effect only until December 1,
42019, and as of that date is repealed.

end delete
5begin insert

begin insertSEC. 5.end insert  

end insert

begin insertSection 17053.74 of the end insertbegin insertRevenue and Taxation Codeend insert
6begin insert is amended to read:end insert

7

17053.74.  

(a) begin insert(1)end insertbegin insertend insert There shall be allowed a credit against the
8“net tax” (as defined in Section 17039) to a taxpayer who employs
9a qualified employee in an enterprise zone during the taxable yearbegin insert,
10but only if the qualified employee first commences employment
11with the taxpayer before January 1, 2014end insert
. The credit shall be equal
12to the sum of each of the following:

begin delete

13(1)

end delete

14begin insert(A)end insert Fifty percent of qualified wages in the first year of
15employment.

begin delete

16(2)

end delete

17begin insert(B)end insert Forty percent of qualified wages in the second year of
18employment.

begin delete

19(3)

end delete

20begin insert(C)end insert Thirty percent of qualified wages in the third year of
21employment.

begin delete

22(4)

end delete

23begin insert(D)end insert Twenty percent of qualified wages in the fourth year of
24employment.

begin delete

25(5)

end delete

26begin insert(E)end insert Ten percent of qualified wages in the fifth year of
27employment.

begin insert

28(2) If a taxpayer relocated to an enterprise zone from within
29the state during the taxable year for which the credit is claimed,
30the taxpayer shall be allowed a credit with respect to qualified
31wages for each net increase in qualified employees only if the
32taxpayer provides each employee at the previous location or
33locations a written notice of transfer to the new location with
34comparable compensation. The taxpayer shall provide
35self-certification with documentation when submitting voucher
36applications.

end insert

37(b) For purposes of this section:

38(1) “Qualified wages” means:

P55   1(A) (i) Except as provided in clause (ii), that portion of wages
2paid or incurred by the taxpayer during the taxable year to qualified
3employees that does not exceed 150 percent of the minimum wage.

4(ii) For up to 1,350 qualified employees who are employed by
5the taxpayer in the Long Beach Enterprise Zone in aircraft
6manufacturing activities described in Codes 3721 to 3728,
7inclusive, and Code 3812 of the Standard Industrial Classification
8(SIC) Manual published by the United States Office of
9Management and Budget, 1987 edition, “qualified wages” means
10that portion of hourly wages that does not exceed 202 percent of
11the minimum wage.

12(B) Wages received during the 60-month period beginning with
13the first day the employee commences employment with the
14taxpayer. Reemployment in connection with any increase, including
15a regularly occurring seasonal increase, in the trade or business
16operations of the taxpayer does not constitute commencement of
17employment for purposes of this section.

18(C) Qualified wages do not include any wages paid or incurred
19by the taxpayer on or after the zone expiration date. However,
20wages paid or incurred with respect to qualified employees who
21are employed by the taxpayer within the enterprise zone within
22the 60-month period prior to the zone expiration date shall continue
23to qualify for the credit under this section after the zone expiration
24date, in accordance with all provisions of this section applied as
25if the enterprise zone designation were still in existence and
26binding.

27(2) “Minimum wage” means the wage established by the
28Industrial Welfare Commission as provided for in Chapter 1
29(commencing with Section 1171) of Part 4 of Division 2 of the
30Labor Code.

31(3) “Zone expiration date” means the date the enterprise zone
32designation expires, is no longer binding, or becomes inoperative.

33(4) (A) “Qualified employee” means an individual who meets
34all of the following requirements:

35(i) At least 90 percent of whose services for the taxpayer during
36the taxable year are directly related to the conduct of the taxpayer’s
37trade or business located in an enterprise zone.

38(ii) Performs at least 50 percent of his or her services for the
39taxpayer during the taxable year in an enterprise zone.

P56   1(iii) Is hired by the taxpayer after the date of original designation
2of the area in which services were performed as an enterprise zone.

3(iv) Is any of the following:

4(I) Immediately preceding the qualified employee’s
5commencement of employment with the taxpayer, was a person
6eligible for services under the federalbegin delete Job Training Partnershipend delete
7begin insert Workforce Investmentend insert Actbegin insert of 1998end insert (29 U.S.C. Sec.begin delete 1501end deletebegin insert 2801end insert et
8seq.), or its successor, who is receiving, or is eligible to receive,
9subsidized employment, training, or services funded by the federal begin delete10 Job Training Partnership Act,end delete begin insert Workforce Investment Act of 1998
11(29 U.S.C. Sec. 2801 et seq.),end insert
or its successor.

12(II) Immediately preceding the qualified employee’s
13commencement of employment with the taxpayer, was a person
14eligible to be a voluntary or mandatory registrant under the Greater
15Avenues for Independence Act of 1985 (GAIN) provided for
16pursuant to Article 3.2 (commencing with Section 11320) of
17Chapter 2 of Part 3 of Division 9 of the Welfare and Institutions
18Code, or its successor.

19(III) Immediately preceding the qualified employee’s
20commencement of employment with the taxpayer, was an
21economically disadvantaged individual 14 years of age or older.

22(IV) Immediately preceding the qualified employee’s
23commencement of employment with the taxpayer, was a dislocated
24worker who meets any of the following:

begin delete

25(aa)

end delete

26begin insert(ia)end insert Has been terminated or laid off or who has received a notice
27of termination or layoff from employment, is eligible for or has
28exhausted entitlement to unemployment insurance benefits, and
29is unlikely to return to his or her previous industry or occupation.

begin delete

30(bb)

end delete

31begin insert(ib)end insert Has been terminated or has received a notice of termination
32of employment as a result of any permanent closure or any
33substantial layoff at a plant, facility, or enterprise, including an
34individual who has not received written notification but whose
35employer has made a public announcement of the closure or layoff.

begin delete

36(cc)

end delete

37begin insert(ic)end insert Is long-term unemployed and has limited opportunities for
38employment or reemployment in the same or a similar occupation
39in the area in which the individual resides, including an individual
P57   155 years of age or older who may have substantial barriers to
2employment by reason of age.

begin delete

3(dd)

end delete

4begin insert(id)end insert Was self-employed (including farmers and ranchers) and
5is unemployed as a result of general economic conditions in the
6community in which he or she resides or because of natural
7disasters.

begin delete

8(ee)

end delete

9begin insert(ie)end insert Was a civilian employee of the Department of Defense
10employed at a military installation being closed or realigned under
11the Defense Base Closure and Realignment Act of 1990.

begin delete

12(ff)

end delete

13begin insert(if)end insert Was an active member of the armed forces or National Guard
14as of September 30, 1990, and was either involuntarily separated
15or separated pursuant to a special benefits program.

begin delete

16(gg)

end delete

17begin insert(ig)end insert Is a seasonal or migrant worker who experiences chronic
18seasonal unemployment and underemployment in the agriculture
19industry, aggravated by continual advancements in technology and
20mechanization.

begin delete

21(hh)

end delete

22begin insert(ih)end insert Has been terminated or laid off, or has received a notice of
23termination or layoff, as a consequence of compliance with the
24Clean Air Act.

25(V) Immediately preceding the qualified employee’s
26commencement of employment with the taxpayer, was a disabled
27individual who is eligible for or enrolled in, or has completed a
28state rehabilitation plan or is a service-connected disabled veteran,
29veteran of the Vietnam era, or veteran who is recently separated
30from military service.

31(VI) Immediately preceding the qualified employee’s
32commencement of employment with the taxpayer, was an
33ex-offender. An individual shall be treated as convicted if he or
34she was placed on probation by a state court without a finding of
35 guilt.

36(VII) Immediately preceding the qualified employee’s
37commencement of employment with the taxpayer, was a person
38eligible for or a recipient of any of the following:

begin delete

39(aa)

end delete

40begin insert(ia)end insert Federal Supplemental Security Income benefits.

begin delete

P58   1(bb)

end delete

2begin insert(ib)end insert Aid to Families with Dependent Children.

begin delete

3(cc)

end delete

4begin insert(ic)end insert CalFresh benefits.

begin delete

5(dd)

end delete

6begin insert(id)end insert State and local general assistance.

7(VIII) Immediately preceding the qualified employee’s
8commencement of employment with the taxpayer, was a member
9of a federally recognized Indian tribe, band, or other group of
10Native American descent.

11(IX) Immediately preceding the qualified employee’s
12commencement of employment with the taxpayer, was a resident
13of a targeted employment area, as defined in Section 7072 of the
14Government Code.

15(X) An employee who qualified the taxpayer for the enterprise
16zone hiring credit under former Section 17053.8 or the program
17area hiring credit under former Section 17053.11.

18(XI) Immediately preceding the qualified employee’s
19commencement of employment with the taxpayer, was a member
20of a targeted group, as defined in Section 51(d) of the Internal
21Revenue Code, or its successor.

22(B) Priority for employment shall be provided to an individual
23who is enrolled in a qualified program under the federal begin delete Job
24 Training Partnership Actend delete
begin insert Workforce Investment Act of 1998 (29
25U.S.C. Sec. 2801 et seq.),end insert
or the Greater Avenues for Independence
26Act of 1985 or who is eligible as a member of a targeted group
27under the Work Opportunity Tax Credit (Section 51 of the Internal
28Revenue Code), or its successor.

29(5) begin insert(A)end insertbegin insertend insert“Taxpayer” means a person or entity engaged in a trade
30or business within an enterprise zone designated pursuant to
31Chapter 12.8 (commencing with Section 7070) of the Government
32Code.

begin insert

33(B) “Taxpayer” shall not include employers that provide
34temporary help services, as described in Code 561320 of the North
35American Industry Classification System (NAICS).

end insert

36(6) “Seasonal employment” means employment by a taxpayer
37that has regular and predictable substantial reductions in trade or
38business operations.

39(c) The taxpayer shall dobegin delete both ofend delete the following:

P59   1(1) begin insert(A)end insertbegin insertend insert Obtain from the Employment Development Department,
2as permitted by federal law, the local county or citybegin delete Job Training
3Partnership Actend delete
begin insert Workforce Investment Act of 1998 (29 U.S.C. Sec.
42801 et seq.),end insert
administrative entity, the local county GAIN office
5or social services agency, or the local government administering
6the enterprise zone, a certification which provides that a qualified
7employee meets the eligibility requirements specified in clause
8(iv) of subparagraph (A) of paragraph (4) of subdivision (b). The
9Employment Development Department may provide preliminary
10screening and referral to a certifying agency. The Employment
11Development Department shall develop a form for this purpose.
12The Department of Housing and Community Development shall
13develop regulations governing the issuance of certificates by local
14governments pursuant to subdivision (a) of Section 7086 of the
15Government Code.

begin insert

16(B) (i) For any otherwise qualified employee for whom a
17certification as described in subparagraph (A) has not been
18obtained and for whom a request for certification as described in
19subparagraph (A) has not been previously submitted, the request
20certification required under subparagraph (A) with respect to that
21otherwise qualified employee shall be submitted to the certifying
22entity no later than one year after the operative date of the act
23amending this section.

end insert
begin insert

24(ii) Notwithstanding anything to the contrary, a credit shall not
25be allowed under this section with respect to any otherwise
26qualified employee described in clause (i) unless the request for
27certification required under subparagraph (A) was timely submitted
28in accordance with clause (i).

end insert

29(2) Retain a copy of the certification and provide itbegin delete upon requestend delete
30 to the Franchise Tax Boardbegin insert annuallyend insert.

31(d) (1) For purposes of this section:

32(A) All employees of trades or businesses, which are not
33 incorporated, that are under common control shall be treated as
34employed by a single taxpayer.

35(B) The credit, if any, allowable by this section with respect to
36each trade or business shall be determined by reference to its
37proportionate share of the expense of the qualified wages giving
38rise to the credit, and shall be allocated in that manner.

P60   1(C) Principles that apply in the case of controlled groups of
2corporations, as specified in subdivision (d) of Section 23622.7,
3shall apply with respect to determining employment.

4(2) If an employer acquires the major portion of a trade or
5business of another employer (hereinafter in this paragraph referred
6to as the “predecessor”) or the major portion of a separate unit of
7a trade or business of a predecessor, then, for purposes of applying
8this section (other than subdivision (e)) for any calendar year
9ending after that acquisition, the employment relationship between
10a qualified employee and an employer shall not be treated as
11terminated if the employee continues to be employed in that trade
12or business.

13(e) (1) (A) If the employment, other than seasonal employment,
14of any qualified employee, with respect to whom qualified wages
15are taken into account under subdivision (a), is terminated by the
16taxpayer at any time during the first 270 days of that employment
17(whether or not consecutive) or before the close of the 270th
18calendar day after the day in which that employee completes 90
19days of employment with the taxpayer, the tax imposed by this
20part for the taxable year in which that employment is terminated
21shall be increased by an amount equal to the credit allowed under
22subdivision (a) for that taxable year and all prior taxable years
23attributable to qualified wages paid or incurred with respect to that
24employee.

25(B) If the seasonal employment of any qualified employee, with
26respect to whom qualified wages are taken into account under
27subdivision (a), is not continued by the taxpayer for a period of
28270 days of employment during the 60-month period beginning
29with the day the qualified employee commences seasonal
30employment with the taxpayer, the tax imposed by this part, for
31the taxable year that includes the 60th month following the month
32in which the qualified employee commences seasonal employment
33with the taxpayer, shall be increased by an amount equal to the
34credit allowed under subdivision (a) for that taxable year and all
35prior taxable years attributable to qualified wages paid or incurred
36with respect to that qualified employee.

37(2) (A) Subparagraph (A) of paragraph (1) shall not apply to
38any of the following:

39(i) A termination of employment of a qualified employee who
40voluntarily leaves the employment of the taxpayer.

P61   1(ii) A termination of employment of a qualified employee who,
2before the close of the period referred to in paragraph (1), becomes
3disabled and unable to perform the services of that employment,
4unless that disability is removed before the close of that period
5and the taxpayer fails to offer reemployment to that employee.

6(iii) A termination of employment of a qualified employee, if
7it is determined that the termination was due to the misconduct (as
8defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of
9the California Code of Regulations) of that employee.

10(iv) A termination of employment of a qualified employee due
11to a substantial reduction in the trade or business operations of the
12taxpayer.

13(v) A termination of employment of a qualified employee, if
14that employee is replaced by other qualified employees so as to
15create a net increase in both the number of employees and the
16hours of employment.

17(B) Subparagraph (B) of paragraph (1) shall not apply to any
18of the following:

19(i) A failure to continue the seasonal employment of a qualified
20employee who voluntarily fails to return to the seasonal
21employment of the taxpayer.

22(ii) A failure to continue the seasonal employment of a qualified
23employee who, before the close of the period referred to in
24subparagraph (B) of paragraph (1), becomes disabled and unable
25to perform the services of that seasonal employment, unless that
26disability is removed before the close of that period and the
27taxpayer fails to offer seasonal employment to that qualified
28employee.

29(iii) A failure to continue the seasonal employment of a qualified
30employee, if it is determined that the failure to continue the
31seasonal employment was due to the misconduct (as defined in
32Sections 1256-30 to 1256-43, inclusive, of Title 22 of the California
33Code of Regulations) of that qualified employee.

34(iv) A failure to continue seasonal employment of a qualified
35employee due to a substantial reduction in the regular seasonal
36trade or business operations of the taxpayer.

37(v) A failure to continue the seasonal employment of a qualified
38employee, if that qualified employee is replaced by other qualified
39employees so as to create a net increase in both the number of
40seasonal employees and the hours of seasonal employment.

P62   1(C) For purposes of paragraph (1), the employment relationship
2between the taxpayer and a qualified employee shall not be treated
3as terminated by reason of a mere change in the form of conducting
4the trade or business of the taxpayer, if the qualified employee
5continues to be employed in that trade or business and the taxpayer
6retains a substantial interest in that trade or business.

7(3) Any increase in tax under paragraph (1) shall not be treated
8as tax imposed by this part for purposes of determining the amount
9of any credit allowable under this part.

10(f) In the case of an estate or trust, both of the following apply:

11(1) The qualified wages for any taxable year shall be apportioned
12between the estate or trust and the beneficiaries on the basis of the
13income of the estate or trust allocable to each.

