Amended in Senate May 7, 2013

Amended in Senate April 29, 2013

Amended in Senate April 24, 2013

Amended in Senate April 1, 2013

Senate Bill No. 434

Introduced by Senators Hill and Wolk

(Coauthors: Assembly Members Gordon and Mullin)

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, to add Section 41 to, and to add and repeal Sections 17053.90 and 23690 of, 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 credit amount for specified credits, limit the application of these credits to only the qualified wages for each net increase of qualified employees, as specified, limit credit eligibility with respect to 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 written notice of transfer to the new location with comparable compensation, revise the definitions of “qualified wages” and “qualified taxpayer” for specified credits, cap the aggregate amount of credit allowed per taxable year for specified hiring credits, as provided, require the Franchise Tax Board to publish specified information on its Internet Web site, as provided, and would provide that those credits remain in effect only until December 1, 2019, and as of that date are repealed.

This bill would limit the credit for a taxpayer that employs a qualified employee in an enterprise zone to only those qualified employees who first commence employment with the taxpayer before January 1, 2014, as specified. The bill would also provide that the credit would remain in effect only until December 1, 2019, and as of that date is repealed. The bill would, for taxable years beginning on or after January 1, 2014, and before January 1, 2019, for wages paid to qualified employees who first commence employment with the taxpayer after January 1, 2014, instead allow a credit for a taxpayer that has a net increase in qualified full-time employees, as specified.

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, 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 would impose 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 2⁄3 of the membership of each house of the Legislature.

This bill would take effect immediately as a tax levy.

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

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

SECTION 1.  

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

41.  

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

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

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

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

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

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

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

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

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

SEC. 2.  

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

17053.34.  

(a) (1) For each taxable year beginning on or after
January 1, 1998, and before January 1, 2014, there shall be allowed
a credit against the “net tax” (as defined in Section 17039) to a
qualified taxpayer that employs a qualified employee in a targeted
tax area during the taxable year. The credit shall be equal to the
sum of each of the following:

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

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

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

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

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

(2) (A) For each taxable year beginning on or after January 1,
2014, and before January 1, 2019, there shall be allowed a credit
against the “net tax,” as defined in Section 17039, to a qualified
taxpayer that employs a qualified employee in a targeted tax area
during the taxable year. The credit shall be equal to the sum of
each of the following:

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

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

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

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

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

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

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

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

(C) If a qualified taxpayer relocated to a targeted tax area from
within the state during the taxable year for which the credit is
claimed, the qualified taxpayer shall be allowed a credit with
respect to qualified wages for each net increase in qualified
employees only if the qualified taxpayer provides each employee
at the previous location or locations a written notice of transfer to
the new location with comparable compensation. begin insert The California
Workforce Investment Board shall certify the notice and provide
a copy to the taxpayer. end insert The qualified taxpayer shall provide
begin delete self-certification with end delete begin insert the end insert documentation when submitting a
voucher application.

(b) For purposes of this section:

(1) “Qualified wages” means:

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

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

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

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

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

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

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

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

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

(iv) Is any of the following:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(ia) Federal Supplemental Security Income benefits.

(ib) Aid to Families with Dependent Children.

(ic) CalFresh benefits.

(id) State and local general assistance.

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

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

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

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

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

(i) Is engaged in a trade or business within a targeted tax area
designated pursuant to Chapter 12.93 (commencing with Section
7097) of Division 7 of Title 1 of the Government Code.

(ii) Is engaged in those lines of business described in Codes
2000 to 2099, inclusive; 2200 to 3999, inclusive; 4200 to 4299,
inclusive; 4500 to 4599, inclusive; and 4700 to 5199, inclusive,
of the Standard Industrial Classification (SIC) Manual published
by the United States Office of Management and Budget, 1987
edition.

(B) In the case of any pass-thru entity, the determination of
whether a taxpayer is a qualified taxpayer under this section shall
be made at the entity level and any credit under this section or
Section 23634 shall be allowed to the pass-thru entity and passed
through to the partners or shareholders in accordance with
applicable provisions of this part or Part 11 (commencing with
Section 23001). For purposes of this subparagraph, the term
“pass-thru entity” means any partnership or “S” corporation.

(C) “Qualified taxpayer” shall not include employers that
provide temporary help services, as described in Code 561320 of
the North American Industry Classification System (NAICS)
published by the United States Office of Management and Budget,
2012 edition.

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

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

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

(1) Obtain from the Employment Development Department, as
permitted by federal law, the local county or city Workforce
Investment Act of 1998 administrative entity, the local county
GAIN office or social services agency, or the local government
administering the targeted tax area, a certification that provides
that a qualified employee meets the eligibility requirements
specified in clause (iv) of subparagraph (A) of paragraph (4) of
subdivision (b). The Employment Development Department may
provide preliminary screening and referral to a certifying agency.
The Department of Housing and Community Development shall
develop regulations governing the issuance of certificates pursuant
to subdivision (g) of Section 7097 of the Government Code, and
shall develop forms for this purpose.

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

(e) (1) For purposes of this section:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(5) In the event that a credit carryover is allowable under
subdivision (i) for any taxable year after the targeted tax area
designation has expired or been revoked, the targeted tax area shall
be deemed to remain in existence for purposes of computing the
limitation specified in this subdivision.

(k) (1) For the 2014 calendar year, and each calendar year
thereafter until January 1, 2019, the total aggregate amount of
credits allowed pursuant to this section shall not exceed the total
aggregate amount of credits claimed pursuant to this section in the
2013 calendar year, as determined by the Franchise Tax Board.

