BILL ANALYSIS Ó SENATE GOVERNANCE & FINANCE COMMITTEE Senator Lois Wolk, Chair BILL NO: SB 434 HEARING: 5/1/13 AUTHOR: Hill & Wolk FISCAL: Yes VERSION: 4/24/13 TAX LEVY: No CONSULTANT: Miller PERSONAL INCOME & CORPORATION TAXES: HIRING CREDITS: ENTERPRISE ZONES, LAMBRAs, MANUFACTURING ENHANCEMENT AREAS, & TARGETED AREAS Makes substantial changes to the Enterprise Zone hiring credits, vouchers, and disclosure requirements. Background and Existing Law Enterprise Zones . California's 40 enterprise zones are located in areas as diverse as the state itself. From Siskiyou County to Compton, and from San Francisco to Calexico, this program provides generous tax incentives for firms that do business in these zones. Cities and Counties apply to the Department of Housing and Community Development (HCD) to designate geographic areas in their jurisdictions as enterprise zones. HCD reviews applications, and may designate up to 42 zones statewide for 15 year periods. Geographic areas are eligible based on its unemployment rates, free lunch program participation, median income, plant closures, or history of gang-related activity. Taxpayers located in enterprise zones may claim income and corporation tax credits for hiring qualified individuals, sales tax paid on equipment purchases, and can qualify banks for a net interest deduction for loans made to a zone business. Firms may also accelerate depreciation of equipment, and carry over 100% of losses; however, these incentives are largely irrelevant today because the Legislature has since enacted similar or superior benefits for nearly all taxpayers regardless of location. The most significant incentive is the hiring credit. Employers inside an enterprise zone may claim a tax credit of 50% of the wages paid to a qualified employee in the first year, 40% in the second year, 30% in the third year, SB 434 -- 4/24/13 -- PageB 20% in the fourth year, and 10% in the fifth year, up to 150% of the minimum wage. Businesses or consultants submit applications to qualify employees to zone managers, who grant the firm or consultant a voucher certifying eligibility if the employee qualifies. The firm then claims the credit on its tax return. Qualified employees include individuals: Eligible for job training programs Eligible for most social welfare programs Economically disadvantaged A "dislocated worker," as defined. A disabled individual who is eligible or enrolled in a state rehabilitation plan Service connected veteran Ex-offender Member of a federally recognized Indian tribe Employers may also claim the hiring credit for residents of Targeted Employment Areas (TEAs), in addition to the criteria listed above. Cities and counties managing enterprise zones may draw TEAs to contain census tracts where 51% or more of the individuals are low or moderate income, meaning 80% of the area wide, or countywide, median. In other words, local agencies draw TEAs to include communities where only half of the residents are actually or somewhat low-income, but anyone living in one qualifies his or her employers for the hiring credit regardless of their own economic status or employability. TEAs need not be contiguous to, or drawn within the borders of the Enterprise Zone. Taxpayers can also receive a certification qualifying an employee for an enterprise zone hiring credit at any time. Taxpayers may certify employees who worked for them in past years, then submit claims for refunds for previous taxes paid to FTB based on those certifications under California's general four year statute of limitations for amending past returns, a practice known as "retro-vouchering." In general, tax law allows taxpayers to amend their returns for four years. SB 974 (Steinberg, 2010) and AB 1139 (Perez, 2009) proposed to repeal the TEA criterion and "retro vouchering," although neither bill advanced to the Governor's Desk. In his 2011-12 Budget, Governor Brown proposed to repeal SB 434 -- 4/24/13 -- PageC all EZ tax credits, citing the Legislative Analyst's Office long-standing recommendation to reform or repeal the program, and the PPIC Study noted below, among others. The proposal-at the time-would have increased revenue $343 million (2010-11), $583 million (2011-12), according to the Department of Finance. The Governor states that zones would continue to provide local incentives, but zone taxpayers could no longer receive state tax benefits. The Legislature did not act on the Governor's proposal at that time. In his 2013-14 Budget, Governor Brown proposes the EZ regulatory reform at the department of Housing and Community Development (HCD) be largely adopted. The comments from round one of comment period are being compiled by HCD staff; the second notice and comment period will be in May of this year. HCD will publish the final package at the end of May/ beginning of June. The Budget includes savings that assumes their adoption as follows: Limit retro vouchering by requiring all voucher applications to be made within one year of the date of hire Require third party verification of employee residence within a Targeted Employment Area. Streamline the vouchering process for hiring veterans and recipients of public assistance. Create stricter