14(2) Any beneficiary to whom any qualified wages have been
15apportioned under paragraph (1) shall be treated, for purposes of
16this part, as the employer with respect to those wages.

17(g) For purposes of this section, “enterprise zone” means an
18area designated as an enterprise zone pursuant to Chapter 12.8
19(commencing with Section 7070) of Division 7 of Title 1 of the
20Government Code.

21(h) The credit allowable under this section shall be reduced by
22the credit allowed under Sections 17053.10, 17053.17, and
2317053.46 claimed for the same employee. The credit shall also be
24reduced by the federal credit allowed under Section 51 of the
25Internal Revenue Code.

26In addition, any deduction otherwise allowed under this part for
27the wages or salaries paid or incurred by the taxpayer upon which
28the credit is based shall be reduced by the amount of the credit,
29prior to any reduction required by subdivision (i) or (j).

30(i) In the case where the credit otherwise allowed under this
31section exceeds the “net tax” for the taxable year, that portion of
32the credit that exceeds the “net tax” may be carried over and added
33to the credit, if any, in succeeding taxable years, until the credit is
34exhausted. The credit shall be applied first to the earliest taxable
35years possible.

36(j) (1) The amount of the credit otherwise allowed under this
37section and Section 17053.70, including any credit carryover from
38prior years, that may reduce the “net tax” for the taxable year shall
39not exceed the amount of tax which would be imposed on the
40taxpayer’s business income attributable to the enterprise zone
P63   1determined as if that attributable income represented all of the
2income of the taxpayer subject to tax under this part.

3(2) Attributable income shall be that portion of the taxpayer’s
4California source business income that is apportioned to the
5enterprise zone. For that purpose, the taxpayer’s business income
6attributable to sources in this state first shall be determined in
7accordance with Chapter 17 (commencing with Section 25101) of
8Part 11. That business income shall be further apportioned to the
9enterprise zone in accordance with Article 2 (commencing with
10Section 25120) of Chapter 17 of Part 11, modified for purposes
11of this section in accordance with paragraph (3).

12(3) Business income shall be apportioned to the enterprise zone
13by multiplying the total California business income of the taxpayer
14by a fraction, the numerator of which is the property factor plus
15the payroll factor, and the denominator of which is two. For
16purposes of this paragraph:

17(A) The property factor is a fraction, the numerator of which is
18the average value of the taxpayer’s real and tangible personal
19property owned or rented and used in the enterprise zone during
20the taxable year, and the denominator of which is the average value
21of all the taxpayer’s real and tangible personal property owned or
22rented and used in this state during the taxable year.

23(B) The payroll factor is a fraction, the numerator of which is
24the total amount paid by the taxpayer in the enterprise zone during
25the taxable year for compensation, and the denominator of which
26is the total compensation paid by the taxpayer in this state during
27the taxable year.

28(4) The portion of any credit remaining, if any, after application
29of this subdivision, shall be carried over to succeeding taxable
30years, as if it were an amount exceeding the “net tax” for the
31taxable year, as provided in subdivision (i).

32(k) The changes made to this section by the act adding this
33subdivision shall apply to taxable years beginning on or after
34January 1, 1997.

begin insert

35(l) The Franchise Tax Board shall compile the certifications
36submitted pursuant to paragraph (2) of subdivision (c) and shall
37provide as a searchable database on its Internet Web site, for each
38taxable year beginning on or after January 1, 2014, and before
39January 1, 2019, the employer names, amounts of tax credit
40claimed, and number of new jobs created for each taxable year
P64   1pursuant to this section, and Sections 17053.34, 17053.46,
217053.47, 23622.7, 23622.8, 23634, and 23646.

end insert
begin insert

3(m) This section shall cease to be operative for taxable years
4beginning on or after January 1, 2019, and is repealed as of
5December 1, 2019.

end insert
6begin insert

begin insertSEC. 6.end insert  

end insert

begin insertSection 17053.90 is added to the end insertbegin insertRevenue and Taxation
7Code
end insert
begin insert, to read:end insert

begin insert
8

begin insert17053.90.end insert  

(a) (1) For each taxable year beginning on or after
9January 1, 2014, there shall be allowed to a qualified taxpayer
10who hires a qualified full-time employee a credit against the “net
11tax,” as defined in Section 17039, in an amount calculated under
12this section.

13(2) The amount of the credit allowable under this section for a
14taxable year shall be equal to the product of the tentative credit
15amount for the taxable year and the applicable percentage for that
16taxable year.

17(b) For purposes of this section:

18(1) The “tentative credit amount” for a taxable year shall be
19equal to the sum of the following amounts:

20(A) For the first year of employment of a qualified employee,
2110 percent of qualified wages paid during the taxable year.

22(B) For the second year of employment of a qualified employee,
2330 percent of qualified wages paid during the taxable year.

24(C) For the third year of employment of a qualified employee,
2550 percent of qualified wages paid during the taxable year.

26(D) For the fourth year of employment of a qualified employee,
2730 percent of qualified wages paid during the taxable year.

28(E) For the fifth year of employment of a qualified employee,
2910 percent of qualified wages paid during the taxable year.

30(2) The “applicable percentage” for a taxable year is equal to
31a fraction, the numerator of which is the net increase in the total
32number of full-time employees employed in this state during the
33taxable year, determined on an annual full-time equivalent basis,
34as compared with the total number of full-time employees employed
35in this state during the base year, determined on the same basis,
36and the denominator of which is the total number of qualified
37full-time employees employed in this state during the taxable year.
38The applicable percentage shall not exceed 100 percent.

39(3) “Base year” means 2013, or in the case of a qualified
40taxpayer who first hires a qualified full-time employee in a taxable
P65   1year beginning on or after January 2015, the taxable year
2immediately preceding the taxable year in which the qualified
3employee was hired.

4(4) “Qualified wages” means both of the following:

5(A) That portion of wages paid or incurred by the qualified
6taxpayer during the taxable year to each qualified full-time
7employee in excess of 200 percent of the minimum wage, but not
8in excess of 400 percent of the minimum wage.

9(B) Wages received during the 60-month period beginning with
10the first day the qualified employee commences employment with
11the qualified taxpayer.

12(5) “Minimum wage” means the wage established pursuant to
13Chapter 1 (commencing with Section 1171) of Part 4 of Division
142 of the Labor Code.

15(6) “Acquired” includes any gift, inheritance, transfer incident
16to divorce, or any other transfer, whether or not for consideration.

17(7) (A) ”Qualified full-time employee” means an individual
18who meets all of the following requirements:

19(i) First commences employment with the qualified taxpayer on
20or after January 1, 2014.

21(ii) Satisfies either of the following conditions:

22(I) Is paid qualified wages by the qualified taxpayer for services
23not less than an average of 35 hours per week.

24(II) Is a salaried employee and was paid compensation during
25the taxable year for full-time employment, within the meaning of
26Section 515 of the Labor Code, by the qualified taxpayer.

27(iii) Is any of the following:

28(I) Immediately preceding the qualified employee’s
29 commencement of employment with the qualified taxpayer, was a
30person eligible for services under the federal Workforce Investment
31Act of 1998 (29 U.S.C. Sec. 2801 et seq.), or its successor, who is
32receiving, or is eligible to receive, subsidized employment, training,
33or services funded by the federal Workforce Investment Act, or its
34successor.

35(II) Immediately preceding the qualified employee’s
36commencement of employment with the qualified taxpayer, was a
37person eligible to be a voluntary or mandatory registrant under
38the Greater Avenues for Independence Act of 1985 (GAIN)
39provided for pursuant to Article 3.2 (commencing with Section
P66   111320) of Chapter 2 of Part 3 of Division 9 of the Welfare and
2Institutions Code, or its successor.

3(III) Immediately preceding the qualified employee’s
4commencement of employment with the qualified taxpayer, was
5an economically disadvantaged individual 14 years of age or older.

6(IV) Immediately preceding the qualified employee’s
7commencement of employment with the qualified taxpayer, was a
8dislocated worker who meets any of the following:

9(ia) Has been terminated or laid off or has received a notice of
10termination or layoff from employment, is eligible for or has
11exhausted entitlement to unemployment insurance benefits, and is
12unlikely to return to his or her previous industry or occupation.

13(ib) Has been terminated or has received a notice of termination
14of employment as a result of any permanent closure or any
15substantial layoff at a plant, facility, or enterprise, including an
16individual who has not received written notification but whose
17employer has made a public announcement of the closure or layoff.

18(ic) Is long-term unemployed and has limited opportunities for
19employment or reemployment in the same or a similar occupation
20in the area in which the individual resides, including an individual
2155 years of age or older who may have substantial barriers to
22employment by reason of age.

23(id) Was self-employed, including farmers and ranchers, and
24is unemployed as a result of general economic conditions in the
25community in which he or she resides or because of natural
26disasters.

27(ie) Was a civilian employee of the Department of Defense
28employed at a military installation being closed or realigned under
29the Defense Base Closure and Realignment Act of 1990.

30(if) Was an active member of the Armed Forces or National
31Guard as of September 30, 1990, and was either involuntarily
32separated or separated pursuant to a special benefits program.

33(ig) Is a seasonal or migrant worker who experiences chronic
34seasonal unemployment and underemployment in the agriculture
35industry, aggravated by continual advancements in technology
36and mechanization.

37(ih) Has been terminated or laid off, or has received a notice
38of termination or layoff, as a consequence of compliance with the
39Clean Air Act.

P67   1(V) Immediately preceding the qualified employee’s
2commencement of employment with the qualified taxpayer, was a
3disabled individual who is eligible for, is enrolled in, or has
4completed a state rehabilitation plan or is a service-connected
5disabled veteran, veteran of the Vietnam era, or veteran who is
6recently separated from military service.

7(VI) Immediately preceding the qualified employee’s
8commencement of employment with the qualified taxpayer, was
9an ex-offender. An individual shall be treated as convicted if he
10or she was placed on probation by a state court without a finding
11of guilt.

12(VII) Immediately preceding the qualified employee’s
13commencement of employment with the qualified taxpayer, was a
14person eligible for or a recipient of any of the following:

15(ia) Federal Supplemental Security Income benefits.

16(ib) Aid to Families with Dependent Children, or its successor.

17(ic) CalFresh benefits.

18(id) State and local general assistance.

19(VIII) Immediately preceding the qualified employee’s
20commencement of employment with the qualified taxpayer, was a
21member of a federally recognized Indian tribe, band, or other
22group of Native American descent.

23(IX) Immediately preceding the qualified employee’s
24commencement of employment with the qualified taxpayer, was a
25resident of a targeted employment area, as defined in Section 7072
26of the Government Code.

27(X) Is an employee who qualified the qualified taxpayer for the
28enterprise zone hiring credit under former Section 17053.8 or the
29program area hiring credit under former Section 17053.11.

30(XI) Immediately preceding the qualified employee’s
31commencement of employment with the qualified taxpayer, was a
32member of a targeted group, as defined in Section 51(d) of the
33Internal Revenue Code, or its successor.

34(B) An individual may only be considered a qualified full-time
35employee for the period of time commencing with the date the
36individual is first employed by the qualified taxpayer and ending
3760 months thereafter.

38(C) Priority for employment shall be provided to an individual
39who is enrolled in a qualified program under the federal Workforce
40Investment Act of 1998 or the Greater Avenues for Independence
P68   1Act of 1985 or who is eligible as a member of a targeted group
2under the Work Opportunity Tax Credit (Section 51 of the Internal
3Revenue Code), or its successor.

4(8) (A) ”Qualified taxpayer” means a person or entity engaged
5in a trade or business that meets both of the following requirements
6during the taxable year:

7(i) Pays or incurs qualified wages.

8(ii) Has a net increase in full-time employees.

9(B) In the case of any pass-thru entity, the determination of
10whether a taxpayer is a qualified taxpayer under this section shall
11be made at the entity level and any credit under this section or
12Section 23691 shall be allowed to the pass-thru entity and passed
13through to the partners and shareholders in accordance with
14applicable provisions of this part or Part 11 (commencing with
15Section 23001). For purposes of this subdivision, the term
16“pass-thru entity” means any partnership or S corporation.

17(9) “Seasonal employment” means employment by a qualified
18taxpayer that has regular and predictable substantial reductions
19in trade or business operations.

20(10) “Annual full-time equivalent” means all of the following:

21(A) Either of the following:

22(i) In the case of a full-time employee paid hourly qualified
23wages, “annual full-time equivalent” means the total number of
24hours worked for the qualified taxpayer by the employee, not to
25exceed 2,000 hours per employee, divided by 2,000.

26(ii) In the case of a salaried full-time employee, “annual
27full-time equivalent” means the total number of weeks worked for
28the qualified taxpayer by the employee, divided by 52.

29(B) All employees of the trades or businesses that are treated
30as related under either Section 267, 318, or 707 of the Internal
31Revenue Code shall be treated as employed by a single taxpayer.

32(C) In determining whether the qualified taxpayer has first
33commenced doing business in this state during the taxable year,
34subdivision (f) of Section 17276.20, without application of
35paragraph (7) of that subdivision, shall apply.

36(c) The “net increase in total full-time employees” of a qualified
37taxpayer shall be determined as provided by this subdivision:

38(1) (A) (i) The net increase in full-time employees in this state
39shall be determined on an annual full-time equivalent basis.

P69   1(ii) The amount determined under clause (i) shall include the
2fractional amount, if any, of the increase for the taxable year.

3(B) The net increase in the total number of full-time employees
4shall be determined by subtracting the amount determined under
5clause (ii) from the amount determined under clause (i). If the
6amount determined under clause (ii) is equal to or exceeds the
7amount determined under clause (i), the amount determined under
8this subparagraph shall be zero.

9(i) The total number of full-time employees in this state employed
10in the current taxable year by the qualified taxpayer and by any
11trade or business acquired by the qualified taxpayer during the
12current taxable year.

13(ii) The total number of full-time employees in this state
14employed in the base year by the qualified taxpayer and by any
15trade or business acquired by the qualified taxpayer during the
16current taxable year.

17(2) For qualified taxpayers who first commence doing business
18in this state during the taxable year, the number of full-time
19employees in this state under clause (ii) of subparagraph (B) of
20paragraph (1) of this subdivision for the base year shall be zero.

21(3) For purposes of determining the number of full-time
22employees of the qualified taxpayer who are employed in this state
23under this section, only those employees who receive wages that
24are subject to Division 6 (commencing with Section 13000) of the
25Unemployment Insurance Code from the qualified taxpayer
26comprising more than 50 percent of that employee’s total wages
27received from the qualified taxpayer for the taxable year shall be
28included.

29(d) (1) Any qualified wages taken into account under this
30section in computing this credit shall not be taken into account in
31computing any other credit otherwise allowable under this part
32or Part 11. (commencing with Section 23001)

33(2) Notwithstanding anything to the contrary, any employee
34whose wages, in whole or in part, are eligible to be taken into
35account in computing a credit under Section 17053.74 or 23622.7
36shall not be treated as a qualified full-time employee under this
37section.

38(e) (1) The qualified taxpayer shall do both of the following:

39(A) Obtain from the Employment Development Department, as
40permitted by federal law, the local county or city Workforce
P70   1Investment Act administrative entity, the local county GAIN office
2or social services agency, or the local government, a certification
3that provides that a qualified employee meets the eligibility
4requirements specified in clause (iv) of subparagraph (A) of
5paragraph (4) of subdivision (b). The Employment Development
6Department may provide preliminary screening and referral to a
7certifying agency. The Employment Development Department shall
8develop a form for this purpose. The Department of Housing and
9Community Development shall develop regulations governing the
10issuance of certificates by local governments pursuant to
11subdivision (a) of Section 7086 of the Government Code.

12(B) Retain a copy of the certification and provide it to the
13Franchise Tax Board annually.

14(2) The credit allowed by this section shall be claimed on a
15timely filed original return of the qualified taxpayer.

16(f) (1) For purposes of this section:

17(A) All employees of trades or businesses that are not
18incorporated, and that are under common control shall be treated
19as employed by a single taxpayer.

20(B) The credit, if any, allowable by this section with respect to
21each trade or business shall be determined by reference to its
22proportionate share of the expense of the qualified wages giving
23rise to the credit, and shall be allocated in that manner.