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

(l) (1) The Franchise Tax Board shall compile the certifications
submitted pursuant to paragraph (2) of subdivision (d) and shall
provide as a searchable database on its Internet Web site, for each
taxable year beginning on or after January 1, 2014, and before
January 1, 2019, the employer names, amounts of tax credit
claimed, and number of new jobs created for each taxable year
pursuant to this section, Sections 17053.46, 17053.47, 17053.74,
17053.90, 23622.7, 23622.8, 23634, 23646, and 23690.

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

(m) This section shall remain in effect only until December 1,
2019, and as of that date is repealed.

SEC. 3.  

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

17053.46.  

(a) (1) For each taxable year beginning on or after
January 1, 1995, and before January 1, 2014, there shall be allowed
as a credit against the “net tax” (as defined in Section 17039) to a
qualified taxpayer for hiring a qualified disadvantaged individual
or a qualified displaced employee during the taxable year for
employment in the LAMBRA. The credit shall be equal to the sum
of each of the following:

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

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

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

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

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

(2) (A) For each taxable year beginning on or after January 1,
2014, and before January 1, 2019, there shall be allowed as a credit
against the “net tax,” as defined in Section 17039, to a qualified
taxpayer for hiring a qualified disadvantaged individual or a
qualified displaced employee during the taxable year for
employment in the LAMBRA. The credit shall be equal to the sum
of each of the following:

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

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

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

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

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

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

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

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

(C) If a qualified taxpayer relocated to a LAMBRA from within
the state during the taxable year for which the credit is claimed,
the qualified taxpayer shall be allowed a credit with respect to
qualified wages for each net increase in qualified employees only
if the qualified taxpayer provides each employee at the previous
location or locations a written notice of transfer to the new location
with comparable compensation. begin insert The California Workforce
Investment Board shall certify the notice and provide a copy to
the taxpayer. end insert The qualified taxpayer shall provide begin delete self-certification
with end delete begin insert the end insert documentation when submitting a voucher application.

(b) For purposes of this section:

(1) “Qualified wages” means:

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

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

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

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

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

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

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

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

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

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

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

(i) An individual who has been determined eligible for services
under the federal Workforce Investment Act of 1998 (29 U.S.C.
Sec. 2801 et seq.).

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

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

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

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

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

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

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

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

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

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

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

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

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

(vii) A recipient of:

(I) Federal Supplemental Security Income benefits.

(II) Aid to Families with Dependent Children.

(III) CalFresh benefits.

(IV) State and local general assistance.

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

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

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

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

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

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

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

(D) “Qualified taxpayer” shall not include employers that
provide temporary help services, as described in Code 561320 of
the North American Industry Classification System (NAICS)
published by the United States Office of Management and Budget,
2012 edition.

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

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

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

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

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

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

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

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

(1) Obtain from the Employment Development Department, as
permitted by federal law, the local county or city Workforce
Investment Act of 1998 administrative entity, the local county
GAIN office or social services agency, or the local government
administering the LAMBRA, a certification that provides that a
qualified disadvantaged individual or qualified displaced employee
meets the eligibility requirements specified in subparagraph (C)
of paragraph (4) of subdivision (b) or subparagraph (A) of
paragraph (6) of subdivision (b). The Employment Development
Department may provide preliminary screening and referral to a
certifying agency. The Department of Housing and Community
Development shall develop regulations governing the issuance of
certificates pursuant to Section 7114.2 of the Government Code
and shall develop forms for this purpose.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(k) (1) For the 2014 calendar year, and each calendar year
thereafter until January 1, 2019, the total aggregate amount of
credits allowed pursuant to this section shall not exceed the total
aggregate amount of credits claimed pursuant to this section in the
2013 calendar year, as determined by the Franchise Tax Board.

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

(l) (1) The Franchise Tax Board shall compile the certifications
submitted pursuant to paragraph (2) of subdivision (c) and shall
provide as a searchable database on its Internet Web site, for each
taxable year beginning on or after January 1, 2014, and before
January 1, 2019, the employer names, amounts of tax credit
claimed, and number of new jobs created for each taxable year
pursuant to this section, Sections 17053.34, 17053.47, 17053.74,
17053.90, 23622.7, 23622.8, 23634, 23646, and 23690.

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

(m) This section shall remain in effect only until December 1,
2019, and as of that date is repealed.

SEC. 4.  

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

17053.47.  

(a) (1) For each taxable year beginning on or after
January 1, 1998, and before January 1, 2014, there shall be allowed
a credit against the “net tax” (as defined in Section 17039) to a
qualified taxpayer for hiring a qualified disadvantaged individual
during the taxable year for employment in the manufacturing
enhancement area. The credit shall be equal to the sum of each of
the following:

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

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

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

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

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

(2) (A) For each taxable year beginning on or after January 1,
2014, and before January 1, 2019, there shall be allowed as a credit
against the “net tax,” as defined in Section 17039, to a qualified
taxpayer for hiring a qualified disadvantaged individual during the
taxable year for employment in the manufacturing enhancement
area. The credit shall be equal to the sum of each of the following:

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

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

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

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

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

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

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

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

(C) If a qualified taxpayer relocated to a manufacturing
enhancement area from within the state during the taxable year
for which the credit is claimed, the qualified taxpayer shall be
allowed a credit with respect to qualified wages for each net
increase in qualified employees only if the qualified taxpayer
provides each employee at the previous location or locations a
written notice of transfer to the new location with comparable
compensation. begin insert The California Workforce Investment Board shall
certify the notice and provide a copy to the taxpayer. end insert The qualified
taxpayer shall provide begin delete self-certification with end delete begin insert the end insert documentation
when submitting a voucher application.