zone audit procedures and audit failure procedures. The budget notes that these regulatory reforms will primarily affect Corporation Tax revenue, but will also have an impact on Personal Income Tax revenue. The regulations, in total, are expected to increase General Fund revenue by $10 million in 2012-13 and $50 million in 2013-14. The Budget also states that the "Administration will be pursuing further Enterprise Zone reform through legislation." Currently, HCD has designated 40 zones. Two zones, the City of Watsonville and the Antelope Valley Zone, expired in 2012, having reached the end of their 15 year designation period. HCD has stated that it "will use its authorized discretion to not open up applications for new zones until the program is sufficiently reformed to strengthen its effectiveness to incentivize job creation." SB 434 -- 4/24/13 -- PageD Contingency fees. Federal law allows the Secretary of the Treasury to regulate practitioners with cases before the Internal Revenue Service (IRS). IRS Circular 230 generally spells out requirements for these practitioners, and also regulates the conduct of anyone providing tax advice or preparing tax returns for compensation, including attorneys, certified public accountants, and enrolled agents. In 2009, IRS revised Circular 230 to bar individuals practicing before the IRS from charging clients contingency fees, with specified exceptions, because of the potential to exploit the audit selection process and compromise a practitioner's duty of independent judgment. Federal law also applies an erroneous claim for refund penalty equal to 20% of the amount of the claim that lacks a reasonable basis for the refund. California does not conform to this penalty. Additionally, the American Institute of Certified Public Accountants Code of Professional Conduct precludes accountants from charging contingency fees for preparing an original or amended tax return, with specified exceptions. State law restricts commissions charged by certified public accountants in specified circumstances (SB 1289, Calderon, 1998). However, sophisticated cottage industries of non-accountant tax consultants have grown considerably in recent years, offering to amend a taxpayer's previous state income tax returns seeking refunds of previous taxes paid by claiming tax credits not included on the taxpayer's original return. The taxpayer compensates the consultant as a percentage of the refund, providing a significant incentive to file aggressive claims with questionable justification. As many of these consultants are neither accountants subject to state law or codes of ethics, nor practitioners covered by Circular 230, they may charge taxpayers contingency fees without any limitation. Disclosure . State law also requires the Franchise Tax Board to "recapture" or "claw back" tax credits from taxpayers under specified circumstances to ensure that taxpayers do not financially benefit when acting opposite to the intent of a tax credit. Taxpayers who claim an enterprise zone hiring credit then terminate an employee within 270 days must repay the credit, and a low-income housing developer must sacrifice tax credits if he or she raises rents at the project to the extent that they're no longer affordable. Additionally, tax law specifies SB 434 -- 4/24/13 -- PageE penalties for understating liability, failing to file returns, engaging in transactions that lack economic substance, and engaging in fraud, among others. Existing state and federal laws generally prohibit unlawful disclosure or inspection of any income tax return information. Existing state law allows a committee of either house of the Legislature to examine confidential taxpayer information. Criminal sanctions, including imprisonment, apply to FTB personnel convicted of unlawful disclosure or inspection of tax records. The Franchise Tax Board (FTB) must notify a taxpayer if criminal charges have been filed for willful unauthorized inspection or disclosure of their tax data. However, FTB may publish statistical data related to taxpayer information so long as nothing specific to a single taxpayer is disclosed. Notwithstanding these provisions, the Legislature directed FTB to publish a list of the top 500 tax delinquencies over $100,000 (AB 1418, Horton, 2006 and AB 1424, Perea, 2011). Existing law also requires the Department of Finance to annually publish a report detailing tax expenditures, and relevant costs. A Form 10-K is an annual report required by the U.S. Securities and Exchange Commission (SEC), that gives a comprehensive summary of a public company's performance. Although similarly named, the annual report on Form 10-K is distinct from the often glossy "annual report to shareholders," which a company must send to its shareholders when it holds an annual meeting to elect directors (though some companies combine the annual report and the 10-K into one document). The 10-K includes information such as company history, organizational structure, executive compensation, equity, subsidiaries, and audited financial statements, among other information. Companies with more than $10 million in assets and a class of equity securities that is held by more than 