24(C) Principles that apply in the case of controlled groups of
25corporations, as specified in subdivision (d) of Section 23622.7,
26shall apply with respect to determining employment.

27(2) If an employer acquires the major portion of a trade or
28business of another employer (hereinafter in this paragraph
29referred to as the “predecessor”) or the major portion of a
30separate unit of a trade or business of a predecessor, then, for
31purposes of applying this section for any calendar year ending
32after that acquisition, the employment relationship between a
33qualified employee and an employer shall not be treated as
34terminated if the employee continues to be employed in that trade
35or business.

36(g) In the case of an estate or trust, both of the following apply:

37(1) The qualified wages for any taxable year shall be
38apportioned between the estate or trust and the beneficiaries on
39the basis of the income of the estate or trust allocable to each.

P71   1(2) Any beneficiary to whom any qualified wages have been
2apportioned under paragraph (1) shall be treated, for purposes
3of this part, as the employer with respect to those wages.

4(h) (1) The credit allowable under this section shall be reduced
5by the credit allowed under Sections 17053.10, 17053.17, and
617053.46 claimed for the same employee. The credit shall also be
7 reduced by the federal credit allowed under Section 51 of the
8Internal Revenue Code, as applicable for federal purposes.

9(2) In addition, any deduction otherwise allowed under this part
10for the wages or salaries paid or incurred by the qualified taxpayer
11upon which the credit is based shall be reduced by the amount of
12the credit, prior to any reduction required by subdivision (i).

13(i) In the case where the credit allowed by this section exceeds
14the “net tax,” the excess may be carried over to reduce the “net
15tax” in the following year, and the succeeding six years if
16necessary, until the credit is exhausted.

17(j) This section shall cease to be operative for taxable years
18beginning on or after January 1, ____, and shall be repealed on
19December 1, ___.

end insert
20begin insert

begin insertSEC. 7.end insert  

end insert

begin insertSection 23622.7 of the end insertbegin insertRevenue and Taxation Codeend insertbegin insert is
21amended to read:end insert

22

23622.7.  

(a) begin insert(1)end insertbegin insertend insertThere shall be allowed a credit against the
23“tax” (as defined by Section 23036) to a taxpayerbegin delete whoend deletebegin insert thatend insert employs
24a qualified employee in an enterprise zone during the taxable yearbegin insert,
25but only if the qualified employee first commences employment
26with the taxpayer before January 1, 2014end insert
. The credit shall be equal
27to the sum of each of the following:

begin delete

28(1)

end delete

29begin insert(A)end insert Fifty percent of qualified wages in the first year of
30employment.

begin delete

31(2)

end delete

32begin insert(B)end insert Forty percent of qualified wages in the second year of
33employment.

begin delete

34(3)

end delete

35begin insert(C)end insert Thirty percent of qualified wages in the third year of
36employment.

begin delete

37(4)

end delete

38begin insert(D)end insert Twenty percent of qualified wages in the fourth year of
39employment.

begin delete

40(5)

end delete

P72   1begin insert(E)end insert Ten percent of qualified wages in the fifth year of
2employment.

begin insert

3(2) If a taxpayer relocated to an enterprise zone from within
4the state during the taxable year for which the credit is claimed,
5the taxpayer shall be allowed a credit with respect to qualified
6wages for each net increase in qualified employees only if the
7taxpayer provides each employee at the previous location or
8locations a written notice of transfer to the new location with
9comparable compensation. The taxpayer shall provide
10self-certification with documentation when submitting voucher
11applications.

end insert

12(b) For purposes of this section:

13(1) “Qualified wages” means:

14(A) (i) Except as provided in clause (ii), that portion of wages
15paid or incurred by the taxpayer during the taxable year to qualified
16employees that does not exceed 150 percent of the minimum wage.

17(ii) For up to 1,350 qualified employees who are employed by
18the taxpayer in the Long Beach Enterprise Zone in aircraft
19manufacturing activities described in Codes 3721 to 3728,
20inclusive, and Code 3812 of the Standard Industrial Classification
21(SIC) Manual published by the United States Office of
22Management and Budget, 1987 edition, “qualified wages” means
23that portion of hourly wages that does not exceed 202 percent of
24the minimum wage.

25(B) Wages received during the 60-month period beginning with
26the first day the employee commences employment with the
27taxpayer. Reemployment in connection with any increase, including
28a regularly occurring seasonal increase, in the trade or business
29operations of the taxpayer does not constitute commencement of
30employment for purposes of this section.

31(C) Qualified wages do not include any wages paid or incurred
32by the taxpayer on or after the zone expiration date. However,
33wages paid or incurred with respect to qualified employees who
34are employed by the taxpayer within the enterprise zone within
35the 60-month period prior to the zone expiration date shall continue
36to qualify for the credit under this section after the zone expiration
37date, in accordance with all provisions of this section applied as
38if the enterprise zone designation were still in existence and
39binding.

P73   1(2) “Minimum wage” means the wage established by the
2Industrial Welfare Commission as provided for in Chapter 1
3(commencing with Section 1171) of Part 4 of Division 2 of the
4Labor Code.

5(3) “Zone expiration date” means the date the enterprise zone
6designation expires, is no longer binding, or becomes inoperative.

7(4) (A) “Qualified employee” means an individual who meets
8all of the following requirements:

9(i) At least 90 percent of whose services for the taxpayer during
10the taxable year are directly related to the conduct of the taxpayer’s
11trade or business located in an enterprise zone.

12(ii) Performs at least 50 percent of his or her services for the
13taxpayer during the taxable year in an enterprise zone.

14(iii) Is hired by the taxpayer after the date of original designation
15of the area in which services were performed as an enterprise zone.

16(iv) Is any of the following:

17(I) Immediately preceding the qualified employee’s
18commencement of employment with the taxpayer, was a person
19eligible for services under the federalbegin delete Job Training Partnershipend delete
20begin insert Workforce Investmentend insert Actbegin insert of 1998end insert (29 U.S.C. Sec.begin delete 1501end deletebegin insert 2801end insert et
21seq.), or its successor, who is receiving, or is eligible to receive,
22subsidized employment, training, or services funded by the federal begin delete23 Job Training Partnership Act,end delete begin insert Workforce Investment Act of 1998
24(29 U.S.C. Sec. 2801 et seq.),end insert
or its successor.

25(II) Immediately preceding the qualified employee’s
26commencement of employment with the taxpayer, was a person
27eligible to be a voluntary or mandatory registrant under the Greater
28Avenues for Independence Act of 1985 (GAIN) provided for
29pursuant to Article 3.2 (commencing with Section 11320) of
30Chapter 2 of Part 3 of Division 9 of the Welfare and Institutions
31Code, or its successor.

32(III) Immediately preceding the qualified employee’s
33commencement of employment with the taxpayer, was an
34economically disadvantaged individual 14 years of age or older.

35(IV) Immediately preceding the qualified employee’s
36commencement of employment with the taxpayer, was a dislocated
37worker who meets any of the following:

begin delete

38(aa)

end delete

39begin insert(ia)end insert Has been terminated or laid off or who has received a notice
40of termination or layoff from employment, is eligible for or has
P74   1exhausted entitlement to unemployment insurance benefits, and
2is unlikely to return to his or her previous industry or occupation.

begin delete

3(bb)

end delete

4begin insert(ib)end insert Has been terminated or has received a notice of termination
5of employment as a result of any permanent closure or any
6substantial layoff at a plant, facility, or enterprise, including an
7individual who has not received written notification but whose
8employer has made a public announcement of the closure or layoff.

begin delete

9(cc)

end delete

10begin insert(ic)end insert Is long-term unemployed and has limited opportunities for
11employment or reemployment in the same or a similar occupation
12in the area in which the individual resides, including an individual
1355 years of age or older who may have substantial barriers to
14employment by reason of age.

begin delete

15(dd)

end delete

16begin insert(id)end insert Was self-employed (including farmers and ranchers) and
17is unemployed as a result of general economic conditions in the
18community in which he or she resides or because of natural
19disasters.

begin delete

20(ee)

end delete

21begin insert(ie)end insert Was a civilian employee of the Department of Defense
22employed at a military installation being closed or realigned under
23the Defense Base Closure and Realignment Act of 1990.

begin delete

24(ff)

end delete

25begin insert(if)end insert Was an active member of the armed forces or National Guard
26as of September 30, 1990, and was either involuntarily separated
27or separated pursuant to a special benefits program.

begin delete

28(gg)

end delete

29begin insert(ig)end insert Is a seasonal or migrant worker who experiences chronic
30seasonal unemployment and underemployment in the agriculture
31industry, aggravated by continual advancements in technology and
32mechanization.

begin delete

33(hh)

end delete

34begin insert(ih)end insert Has been terminated or laid off, or has received a notice of
35termination or layoff, as a consequence of compliance with the
36Clean Air Act.

37(V) Immediately preceding the qualified employee’s
38commencement of employment with the taxpayer, was a disabled
39individual who is eligible for or enrolled in, or has completed a
40state rehabilitation plan or is a service-connected disabled veteran,
P75   1veteran of the Vietnam era, or veteran who is recently separated
2from military service.

3(VI) Immediately preceding the qualified employee’s
4commencement of employment with the taxpayer, was an
5ex-offender. An individual shall be treated as convicted if he or
6she was placed on probation by a state court without a finding of
7 guilt.

8(VII) Immediately preceding the qualified employee’s
9commencement of employment with the taxpayer, was a person
10eligible for or a recipient of any of the following:

begin delete

11(aa)

end delete

12begin insert(ia)end insert Federal Supplemental Security Income benefits.

begin delete

13(bb)

end delete

14begin insert(ib)end insert Aid to Families with Dependent Children.

begin delete

15(cc)

end delete

16begin insert(ic)end insert CalFresh benefits.

begin delete

17(dd)

end delete

18begin insert(id)end insert State and local general assistance.

19(VIII) Immediately preceding the qualified employee’s
20commencement of employment with the taxpayer, was a member
21of a federally recognized Indian tribe, band, or other group of
22Native American descent.

23(IX) Immediately preceding the qualified employee’s
24commencement of employment with the taxpayer, was a resident
25of a targeted employment area (as defined in Section 7072 of the
26Government Code).

27(X) An employee who qualified the taxpayer for the enterprise
28zone hiring credit under former Section 23622 or the program area
29hiring credit under former Section 23623.

30(XI) Immediately preceding the qualified employee’s
31commencement of employment with the taxpayer, was a member
32of a targeted group, as defined in Section 51(d) of the Internal
33Revenue Code, or its successor.

34(B) Priority for employment shall be provided to an individual
35who is enrolled in a qualified program under the federalbegin delete Job
36Training Partnership Actend delete
begin insert Workforce Investment Act of 1998 (29
37U.S.C. Sec. 2801 et seq.),end insert
or the Greater Avenues for Independence
38Act of 1985 or who is eligible as a member of a targeted group
39under the Work Opportunity Tax Credit (Section 51 of the Internal
40Revenue Code), or its successor.

P76   1(5) begin insert(A)end insertbegin insertend insert“Taxpayer” means a corporation engaged in a trade or
2business within an enterprise zone designated pursuant to Chapter
312.8 (commencing with Section 7070) of Division 7 of Title 1 of
4the Government Code.

begin insert

5(B) “Taxpayer” shall not include employers that provide
6temporary help services, as described in Code 561320 of the North
7American Industry Classification System (NAICS).

end insert

8(6) “Seasonal employment” means employment by a taxpayer
9that has regular and predictable substantial reductions in trade or
10business operations.

11(c) The taxpayer shall dobegin delete both ofend delete the following:

12(1) begin insert(A)end insertbegin insertend insertObtain from the Employment Development Department,
13as permitted by federal law, the local county or citybegin delete Job Training
14Partnership Actend delete
begin insert Workforce Investment Act of 1998 (29 U.S.C. Sec.
152801 et seq.)end insert
administrative entity, the local county GAIN office
16or social services agency, or the local government administering
17the enterprise zone, a certification that provides that a qualified
18employee meets the eligibility requirements specified in clause
19(iv) of subparagraph (A) of paragraph (4) of subdivision (b). The
20Employment Development Department may provide preliminary
21screening and referral to a certifying agency. The Employment
22Development Department shall develop a form for this purpose.
23The Department of Housing and Community Development shall
24develop regulations governing the issuance of certificates by local
25governments pursuant to subdivision (a) of Section 7086 of the
26Government Code.

begin insert

27(B) (i) For any otherwise qualified employee for whom a
28certification as described in subparagraph (A) has not been
29obtained and for whom a request for certification described in
30subparagraph (A) has not been previously submitted, the request
31certification required under subparagraph (A) with respect to that
32otherwise qualified employee shall be submitted to the certifying
33entity no later than one year after the operative date of the act
34amending this section.

end insert
begin insert

35(ii) Notwithstanding anything to the contrary, a credit shall not
36be allowed under this section with respect to any otherwise
37qualified employee described in clause (i) unless the request for
38certification required under subparagraph (A) was timely submitted
39in accordance with clause (i).

end insert

P77   1(2) Retain a copy of the certification and provide itbegin delete upon requestend delete
2 to the Franchise Tax Boardbegin insert annuallyend insert.

3(d) (1) For purposes of this section:

4(A) All employees of all corporations which are members of
5the same controlled group of corporations shall be treated as
6employed by a single taxpayer.

7(B) The credit, if any, allowable by this section to each member
8shall be determined by reference to its proportionate share of the
9expense of the qualified wages giving rise to the credit, and shall
10be allocated in that manner.

11(C) For purposes of this subdivision, “controlled group of
12corporations” means “controlled group of corporations” as defined
13in Section 1563(a) of the Internal Revenue Code, except that:

14(i) “More than 50 percent” shall be substituted for “at least 80
15percent” each place it appears in Section 1563(a)(1) of the Internal
16Revenue Code.

17(ii) The determination shall be made without regard to
18subsections (a)(4) and (e)(3)(C) of Section 1563 of the Internal
19Revenue Code.

20(2) If an employer acquires the major portion of a trade or
21business of another employer (hereinafter in this paragraph referred
22to as the “predecessor”) or the major portion of a separate unit of
23a trade or business of a predecessor, then, for purposes of applying
24this section (other than subdivision (e)) for any calendar year
25ending after that acquisition, the employment relationship between
26a qualified employee and an employer shall not be treated as
27terminated if the employee continues to be employed in that trade
28or business.

29(e) (1) (A) If the employment, other than seasonal employment,
30of any qualified employee with respect to whom qualified wages
31are taken into account under subdivision (a) is terminated by the
32taxpayer at any time during the first 270 days of that employment,
33whether or not consecutive, or before the close of the 270th
34calendar day after the day in which that employee completes 90
35days of employment with the taxpayer, the tax imposed by this
36part for the taxable year in which that employment is terminated
37shall be increased by an amount equal to the credit allowed under
38subdivision (a) for that taxable year and all prior taxable years
39attributable to qualified wages paid or incurred with respect to that
40employee.

P78   1(B) If the seasonal employment of any qualified employee, with
2respect to whom qualified wages are taken into account under
3subdivision (a) is not continued by the taxpayer for a period of
4270 days of employment during the 60-month period beginning
5with the day the qualified employee commences seasonal
6employment with the taxpayer, the tax imposed by this part, for
7the taxable year that includes the 60th month following the month
8in which the qualified employee commences seasonal employment
9with the taxpayer, shall be increased by an amount equal to the
10credit allowed under subdivision (a) for that taxable year and all
11prior taxable years attributable to qualified wages paid or incurred
12with respect to that qualified employee.

13(2) (A) Subparagraph (A) of paragraph (1) shall not apply to
14any of the following:

15(i) A termination of employment of a qualified employee who
16voluntarily leaves the employment of the taxpayer.

17(ii) A termination of employment of a qualified employee who,
18before the close of the period referred to in subparagraph (A) of
19paragraph (1), becomes disabled and unable to perform the services
20of that employment, unless that disability is removed before the
21close of that period and the taxpayer fails to offer reemployment
22to that employee.

23(iii) A termination of employment of a qualified employee, if
24it is determined that the termination was due to the misconduct (as
25defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of
26the California Code of Regulations) of that employee.