(b) For purposes of this section:

(1) “Qualified wages” means:

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

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

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

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

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

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

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

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

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

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

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

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

(i) An individual who has been determined eligible for services
under the federal Workforce Investment Act of 1998 (29 U.S.C.
Sec. 2801 et seq.), or its successor.

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

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

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

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

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

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

(B) “Qualified taxpayer” shall not include employers that
provide temporary help services, as described in Code 561320 of
the North American Industry Classification System (NAICS)
published by the United States Office of Management and Budget,
2012 edition.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(1) Obtain from the Employment Development Department, as
permitted by federal law, the local county or city Workforce
Investment Act of 1998 administrative entity, the local county
GAIN office or social services agency, or the local government
administering the manufacturing enhancement area, a certification
that provides that a qualified disadvantaged individual meets the
eligibility requirements specified in paragraph (5) of subdivision
(b). The Employment Development Department may provide
preliminary screening and referral to a certifying agency. The
Department of Housing and Community Development shall
develop regulations governing the issuance of certificates pursuant
to subdivision (d) of Section 7086 of the Government Code and
shall develop forms for this purpose.

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

(k) (1) For the 2014 calendar year, and each calendar year
thereafter, until January 1, 2019, the total aggregate amount of
credits allowed pursuant to this section shall not exceed the total
aggregate amount of credits claimed pursuant to this section in the
2013 calendar year, as determined by the Franchise Tax Board.

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

(l) (1) The Franchise Tax Board shall compile the certifications
submitted pursuant to paragraph (2) of subdivision (j) and shall
provide as a searchable database on its Internet Web site, for each
taxable year beginning on or after January 1, 2014, and before
January 1, 2019, the employer names, amounts of tax credit
claimed, and number of new jobs created for each taxable year
pursuant to this section, Sections 17053.34, 17053.46, 17053.74,
17053.90, 23622.7, 23622.8, 23634, 23646, and 23690.

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

(m) This section shall remain in effect only until December 1,
2019, and as of that date is repealed.

SEC. 5.  

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

17053.74.  

(a) (1) There shall be allowed a credit against the
“net tax” (as defined in Section 17039) to a taxpayer that employs
a qualified employee in an enterprise zone during the taxable year,
but only if the qualified employee first commences employment
with the taxpayer before January 1, 2014. The credit shall be equal
to the sum of each of the following:

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

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

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

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

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

(2) If a taxpayer relocated to an enterprise zone from within the
state during the taxable year for which the credit is claimed, the
taxpayer shall be allowed a credit with respect to qualified wages
for each net increase in qualified employees only if the taxpayer
provides each employee at the previous location or locations a
written notice of transfer to the new location with comparable
compensation. begin insert The California Workforce Investment Board shall
certify the notice and provide a copy to the taxpayer. end insert The taxpayer
shall provide begin delete self-certification with end delete begin insert the end insert documentation when
submitting voucher applications.

(b) For purposes of this section:

(1) “Qualified wages” means:

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

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

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

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

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

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

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

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

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

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

(iv) Is any of the following:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(ia) Federal Supplemental Security Income benefits.

(ib) Aid to Families with Dependent Children.

(ic) CalFresh benefits.

(id) State and local general assistance.

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

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

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

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

(B) Priority for employment shall be provided to an individual
who is enrolled in a qualified program under the federal Workforce
Investment Act of 1998 (29 U.S.C. Sec. 2801 et seq.), or its
successor, or the Greater Avenues for Independence Act of 1985
or who is eligible as a member of a targeted group under the Work
Opportunity Tax Credit (Section 51 of the Internal Revenue Code),
or its successor.

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

(B) “Taxpayer” shall not include employers that provide
temporary help services, as described in Code 561320 of the North
American Industry Classification System (NAICS) published by
the United States Office of Management and Budget, 2012 edition.

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

(c) The taxpayer shall do the following:

(1) (A) Obtain from the Employment Development Department,
as permitted by federal law, the local county or city Workforce
Investment Act of 1998 (29 U.S.C. Sec. 2801 et seq.)
administrative entity, the local county GAIN office or social
services agency, or the local government administering the
enterprise zone, a certification which provides that a qualified
employee meets the eligibility requirements specified in clause
(iv) of subparagraph (A) of paragraph (4) of subdivision (b). The
Employment Development Department may provide preliminary
screening and referral to a certifying agency. The Employment
Development Department shall develop a form for this purpose.
The Department of Housing and Community Development shall
develop regulations governing the issuance of certificates by local
governments pursuant to subdivision (a) of Section 7086 of the
Government Code.

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

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

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

(d) (1) For purposes of this section:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(h) The credit allowable under this section shall be reduced by
the credit allowed under Sections 17053.10, 17053.17, and
17053.46 claimed for the same employee. The credit shall also be
reduced by the federal credit allowed under Section 51 of the
Internal Revenue Code.

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

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

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

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

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

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

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

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

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

(l) The Franchise Tax Board shall compile the certifications
submitted pursuant to paragraph (2) of subdivision (c) and shall
provide as a searchable database on its Internet Web site, for each
taxable year beginning on or after January 1, 2014, and before
January 1, 2019, the employer names, amounts of tax credit
claimed, and number of new jobs created for each taxable year
pursuant to this section, and Sections 17053.34, 17053.46,
17053.47, 17053.90, 23622.7, 23622.8, 23634, 23646, and 23690.

(m) This section shall remain in effect only until December 1,
2019, and as of that date is repealed.