500 owners must file annual and other periodic reports, regardless of whether the securities are publicly or privately traded. In addition to the 10-K, which is filed annually, a company is also required to file quarterly reports on Form 10-Q. In the period between these filings, and in case of a SB 434 -- 4/24/13 -- PageF significant event, such as a CEO departing or bankruptcy, a Form 8-K must be filed in order to provide up to date information. Proposed Law EZ Hiring credit . Senate Bill 434 makes significant changes to the hiring credit within the enterprise zone program, while maintaining the 40 designated zones, beginning on January 1, 2014 as follows: Net new jobs requirement . SB 434 requires that in order to qualify for any credit the taxpayer must have experienced an increase in total jobs throughout the state from one year to the next. While the credit may be spread across all new employees in the "hard to hire" categories under existing law, taxpayers are only allowed the credit for the number of new jobs in the state. For example, if ABC Inc. shows it has hired 100 employees statewide, the company may receive total credits for up to 100 employees. Alternatively, if a taxpayer hires 50 new employees (qualified or not) in the Compton EZ but laid off 25 employees in Napa, the taxpayer would only be eligible for credits of 25 "qualified employees." Credit percentages . The credit percentages in the bill will change to 10% in the first year; 30% in the second year; 50% in the third year; 30% in the fourth year and 10% in the fifth year. Taxpayer restrictions . Prohibits taxpayers from a temporary agency, as defined by the National Association of Industry Classification Codes (NAICS) from receiving the hiring credit. Offer of transfer . Requires taxpayers that move into an Enterprise Zone to provide an "offer of transfer" to its employees with comparable compensation. Voucher requirements . Taxpayers must provide the hiring credit voucher certification annually. Public database . SB 434 requires the FTB to SB 434 -- 4/24/13 -- PageG compile a list of the hiring credit vouchers claimed and number of new jobs created for each taxable year. Retro-vouchering . Beginning on January 1, 2014, taxpayers may only amend a return to claim the hiring credit for one year. LAMBRA's, Manufacturing Enhancement Areas, Hiring Credit : SB 434 requires a net new jobs calculation and changes the credit percentages; all other provisions remain the same. Credit percentages . The percentages are: 10% in the first year, 10% in the second year, 30% in the third year, 40% in the fourth year and 50% in the fifth year. Sunset . Sunsets the hiring credit for LAMBRA's, Manufacturing Enhancement Areas, Targeted Areas and Enterprise Zones on January 1, 2019. Contingency fees. Senate Bill 434 prohibits a person from charging a contingency fee for services 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. The bill defines a contingency fee as any fee The bill defines "contingent fee" identically to Circular 230, but without the exceptions, as any fee that is: A fee that is based on the percentage of the refund reported on a return, a fee that is based on a percentage of the taxes saved, or a fee that depends on the specific tax result attained. Any fee arrangement in which the party to whom services are rendered, or a designee of the party to whom services are rendered, is reimbursed or credited for all or a portion of the fee paid or agreed to be paid if a position taken on a tax return or other filing is challenged or is not sustained, whether pursuant to an indemnity agreement, a guarantee, a right of rescission, or any other arrangement with similar effect. The governmental entity responsible for administering the tax shall impose a penalty equal to the amount of the contingency fee or $5,000, whichever is greater, for SB 434 -- 4/24/13 -- PageH persons who fail to comply. State Revenue Impact The revenue estimate is still pending from the FTB. Comments 1. Purpose of the bill . According to the author, SB 434 reforms the California Enterprise Zone program to make sure taxpayer dollars are being spent on true job creation instead of job transferring. The California Enterprise Zone program has cost the state over $4 billion dollars since its creation in the 1980s. It began as a way to help struggling companies create jobs in disadvantaged communities but it's evolved into a handout for large corporations. Nearly all of the tax credits (91 percent) were claimed by corporations with assets of $10 million or more. Corporations with less than $1 million in assets claimed only 1 percent of Enterprise Zone tax credits. The largest EZ tax break is the hiring credit that gives employers up to $37,440 for each qualified hire over a five year period. The EZ program costs the state $700 million a year, and the cost is growing by more than 30 percent annually. The Public Policy Institute of California found that "on average, enterprise zones have no effect on business creation or job growth." The Legislative Analysts' Office said "most research indicates that programs [such as the Enterprise Zone Program] have little if any impact on the creation of new employment" In a survey conducted by the California Department of Housing and Community Development, nearly half of businesses report that the Enterprise Zone hiring credit "never" or "rarely" influenced their hiring decisions. 