27(iv) A termination of employment of a qualified employee due
28to a substantial reduction in the trade or business operations of the
29taxpayer.

30(v) A termination of employment of a qualified employee, if
31that employee is replaced by other qualified employees so as to
32create a net increase in both the number of employees and the
33hours of employment.

34(B) Subparagraph (B) of paragraph (1) shall not apply to any
35of the following:

36(i) A failure to continue the seasonal employment of a qualified
37employee who voluntarily fails to return to the seasonal
38employment of the taxpayer.

39(ii) A failure to continue the seasonal employment of a qualified
40employee who, before the close of the period referred to in
P79   1subparagraph (B) of paragraph (1), becomes disabled and unable
2to perform the services of that seasonal employment, unless that
3disability is removed before the close of that period and the
4taxpayer fails to offer seasonal employment to that qualified
5employee.

6(iii) A failure to continue the seasonal employment of a qualified
7employee, if it is determined that the failure to continue the
8seasonal employment was due to the misconduct (as defined in
9Sections 1256-30 to 1256-43, inclusive, of Title 22 of the California
10Code of Regulations) of that qualified employee.

11(iv) A failure to continue seasonal employment of a qualified
12employee due to a substantial reduction in the regular seasonal
13trade or business operations of the taxpayer.

14(v) A failure to continue the seasonal employment of a qualified
15employee, if that qualified employee is replaced by other qualified
16employees so as to create a net increase in both the number of
17seasonal employees and the hours of seasonal employment.

18(C) For purposes of paragraph (1), the employment relationship
19between the taxpayer and a qualified employee shall not be treated
20as terminated by either of the following:

21(i) By a transaction to which Section 381(a) of the Internal
22Revenue Code applies, if the qualified employee continues to be
23employed by the acquiring corporation.

24(ii) By reason of a mere change in the form of conducting the
25trade or business of the taxpayer, if the qualified employee
26continues to be employed in that trade or business and the taxpayer
27retains a substantial interest in that trade or business.

28(3) Any increase in tax under paragraph (1) shall not be treated
29as tax imposed by this part for purposes of determining the amount
30of any credit allowable under this part.

31(f) Rules similar to the rules provided in Section 46(e) and (h)
32of the Internal Revenue Code shall apply to both of the following:

33(1) An organization to which Section 593 of the Internal
34Revenue Code applies.

35(2) A regulated investment company or a real estate investment
36trust subject to taxation under this part.

37(g) For purposes of this section, “enterprise zone” means an
38area designated as an enterprise zone pursuant to Chapter 12.8
39(commencing with Section 7070) of Division 7 of Title 1 of the
40Government Code.

P80   1(h) The credit allowable under this section shall be reduced by
2the credit allowed under Sections 23623.5, 23625, and 23646
3claimed for the same employee. The credit shall also be reduced
4by the federal credit allowed under Section 51 of the Internal
5Revenue Code.

6In addition, any deduction otherwise allowed under this part for
7the wages or salaries paid or incurred by the taxpayer upon which
8the credit is based shall be reduced by the amount of the credit,
9prior to any reduction required by subdivision (i) or (j).

10(i) In the case where the credit otherwise allowed under this
11section exceeds the “tax” for the taxable year, that portion of the
12credit that exceeds the “tax” may be carried over and added to the
13credit, if any, in succeeding taxable years, until the credit is
14exhausted. The credit shall be applied first to the earliest taxable
15years possible.

16(j) (1) The amount of the credit otherwise allowed under this
17section and Section 23612.2, including any credit carryover from
18prior years, that may reduce the “tax” for the taxable year shall
19not exceed the amount of tax which would be imposed on the
20taxpayer’s business income attributable to the enterprise zone
21determined as if that attributable income represented all of the
22income of the taxpayer subject to tax under this part.

23(2) Attributable income shall be that portion of the taxpayer’s
24California source business income that is apportioned to the
25enterprise zone. For that purpose, the taxpayer’s business
26attributable to sources in this state first shall be determined in
27accordance with Chapter 17 (commencing with Section 25101).
28That business income shall be further apportioned to the enterprise
29zone in accordance with Article 2 (commencing with Section
3025120) of Chapter 17, modified for purposes of this section in
31accordance with paragraph (3).

32(3) Business income shall be apportioned to the enterprise zone
33by multiplying the total California business income of the taxpayer
34by a fraction, the numerator of which is the property factor plus
35the payroll factor, and the denominator of which is two. For
36purposes of this paragraph:

37(A) The property factor is a fraction, the numerator of which is
38the average value of the taxpayer’s real and tangible personal
39property owned or rented and used in the enterprise zone during
40the income year, and the denominator of which is the average value
P81   1of all the taxpayer’s real and tangible personal property owned or
2rented and used in this state during the income year.

3(B) The payroll factor is a fraction, the numerator of which is
4the total amount paid by the taxpayer in the enterprise zone during
5the income year for compensation, and the denominator of which
6is the total compensation paid by the taxpayer in this state during
7the income year.

8(4) The portion of any credit remaining, if any, after application
9of this subdivision, shall be carried over to succeeding taxable
10years, as if it were an amount exceeding the “tax” for the taxable
11year, as provided in subdivision (i).

12(k) The changes made to this section by the act adding this
13subdivision shall apply to taxable years on or after January 1, 1997.

begin insert

14(l) The Franchise Tax Board shall compile the certifications
15submitted pursuant to paragraph (2) of subdivision (c) and shall
16provide as a searchable database on its Internet Web site, for each
17taxable year beginning on or after January 1, 2014, and before
18January 1, 2019, the employer names, amounts of tax credit
19claimed, and number of new jobs created for each taxable year
20pursuant to this section, and Sections 17053.34, 17053.46,
2117053.47, 23622.7, 23622.8, 23634, and 23646.

end insert
begin insert

22(m) This section shall cease to be operative for taxable years
23beginning on or after January 1, 2019, and is repealed as of
24December 1, 2019.

end insert
25

begin deleteSEC. 7.end delete
26begin insertSEC. 8.end insert  

Section 23622.8 of the Revenue and Taxation Code is
27amended to read:

28

23622.8.  

(a) (1) For each taxable year beginning on or after
29January 1, 1998, and before January 1, 2013, there shall be allowed
30a credit against the “tax” (as defined in Section 23036) to a
31qualified taxpayer for hiring a qualified disadvantaged individual
32during the taxable year for employment in the manufacturing
33enhancement area. The credit shall be equal to the sum of each of
34the following:

35(A) Fifty percent of the qualified wages in the first year of
36employment.

37(B) Forty percent of the qualified wages in the second year of
38employment.

39(C) Thirty percent of the qualified wages in the third year of
40employment.

P82   1(D) Twenty percent of the qualified wages in the fourth year of
2employment.

3(E) Ten percent of the qualified wages in the fifth year of
4employment.

5(2) (A) For each taxable year beginning on or after January 1,
62013, and before January 1, 2019, there shall be allowed as a credit
7against the “net tax,” as defined in Section 23036, to a qualified
8taxpayer for hiring a qualified disadvantaged individual during the
9taxable year for employment in the manufacturing enhancement
10area. The credit shall be equal to the sum of each of the following:

11(i) Ten percent of qualified wages in the first year of
12employment.

13(ii) Ten percent of qualified wages in the second year of
14employment.

15(iii) Thirty percent of qualified wages in the third year of
16employment.

17(iv) Forty percent of qualified wages in the fourth year of
18employment.

19(v) Fifty percent of qualified wages in the fifth year of
20employment.

21(B) The credit shall be allowed only with respect to qualified
22wages paid for each net increase in qualified employees. A net
23increase shall be determined by subtracting from the amount
24determined in clause (i) the amount determined in clause (ii). For
25purposes of this subparagraph, “qualified employee” means
26qualified disadvantaged individual.

27(i) The total number of qualified employees employed in the
28state in the preceding taxable year by the qualified taxpayer and
29by any trade or business acquired by the qualified taxpayer during
30the preceding taxable year.

31(ii) The total number of qualified employees employed in the
32state in the current taxable year by the qualified taxpayer and by
33any trade or business acquired by the qualified taxpayer during
34the current taxable year.

35(C) If a qualified taxpayer relocated to abegin delete targeted taxend delete
36begin insert manufacturing enhancementend insert area from within the state during the
37taxable year for which the credit is claimed, the qualified taxpayer
38shall be allowed a credit with respect to qualified wages for each
39net increase in qualified employees only if the qualified taxpayer
40begin delete makesend deletebegin insert providesend insert each employee at the previous location or locations
P83   1a writtenbegin delete bona fide offer of employment at the new locationend deletebegin insert notice
2of transfer to the new location with comparable compensation.
3The qualified taxpayer shall provide self-certification with
4documentation when submitting a voucher applicationend insert
.

5(b) For purposes of this section:

6(1) “Qualified wages” means:

7(A) That portion of wages paid or incurred by the qualified
8taxpayer during the taxable year to qualified disadvantaged
9individuals that exceeds 200 percent of the minimum wage and
10does not exceed 500 percent of the minimum wage.

11(B) The total amount of qualified wages which may be taken
12into account for purposes of claiming the credit allowed under this
13section shall not exceed two million dollars ($2,000,000) per
14taxable year.

15(C) Wages received during the 60-month period beginning with
16the first day the qualified disadvantaged individual commences
17employment with the qualified taxpayer. Reemployment in
18connection with any increase, including a regularly occurring
19seasonal increase, in the trade or business operations of the
20qualified taxpayer does not constitute commencement of
21employment for purposes of this section.

22(D) Qualified wages do not include any wages paid or incurred
23by the qualified taxpayer on or after the manufacturing
24enhancement area expiration date. However, wages paid or incurred
25with respect to qualified employees who are employed by the
26qualified taxpayer within the manufacturing enhancement area
27within the 60-month period prior to the manufacturing enhancement
28area expiration date shall continue to qualify for the credit under
29this section after the manufacturing enhancement area expiration
30date, in accordance with all provisions of this section applied as
31if the manufacturing enhancement area designation were still in
32existence and binding.

33(2) “Minimum wage” means the wage established by the
34Industrial Welfare Commission as provided for in Chapter 1
35(commencing with Section 1171) of Part 4 of Division 2 of the
36Labor Code.

37(3) “Manufacturing enhancement area” means an area designated
38pursuant to Section 7073.8 of the Government Code according to
39the procedures of Chapter 12.8 (commencing with Section 7070)
40of Division 7 of Title 1 of the Government Code.

P84   1(4) “Manufacturing enhancement area expiration date” means
2the date the manufacturing enhancement area designation expires,
3is no longer binding, or becomes inoperative.

4(5) “Qualified disadvantaged individual” means an individual
5who satisfies all of the following requirements:

6(A) (i) At least 90 percent of whose services for the qualified
7taxpayer during the taxable year are directly related to the conduct
8of the qualified taxpayer’s trade or business located in a
9manufacturing enhancement area.

10(ii) Who performs at least 50 percent of his or her services for
11the qualified taxpayer during the taxable year in the manufacturing
12enhancement area.

13(B) Who is hired by the qualified taxpayer after the designation
14of the area as a manufacturing enhancement area in which the
15individual’s services were primarily performed.

16(C) Who is any of the following immediately preceding the
17 individual’s commencement of employment with the qualified
18taxpayer:

19(i) An individual who has been determined eligible for services
20under the federal Job Training Partnership Act (29 U.S.C. Sec.
211501 et seq.) or its successor.

22(ii) Any voluntary or mandatory registrant under the Greater
23Avenues for Independence Act of 1985, or its successor, as
24provided pursuant to Article 3.2 (commencing with Section 11320)
25of Chapter 2 of Part 3 of Division 9 of the Welfare and Institutions
26Code.

27(iii) Any individual who has been certified eligible by the
28Employment Development Department under the federal Targeted
29Jobs Tax Credit Program, or its successor, whether or not this
30program is in effect.

31(6) (A) “Qualified taxpayer” means any corporation engaged
32in a trade or business within a manufacturing enhancement area
33designated pursuant to Section 7073.8 of the Government Code
34and that meets all of the following requirements:

35(i) Is engaged in those lines of business described in Codes 0211
36to 0291, inclusive, Code 0723, or in Codes 2011 to 3999, inclusive,
37of the Standard Industrial Classification (SIC) Manual published
38by the United States Office of Management and Budget, 1987
39edition.

P85   1(ii) At least 50 percent of the qualified taxpayer’s workforce
2hired after the designation of the manufacturing enhancement area
3is composed of individuals who, at the time of hire, are residents
4of the county in which the manufacturing enhancement area is
5located.

6(iii) Of this percentage of local hires, at least 30 percent shall
7be qualified disadvantaged individuals.

8(B) “Qualified taxpayer” shall not include employers that
9provide temporary help services, as described in Code 561320 of
10the North American Industry Classification System (NAICS).

11(7) “Seasonal employment” means employment by a qualified
12taxpayer that has regular and predictable substantial reductions in
13trade or business operations.

14(c) (1) For purposes of this section, all of the following apply:

15(A) All employees of all corporations that are members of the
16same controlled group of corporations shall be treated as employed
17by a single qualified taxpayer.

18(B) The credit (if any) allowable by this section with respect to
19each member shall be determined by reference to its proportionate
20share of the expenses of the qualified wages giving rise to the
21credit and shall be allocated in that manner.

22(C) Principles that apply in the case of controlled groups of
23corporations, as specified in subdivision (d) of Section 23622.7,
24shall apply with respect to determining employment.

25(2) If a qualified taxpayer acquires the major portion of a trade
26or business of another employer (hereinafter in this paragraph
27referred to as the “predecessor”) or the major portion of a separate
28unit of a trade or business of a predecessor, then, for purposes of
29applying this section (other than subdivision (d)) for any calendar
30year ending after that acquisition, the employment relationship
31between a qualified disadvantaged individual and a qualified
32taxpayer shall not be treated as terminated if the qualified
33disadvantaged individual continues to be employed in that trade
34or business.

35(d) (1) (A) If the employment, other than seasonal employment,
36of any qualified disadvantaged individual, with respect to whom
37qualified wages are taken into account under subdivision (b) is
38terminated by the qualified taxpayer at any time during the first
39270 days of that employment (whether or not consecutive) or before
40the close of the 270th calendar day after the day in which that
P86   1qualified disadvantaged individual completes 90 days of
2employment with the qualified taxpayer, the tax imposed by this
3part for the taxable year in which that employment is terminated
4shall be increased by an amount equal to the credit allowed under
5subdivision (a) for that taxable year and all prior taxable years
6attributable to qualified wages paid or incurred with respect to that
7qualified disadvantaged individual.

8(B) If the seasonal employment of any qualified disadvantaged
9individual, with respect to whom qualified wages are taken into
10account under subdivision (a) is not continued by the qualified
11taxpayer for a period of 270 days of employment during the
1260-month period beginning with the day the qualified
13disadvantaged individual commences seasonal employment with
14the qualified taxpayer, the tax imposed by this part, for the income
15year that includes the 60th month following the month in which
16the qualified disadvantaged individual commences seasonal
17employment with the qualified taxpayer, shall be increased by an
18amount equal to the credit allowed under subdivision (a) for that
19taxable year and all prior taxable years attributable to qualified
20wages paid or incurred with respect to that qualified disadvantaged
21individual.

22(2) (A) Subparagraph (A) of paragraph (1) does not apply to
23any of the following:

24(i) A termination of employment of a qualified disadvantaged
25individual who voluntarily leaves the employment of the qualified
26taxpayer.

27(ii) A termination of employment of a qualified disadvantaged
28individual who, before the close of the period referred to in
29subparagraph (A) of paragraph (1), becomes disabled to perform
30the services of that employment, unless that disability is removed
31before the close of that period and the qualified taxpayer fails to
32offer reemployment to that individual.

33(iii) A termination of employment of a qualified disadvantaged
34individual, if it is determined that the termination was due to the
35misconduct (as defined in Sections 1256-30 to 1256-43, inclusive,
36of Title 22 of the California Code of Regulations) of that individual.

37(iv) A termination of employment of a qualified disadvantaged
38individual due to a substantial reduction in the trade or business
39operations of the qualified taxpayer.