SEC. 6.  

Section 17053.90 is added to the Revenue and Taxation
Code, to read:

17053.90.  

(a) (1) For each taxable year beginning on or after
January 1, 2014, and before January 1, 2019, there shall be allowed
to a qualified taxpayer that hires a qualified full-time employee
and pays or incurs qualified wages attributable to work performed
by the qualified full-time employee in an enterprise zone during
the taxable year a credit against the “net tax,” as defined in Section
17039, in an amount calculated under this section.

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

(3) If a qualified taxpayer relocated to an enterprise zone from
within the state during the taxable year for which the credit is
claimed, the qualified taxpayer shall be allowed a credit with
respect to qualified wages for each net increase in qualified
employees only if the qualified taxpayer provides each employee
at the previous location or locations a written notice of transfer to
the new location with comparable compensation. begin insert The California
Workforce Investment Board shall certify the notice and provide
a copy to the taxpayer. end insert The qualified taxpayer shall provide
begin delete self-certification with end delete begin insert the end insert documentation when submitting a
voucher application.

(b) For purposes of this section:

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

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

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

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

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

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

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

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

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

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

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

(B) Except as provided in paragraph (2) of subdivision (m),
qualified wages do not include any wages paid or incurred by the
qualified taxpayer on or after the zone expiration date.

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

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

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

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

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

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

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

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

(v) Satisfies either of the following conditions:

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

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

(vi) Is any of the following:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(ia) Federal Supplemental Security Income benefits.

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

(ic) CalFresh benefits.

(id) State and local general assistance.

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

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

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

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

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

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

(9) (A) “Qualified taxpayer” means a person or entity engaged
in a trade or business within an enterprise zone that meets both of
the following requirements during the taxable year:

(i) Pays or incurs qualified wages.

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

(B) In the case of any pass-thru entity, the determination of
whether a taxpayer is a qualified taxpayer under this section shall
be made at the entity level and any credit under this section or
Section 23690 shall be allowed to the pass-thru entity and passed
through to the partners and shareholders in accordance with
applicable provisions of this part or Part 11 (commencing with
Section 23001). For purposes of this subdivision, the term
“pass-thru entity” means any partnership or “S” corporation.

(C) “Qualified taxpayer” shall not include employers that
provide temporary help services, as described in Code 561320 of
the North American Industry Classification System (NAICS)
published by the United States Office of Management and Budget,
2012 edition.

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

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

(A) Either of the following:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(A) Obtain from the Employment Development Department,
as permitted by federal law, the local county or city Workforce
Investment Act of 1998 administrative entity, the local county
GAIN office or social services agency, or the local government
administering the enterprise zone, a certification that provides that
a qualified employee meets the eligibility requirements specified
in clause (vi) of subparagraph (A) of paragraph (8) of subdivision
(b). The Employment Development Department may provide
preliminary screening and referral to a certifying agency. The
Employment Development Department shall develop a form for
this purpose. The Department of Housing and Community
Development shall develop regulations governing the issuance of
certificates by local governments pursuant to subdivision (a) of
Section 7086 of the Government Code.

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

(2) The credit allowed by this section may only be claimed on
an original or amended return of the qualified taxpayer filed no
later than one year after the original due date, without regard to
extension, of the qualified taxpayer’s return for the year for which
the credit is claimed.

(f) (1) For purposes of this section:

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

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

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

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

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

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

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

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

(i) (1) The credit allowable under this section shall be reduced
by the credit allowed under Section 17053.46 claimed for the same
employee. The credit shall also be reduced by the federal credit
allowed under Section 51 of the Internal Revenue Code, as
applicable for federal purposes.

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

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

(k) (1) The amount of the credit otherwise allowed under this
section and Section 23690, including any credit carryover from
prior years, that may reduce the “net tax” for the taxable year shall
not exceed the amount of tax that would be imposed on the
qualified taxpayer’s business income attributable to the enterprise
zone determined as if that attributable income represented all of
the income of the qualified taxpayer subject to tax under this part.

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

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

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

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

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

(l) (1) The Franchise Tax Board shall compile the certifications
submitted pursuant to subparagraph (B) of paragraph (1) of
subdivision (e) and shall provide as a searchable database on its
Internet Web site, for each taxable year beginning on or after
January 1, 2014, and before January 1, 2019, the employer names,
amounts of tax credit claimed, and number of new jobs created
for each taxable year pursuant to this section, Sections 17053.34,
17053.46, 17053.47, 17053.74, 17053.90, 23622.7, 23622.8, 23634,
23646, and 23690.

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

(m) (1) This section shall remain in effect only until December
1, 2019, and as of that date is repealed.

(2) Notwithstanding paragraph (1), this section shall remain
operative for any qualified taxpayer with respect to any qualified
full-time employee after the zone expiration date for the remaining
period, if any, of the 60-month period after the original date of
hiring of an otherwise qualified full-time employee, and any wages
paid or incurred with respect to those qualified full-time employees
after the zone expiration date shall be treated as qualified wages
under this section, provided the employee satisfies any other
requirements of paragraphs (4) and (8) of subdivision (b), as if the
enterprise zone designation were still in existence and binding.

SEC. 7.  

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

23622.7.  