61 percent of companies report that it "never" or "rarely" played a role in deciding whether or not to retain workers. SB 434 continues to allow local governments and employers to utilize the Enterprise Zone program, but enacts common sense reforms to focus incentives on true job creation that will benefit the state. 2. Economic development . The opponents of SB 434 state that it would seriously harm California's only remaining economic development program and particularly impact small businesses, impoverished areas of the state and primarily SB 434 -- 4/24/13 -- PageI low-income and minority communities. The coalition opposition letter points to several provisions that it finds objectionable including the elimination of retroactive credits, the net increase in headcount requirement, no hiring for temp jobs, cap, sunset and review, transparency and the regulation of tax consultants. All of these reforms will preclude small businesses from claiming the credit, have a chilling effect on business climate and lose much of its incentive effect. 3. Hiring credits . Economists generally favor broad based levies that which spread the costs of providing public services broadly throughout the economy with rates that are as low as possible. A hiring credit is counter to the economic theory and is therefore by its nature inefficient. The EZ hiring credit does focus on the hardest to hire individuals but only in specific areas and may reward taxpayers for employees that would have been hired without the credit. Economists agree that if the state does have a hiring credit, it makes sense to focus on the hard to hire categories in the EZ program but that it should also be applied on a statewide basis. The committee may wish to consider amending the bill to apply statewide instead of only in the 40 zones. 4. Assessing performance . California's enterprise zone program, the result of collaboration between former Assembly members Pat Nolan and Maxine Waters (AB 40 and 514, 1984, respectively), has evolved from a well-intentioned legislative effort to use tax credits to draw investment into economically depressed rural and urban areas into an almost half-billion tax credit program referred to as California's best economic development program. HCD administers the program, taking over from the now-defunct Trade and Commerce Agency in 2003. Program defenders say the program is the state's best tool for economic development, citing accounts from taxpayers who state that they locate in California largely because of enterprise zone program incentives, which overcome stated disadvantages posed by California's tax and regulatory system. Supporters state that the incentives draw investment into economically distressed communities and provide avenues for hard-to-hire individuals to find employment. However, detractors argue that the program offers a poor return on the state's investment, and criticize individual parts such as TEA criterion, the SB 434 -- 4/24/13 -- PageJ practice of "retro vouchering," and the sliding scale structure of the hiring credit. At the Senate Revenue and Taxation Committee's Enterprise Zone Oversight Hearing on March 10, 2010, the Committee took testimony from experts, including: Dr. Charles Swenson, whose work shows that enterprise zones have decreased unemployment and poverty rates in California census tracts within zones. <1> David Neumark, whose paper states that California's enterprise zones have no effect upon employment and business formation in zones,<2> and zones which have lower share of manufacturing and where managers perform more marketing activities have more favorable effects on employment, and zones that devote more time to helping firms claim tax credits, eliminate any positive benefit.<3> Eileen Norcross of the Mercatus Center at George Mason University, whose written testimony stated that enterprise zones failed to produce the hoped for benefits of economic revitalization and robust economic growth because the policy is discriminatory and introduces complexity and gamesmanship into the tax code and business decisions. Norcross recommended that the state should instead set rules that encourage entrepreneurship without regard to firm size or business activity. LAO, which recommends that the program be eliminated or restructured. 