P87   1(v) A termination of employment of a qualified disadvantaged
2individual, if that individual is replaced by other qualified
3disadvantaged individuals so as to create a net increase in both the
4number of employees and the hours of employment.

5(B) Subparagraph (B) of paragraph (1) shall not apply to any
6of the following:

7(i) A failure to continue the seasonal employment of a qualified
8disadvantaged individual who voluntarily fails to return to the
9seasonal employment of the qualified taxpayer.

10(ii) A failure to continue the seasonal employment of a qualified
11disadvantaged individual who, before the close of the period
12referred to in subparagraph (B) of paragraph (1), becomes disabled
13and unable to perform the services of that seasonal employment,
14unless that disability is removed before the close of that period
15and the qualified taxpayer fails to offer seasonal employment to
16that qualified disadvantaged individual.

17(iii) A failure to continue the seasonal employment of a qualified
18disadvantaged individual, if it is determined that the failure to
19continue the seasonal employment was due to the misconduct (as
20defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of
21the California Code of Regulations) of that qualified disadvantaged
22individual.

23(iv) A failure to continue seasonal employment of a qualified
24disadvantaged individual due to a substantial reduction in the
25regular seasonal trade or business operations of the qualified
26taxpayer.

27(v) A failure to continue the seasonal employment of a qualified
28disadvantaged individual, if that qualified disadvantaged individual
29is replaced by other qualified disadvantaged individuals so as to
30create a net increase in both the number of seasonal employees
31and the hours of seasonal employment.

32(C) For purposes of paragraph (1), the employment relationship
33between the qualified taxpayer and a qualified disadvantaged
34individual shall not be treated as terminated by either of the
35following:

36(i) By a transaction to which Section 381(a) of the Internal
37Revenue Code applies, if the qualified disadvantaged individual
38continues to be employed by the acquiring corporation.

39(ii) By reason of a mere change in the form of conducting the
40trade or business of the qualified taxpayer, if the qualified
P88   1disadvantaged individual continues to be employed in that trade
2or business and the qualified taxpayer retains a substantial interest
3in that trade or business.

4(3) Any increase in tax under paragraph (1) shall not be treated
5as tax imposed by this part for purposes of determining the amount
6of any credit allowable under this part.

7(e) The credit shall be reduced by the credit allowed under
8Section 23621. The credit shall also be reduced by the federal
9credit allowed under Section 51 of the Internal Revenue Code.

10In addition, any deduction otherwise allowed under this part for
11the wages or salaries paid or incurred by the qualified taxpayer
12upon which the credit is based shall be reduced by the amount of
13the credit, prior to any reduction required by subdivision (f) or (g).

14(f) In the case where the credit otherwise allowed under this
15section exceeds the “tax” for the taxable year, that portion of the
16credit that exceeds the “tax” may be carried over and added to the
17credit, if any, in succeeding years, until the credit is exhausted.
18The credit shall be applied first to the earliest taxable years
19possible.

20(g) (1) The amount of credit otherwise allowed under this
21section, including prior year credit carryovers, that may reduce
22the “tax” for the taxable year shall not exceed the amount of tax
23that would be imposed on the qualified taxpayer’s business income
24attributed to a manufacturing enhancement area determined as if
25that attributed income represented all of the net income of the
26qualified taxpayer subject to tax under this part.

27(2) Attributable income is that portion of the taxpayer’s
28California source business income that is apportioned to the
29manufacturing enhancement area. For that purpose, the taxpayer’s
30business income attributable to sources in this state first shall be
31determined in accordance with Chapter 17 (commencing with
32Section 25101). That business income shall be further apportioned
33to the manufacturing enhancement area in accordance with Article
342 (commencing with Section 25120) of Chapter 17, modified for
35purposes of this section in accordance with paragraph (3).

36(3) Income shall be apportioned to a manufacturing enhancement
37area by multiplying the total California business income of the
38taxpayer by a fraction, the numerator of which is the property
39factor plus the payroll factor, and the denominator of which is two.
40For the purposes of this paragraph:

P89   1(A) The property factor is a fraction, the numerator of which is
2 the average value of the taxpayer’s real and tangible personal
3property owned or rented and used in the manufacturing
4enhancement area during the taxable year, and the denominator
5of which is the average value of all the taxpayer’s real and tangible
6personal property owned or rented and used in this state during
7the taxable year.

8(B) The payroll factor is a fraction, the numerator of which is
9the total amount paid by the taxpayer in the manufacturing
10enhancement area during the taxable year for compensation, and
11the denominator of which is the total compensation paid by the
12taxpayer in this state during the taxable year.

13(4) The portion of any credit remaining, if any, after application
14of this subdivision, shall be carried over to succeeding taxable
15years, as if it were an amount exceeding the “tax” for the taxable
16year, as provided in subdivision (g).

17(h) If the taxpayer is allowed a credit pursuant to this section
18for qualified wages paid or incurred, only one credit shall be
19allowed to the taxpayer under this part with respect to any wage
20consisting in whole or in part of those qualified wages.

21(i) The qualified taxpayer shall do both of the following:

22(1) Obtain from the Employment Development Department, as
23permitted by federal law, the local county or city Job Training
24Partnership Act administrative entity, the local county GAIN office
25or social services agency, or the local government administering
26the manufacturing enhancement area, a certification that provides
27that a qualified disadvantaged individual meets the eligibility
28requirements specified in paragraph (5) of subdivision (b). The
29Employment Development Department may provide preliminary
30screening and referral to a certifying agency. The Department of
31Housing and Community Development shall develop regulations
32governing the issuance of certificates pursuant to subdivision (d)
33of Section 7086 of the Government Code and shall develop forms
34for this purpose.

35(2) Retain a copy of the certification and provide it to the
36Franchise Tax Board annually.

37(j) (1) Forbegin delete each taxable year beginning on or after January 1,
382013, and beforeend delete
begin insert the 2014 calendar year, and each calendar year
39thereafter, untilend insert
January 1, 2019, the total aggregate amount of
40credits allowed pursuant to this section shall not exceed the total
P90   1aggregate amount of credits claimed pursuant to this section in the
2begin delete taxable year beginning on or after January 1, 2012, and before
3January 1, 2013end delete
begin insert 2013 calendar yearend insert, as determined by the
4Franchise Tax Board.

5(2) Upon receipt of a timely filed original return, the Franchise
6Tax Board shall allocate the credit to the qualified taxpayer on a
7first-come-first-served basis.

8(k) (1) The Franchise Tax Board shall compile the certifications
9submitted pursuant to paragraph (2) of subdivision (i) and shall
10provide as a searchable database on its Internet Web site, for each
11taxable year beginning on or after January 1,begin delete 2013,end deletebegin insert 2014,end insert and
12before January 1, 2019, the employer names, amounts of tax credit
13claimed, and number of new jobs created for each taxable year
14pursuant to this section, Sections 17053.34, 17053.46, 17053.47,
1517053.74, 23622.7, 23634, and 23646.

16(2) The Franchise Tax Board may prescribe rules, guidelines,
17or procedures necessary or appropriate to carry out the purposes
18of this section, including any guidelines regarding the allocation
19of the credit allowed under this section.

20(l) This section shall remain in effect only until December 1,
212019, and as of that date is repealed.

22

begin deleteSEC. 8.end delete
23begin insertSEC. 9.end insert  

Section 23634 of the Revenue and Taxation Code is
24amended to read:

25

23634.  

(a) (1) For each taxable year beginning on or after
26January 1, 1998, and before January 1, 2013, there shall be allowed
27a credit against the “tax” (as defined by Section 23036) to a
28qualified taxpayer who employs a qualified employee in a targeted
29tax area during the taxable year. The credit shall be equal to the
30sum of each of the following:

31(A) Fifty percent of qualified wages in the first year of
32employment.

33(B) Forty percent of qualified wages in the second year of
34employment.

35(C) Thirty percent of qualified wages in the third year of
36employment.

37(D) Twenty percent of qualified wages in the fourth year of
38employment.

39(E) Ten percent of qualified wages in the fifth year of
40employment.

P91   1(2) (A) For each taxable year beginning on or after January 1,
22013, and before January 1, 2019, there shall be allowed a credit
3against the “net tax,” as defined in Section 23036, to a qualified
4taxpayer who employs a qualified employee in a targeted tax area
5during the taxable year. The credit shall be equal to the sum of
6each of the following:

7(i) Ten percent of qualified wages in the first year of
8employment.

9(ii) Ten percent of qualified wages in the second year of
10employment.

11(iii) Thirty percent of qualified wages in the third year of
12employment.

13(iv) Forty percent of qualified wages in the fourth year of
14employment.

15(v) Fifty percent of qualified wages in the fifth year of
16employment.

17(B) The credit shall be allowed only with respect to qualified
18wages paid for each net increase in qualified employees. A net
19increase shall be determined by subtracting from the amount
20determined in clause (i) the amount determined in clause (ii).

21(i) The total number of qualified employees employed in the
22state in the preceding taxable year by the qualified taxpayer and
23by any trade or business acquired by the qualified taxpayer during
24the preceding taxable year.

25(ii) The total number of qualified employees employed in the
26state in the current taxable year by the qualified taxpayer and by
27any trade or business acquired by the qualified taxpayer during
28the current taxable year.

29(C) If a qualified taxpayer relocated to a targeted tax area from
30within the state during the taxable year for which the credit is
31claimed, the qualified taxpayer shall be allowed a credit with
32respect to qualified wages for each net increase in qualified
33employees only if the qualified taxpayerbegin delete makesend deletebegin insert providesend insert each
34employee at the previous location or locations a writtenbegin delete bona fide
35offer of employment at the new locationend delete
begin insert notice of transfer to the
36new location with comparable compensation. The qualified
37taxpayer shall provide self-certification with documentation when
38submitting a voucher applicationend insert
.

39(b) For purposes of this section:

40(1) “Qualified wages” means:

P92   1(A) That portion of wages paid or incurred by the qualified
2taxpayer during the taxable year to qualified employees that
3exceeds 200 percent of the minimum wage and does not exceed
4500 percent of the minimum wage.

5(B) Wages received during the 60-month period beginning with
6the first day the employee commences employment with the
7qualified taxpayer. Reemployment in connection with any increase,
8including a regularly occurring seasonal increase, in the trade or
9business operations of the qualified taxpayer does not constitute
10commencement of employment for purposes of this section.

11(C) Qualified wages do not include any wages paid or incurred
12by the qualified taxpayer on or after the targeted tax area expiration
13date. However, wages paid or incurred with respect to qualified
14employees who are employed by the qualified taxpayer within the
15targeted tax area within the 60-month period prior to the targeted
16tax area expiration date shall continue to qualify for the credit
17under this section after the targeted tax area expiration date, in
18accordance with all provisions of this section applied as if the
19targeted tax area designation were still in existence and binding.

20(2) “Minimum wage” means the wage established by the
21Industrial Welfare Commission as provided for in Chapter 1
22(commencing with Section 1171) of Part 4 of Division 2 of the
23Labor Code.

24(3) “Targeted tax area expiration date” means the date the
25targeted tax area designation expires, is revoked, is no longer
26binding, or becomes inoperative.

27(4) (A) “Qualified employee” means an individual who meets
28all of the following requirements:

29(i) At least 90 percent of his or her services for the qualified
30taxpayer during the taxable year are directly related to the conduct
31of the qualified taxpayer’s trade or business located in a targeted
32tax area.

33(ii) Performs at least 50 percent of his or her services for the
34qualified taxpayer during the taxable year in a targeted tax area.

35(iii) Is hired by the qualified taxpayer after the date of original
36designation of the area in which services were performed as a
37targeted tax area.

38(iv) Is any of the following:

39(I) Immediately preceding the qualified employee’s
40commencement of employment with the qualified taxpayer, was
P93   1a person eligible for services under the federal Job Training
2Partnership Act (29 U.S.C. Sec. 1501 et seq.), or its successor,
3who is receiving, or is eligible to receive, subsidized employment,
4training, or services funded by the federalbegin delete Job Training Partnership
5Act,end delete
begin insert Workforce Investment Act of 1998 (29 U.S.C. Sec. 2801 et
6seq.),end insert
or its successor.

7(II) Immediately preceding the qualified employee’s
8commencement of employment with the qualified taxpayer, was
9a person eligible to be a voluntary or mandatory registrant under
10the Greater Avenues for Independence Act of 1985 (GAIN)
11provided for pursuant to Article 3.2 (commencing with Section
1211320) of Chapter 2 of Part 3 of Division 9 of the Welfare and
13Institutions Code, or its successor.

14(III) Immediately preceding the qualified employee’s
15commencement of employment with the qualified taxpayer, was
16an economically disadvantaged individual 14 years of age or older.

17(IV) Immediately preceding the qualified employee’s
18commencement of employment with the qualified taxpayer, was
19a dislocated worker who meets any of the following:

begin delete

20(aa)

end delete

21begin insert(ia)end insert Has been terminated or laid off or who has received a notice
22of termination or layoff from employment, is eligible for or has
23exhausted entitlement to unemployment insurance benefits, and
24is unlikely to return to his or her previous industry or occupation.

begin delete

25(bb)

end delete

26begin insert(ib)end insert Has been terminated or has received a notice of termination
27of employment as a result of any permanent closure or any
28substantial layoff at a plant, facility, or enterprise, including an
29individual who has not received written notification but whose
30employer has made a public announcement of the closure or layoff.

begin delete

31(cc)

end delete

32begin insert(ic)end insert Is long-term unemployed and has limited opportunities for
33employment or reemployment in the same or a similar occupation
34in the area in which the individual resides, including an individual
3555 years of age or older who may have substantial barriers to
36employment by reason of age.

begin delete

37(dd)

end delete

38begin insert(id)end insert Was self-employed (including farmers and ranchers) and
39is unemployed as a result of general economic conditions in the
P94   1community in which he or she resides or because of natural
2disasters.

begin delete

3(ee)

end delete

4begin insert(ie)end insert Was a civilian employee of the Department of Defense
5employed at a military installation being closed or realigned under
6the Defense Base Closure and Realignment Act of 1990.

begin delete

7(ff)

end delete

8begin insert(if)end insert Was an active member of the Armed Forces or National
9Guard as of September 30, 1990, and was either involuntarily
10separated or separated pursuant to a special benefits program.

begin delete

11(gg)

end delete

12begin insert(ig)end insert Is a seasonal or migrant worker who experiences chronic
13seasonal unemployment and underemployment in the agriculture
14industry, aggravated by continual advancements in technology and
15mechanization.

begin delete

16(hh)

end delete

17begin insert(ih)end insert Has been terminated or laid off, or has received a notice of
18 termination or layoff, as a consequence of compliance with the
19Clean Air Act.

20(V) Immediately preceding the qualified employee’s
21commencement of employment with the qualified taxpayer, was
22a disabled individual who is eligible for or enrolled in, or has
23completed a state rehabilitation plan or is a service-connected
24disabled veteran, veteran of the Vietnam era, or veteran who is
25recently separated from military service.

26(VI) Immediately preceding the qualified employee’s
27commencement of employment with the qualified taxpayer, was
28an ex-offender. An individual shall be treated as convicted if he
29or she was placed on probation by a state court without a finding
30of guilt.

31(VII) Immediately preceding the qualified employee’s
32commencement of employment with the qualified taxpayer, was
33a person eligible for or a recipient of any of the following:

begin delete

34(aa)

end delete

35begin insert(ia)end insert Federal Supplemental Security Income benefits.

begin delete

36(bb)

end delete

37begin insert(ib)end insert Aid to Families with Dependent Children.

begin delete

38(cc)

end delete

39begin insert(ic)end insert CalFresh benefits.

begin delete

40(dd)

end delete

P95   1begin insert(id)end insert State and local general assistance.

2(VIII) Immediately preceding the qualified employee’s
3commencement of employment with the qualified taxpayer, was
4a member of a federally recognized Indian tribe, band, or other
5group of Native American descent.

6(IX) Immediately preceding the qualified employee’s
7commencement of employment with the qualified taxpayer, was
8a resident of a targeted tax area.

9(X) Immediately preceding the qualified employee’s
10commencement of employment with the taxpayer, was a member
11of a targeted group, as defined in Section 51(d) of the Internal
12Revenue Code, or its successor.