(a) (1) There shall be allowed a credit against the
“tax” (as defined by Section 23036) to a taxpayer that employs a
qualified employee in an enterprise zone during the taxable year,
but only if the qualified employee first commences employment
with the taxpayer before January 1, 2014. The credit shall be equal
to the sum of each of the following:

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

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

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

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

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

(2) If a taxpayer relocated to an enterprise zone from within the
state during the taxable year for which the credit is claimed, the
taxpayer shall be allowed a credit with respect to qualified wages
for each net increase in qualified employees only if the taxpayer
provides each employee at the previous location or locations a
written notice of transfer to the new location with comparable
compensation. begin insert The California Workforce Investment Board shall
certify the notice and provide a copy to the taxpayer. end insert The taxpayer
shall provide begin delete self-certification with end delete begin insert the end insert documentation when
submitting voucher applications.

(b) For purposes of this section:

(1) “Qualified wages” means:

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

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

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

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

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

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

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

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

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

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

(iv) Is any of the following:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(ia) Federal Supplemental Security Income benefits.

(ib) Aid to Families with Dependent Children.

(ic) CalFresh benefits.

(id) State and local general assistance.

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

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

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

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

(B) Priority for employment shall be provided to an individual
who is enrolled in a qualified program under the federal Workforce
Investment Act of 1998 (29 U.S.C. Sec. 2801 et seq.), or its
successor, or the Greater Avenues for Independence Act of 1985
or who is eligible as a member of a targeted group under the Work
Opportunity Tax Credit (Section 51 of the Internal Revenue Code),
or its successor.

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

(B) “Taxpayer” shall not include employers that provide
temporary help services, as described in Code 561320 of the North
American Industry Classification System (NAICS) published by
the United States Office of Management and Budget, 2012 edition.

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

(c) The taxpayer shall do the following:

(1) (A) Obtain from the Employment Development Department,
as permitted by federal law, the local county or city Workforce
Investment Act of 1998 administrative entity, the local county
GAIN office or social services agency, or the local government
administering the enterprise zone, a certification that provides that
a qualified employee meets the eligibility requirements specified
in clause (iv) of subparagraph (A) of paragraph (4) of subdivision
(b). The Employment Development Department may provide
preliminary screening and referral to a certifying agency. The
Employment Development Department shall develop a form for
this purpose. The Department of Housing and Community
Development shall develop regulations governing the issuance of
certificates by local governments pursuant to subdivision (a) of
Section 7086 of the Government Code.

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

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

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

(d) (1) For purposes of this section:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(l) The Franchise Tax Board shall compile the certifications
submitted pursuant to paragraph (2) of subdivision (c) and shall
provide as a searchable database on its Internet Web site, for each
taxable year beginning on or after January 1, 2014, and before
January 1, 2019, the employer names, amounts of tax credit
claimed, and number of new jobs created for each taxable year
pursuant to this section, and Sections 17053.34, 17053.46,
17053.47, 17053.90, 23622.7, 23622.8, 23634, 23646, and 23690.

(m) This section shall remain in effect only until December 1,
2019, and as of that date is repealed.

SEC. 8.  

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

23622.8.  

(a) (1) For each taxable year beginning on or after
January 1, 1998, and before January 1, 2014, there shall be allowed
a credit against the “tax” (as defined in Section 23036) to a
qualified taxpayer for hiring a qualified disadvantaged individual
during the taxable year for employment in the manufacturing
enhancement area. The credit shall be equal to the sum of each of
the following:

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

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

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

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

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

(2) (A) For each taxable year beginning on or after January 1,
2014, and before January 1, 2019, there shall be allowed as a credit
against the “net tax,” as defined in Section 23036, to a qualified
taxpayer for hiring a qualified disadvantaged individual during the
taxable year for employment in the manufacturing enhancement
area. The credit shall be equal to the sum of each of the following:

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

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

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

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

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

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

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

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

(C) If a qualified taxpayer relocated to a manufacturing
enhancement area from within the state during the taxable year
for which the credit is claimed, the qualified taxpayer shall be
allowed a credit with respect to qualified wages for each net
increase in qualified employees only if the qualified taxpayer
provides each employee at the previous location or locations a
written notice of transfer to the new location with comparable
compensation. begin insert The California Workforce Investment Board shall
certify the notice and provide a copy to the taxpayer. end insert The qualified
taxpayer shall provide begin delete self-certification with end delete begin insert the end insert documentation
when submitting a voucher application.

(b) For purposes of this section:

(1) “Qualified wages” means:

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

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

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

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

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

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

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

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

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

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

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

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

(i) An individual who has been determined eligible for services
under the federal Workforce Investment Act of 1998 (29 U.S.C.
Sec. 2801 et seq.), or its successor.

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

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

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

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

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

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

(B) “Qualified taxpayer” shall not include employers that
provide temporary help services, as described in Code 561320 of
the North American Industry Classification System (NAICS)
published by the United States Office of Management and Budget,
2012 edition.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(1) Obtain from the Employment Development Department, as
permitted by federal law, the local county or city Workforce
Investment Act of 1998 administrative entity, the local county
GAIN office or social services agency, or the local government
administering the manufacturing enhancement area, a certification
that provides that a qualified disadvantaged individual meets the
eligibility requirements specified in paragraph (5) of subdivision
(b). The Employment Development Department may provide
preliminary screening and referral to a certifying agency. The
Department of Housing and Community Development shall
develop regulations governing the issuance of certificates pursuant
to subdivision (d) of Section 7086 of the Government Code and
shall develop forms for this purpose.

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

(j) (1) For the 2014 calendar year, and each calendar year
thereafter, until January 1, 2019, the total aggregate amount of
credits allowed pursuant to this section shall not exceed the total
aggregate amount of credits claimed pursuant to this section in the
2013 calendar year, as determined by the Franchise Tax Board.