5. Who wins ? Committee staff asked the FTB to provide a breakdown of 2010 hiring credits by industry and net income. In 2010, taxpayers claimed almost $402 million in credits but 94.62% of the firms had over $1 million in net ------------------------- <1> Government Programs Can Improve Local Labor Markets: Evidence from State Enterprise Zones, Federal Empowerment Zones, and Federal Enterprise Communities," by John Ham, Ayse Imrohoroglu, and Charles Swenson, February 2009. <2> "Do Enterprise Zones Create Jobs?" by David Neumark and Jed Kolko, Journal of Urban Economics, June 2010 <3> "Do Some Enterprise Zones Create Jobs?" by Jed Kolko and David Neumark. Journal of Policy Analysis and Entrepreneurship, Vol 29, No. 1, 5-38 (2010). SB 434 -- 4/24/13 -- PageK income. A review of the data illustrated in the data below shows all the industries with credits greater than $3.5 million are largely consolidated within a few industries. The Committee may wish to consider if the program is intended for small companies, should there be an income limitation? Furthermore, is the program growing in appropriate industries and could all these industries be better served with a statewide credit? The appended table shows the results of a public records act request for individual companies in Sacramento receiving vouchers for the hiring credit. SB 434 -- 4/24/13 -- PageL Credit amounts by industry in 2010: ------------------------------------------------- |Industry |S&UT/Hiring |PBA | | |Credit in 2010 |Code | |-------------------------+----------------+------| |Other General Merch |$22,115,745 |452900| |Stores | | | |-------------------------+----------------+------| |Holding Companies |$20,378,245 |551112| | | | | |-------------------------+----------------+------| |Telecommunication |$19,250,261 |517000| |Distribution | | | |-------------------------+----------------+------| |Wineries |$13,392,749 |312130| | | | | |-------------------------+----------------+------| |Ship and Boat Building |$12,898,706 |336610| | | | | |-------------------------+----------------+------| |Aerospace Mfg |$11,538,092 |336410| | | | | |-------------------------+----------------+------| |Supermarkets & Other |$11,212,139 |445110| |Grocery | | | |-------------------------+----------------+------| |Home Centers |$9,451,486 |444110| | | | | |-------------------------+----------------+------| |Department Stores |$8,304,146 |452110| | | | | |-------------------------+----------------+------| |Pharmacies/Drug Stores |$6,627,821 |446110| | | | | |-------------------------+----------------+------| |Pharma/Medicine Mfg |$6,538,856 |325410| | | | | |-------------------------+----------------+------| |Other Food Mfg |$6,379,676 |311900| | | | | |-------------------------+----------------+------| |Investment Banking |$6,078,391 |523110| | | | | |-------------------------+----------------+------| |News Syndicates |$5,970,656 |519100| SB 434 -- 4/24/13 -- PageM | | | | |-------------------------+----------------+------| |Education Services |$5,771,763 |611000| | | | | |-------------------------+----------------+------| |Grocery Wholesale |$5,731,095 |424400| | | | | |-------------------------+----------------+------| |Soft Drink Mfg |$5,598,381 |312110| | | | | |-------------------------+----------------+------| |Auto Parts and Tire |$5,567,572 |441300| |Stores | | | |-------------------------+----------------+------| |Electrical Power Gen |$5,512,978 |221100| | | | | |-------------------------+----------------+------| |Long Distance Trucking |$5,276,313 |484120| | | | | |-------------------------+----------------+------| |Specialty Foods |$5,162,469 |445299| | | | | |-------------------------+----------------+------| |Fruit, Veg Preserve Mfg. |$5,003,546 |311400| | | | | |-------------------------+----------------+------| |Bank Holding Companies |$4,802,774 |551111| | | | | |-------------------------+----------------+------| |Electrical Lighting |$4,652,252 |335100| |Equip Mfg. | | | |-------------------------+----------------+------| |Other Misc. Mfg. |$4,224,855 |339900| | | | | |-------------------------+----------------+------| |Portfolio |$4,121,487 |523900| |Management/Investment. | | | |Advice | | | |-------------------------+----------------+------| |Iron and Steel Mills |$3,906,607 |331110| | | | | |-------------------------+----------------+------| |Dairies |$3,609,411 |311500| | | | | |-------------------------+----------------+------| |Hotels |$3,581,090 |721110| | | | | SB 434 -- 4/24/13 -- PageN |-------------------------+----------------+------| |Advertising |$3,540,109 |541800| | | | | |-------------------------+----------------+------| |Other Depository Credit |$3,519,956 |522190| |Intermediation | | | |-------------------------+----------------+------| |Waste Management |$3,449,681 |562000| | | | | |-------------------------+----------------+------| |HMOs |$3,435,873 |621491| | | | | |-------------------------+----------------+------| |Engineers |$3,409,482 |541330| | | | | |-------------------------+----------------+------| |Other Professional, |$3,370,641 |541990| |Scientific Tech | | | |-------------------------+----------------+------| |Other Fabricated Product |$3,360,768 |332900| |Mfg. | | | |-------------------------+----------------+------| |Other Misc. Retailers |$3,265,254 |453990| | | | | |-------------------------+----------------+------| |Machinery Equip & |$3,124,972 |423800| |Supplies | | | |-------------------------+----------------+------| |Apparel Accessory Mfg. |$2,994,565 |315990| | | | | |-------------------------+----------------+------| |Fast Food |$2,867,673 |722210| | | | | |-------------------------+----------------+------| |Oil Refineries |$2,848,027 |324110| | | | | |-------------------------+----------------+------| |Misc. Wholesale |$2,822,827 |424990| |Nondurable | | | |-------------------------+----------------+------| |Transpiration Support |$2,771,545 |488990| | | | | |-------------------------+----------------+------| |Apparel Wholesale |$2,742,946 |424300| | | | | |-------------------------+----------------+------| |Software Publishing |$2,710,993 |511210| SB 434 -- 4/24/13 -- PageO | | | | |-------------------------+----------------+------| |Commercial Banks |$2,641,893 |522110| | | | | |-------------------------+----------------+------| |Restaurants |$2,599,672 |722110| | | | | |-------------------------+----------------+------| |Radio, TV, and |$2,530,395 |443112| |Electronics Stores | | | |-------------------------+----------------+------| |Motion Pictures |$2,413,621 |512100| | | | | ------------------------------------------------- 6. The right percent . SB 434 proposes changing the percentages of the hiring credit to provide an incentive to retain qualified employees once hired. Instead of starting at 50% in the first year, the credit grows to 50% by the third year. Opponents to this proposal point out that "hard to hire" employees are the most expensive in the first year they are hired due to the high training costs. The research indicates, however, that the high first year credit encourages churning of employees to maintain the 50% credit. What is the right balance of acknowledging the costs versus retaining the employees? The Committee may wish to consider a higher percentage that includes a claw back provision whereby if an employee is not retained for more than one year, the taxpayers loses the credit. 7. Deluxe and Dicon . HCD released new regulations to the program which, among other things, only allows one year of "retro vouchering." Past regulations have been litigated by tax credit consultants, who unsuccessfully brought suit to enjoin HCD's 2007 regulations in Cyntron v. HCD et al , and also failed to disqualify the Franchise Tax Board from auditing enterprise zone tax credits at all first through the BOE, then in the courts. The BOE affirmed FTB's authority in The Appeal of Deluxe (Case No. 297128). However, tax credit consultants appealed to the courts, and the California Court of Appeal weakened FTB's authority in Dicon Fiberoptics v. Franchise Tax Board (Case B202997, 2009), holding that while FTB is legally authorized to audit EZ credits, the voucher constitutes prima facie evidence that the taxpayer is entitled to the credit. FTB appealed this case to the California Supreme Court, which unanimously reversed the Court of Appeal's decision in SB 434 -- 4/24/13 -- PageP April, 2012, thereby allowing FTB to continue to audit documentation of enterprise zone tax credits. 8. Taxpayer confidentiality . SB 434 poses a clear tradeoff in tax policy: are taxpayer privacy protections more important than making public information necessary to determine how much certain corporations pay in tax? While taxpayer privacy is the cornerstone of a self-assessed income tax system, how can the Legislature evaluate if the tax system is equitable when it doesn't know who pays what and what tax breaks are worth? Financial information is highly sensitive to both individuals and business - allowing friends and neighbors to know your financial investments or personal spending, or to disclose vital data in a tax return to a competitor, is a violation of privacy. For these reasons, state law allows felony prosecution for unlawful inspection and disclosure to enforce these safeguards, and FTB must notify any taxpayers if criminal charges are filed. Conversely, the proponents of the measure state that during this difficult budget climate, it is imperative to enact the bill to ensure that state policymakers have the information necessary to determine the impact of the elective single sales factor on the state budget. The Committee may wish to consider whether breaching the veil of taxpayer confidentially is worth the tradeoff for additional information. Is the information as important as sound tax policy that makes sense on a statewide basis? 9. Contingency fees . SB 434 limits contingency fees; these fees have shown to make taxpayers overly aggressive with little to no documentation; these fees have created a cottage industry of consultants that mine the tax code which is counter to the intent of the program. For some small businesses, the fees can be very high which contradicts the program's intent of helping small businesses. On the other hand, many taxpayers prepare their tax returns unaware of many benefits to which they're lawfully entitled because documenting eligibility, filing amended returns, can be time consuming and costly, often too much so for smaller businesses and individuals, who can only afford to pursue these benefits using a consultant willing to work on contingency. The Committee may wish to consider whether the self-certification process in this bill will result in the desired behavior suggested by this change. SB 434 -- 4/24/13 -- PageQ 10. " Offer of transfer ." This bill seeks to address a perceived abuse in the EZ system whereby an employer leaves one area outside of a zone, relieves its employees and moves to a zone just for the purpose of receiving the credit. The bill's terms are vague, not