13(B) Priority for employment shall be provided to an individual
14who is enrolled in a qualified program under the federal Job
15Training Partnership Act or the Greater Avenues for Independence
16Act of 1985 or who is eligible as a member of a targeted group
17under the Work Opportunity Tax Credit (Section 51 of the Internal
18Revenue Code), or its successor.

19(5) (A) “Qualified taxpayer” means a person or entity that meets
20both of the following:

21(i) Is engaged in a trade or business within a targeted tax area
22designated pursuant to Chapter 12.93 (commencing with Section
237097) of Division 7 of Title 1 of the Government Code.

24(ii) Is engaged in those lines of business described in Codes
252000 to 2099, inclusive; 2200 to 3999, inclusive; 4200 to 4299,
26inclusive; 4500 to 4599, inclusive; and 4700 to 5199, inclusive,
27of the Standard Industrial Classification (SIC) Manual published
28by the United States Office of Management and Budget, 1987
29edition.

30(B) In the case of any passthrough entity, the determination of
31whether a taxpayer is a qualified taxpayer under this section shall
32be made at the entity level and any credit under this section or
33Section 17053.34 shall be allowed to the passthrough entity and
34passed through to the partners or shareholders in accordance with
35applicable provisions of this part or Part 10 (commencing with
36Section 17001). For purposes of this subparagraph, the term
37“passthrough entity” means any partnership or “S” corporation.

38(C) “Qualified taxpayer” shall not include employers that
39provide temporary help services, as described in Code 561320 of
40the North American Industry Classification System (NAICS).

P96   1(6) “Seasonal employment” means employment by a qualified
2taxpayer that has regular and predictable substantial reductions in
3trade or business operations.

4(c) If the qualified taxpayer is allowed a credit for qualified
5wages pursuant to this section, only one credit shall be allowed to
6the taxpayer under this part with respect to those qualified wages.

7(d) The qualified taxpayer shall do both of the following:

8(1) Obtain from the Employment Development Department, as
9permitted by federal law, the local county or city Job Training
10Partnership Act administrative entity, the local county GAIN office
11or social services agency, or the local government administering
12the targeted tax area, a certification that provides that a qualified
13employee meets the eligibility requirements specified in clause
14(iv) of subparagraph (A) of paragraph (4) of subdivision (b). The
15Employment Development Department may provide preliminary
16screening and referral to a certifying agency. The Department of
17Housing and Community Development shall develop regulations
18for the issuance of certificates pursuant to subdivision (g) of
19Section 7097 of the Government Code, and shall develop forms
20for this purpose.

21(2) Retain a copy of the certification and provide it to the
22Franchise Tax Board annually.

23(e) (1) For purposes of this section:

24(A) All employees of all corporations that are members of the
25same controlled group of corporations shall be treated as employed
26by a single taxpayer.

27(B) The credit, if any, allowable by this section to each member
28shall be determined by reference to its proportionate share of the
29expense of the qualified wages giving rise to the credit, and shall
30be allocated in that manner.

31(C) For purposes of this subdivision, “controlled group of
32corporations” means “controlled group of corporations” as defined
33in Section 1563(a) of the Internal Revenue Code, except that:

34(i) “More than 50 percent” shall be substituted for “at least 80
35percent” each place it appears in Section 1563(a)(1) of the Internal
36Revenue Code.

37(ii) The determination shall be made without regard to
38subsections (a)(4) and (e)(3)(C) of Section 1563 of the Internal
39Revenue Code.

P97   1(2) If an employer acquires the major portion of a trade or
2business of another employer (hereinafter in this paragraph referred
3to as the “predecessor”) or the major portion of a separate unit of
4a trade or business of a predecessor, then, for purposes of applying
5this section (other than subdivision (f)) for any calendar year ending
6after that acquisition, the employment relationship between a
7qualified employee and an employer shall not be treated as
8terminated if the employee continues to be employed in that trade
9or business.

10(f) (1) (A) If the employment, other than seasonal employment,
11of any qualified employee with respect to whom qualified wages
12are taken into account under subdivision (a) is terminated by the
13qualified taxpayer at any time during the first 270 days of that
14employment (whether or not consecutive) or before the close of
15the 270th calendar day after the day in which that employee
16completes 90 days of employment with the qualified taxpayer, the
17tax imposed by this part for the taxable year in which that
18employment is terminated shall be increased by an amount equal
19to the credit allowed under subdivision (a) for that taxable year
20and all prior taxable years attributable to qualified wages paid or
21incurred with respect to that employee.

22(B) If the seasonal employment of any qualified employee, with
23respect to whom qualified wages are taken into account under
24subdivision (a) is not continued by the qualified taxpayer for a
25period of 270 days of employment during the 60-month period
26beginning with the day the qualified employee commences seasonal
27employment with the qualified taxpayer, the tax imposed by this
28part, for the taxable year that includes the 60th month following
29the month in which the qualified employee commences seasonal
30employment with the qualified taxpayer, shall be increased by an
31amount equal to the credit allowed under subdivision (a) for that
32taxable year and all prior taxable years attributable to qualified
33wages paid or incurred with respect to that qualified employee.

34(2) (A) Subparagraph (A) of paragraph (1) shall not apply to
35any of the following:

36(i) A termination of employment of a qualified employee who
37voluntarily leaves the employment of the qualified taxpayer.

38(ii) A termination of employment of a qualified employee who,
39before the close of the period referred to in subparagraph (A) of
40paragraph (1), becomes disabled and unable to perform the services
P98   1of that employment, unless that disability is removed before the
2close of that period and the qualified taxpayer fails to offer
3reemployment to that employee.

4(iii) A termination of employment of a qualified employee, if
5it is determined that the termination was due to the misconduct (as
6defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of
7the California Code of Regulations) of that employee.

8(iv) A termination of employment of a qualified employee due
9to a substantial reduction in the trade or business operations of the
10taxpayer.

11(v) A termination of employment of a qualified employee, if
12that employee is replaced by other qualified employees so as to
13create a net increase in both the number of employees and the
14hours of employment.

15(B) Subparagraph (B) of paragraph (1) shall not apply to any
16of the following:

17(i) A failure to continue the seasonal employment of a qualified
18employee who voluntarily fails to return to the seasonal
19employment of the qualified taxpayer.

20(ii) A failure to continue the seasonal employment of a qualified
21employee who, before the close of the period referred to in
22subparagraph (B) of paragraph (1), becomes disabled and unable
23to perform the services of that seasonal employment, unless that
24disability is removed before the close of that period and the
25qualified taxpayer fails to offer seasonal employment to that
26qualified employee.

27(iii) A failure to continue the seasonal employment of a qualified
28employee, if it is determined that the failure to continue the
29 seasonal employment was due to the misconduct (as defined in
30Sections 1256-30 to 1256-43, inclusive, of Title 22 of the California
31Code of Regulations) of that qualified employee.

32(iv) A failure to continue seasonal employment of a qualified
33employee due to a substantial reduction in the regular seasonal
34trade or business operations of the qualified taxpayer.

35(v) A failure to continue the seasonal employment of a qualified
36employee, if that qualified employee is replaced by other qualified
37employees so as to create a net increase in both the number of
38seasonal employees and the hours of seasonal employment.

P99   1(C) For purposes of paragraph (1), the employment relationship
2between the qualified taxpayer and a qualified employee shall not
3be treated as terminated by either of the following:

4(i) By a transaction to which Section 381(a) of the Internal
5Revenue Code applies, if the qualified employee continues to be
6employed by the acquiring corporation.

7(ii) By reason of a mere change in the form of conducting the
8trade or business of the qualified taxpayer, if the qualified
9employee continues to be employed in that trade or business and
10the qualified taxpayer retains a substantial interest in that trade or
11business.

12(3) Any increase in tax under paragraph (1) shall not be treated
13as tax imposed by this part for purposes of determining the amount
14of any credit allowable under this part.

15(g) Rules similar to the rules provided in Sections 46(e) and (h)
16of the Internal Revenue Code shall apply to both of the following:

17(1) An organization to which Section 593 of the Internal
18Revenue Code applies.

19(2) A regulated investment company or a real estate investment
20trust subject to taxation under this part.

21(h) For purposes of this section, “targeted tax area” means an
22area designated pursuant to Chapter 12.93 (commencing with
23Section 7097) of Division 7 of Title 1 of the Government Code.

24(i) In the case where the credit otherwise allowed under this
25section exceeds the “tax” for the taxable year, that portion of the
26credit that exceeds the “tax” may be carried over and added to the
27credit, if any, in succeeding taxable years, until the credit is
28exhausted. The credit shall be applied first to the earliest taxable
29years possible.

30(j) (1) The amount of the credit otherwise allowed under this
31section and Section 23633, including any credit carryover from
32prior years, that may reduce the “tax” for the taxable year shall
33not exceed the amount of tax that would be imposed on the
34qualified taxpayer’s business income attributable to the targeted
35tax area determined as if that attributable income represented all
36of the income of the qualified taxpayer subject to tax under this
37part.

38(2) Attributable income shall be that portion of the taxpayer’s
39California source business income that is apportioned to the
40targeted tax area. For that purpose, the taxpayer’s business income
P100  1attributable to sources in this state first shall be determined in
2accordance with Chapter 17 (commencing with Section 25101).
3That business income shall be further apportioned to the targeted
4tax area in accordance with Article 2 (commencing with Section
525120) of Chapter 17, modified for purposes of this section in
6accordance with paragraph (3).

7(3) Business income shall be apportioned to the targeted tax
8area by multiplying the total California business income of the
9taxpayer by a fraction, the numerator of which is the property
10factor plus the payroll factor, and the denominator of which is two.
11For purposes of this paragraph:

12(A) The property factor is a fraction, the numerator of which is
13the average value of the taxpayer’s real and tangible personal
14property owned or rented and used in the targeted tax area during
15the taxable year, and the denominator of which is the average value
16of all the taxpayer’s real and tangible personal property owned or
17rented and used in this state during the taxable year.

18(B) The payroll factor is a fraction, the numerator of which is
19the total amount paid by the taxpayer in the targeted tax area during
20the taxable year for compensation, and the denominator of which
21is the total compensation paid by the taxpayer in this state during
22the taxable year.

23(4) The portion of any credit remaining, if any, after application
24of this subdivision, shall be carried over to succeeding taxable
25years, as if it were an amount exceeding the “tax” for the taxable
26year, as provided in subdivision (h).

27(5) In the event that a credit carryover is allowable under
28subdivision (h) for any taxable year after the targeted tax area
29designation has expired or been revoked, the targeted tax area shall
30be deemed to remain in existence for purposes of computing the
31limitation specified in this subdivision.

32(k) (1) Forbegin delete each taxable year beginning on or after January 1,
332013, and beforeend delete
begin insert the 2014 calendar year, and each calendar year
34thereafter, untilend insert
January 1, 2019, the total aggregate amount of
35credits allowed pursuant to this section shall not exceed the total
36aggregate amount of credits claimed pursuant to this section in the
37begin delete taxable year beginning on or after January 1, 2012, and before
38January 1, 2013end delete
begin insert 2013 calendar yearend insert, as determined by the
39Franchise Tax Board.

P101  1(2) Upon receipt of a timely filed original return, the Franchise
2Tax Board shall allocate the credit to the qualified taxpayer on a
3first-come-first-served basis.

4(l) (1) The Franchise Tax Board shall compile the certifications
5submitted pursuant to paragraph (2) of subdivision (d) and shall
6provide as a searchable database on its Internet Web site, for each
7taxable year beginning on or after January 1,begin delete 2013,end deletebegin insert 2014,end insert and
8before January 1, 2019, the employer names, amounts of tax credit
9claimed, and number of new jobs created for each taxable year
10pursuant to this section, Sections 17053.34, 17053.46, 17053.47,
1117053.74, 23622.7, 23622.8, and 23646.

12(2) The Franchise Tax Board may prescribe rules, guidelines,
13or procedures necessary or appropriate to carry out the purposes
14of this section, including any guidelines regarding the allocation
15of the credit allowed under this section.

16(m) This section shall remain in effect only until December 1,
172019, and as of that date is repealed.

18

begin deleteSEC. 9.end delete
19begin insertSEC. 10.end insert  

Section 23646 of the Revenue and Taxation Code is
20amended to read:

21

23646.  

(a) (1) For each taxable year beginning on or after
22January 1, 1995, and before January 1, 2013, there shall be allowed
23as a credit against the “tax” (as defined in Section 23036) to a
24qualified taxpayer for hiring a qualified disadvantaged individual
25or a qualified displaced employee during the taxable year for
26employment in the LAMBRA. The credit shall be equal to the sum
27of each of the following:

28(A) Fifty percent of the qualified wages in the first year of
29employment.

30(B) Forty percent of the qualified wages in the second year of
31employment.

32(C) Thirty percent of the qualified wages in the third year of
33 employment.

34(D) Twenty percent of the qualified wages in the fourth year of
35employment.

36(E) Ten percent of the qualified wages in the fifth year of
37employment.

38(2) (A) For each taxable year beginning on or after January 1,
392013, and before January 1, 2019, there shall be allowed as a credit
40against the “net tax,” as defined in Section 17039, to a qualified
P102  1taxpayer for hiring a qualified disadvantaged individual or a
2qualified displaced employee during the taxable year for
3employment in the LAMBRA. The credit shall be equal to the sum
4of each of the following:

5(i) Ten percent of qualified wages in the first year of
6employment.

7(ii) Ten percent of qualified wages in the second year of
8employment.

9(iii) Thirty percent of qualified wages in the third year of
10employment.

11(iv) Forty percent of qualified wages in the fourth year of
12employment.

13(v) Fifty percent of qualified wages in the fifth year of
14employment.

15(B) The credit shall be allowed only with respect to qualified
16wages paid for each net increase in qualified employees. A net
17increase shall be determined by subtracting from the amount
18determined in clause (i) the amount determined in clause (ii). For
19purposes of this subparagraph, “qualified employees” means
20qualified disadvantaged individuals and qualified displaced
21employees.

22(i) The total number of qualified employees employed in the
23state in the preceding taxable year by the qualified taxpayer and
24by any trade or business acquired by the qualified taxpayer during
25the preceding taxable year.

26(ii) The total number of qualified employees employed in the
27state in the current taxable year by the qualified taxpayer and by
28any trade or business acquired by the qualified taxpayer during
29the current taxable year.

30(C) If a qualified taxpayer relocated to abegin delete targeted tax areaend delete
31begin insert LAMBRAend insert from within the state during the taxable year for which
32the credit is claimed, the qualified taxpayer shall be allowed a
33credit with respect to qualified wages for each net increase in
34qualified employees only if the qualified taxpayerbegin delete makesend deletebegin insert providesend insert
35 each employee at the previous location or locations a writtenbegin delete bona
36fide offer of employment at the new locationend delete
begin insert notice of transfer to
37the new location with comparable compensation. The qualified
38taxpayer shall provide self-certification with documentation when
39submitting a voucher applicationend insert
.

40(b) For purposes of this section:

P103  1(1) “Qualified wages” means:

2(A) That portion of wages paid or incurred by the employer
3during the taxable year to qualified disadvantaged individuals or
4qualified displaced employees that exceeds 200 percent of the
5minimum wage and does not exceed 500 percent of the minimum
6wage.

7(B) The total amount of qualified wages which may be taken
8into account for purposes of claiming the credit allowed under this
9section shall not exceed two million dollars ($2,000,000) per
10taxable year.

11(C) Wages received during the 60-month period beginning with
12the first day the individual commences employment with the
13taxpayer. Reemployment in connection with any increase, including
14a regularly occurring seasonal increase, in the trade or business
15operation of the qualified taxpayer does not constitute
16commencement of employment for purposes of this section.

17(D) Qualified wages do not include any wages paid or incurred
18by the qualified taxpayer on or after the LAMBRA expiration date.
19However, wages paid or incurred with respect to qualified
20disadvantaged individuals or qualified displaced employees who
21are employed by the qualified taxpayer within the LAMBRA within
22the 60-month period prior to the LAMBRA expiration date shall
23continue to qualify for the credit under this section after the
24LAMBRA expiration date, in accordance with all provisions of
25this section applied as if the LAMBRA designation were still in
26existence and binding.