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

(k) (1) The Franchise Tax Board shall compile the certifications
submitted pursuant to paragraph (2) of subdivision (i) and shall
provide as a searchable database on its Internet Web site, for each
taxable year beginning on or after January 1, 2014, and before
January 1, 2019, the employer names, amounts of tax credit
claimed, and number of new jobs created for each taxable year
pursuant to this section, Sections 17053.34, 17053.46, 17053.47,
17053.74, 17053.90, 23622.7, 23634, 23646, and 23690.

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

(l) This section shall remain in effect only until December 1,
2019, and as of that date is repealed.

SEC. 9.  

Section 23634 of the Revenue and Taxation Code is
amended to read:

23634.  

(a) (1) For each taxable year beginning on or after
January 1, 1998, and before January 1, 2014, there shall be allowed
a credit against the “tax” (as defined by Section 23036) to a
qualified taxpayer that employs a qualified employee in a targeted
tax area during the taxable year. The credit shall be equal to the
sum of each of the following:

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

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

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

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

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

(2) (A) For each taxable year beginning on or after January 1,
2014, and before January 1, 2019, there shall be allowed a credit
against the “net tax,” as defined in Section 23036, to a qualified
taxpayer that employs a qualified employee in a targeted tax area
during the taxable year. The credit shall be equal to the sum of
each of the following:

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

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

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

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

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

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

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

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

(C) If a qualified taxpayer relocated to a targeted tax area from
within the state during the taxable year for which the credit is
claimed, the qualified taxpayer shall be allowed a credit with
respect to qualified wages for each net increase in qualified
employees only if the qualified taxpayer provides each employee
at the previous location or locations a written notice of transfer to
the new location with comparable compensation. begin insert The California
Workforce Investment Board shall certify the notice and provide
a copy to the taxpayer. end insert The qualified taxpayer shall provide
begin delete self-certification with end delete begin insert the end insert documentation when submitting a
voucher application.

(b) For purposes of this section:

(1) “Qualified wages” means:

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

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

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

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

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

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

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

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

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

(iv) Is any of the following:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(ia) Federal Supplemental Security Income benefits.

(ib) Aid to Families with Dependent Children.

(ic) CalFresh benefits.

(id) State and local general assistance.

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

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

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

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

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

(i) Is engaged in a trade or business within a targeted tax area
designated pursuant to Chapter 12.93 (commencing with Section
7097) of Division 7 of Title 1 of the Government Code.

(ii) Is engaged in those lines of business described in Codes
2000 to 2099, inclusive; 2200 to 3999, inclusive; 4200 to 4299,
inclusive; 4500 to 4599, inclusive; and 4700 to 5199, inclusive,
of the Standard Industrial Classification (SIC) Manual published
by the United States Office of Management and Budget, 1987
edition.

(B) In the case of any pass-thru entity, the determination of
whether a taxpayer is a qualified taxpayer under this section shall
be made at the entity level and any credit under this section or
Section 17053.34 shall be allowed to the pass-thru entity and
passed through to the partners or shareholders in accordance with
applicable provisions of this part or Part 10 (commencing with
Section 17001). For purposes of this subparagraph, the term
“pass-thru entity” means any partnership or “S” corporation.

(C) “Qualified taxpayer” shall not include employers that
provide temporary help services, as described in Code 561320 of
the North American Industry Classification System (NAICS)
published by the United States Office of Management and Budget,
2012 edition.

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

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

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

(1) Obtain from the Employment Development Department, as
permitted by federal law, the local county or city Workforce
Investment Act of 1998 administrative entity, the local county
GAIN office or social services agency, or the local government
administering the targeted tax area, a certification that provides
that a qualified employee meets the eligibility requirements
specified in clause (iv) of subparagraph (A) of paragraph (4) of
subdivision (b). The Employment Development Department may
provide preliminary screening and referral to a certifying agency.
The Department of Housing and Community Development shall
develop regulations governing the issuance of certificates pursuant
to subdivision (g) of Section 7097 of the Government Code, and
shall develop forms for this purpose.

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

(e) (1) For purposes of this section:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(j) (1) The amount of the credit otherwise allowed under this
section and Section 23633, including any credit carryover from
prior years, that may reduce the “tax” for the taxable year shall
not exceed the amount of tax that would be imposed on the
qualified taxpayer’s business income attributable to the targeted
tax area determined as if that attributable income represented all
of the income of the qualified taxpayer subject to tax under this
part.

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

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

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

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

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

(5) In the event that a credit carryover is allowable under
subdivision (i) for any taxable year after the targeted tax area
designation has expired or been revoked, the targeted tax area shall
be deemed to remain in existence for purposes of computing the
limitation specified in this subdivision.

(k) (1) For the 2014 calendar year, and each calendar year
thereafter, until January 1, 2019, the total aggregate amount of
credits allowed pursuant to this section shall not exceed the total
aggregate amount of credits claimed pursuant to this section in the
2013 calendar year, as determined by the Franchise Tax Board.

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

(l) (1) The Franchise Tax Board shall compile the certifications
submitted pursuant to paragraph (2) of subdivision (d) and shall
provide as a searchable database on its Internet Web site, for each
taxable year beginning on or after January 1, 2014, and before
January 1, 2019, the employer names, amounts of tax credit
claimed, and number of new jobs created for each taxable year
pursuant to this section, Sections 17053.34, 17053.46, 17053.47,
17053.74, 17053.90, 23622.7, 23622.8, 23646, and 23690.

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

(m) This section shall remain in effect only until December 1,
2019, and as of that date is repealed.

SEC. 10.  

Section 23646 of the Revenue and Taxation Code is
amended to read:

23646.  