defined anywhere in the Revenue & Taxation code and the certification by the FTB cannot be administered. The Committee may wish to consider amending the bill to have a more appropriate department or agency that understands "transfer offers" administer this provision in the bill. 11. Technical amendment . In order to receive the credit, the taxpayer must be in the zone; to qualify for the credit the taxpayer must experience an increase in statewide jobs. The author will take amendments in committee to clarify the enterprise zone specific provisions in all parts of the bill. Support and Opposition (4/25/13) Support : California Labor Federation; California Nurses Association; California Public Interest Research Group; CA Teamsters Public Affairs Council; CA Conference Board of the Amalgamated Transit Union; United Food and Commercial Workers Union, Western States Council; Engineers and Scientists of CA; UNITE HERE!; California Conference of Machinists; American Federation of State, County and Municipal Employees, AFL-CIO; Professional & Technical Engineers, Local 21; International Longshore & Warehouse Union; Utility Workers Union of America, Local 132; San Mateo County Central Labor Council; Western Center on Law and Poverty; California School Employees Association. Opposition : California Asian Pacific Chamber of Commerce; California Association for Local Economic Development; California Bankers Association; California Business Properties Association; California Chamber of Commerce; California Employment Opportunity Network; California Hispanic Chamber of Commerce; California League of Cities; California Manufacturing and Technology Association; California Retailers Association; City of Sacramento; National Federation of Independent Business; League of California Cities; California Association of Enterprise Zones. SB 434 -- 4/24/13 -- PageR SB 434 -- 4/24/13 -- PageS Appendix: Public records act request finding for one month. Sacramento Enterprise Zone Monthly Report October 2012 --------------------------------------------------------------------- | Business |City |Address |Zip |Vouchers | | | | | |Received | |-------------+-------------+-------------+-------------+-------------| |99 Cents |Rancho |2868 |95670 |1 | |Only Stores |Cordova |Zinfandel Dr | | | |-------------+-------------+-------------+-------------+-------------| |99 Cents |Sacramento |5924 |95824 |1 | |Only Stores | |Stockton | | | | | |Blvd | | | |-------------+-------------+-------------+-------------+-------------| |Acuity |Sacramento |6201 27th St |95822 |1 | |Brands LL069 | | | | | |-------------+-------------+-------------+-------------+-------------| |AMPAC |Sacramento |8388 Rovana |95828 |1 | |Services, | |Circle | | | |Inc | | | | | |-------------+-------------+-------------+-------------+-------------| |A-Z Bus |Sacramento |3418 52nd |95823 |7 | |Sales, Inc | |Ave | | | |-------------+-------------+-------------+-------------+-------------| |Bank of |Rancho |2882 |95670 |2 | |America |Cordova |Prospect | | | | | |Park Dr Ste | | | | | |240 | | | |-------------+-------------+-------------+-------------+-------------| |Capital |Sacramento |5657 |95824 |1 | |Force | |Stockton | | | |Protective | |Blvd | | | |Services, | | | | | |Inc | | | | | |-------------+-------------+-------------+-------------+-------------| |Checksmart |Sacramento |2815 Florin |95822 |1 | |Financial | |Rd | | | |Holding | | | | | SB 434 -- 4/24/13 -- PageT |Corporation | | | | | |-------------+-------------+-------------+-------------+-------------| |Chemical |Rancho |3765 Omec |95742 |2 | |Technologies |Cordova |Circle #2 | | | |International| | | | | | | | | | | |-------------+-------------+-------------+-------------+-------------| |Chevron |Sacramento |2700 Del |95815 |1 | |Stations, | |Paso Rd | | | |Inc | | | | | |-------------+-------------+-------------+-------------+-------------| |Controlled |Sacramento |5701-C 88th |95828 |5 | |Access | |St | | | |Consultants, | | | | | |Inc | | | | | |-------------+-------------+-------------+-------------+-------------| |Costco |Rancho |11260 White |95742 |1 | |Wholesale |Cordova |Rock Rd | | | |Corporation | | | | | |-------------+-------------+-------------+-------------+-------------| |Crusader |Rancho |3115 B Gold |95742 |5 | |Fence Co, |Cordova |Valley Dr | | | |Inc | | | | | |-------------+-------------+-------------+-------------+-------------| |CTI II LLC |Rancho |10860 Gold |95670 |6 | | |Cordova |Ctr Dr Ste | | | | | |255 | | | |-------------+-------------+-------------+-------------+-------------| |Dish Network |Sacramento |5601 |95826 |1 | |SA2 | |Warehouse | | | | | |Way | | | |-------------+-------------+-------------+-------------+-------------| |ECOM |Sacramento |1796 Tribute |95815 |1 | |Engineering, | |Rd Ste 100 | | | |Inc | | | | | |-------------+-------------+-------------+-------------+-------------| |E-filliate, |Rancho |11321 White |95742 |1 | |Inc |Cordova |Rock Rd | | | |-------------+-------------+-------------+-------------+-------------| |Fastenal |Sacramento |5005 Raley |95838 |1 | |Company | |Blvd Unit H | | | |-------------+-------------+-------------+-------------+-------------| |FedEx Ground |Sacramento |8200 Elder |95824 |19 | |Package | |Creek Rd | | | |Systems | | | | | |-------------+-------------+-------------+-------------+-------------| |FedEx |Sacramento |8371 Rovana |95828 |1 | SB 434 -- 4/24/13 -- PageU |SmartPost | |Circle | | | |S5958 | | | | | |-------------+-------------+-------------+-------------+-------------| |G4S Secure |Sacramento |1565 River |95815 |4 | |Solutions, | |Pk Dr Ste A | | | |Inc | | | | | |-------------+-------------+-------------+-------------+-------------| |Gold Club, |Rancho |11363 Folsom |95742 |3 | |Inc |Cordova |Blvd | | | |-------------+-------------+-------------+-------------+-------------| |Goyette & |Gold River |2366 Gold |95670 |1 | |Associates, | |Meadow Way | | | |Inc | |Ste 200 | | | |-------------+-------------+-------------+-------------+-------------| |Interline |Sacramento |5961 Outfall |95828 |1 | |Brands Inc | |Circle | | | |-------------+-------------+-------------+-------------+-------------| |JRD Holdings |Sacramento |1275 Vine St |95811 |2 | |-------------+-------------+-------------+-------------+-------------| |Kroger |Sacramento |5330 |95820 |1 | | | |Stockton | | | | | |Blvd | | | |-------------+-------------+-------------+-------------+-------------| |Maita |Sacramento |2820 Auburn |95821 |6 | |Chevrolet | |Blvd | | | |-------------+-------------+-------------+-------------+-------------| |Maita |Sacramento |2820 Auburn |95821 |25 | |Enterprises, | |Blvd | | | |Inc | | | | | |-------------+-------------+-------------+-------------+-------------| |Markstein |Sacramento |60 Main Ave |95838 |2 | |Beverage | | | | | |Company | | | | | |-------------+-------------+-------------+-------------+-------------| |McGee & |Sacramento |3780 Rosin |95834 |1 | |Thielen | |Ct #120 | | | |Insurance | | | | | |Brokers | | | | | |-------------+-------------+-------------+-------------+-------------| |OfficeMax |Sacramento |2800 Power |95826 |1 | | | |Inn Rd | | | |-------------+-------------+-------------+-------------+-------------| |O'Reilly |Sacramento |5908 |95824 |1 | |Automotive, | |Stockton | | | |Inc | |Blvd | | | |-------------+-------------+-------------+-------------+-------------| |Pacific |Sacramento |8670 23rd |95826 |2 | SB 434 -- 4/24/13 -- PageV |Adhesive | |Ave | | | |Company | | | | | |-------------+-------------+-------------+-------------+-------------| |Packageone, |Sacramento |4225 Pell Dr |95838 |7 | |Inc. | | | | | |-------------+-------------+-------------+-------------+-------------| |Performance |Sacramento |3131 52nd |95823 |1 | |Swing Stage, | |Ave | | | |Inc | | | | | |-------------+-------------+-------------+-------------+-------------| |Pool Corp |Rancho |11285 Sunco |95742 |2 | | |Cordova |Dr | | | |-------------+-------------+-------------+-------------+-------------| |Pool Corp |Rancho |2751 |95742 |1 | | |Cordova |Mercantile | | | | | |Dr Ste 400 | | | |-------------+-------------+-------------+-------------+-------------| |Prenatal |Sacramento |1111 |95815 |2 | |Diagnosis of | |Exposition | | | |N. CA | |Blvd Ste 200 | | | |Medical | | | | | |Group, Inc | | | | | |-------------+-------------+-------------+-------------+-------------| |R & M Oritz, |Rancho |2801 |95670 |1 | |Inc |Cordova |Zinfandel Dr | | | |-------------+-------------+-------------+-------------+-------------| |Recycling |Sacramento |3300 Power |95826 |12 | |Industries | |Inn Rd | | | |-------------+-------------+-------------+-------------+-------------| |RSM, Inc |Rancho |2731 Citrus |95742 |4 | | |Cordova |Rd #A | | | |-------------+-------------+-------------+-------------+-------------| |Sam's |Rancho |11167-G |95670 |7 | |Airpack |Cordova |Trade Ctr Dr | | | |Plus, Inc | | | | | |-------------+-------------+-------------+-------------+-------------| |Save Mart |Sacramento |3860 Florin |95823 |1 | |Supermarkets,| |Rd | | | | Inc 464 | | | | | |-------------+-------------+-------------+-------------+-------------| |Staples 0887 |Rancho |2690 Sunrise |95742 |1 | | |Cordova |Blvd | | | |-------------+-------------+-------------+-------------+-------------| |Superior |Rancho |11285 Sunco |95742 |1 | |Pool |Cordova |Dr | | | |Products | | | | | |-------------+-------------+-------------+-------------+-------------| SB 434 -- 4/24/13 -- PageW |Taco Bell |Rancho |2891 |95670 |1 | |3007 |Cordova |Zinfandel Dr | | | |-------------+-------------+-------------+-------------+-------------| |Total Renal |Sacramento |4650 |95834 |2 | |Care, Inc | |Northgate | | | | | |Blvd Ste 150 | | | |-------------+-------------+-------------+-------------+-------------| |Touchstone |Sacramento |116 N. 16th |95814 |1 | |Climbing, | |St | | | |Inc 05 | | | | | |-------------+-------------+-------------+-------------+-------------| |Tri Tool Inc |Rancho |3041 Sunrise |95742 |1 | | |Cordova |Blvd | | | |-------------+-------------+-------------+-------------+-------------| |TruGreen |Rancho |3213 |95742 |2 | |LandCare LLC |Cordova |Fitzgerald | | | | | |Rd | | | |-------------+-------------+-------------+-------------+-------------| |Western |Sacramento |5501 |95820 |1 | |Dental | |Stockton | | | |Services, | |Blvd | | | |Inc | | | | | ---------------------------------------------------------------------