27(2) “Minimum wage” means the wage established by the
28Industrial Welfare Commission as provided for in Chapter 1
29(commencing with Section 1171) of Part 4 of Division 2 of the
30Labor Code.

31(3) “LAMBRA” means a local agency military base recovery
32area designated in accordance with the provisions of Section 7114
33of the Government Code.

34(4) “Qualified disadvantaged individual” means an individual
35who satisfies all of the following requirements:

36(A) (i) At least 90 percent of whose services for the taxpayer
37during the taxable year are directly related to the conduct of the
38taxpayer’s trade or business located in a LAMBRA.

39(ii) Who performs at least 50 percent of his or her services for
40the taxpayer during the taxable year in the LAMBRA.

P104  1(B) Who is hired by the employer after the designation of the
2area as a LAMBRA in which the individual’s services were
3primarily performed.

4(C) Who is any of the following immediately preceding the
5individual’s commencement of employment with the taxpayer:

6(i) An individual who has been determined eligible for services
7under the federalbegin delete Job Training Partnershipend deletebegin insert Workforce Investmentend insert
8 Actbegin insert of 1998end insert (29 U.S.C. Sec.begin delete 1501end deletebegin insert 2801end insert et seq.), or its successor.

9(ii) Any voluntary or mandatory registrant under the Greater
10Avenues for Independence Act of 1985 provided for pursuant to
11Article 3.2 (commencing with Section 11320) of Chapter 2 of Part
123 of Division 9 of the Welfare and Institutions Code.

13(iii) An economically disadvantaged individual 16 years of age
14or older.

15(iv) A dislocated worker who meets any of the following
16conditions:

17(I) Has been terminated or laid off or who has received a notice
18of termination or layoff from employment, is eligible for or has
19exhausted entitlement to unemployment insurance benefits, and
20is unlikely to return to his or her previous industry or occupation.

21(II) Has been terminated or has received a notice of termination
22of employment as a result of any permanent closure or any
23substantial layoff at a plant, facility, or enterprise, including an
24individual who has not received written notification but whose
25employer has made a public announcement of the closure or layoff.

26(III) Is long-term unemployed and has limited opportunities for
27employment or reemployment in the same or a similar occupation
28in the area in which the individual resides, including an individual
2955 years of age or older who may have substantial barriers to
30employment by reason of age.

31(IV) Was self-employed (including farmers and ranchers) and
32is unemployed as a result of general economic conditions in the
33community in which he or she resides or because of natural
34disasters.

35(V) Was a civilian employee of the Department of Defense
36employed at a military installation being closed or realigned under
37the Defense Base Closure and Realignment Act of 1990.

38(VI) Was an active member of the Armed Forces or National
39Guard as of September 30, 1990, and was either involuntarily
40separated or separated pursuant to a special benefits program.

P105  1(VII) Experiences chronic seasonal unemployment and
2underemployment in the agriculture industry, aggravated by
3continual advancements in technology and mechanization.

4(VIII) Has been terminated or laid off or has received a notice
5of termination or layoff as a consequence of compliance with the
6Clean Air Act.

7(v) An individual who is enrolled in or has completed a state
8rehabilitation plan or is a service-connected disabled veteran,
9veteran of the Vietnam era, or veteran who is recently separated
10from military service.

11(vi) An ex-offender. An individual shall be treated as convicted
12if he or she was placed on probation by a state court without a
13finding of guilty.

14(vii) A recipient of:

15(I) Federal Supplemental Security Income benefits.

16(II) Aid to Families with Dependent Children.

17(III) CalFresh benefits.

18(IV) State and local general assistance.

19(viii) Is a member of a federally recognized Indian tribe, band,
20or other group of Native American descent.

21(5) “Qualified taxpayer” means a corporation that conducts a
22trade or business within a LAMBRA and, for the first two taxable
23years, has a net increase in jobs (defined as 2,000 paid hours per
24employee per year) of one or more employees as determined below
25in the LAMBRA.

26(A) The net increase in the number of jobs shall be determined
27by subtracting the total number of full-time employees (defined
28as 2,000 paid hours per employee per year) the taxpayer employed
29in this state in the taxable year prior to commencing business
30operations in the LAMBRA from the total number of full-time
31employees the taxpayer employed in this state during the second
32taxable year after commencing business operations in the
33LAMBRA. For taxpayers who commence doing business in this
34state with their LAMBRA business operation, the number of
35employees for the taxable year prior to commencing business
36operations in the LAMBRA shall be zero. If the taxpayer has a net
37increase in jobs in the state, the credit shall be allowed only if one
38or more full-time employees is employed within the LAMBRA.

39(B) The total number of employees employed in the LAMBRA
40shall equal the sum of both of the following:

P106  1(i) The total number of hours worked in the LAMBRA for the
2taxpayer by employees (not to exceed 2,000 hours per employee)
3who are paid an hourly wage divided by 2,000.

4(ii) The total number of months worked in the LAMBRA for
5the taxpayer by employees who are salaried employees divided
6by 12.

7(C) In the case of a qualified taxpayer that first commences
8doing business in the LAMBRA during the taxable year, for
9purposes of clauses (i) and (ii), respectively, of subparagraph (B)
10the divisors “2,000” and “12” shall be multiplied by a fraction, the
11numerator of which is the number of months of the taxable year
12that the taxpayer was doing business in the LAMBRA and the
13denominator of which is 12.

14(D) “Qualified taxpayer” shall not include employers that
15provide temporary help services, as described in Code 561320 of
16the North American Industry Classification System (NAICS).

17(6) “Qualified displaced employee” means an individual who
18satisfies all of the following requirements:

19(A) Any civilian or military employee of a base or former base
20that has been displaced as a result of a federal base closure act.

21(B) (i) At least 90 percent of whose services for the taxpayer
22during the taxable year are directly related to the conduct of the
23taxpayer’s trade or business located in a LAMBRA.

24(ii) Who performs at least 50 percent of his or her services for
25the taxpayer during the taxable year in a LAMBRA.

26(C) Who is hired by the employer after the designation of the
27area in which services were performed as a LAMBRA.

28(7) “Seasonal employment” means employment by a qualified
29taxpayer that has regular and predictable substantial reductions in
30trade or business operations.

31(8) “LAMBRA expiration date” means the date the LAMBRA
32designation expires, is no longer binding, or becomes inoperative.

33(c) For qualified disadvantaged individuals or qualified displaced
34employees hired on or after January 1, 2001, the taxpayer shall do
35both of the following:

36(1) Obtain from the Employment Development Department, as
37permitted by federal law, the administrative entity of the local
38county or city for the federalbegin delete Job Training Partnership Act,end delete
39begin insert Workforce Investment Act of 1998 (29 U.S.C. Sec. 2801 et seq.),end insert
40 or its successor, the local county GAIN office or social services
P107  1agency, or the local government administering the LAMBRA, a
2certification that provides that a qualified disadvantaged individual
3or qualified displaced employee meets the eligibility requirements
4specified in subparagraph (C) of paragraph (4) of subdivision (b)
5or subparagraph (A) of paragraph (6) of subdivision (b). The
6Employment Development Department may provide preliminary
7screening and referral to a certifying agency. The Department of
8Housing and Community Development shall develop regulations
9governing the issuance of certificates pursuant to Section 7114.2
10of the Government Code and shall develop forms for this purpose.

11(2) Retain a copy of the certification and provide it to the
12Franchise Tax Board annually.

13(d) (1) For purposes of this section, both of the following apply:

14(A) All employees of all corporations that are members of the
15same controlled group of corporations shall be treated as employed
16by a single employer.

17(B) The credit (if any) allowable by this section to each member
18shall be determined by reference to its proportionate share of the
19qualified wages giving rise to the credit.

20(2) For purposes of this subdivision, “controlled group of
21corporations” has the meaning given to that term by Section
221563(a) of the Internal Revenue Code, except that both of the
23following apply:

24(A) “More than 50 percent” shall be substituted for “at least 80
25percent” each place it appears in Section 1563(a)(1) of the Internal
26 Revenue Code.

27(B) The determination shall be made without regard to Section
281563(a)(4) and Section 1563(e)(3)(C) of the Internal Revenue
29Code.

30(3) If an employer acquires the major portion of a trade or
31business of another employer (hereinafter in this paragraph referred
32to as the “predecessor”) or the major portion of a separate unit of
33a trade or business of a predecessor, then, for purposes of applying
34this section (other than subdivision (e)) for any calendar year
35ending after that acquisition, the employment relationship between
36an employee and an employer shall not be treated as terminated if
37the employee continues to be employed in that trade or business.

38(e) (1) (A) If the employment of any employee, other than
39seasonal employment, with respect to whom qualified wages are
40taken into account under subdivision (a) is terminated by the
P108  1taxpayer at any time during the first 270 days of that employment
2(whether or not consecutive) or before the close of the 270th
3calendar day after the day in which that employee completes 90
4days of employment with the taxpayer, the tax imposed by this
5part for the taxable year in which that employment is terminated
6shall be increased by an amount equal to the credit allowed under
7subdivision (a) for that taxable year and all prior income years
8attributable to qualified wages paid or incurred with respect to that
9employee.

10(B) If the seasonal employment of any qualified disadvantaged
11individual, with respect to whom qualified wages are taken into
12account under subdivision (a) is not continued by the qualified
13taxpayer for a period of 270 days of employment during the
1460-month period beginning with the day the qualified
15disadvantaged individual commences seasonal employment with
16the qualified taxpayer, the tax imposed by this part, for the taxable
17year that includes the 60th month following the month in which
18the qualified disadvantaged individual commences seasonal
19employment with the qualified taxpayer, shall be increased by an
20amount equal to the credit allowed under subdivision (a) for that
21taxable year and all prior taxable years attributable to qualified
22wages paid or incurred with respect to that qualified disadvantaged
23individual.

24(2) (A) Subparagraph (A) of paragraph (1) shall not apply to
25any of the following:

26(i) A termination of employment of an employee who voluntarily
27leaves the employment of the taxpayer.

28(ii) A termination of employment of an individual who, before
29the close of the period referred to in paragraph (1), becomes
30disabled to perform the services of that employment, unless that
31disability is removed before the close of that period and the
32taxpayer fails to offer reemployment to that individual.

33(iii) A termination of employment of an individual, if it is
34determined that the termination was due to the misconduct (as
35defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of
36the California Code of Regulations) of that individual.

37(iv) A termination of employment of an individual due to a
38substantial reduction in the trade or business operations of the
39taxpayer.

P109  1(v) A termination of employment of an individual, if that
2individual is replaced by other qualified employees so as to create
3a net increase in both the number of employees and the hours of
4employment.

5(B) Subparagraph (B) of paragraph (1) shall not apply to any
6of the following:

7(i) A failure to continue the seasonal employment of a qualified
8disadvantaged individual who voluntarily fails to return to the
9seasonal employment of the qualified taxpayer.

10(ii) A failure to continue the seasonal employment of a qualified
11disadvantaged individual who, before the close of the period
12referred to in subparagraph (B) of paragraph (1), becomes disabled
13and unable to perform the services of that seasonal employment,
14unless that disability is removed before the close of that period
15and the qualified taxpayer fails to offer seasonal employment to
16that qualified disadvantaged individual.

17(iii) A failure to continue the seasonal employment of a qualified
18disadvantaged individual, if it is determined that the failure to
19continue the seasonal employment was due to the misconduct (as
20defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of
21the California Code of Regulations) of that individual.

22(iv) A failure to continue seasonal employment of a qualified
23disadvantaged individual due to a substantial reduction in the
24regular seasonal trade or business operations of the qualified
25taxpayer.

26(v) A failure to continue the seasonal employment of a qualified
27disadvantaged individual, if that individual is replaced by other
28qualified disadvantaged individuals so as to create a net increase
29in both the number of seasonal employees and the hours of seasonal
30employment.

31(C) For purposes of paragraph (1), the employment relationship
32between the taxpayer and an employee shall not be treated as
33terminated by either of the following:

34(i) A transaction to which Section 381(a) of the Internal Revenue
35Code applies, if the employee continues to be employed by the
36acquiring corporation.

37(ii) A mere change in the form of conducting the trade or
38business of the taxpayer, if the employee continues to be employed
39in that trade or business and the taxpayer retains a substantial
40interest in that trade or business.

P110  1(3) Any increase in tax under paragraph (1) shall not be treated
2as tax imposed by this part for purposes of determining the amount
3of any credit allowable under this part.

4(4) At the close of the second taxable year, if the taxpayer has
5not increased the number of its employees as determined by
6paragraph (5) of subdivision (b), then the amount of the credit
7previously claimed shall be added to the taxpayer’s tax for the
8taxpayer’s second taxable year.

9(f) In the case of an organization to which Section 593 of the
10Internal Revenue Code applies, and a regulated investment
11company or a real estate investment trust subject to taxation under
12this part, rules similar to the rules provided in Section 46(e) and
13Section 46(h) of the Internal Revenue Code shall apply.

14(g) The credit shall be reduced by the credit allowed under
15Section 23621. The credit shall also be reduced by the federal
16credit allowed under Section 51 of the Internal Revenue Code.

17In addition, any deduction otherwise allowed under this part for
18the wages or salaries paid or incurred by the taxpayer upon which
19the credit is based shall be reduced by the amount of the credit,
20prior to any reduction required by subdivision (h) or (i).

21(h) In the case where the credit otherwise allowed under this
22section exceeds the “tax” for the taxable year, that portion of the
23credit that exceeds the “tax” may be carried over and added to the
24credit, if any, in succeeding years, until the credit is exhausted.
25The credit shall be applied first to the earliest taxable years
26possible.

27(i) (1) The amount of credit otherwise allowed under this section
28and Section 23645, including any prior year carryovers, that may
29reduce the “tax” for the taxable year shall not exceed the amount
30of tax that would be imposed on the taxpayer’s business income
31attributed to a LAMBRA determined as if that attributed income
32represented all of the income of the taxpayer subject to tax under
33this part.

34(2) Attributable income shall be that portion of the taxpayer’s
35 California source business income that is apportioned to the
36LAMBRA. For that purpose, the taxpayer’s business income that
37is attributable to sources in this state first shall be determined in
38accordance with Chapter 17 (commencing with Section 25101).
39That business income shall be further apportioned to the LAMBRA
40in accordance with Article 2 (commencing with Section 25120)
P111  1of Chapter 17, modified for purposes of this section in accordance
2with paragraph (3).

3(3) Income shall be apportioned to a LAMBRA by multiplying
4the total California business income of the taxpayer by a fraction,
5the numerator of which is the property factor plus the payroll factor,
6and the denominator of which is two. For purposes of this
7paragraph:

8(A) The property factor is a fraction, the numerator of which is
9the average value of the taxpayer’s real and tangible personal
10property owned or rented and used in the LAMBRA during the
11taxable year, and the denominator of which is the average value
12of all the taxpayer’s real and tangible personal property owned or
13rented and used in this state during the taxable year.

14(B) The payroll factor is a fraction, the numerator of which is
15the total amount paid by the taxpayer in the LAMBRA during the
16taxable year for compensation, and the denominator of which is
17the total compensation paid by the taxpayer in this state during the
18taxable year.

19(4) The portion of any credit remaining, if any, after application
20of this subdivision, shall be carried over to succeeding taxable
21years, as if it were an amount exceeding the “tax” for the taxable
22year, as provided in subdivision (h).

23(j) If the taxpayer is allowed a credit pursuant to this section for
24qualified wages paid or incurred, only one credit shall be allowed
25to the taxpayer under this part with respect to any wage consisting
26in whole or in part of those qualified wages.

27(k) (1) Forbegin delete each taxable year beginning on or after January 1,
282013, and beforeend delete
begin insert the 2014 calendar year, and each calendar year
29thereafter, untilend insert
January 1, 2019, the total aggregate amount of
30credits allowed pursuant to this section shall not exceed the total
31aggregate amount of credits claimed pursuant to this section in the
32begin delete taxable year beginning on or after January 1, 2012, and before
33January 1, 2013,end delete
begin insert 2013 calendar year,end insert as determined by the
34Franchise Tax Board.