(a) (1) For each taxable year beginning on or after
January 1, 1995, and before January 1, 2014, there shall be allowed
as a credit against the “tax” (as defined in Section 23036) to a
qualified taxpayer for hiring a qualified disadvantaged individual
or a qualified displaced employee during the taxable year for
employment in the LAMBRA. The credit shall be equal to the sum
of each of the following:

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

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

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

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

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

(2) (A) For each taxable year beginning on or after January 1,
2014, and before January 1, 2019, there shall be allowed as a credit
against the “net tax,” as defined in Section 17039, to a qualified
taxpayer for hiring a qualified disadvantaged individual or a
qualified displaced employee during the taxable year for
employment in the LAMBRA. The credit shall be equal to the sum
of each of the following:

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

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

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

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

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

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

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

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

(C) If a qualified taxpayer relocated to a LAMBRA from within
the state during the taxable year for which the credit is claimed,
the qualified taxpayer shall be allowed a credit with respect to
qualified wages for each net increase in qualified employees only
if the qualified taxpayer provides each employee at the previous
location or locations a written notice of transfer to the new location
with comparable compensation. begin insert The California Workforce
Investment Board shall certify the notice and provide a copy to
the taxpayer. end insert The qualified taxpayer shall provide begin delete self-certification
with end delete begin insert the end insert documentation when submitting a voucher application.

(b) For purposes of this section:

(1) “Qualified wages” means:

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

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

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

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

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

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

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

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

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

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

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

(i) An individual who has been determined eligible for services
under the federal Workforce Investment Act of 1998 (29 U.S.C.
Sec. 2801 et seq.), or its successor.

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

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

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

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

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

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

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

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

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

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

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

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

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

(vii) A recipient of:

(I) Federal Supplemental Security Income benefits.

(II) Aid to Families with Dependent Children.

(III) CalFresh benefits.

(IV) State and local general assistance.

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

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

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

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

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

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

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

(D) “Qualified taxpayer” shall not include employers that
provide temporary help services, as described in Code 561320 of
the North American Industry Classification System (NAICS)
published by the United States Office of Management and Budget,
2012 edition.

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

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

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

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

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

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

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

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

(1) Obtain from the Employment Development Department, as
permitted by federal law, the administrative entity of the local
county or city for the federal Workforce Investment Act of 1998
(29 U.S.C. Sec. 2801 et seq.), or its successor, the local county
GAIN office or social services agency, or the local government
administering the LAMBRA, a certification that provides that a
qualified disadvantaged individual or qualified displaced employee
meets the eligibility requirements specified in subparagraph (C)
of paragraph (4) of subdivision (b) or subparagraph (A) of
paragraph (6) of subdivision (b). The Employment Development
Department may provide preliminary screening and referral to a
certifying agency. The Department of Housing and Community
Development shall develop regulations governing the issuance of
certificates pursuant to Section 7114.2 of the Government Code
and shall develop forms for this purpose.

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

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

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

(B) The credit (if any) allowable by this section to each member
shall be determined by reference to its proportionate share of the
qualified wages giving rise to the credit.

(2) For purposes of this subdivision, “controlled group of
corporations” has the meaning given to that term by Section
1563(a) of the Internal Revenue Code, except that both of the
following apply:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(ii) A mere change in the form of conducting the trade or
business of the taxpayer, if the employee continues to be employed
in that trade or business and the taxpayer retains a substantial
interest in that trade or business.

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

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

(f) In the case of an organization to which Section 593 of the
Internal Revenue Code applies, and a regulated investment
company or a real estate investment trust subject to taxation under
this part, rules similar to the rules provided in subsections (e) and
(h) of Section 46 of the Internal Revenue Code shall apply.

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

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

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

(i) (1) The amount of credit otherwise allowed under this section
and Section 23645, including any prior year carryovers, that may
reduce the “tax” for the taxable year shall not exceed the amount
of tax that would be imposed on the taxpayer’s business income
attributed to a LAMBRA determined as if that attributed income
represented all of the income of the taxpayer subject to tax under
this part.

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

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

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

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

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

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

(k) (1) For the 2014 calendar year, and each calendar year
thereafter, until January 1, 2019, the total aggregate amount of
credits allowed pursuant to this section shall not exceed the total
aggregate amount of credits claimed pursuant to this section in the
2013 calendar year, as determined by the Franchise Tax Board.

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

(l) (1) The Franchise Tax Board shall compile the certifications
submitted pursuant to paragraph (2) of subdivision (c) and shall
provide as a searchable database on its Internet Web site, for each
taxable year beginning on or after January 1, 2014, and before
January 1, 2019, the employer names, amounts of tax credit
claimed, and number of new jobs created for each taxable year
pursuant to this section, Sections 17053.34, 17053.46, 17053.47,
17053.74, 17053.90, 23622.7, 23622.8, 23634, and 23690.

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

(m) This section shall remain in effect only until December 1,
2019, and as of that date is repealed.

SEC. 11.  

Section 23690 is added to the Revenue and Taxation
Code, to read:

23690.  

(a) (1) For each taxable year beginning on or after
January 1, 2014, and before January 1, 2019, there shall be allowed
to a qualified taxpayer that hires a qualified full-time employee
and pays or incurs qualified wages attributable to work performed
by the qualified full-time employee in an enterprise zone during
the taxable year a credit against the “tax,” as defined by Section
23036, in an amount calculated under this section.

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

(3) If a qualified taxpayer relocated to an enterprise zone from
within the state during the taxable year for which the credit is
claimed, the qualified taxpayer shall be allowed a credit with
respect to qualified wages for each net increase in qualified
employees only if the qualified taxpayer provides each employee
at the previous location or locations a written notice of transfer to
the new location with comparable compensation. begin insert The California
Workforce Investment Board shall certify the notice and provide
a copy to the taxpayer. end insert The qualified taxpayer shall provide
begin delete self-certification with end delete begin insert the end insert documentation when submitting a
voucher application.

(b) For purposes of this section:

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

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

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

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

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

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

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

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

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

(i) That portion of wages paid or incurred during the taxable
year to each qualified full-time employee in excess of 200 percent
of the minimum wage, but not in excess of 400 percent of the
minimum wage.

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

(B) Except as provided in paragraph (2) of subdivision (m),
qualified wages do not include any wages paid or incurred by the
qualified taxpayer on or after the zone expiration date.

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

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

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

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

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

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

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

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

(v) Satisfies either of the following conditions:

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

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

(vi) Is any of the following:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(ia) Federal Supplemental Security Income benefits.

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

(ic) CalFresh benefits.

(id) State and local general assistance.

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

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

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

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

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

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

(9) (A) “Qualified taxpayer” means a corporation engaged in
a trade or business within an enterprise zone that meets both of
the following requirements during the taxable year:

(i) Pays or incurs qualified wages.

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

(B) In the case of any pass-thru entity, the determination of
whether a taxpayer is a qualified taxpayer under this section shall
be made at the entity level and any credit under this section or
Section 17053.90 shall be allowed to the pass-thru entity and
passed through to the partners and shareholders in accordance with
applicable provisions of this part or Part 10 (commencing with
Section 17001). For purposes of this subdivision, the term
“pass-thru entity” means any partnership or “S” corporation.

(C) “Qualified taxpayer” shall not include employers that
provide temporary help services, as described in Code 561320 of
the North American Industry Classification System (NAICS)
published by the United States Office of Management and Budget,
2012 edition.

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

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

(A) Either of the following:

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

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

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

(C) In determining whether the qualified taxpayer has first
commenced doing business in this state during the taxable year,
subdivision (g) of Section 24416.20, without application of
paragraph (7) of that subdivision, shall apply.

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

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

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

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

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

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

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

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

(d) (1) Any qualified wages taken into account under this
section in computing this credit shall not be taken into account in
computing any other credit otherwise allowable under this part or
Part 10 (commencing with Section 17001).

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

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

(A) Obtain from the Employment Development Department,
as permitted by federal law, the local county or city Workforce
Investment Act of 1998 administrative entity, the local county
GAIN office or social services agency, or the local government
administering the enterprise zone, a certification that provides that
a qualified employee meets the eligibility requirements specified
in clause (vi) of subparagraph (A) of paragraph (8) of subdivision
(b). The Employment Development Department may provide
preliminary screening and referral to a certifying agency. The
Employment Development Department shall develop a form for
this purpose. The Department of Housing and Community
Development shall develop regulations governing the issuance of
certificates by local governments pursuant to subdivision (a) of
Section 7086 of the Government Code.

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

(2) The credit allowed by this section may only be claimed on
an original or amended return of the qualified taxpayer filed no
later than one year after the original due date, without regard to
extension, of the qualified taxpayer’s return for the year for which
the credit is claimed.

(f) (1) For purposes of this section:

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

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

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

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

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

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

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

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

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

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

(i) (1) The credit allowable under this section shall be reduced
by the credit allowed under Section 23646 claimed for the same
employee. The credit shall also be reduced by the federal credit
allowed under Section 51 of the Internal Revenue Code, as
applicable for federal purposes.

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

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

(k) (1) The amount of the credit otherwise allowed under this
section and Section 17053.90, including any credit carryover from
prior years, that may reduce the “tax” for the taxable year shall
not exceed the amount of tax that would be imposed on the
qualified taxpayer’s business income attributable to the enterprise
zone determined as if that attributable income represented all of
the income of the qualified taxpayer subject to tax under this part.

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

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

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

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

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

(l) (1) The Franchise Tax Board shall compile the certifications
submitted pursuant to subparagraph (B) of paragraph (1) of
subdivision (e) and shall provide as a searchable database on its
Internet Web site, for each taxable year beginning on or after
January 1, 2014, and before January 1, 2019, the employer names,
amounts of tax credit claimed, and number of new jobs created
for each taxable year pursuant to this section, Sections 17053.34,
17053.46, 17053.47, 17053.74, 17053.90, 23622.7, 23622.8, 23634,
and 23646.

(2) The Franchise Tax Board may prescribe rules, guidelines,
or procedures necessary or appropriate to carry out the purposes
of this section, including any guidelines regarding the allocation
of the credit allowed under this section.

(m) This section shall remain in effect only until December 1,
2019, and as of that date is repealed.

(2) Notwithstanding paragraph (1) of this subdivision, this
section shall remain operative for any qualified taxpayer with
respect to any qualified full-time employee after the zone expiration
date for the remaining period, if any, of the 60-month period after
the original date of hiring of an otherwise qualified full-time
employee and any wages paid or incurred with respect to those
qualified full-time employees after the zone expiration date shall
be treated as qualified wages under this section, provided the
employee satisfies any other requirements of paragraphs (4) and
(8) of subdivision (b), as if the enterprise zone designation were
still in existence and binding.

SEC. 12.  

No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of
the Government Code, or changes the definition of a crime within
the meaning of Section 6 of Article XIII B of the California
Constitution.

SEC. 13.  

This act provides for a tax levy within the meaning
of Article IV of the Constitution and shall go into immediate effect.