35(2) Upon receipt of a timely filed original return, the Franchise
36Tax Board shall allocate the credit to the qualified taxpayer on a
37first-come-first-served basis.

38(l) (1) The Franchise Tax Board shall compile the certifications
39submitted pursuant to paragraph (2) of subdivision (c) and shall
40provide as a searchable database on its Internet Web site, for each
P112  1taxable year beginning on or after January 1,begin delete 2013,end deletebegin insert 2014,end insert and
2before January 1, 2019, the employer names, amounts of tax credit
3claimed, and number of new jobs created for each taxable year
4pursuant to this section, Sections 17053.34, 17053.46, 17053.47,
517053.74, 23622.7, 23622.8, and 23634.

6(2) The Franchise Tax Board may prescribe rules, guidelines,
7or procedures necessary or appropriate to carry out the purposes
8of this section, including any guidelines regarding the allocation
9of the credit allowed under this section.

10(m) This section shall remain in effect only until December 1,
112019, and as of that date is repealed.

12begin insert

begin insertSEC. 11.end insert  

end insert

begin insertSection 23690 is added to the end insertbegin insertRevenue and Taxation
13Code
end insert
begin insert, to read:end insert

begin insert
14

begin insert23690.end insert  

(a) (1) For each taxable year beginning on or after
15January 1, 2014, there shall be allowed to a qualified taxpayer
16that hires a qualified full-time employee a credit against the “tax,”
17as defined by Section 23036, in an amount calculated under this
18section.

19(2) The amount of the credit allowable under this section for a
20taxable year shall be equal to the product of the tentative credit
21amount for the taxable year and the applicable percentage for that
22taxable year.

23(b) For purposes of this section:

24(1) The “tentative credit amount” for a taxable year shall be
25equal to the sum of the following amounts:

26(A) For the first year of employment of a qualified employee,
2710 percent of qualified wages paid during the taxable year.

28(B) For the second year of employment of a qualified employee,
2930 percent of qualified wages paid during the taxable year.

30(C) For the third year of employment of a qualified employee,
3150 percent of qualified wages paid during the taxable year.

32(D) For the fourth year of employment of a qualified employee,
3330 percent of qualified wages paid during the taxable year.

34(E) For the fifth year of employment of a qualified employee,
3510 percent of qualified wages paid during the taxable year.

36(2) The “applicable percentage” for a taxable year is equal to
37a fraction, the numerator of which is the net increase in the total
38number of full-time employees who are employed in this state
39during the taxable year, determined on an annual full-time
40equivalent basis, as compared with the total number of full-time
P113  1employees employed in this state during the base year, determined
2on the same basis, and the denominator of which is the total
3number of qualified full-time employees employed in this state
4during the taxable year. The applicable percentage shall not exceed
5100 percent.

6(3) “Base year” means 2013, or in the case of a qualified
7taxpayer that first hires a qualified full-time employee in a taxable
8year beginning on or after January 1, 2015, the taxable year
9immediately preceding the taxable year in which the qualified
10employee was hired.

11(4) “Qualified wages” means both of the following:

12(A) That portion of wages paid or incurred during the taxable
13year to each qualified full-time employee in excess of 200 percent
14of the minimum wage, but not in excess of 400 percent of the
15minimum wage.

16(B) Wages received during the 60-month period beginning with
17the first day the qualified employee commences employment with
18the qualified taxpayer.

19(5) “Minimum wage” means the wage established pursuant to
20Chapter 1 (commencing with Section 1171) of Part 4 of Division
212 of the Labor Code.

22(6) “Acquired” includes any gift, inheritance, transfer incident
23to divorce, or any other transfer, whether or not for consideration.

24(7) (A) “Qualified full-time employee” means an individual
25who meets all of the following requirements:

26(i) First commences employment with the qualified taxpayer on
27or after January 1, 2014.

28(ii) Satisfies either of the following conditions:

29(I) Is paid qualified wages by the qualified taxpayer for services
30not less than an average of 35 hours per week.

31(II) Is a salaried employee and was paid compensation during
32the taxable year for full-time employment, within the meaning of
33Section 515 of the Labor Code, by the qualified taxpayer.

34(iii) Is any of the following:

35(I) Immediately preceding the qualified employee’s
36commencement of employment with the qualified taxpayer, was a
37person eligible for services under the federal Workforce Investment
38Act of 1998 (29 U.S.C. Sec. 2801 et seq.), or its successor, who is
39receiving, or is eligible to receive, subsidized employment, training,
P114  1or services funded by the federal Workforce Investment Act, or its
2successor.

3(II) Immediately preceding the qualified employee’s
4commencement of employment with the qualified taxpayer, was a
5person eligible to be a voluntary or mandatory registrant under
6the Greater Avenues for Independence Act of 1985 (GAIN)
7provided for pursuant to Article 3.2 (commencing with Section
811320) of Chapter 2 of Part 3 of Division 9 of the Welfare and
9Institutions Code, or its successor.

10(III) Immediately preceding the qualified employee’s
11commencement of employment with the qualified taxpayer, was
12an economically disadvantaged individual 14 years of age or older.

13(IV) Immediately preceding the qualified employee’s
14commencement of employment with the qualified taxpayer, was a
15dislocated worker who meets any of the following:

16(ia) Has been terminated or laid off or has received a notice of
17termination or layoff from employment, is eligible for or has
18exhausted entitlement to unemployment insurance benefits, and is
19unlikely to return to his or her previous industry or occupation.

20(ib) Has been terminated or has received a notice of termination
21of employment as a result of any permanent closure or any
22substantial layoff at a plant, facility, or enterprise, including an
23individual who has not received written notification but whose
24employer has made a public announcement of the closure or layoff.

25(ic) Is long-term unemployed and has limited opportunities for
26employment or reemployment in the same or a similar occupation
27in the area in which the individual resides, including an individual
2855 years of age or older who may have substantial barriers to
29employment by reason of age.

30(id) Was self-employed, including farmers and ranchers, and
31is unemployed as a result of general economic conditions in the
32community in which he or she resides or because of natural
33disasters.

34(ie) Was a civilian employee of the Department of Defense
35employed at a military installation being closed or realigned under
36the Defense Base Closure and Realignment Act of 1990.

37(if) Was an active member of the Armed Forces or National
38Guard as of September 30, 1990, and was either involuntarily
39separated or separated pursuant to a special benefits program.

P115  1(ig) Is a seasonal or migrant worker who experiences chronic
2seasonal unemployment and underemployment in the agriculture
3industry, aggravated by continual advancements in technology
4and mechanization.

5(ih) Has been terminated or laid off, or has received a notice
6of termination or layoff, as a consequence of compliance with the
7Clean Air Act.

8(V) Immediately preceding the qualified employee’s
9commencement of employment with the qualified taxpayer, was a
10disabled individual who is eligible for, is enrolled in, or has
11completed a state rehabilitation plan or is a service-connected
12disabled veteran, veteran of the Vietnam era, or veteran who is
13recently separated from military service.

14(VI) Immediately preceding the qualified employee’s
15commencement of employment with the qualified taxpayer, was
16an ex-offender. An individual shall be treated as convicted if he
17or she was placed on probation by a state court without a finding
18of guilt.

19(VII) Immediately preceding the qualified employee’s
20commencement of employment with the qualified taxpayer, was a
21person eligible for or a recipient of any of the following:

22(ia) Federal Supplemental Security Income benefits.

23(ib) Aid to Families with Dependent Children, or its successor.

24(ic) CalFresh benefits.

25(id) State and local general assistance.

26(VIII) Immediately preceding the qualified employee’s
27commencement of employment with the qualified taxpayer, was a
28member of a federally recognized Indian tribe, band, or other
29group of Native American descent.

30(IX) Immediately preceding the qualified employee’s
31commencement of employment with the qualified taxpayer, was a
32resident of a targeted employment area, as defined in Section 7072
33of the Government Code.

34(X) Is an employee who qualified the qualified taxpayer for the
35enterprise zone hiring credit under former Section 17053.8 or the
36program area hiring credit under former Section 17053.11.

37(XI) Immediately preceding the qualified employee’s
38commencement of employment with the qualified taxpayer, was a
39member of a targeted group, as defined in Section 51(d) of the
40Internal Revenue Code, or its successor.

P116  1(B) An individual may only be considered a qualified full-time
2employee for the period of time commencing with the date the
3individual is first employed by the qualified taxpayer and ending
460 months thereafter.

5(C) Priority for employment shall be provided to an individual
6who is enrolled in a qualified program under the federal Workforce
7Investment Act of 1998 or the Greater Avenues for Independence
8Act of 1985 or who is eligible as a member of a targeted group
9under the Work Opportunity Tax Credit (Section 51 of the Internal
10Revenue Code), or its successor.

11(8) (A) ”Qualified taxpayer” means a person or entity engaged
12in a trade or business that meets both of the following requirements
13during the taxable year:

14(i) Pays or incurs qualified wages.

15(ii) Has a net increase in full-time employees.

16(B) In the case of any pass-thru entity, the determination of
17whether a taxpayer is a qualified taxpayer under this section shall
18be made at the entity level and any credit under this section or
19Section 17053.90 shall be allowed to the pass-thru entity and
20passed through to the partners and shareholders in accordance
21with applicable provisions of this part or Part 10 (commencing
22with Section 17001). For purposes of this subdivision, the term
23“pass-thru entity” means any partnership or S corporation.

24(9) “Seasonal employment” means employment by a qualified
25taxpayer that has regular and predictable substantial reductions
26in trade or business operations.

27(10) “Annual full-time equivalent” means all of the following:

28(A) Either of the following:

29(i) In the case of a full-time employee paid hourly qualified
30wages, “annual full-time equivalent” means the total number of
31hours worked for the qualified taxpayer by the employee, not to
32exceed 2,000 hours per employee, divided by 2,000.

33(ii) In the case of a salaried full-time employee, “annual
34full-time equivalent” means the total number of weeks worked for
35the qualified taxpayer by the employee, divided by 52.

36(B) All employees of the trades or businesses that are treated
37as related under either Section 267, 318, or 707 of the Internal
38Revenue Code shall be treated as employed by a single qualified
39taxpayer.

P117  1(C) In determining whether the qualified taxpayer has first
2commenced doing business in this state during the taxable year,
3subdivision (f) of Section 24416.20, without application of
4paragraph (7) of that subdivision, shall apply.

5(c) The “net increase in total full-time employees” of a qualified
6employer shall be determined as provided by this subdivision:

7(1) (A) (i) The net increase in full-time employees shall be
8determined on an annual full-time equivalent basis.

9(ii) The amount determined under clause (i) shall include the
10fractional amount, if any, of the increase for the taxable year.

11(B) The net increase in the total number of full-time employees
12shall be determined by subtracting the amount determined under
13clause (ii) from the amount determined under clause (i). If the
14amount determined under clause (ii) is equal to or exceeds the
15amount determined under clause (i), the amount determined under
16this subparagraph shall be zero.

17(i) The total number of full-time employees employed in the
18current taxable year by the qualified taxpayer and by any trade
19or business acquired by the qualified taxpayer during the current
20taxable year.

21(ii) The total number of full-time employees employed in the
22base year by the qualified taxpayer and by any trade or business
23acquired by the qualified taxpayer during the current taxable year.

24(2) For qualified taxpayers that first commence doing business
25in this state during the taxable year, the number of full-time
26employees under clause (ii) of subparagraph (B) of paragraph (1)
27of this subdivision for the base year shall be zero.

28(3) For purposes of determining the number of full-time
29employees of the qualified taxpayer who are employed in this state
30under this section, only those employees who receive wages that
31are subject to Division 6 (commencing with Section 13000) of the
32Unemployment Insurance Code from the qualified taxpayer
33comprising more than 50 percent of that employee’s total wages
34received from the qualified taxpayer for the taxable year shall be
35included.

36(d) (1) Any qualified wages taken into account under this
37section in computing this credit shall not be taken into account in
38computing any other credit otherwise allowable under this part
39or Part 10 (commencing with Section 17001).

P118  1(2) Notwithstanding anything to the contrary, any employee
2whose wages, in whole or in part, are eligible to be taken into
3account in computing a credit under Section 17053.74 or 23622.7
4shall not be treated as a qualified full-time employee under this
5section.

6(e) (1) The qualified taxpayer shall do both of the following:

7(A) Obtain from the Employment Development Department, as
8permitted by federal law, the local county or city Workforce
9Investment Act administrative entity, the local county GAIN office
10or social services agency, or the local government, a certification
11that provides that a qualified employee meets the eligibility
12requirements specified in clause (iv) of subparagraph (A) of
13paragraph (4) of subdivision (b). The Employment Development
14Department may provide preliminary screening and referral to a
15certifying agency. The Employment Development Department shall
16develop a form for this purpose. The Department of Housing and
17Community Development shall develop regulations governing the
18issuance of certificates by local governments pursuant to
19subdivision (a) of Section 7086 of the Government Code.

20(B) Retain a copy of the certification and provide it to the
21Franchise Tax Board annually.

22(2) The credit allowed by this section must be claimed on a
23timely filed original return of the qualified taxpayer.

24(f) (1) For purposes of this section:

25(A) All employees of all corporations that are members of the
26same controlled group of corporations shall be treated as employed
27by a single qualified taxpayer.

28(B) The credit, if any, allowable by this section to each member
29shall be determined by reference to its proportionate share of the
30expense of the qualified wages giving rise to the credit, and shall
31be allocated in that manner.

32(C) For purposes of this subdivision, “controlled group of
33corporations” means “controlled group of corporations” as
34defined in Section 1563(a) of the Internal Revenue Code, except
35that:

36(i) “More than 50 percent” shall be substituted for “at least 80
37percent” each place it appears in Section 1563(a)(1) of the Internal
38Revenue Code.

P119  1(ii) The determination shall be made without regard to
2subsections (a)(4) and (e)(3)(C) of Section 1563 of the Internal
3Revenue Code.

4(2) If a qualified taxpayer acquires the major portion of a trade
5or business of another taxpayer (hereinafter in this paragraph
6referred to as the “predecessor”) or the major portion of a
7separate unit of a trade or business of a predecessor, then, for
8purposes of applying this section for any calendar year ending
9after that acquisition, the employment relationship between a
10qualified employee and a qualified taxpayer shall not be treated
11as terminated if the employee continues to be employed in that
12trade or business.

13(g) Rules similar to the rules provided in Section 46(e) and (h)
14of the Internal Revenue Code shall apply to both of the following:

15(1) An organization to which Section 593 of the Internal Revenue
16Code applies.

17(2) A regulated investment company or a real estate investment
18trust subject to taxation under this part.

19(h) (1) The credit allowable under this section shall be reduced
20by the credit allowed under Sections 23623.5, 23625, and 23646
21claimed for the same employee. The credit shall also be reduced
22by the federal credit allowed under Section 51 of the Internal
23Revenue Code, as applicable for federal purposes.

24(2) In addition, any deduction otherwise allowed under this part
25for the wages or salaries paid or incurred by the qualified taxpayer
26upon which the credit is based shall be reduced by the amount of
27the credit, prior to any reduction required by subdivision (i).

28(i) In the case where the credit allowed by this section exceeds
29the “tax,” the excess may be carried over to reduce the “tax” in
30the following year, and the succeeding six years if necessary, until
31exhausted.

32(j) This section shall cease to be operative for taxable years
33beginning on or after January 1, ___, and shall be repealed on
34December 1, ___.

end insert
35

begin deleteSEC. 10.end delete
36begin insertSEC. 12.end insert  

No reimbursement is required by this act pursuant to
37Section 6 of Article XIII B of the California Constitution because
38the only costs that may be incurred by a local agency or school
39district will be incurred because this act creates a new crime or
40infraction, eliminates a crime or infraction, or changes the penalty
P120  1for a crime or infraction, within the meaning of Section 17556 of
2 the Government Code, or changes the definition of a crime within
3the meaning of Section 6 of Article XIII B of the California
4Constitution.

5

begin deleteSEC. 11.end delete
6begin insertSEC. 13.end insert  

This act provides for a tax levy within the meaning
7of Article IV of the Constitution and shall go into immediate effect.



O

    97