BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 931 (Irwin) - Taxation: credit: hiring
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|Version: July 1, 2015 |Policy Vote: GOV. & F. 7 - 0 |
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|Urgency: No |Mandate: No |
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|Hearing Date: August 17, 2015 |Consultant: Robert Ingenito |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: AB 931 would permit veterans separated from military
service for a longer period of time to qualify their employers
for the AB 93 hiring tax credit.
Fiscal
Impact: The Franchise Tax Board (FTB) estimates that this bill
would result in General Fund losses of $20,000 in 2015-16,
$150,000 in 2016-17, and $250,000 in 2017-18. The bill would not
impact FTB's administration costs.
Background: In 2013, the Legislature enacted AB 93 (Committee on Budget),
which reformed California's economic development policies by (1)
eliminating enterprise zones and other geographically-targeted
economic development areas, and (2) replacing them with three
new tax benefits, whose aggregate fiscal impact is designed to
AB 931 (Irwin) Page 1 of
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be revenue netural:
Tax credits for wages paid by taxpayers to qualified
employees within former enterprise zones, and other areas
that suffer from high levels of poverty and unemployment.
The credit lasts from taxable 2014 to taxable year 2019. In
For 2014, there were 8,828 reservations with a tentative
credit amount of $14.7 million, with most of the activity
coming in the final two months of the year.
A sales and use tax exemption on purchases of
manufacturing equipment made by taxpayers within specific
North American Industrial Classification System codes,
capped at $200 million annually per taxpayer, effective
July 1, 2014 through July 1, 2022.
The California Competes Tax Credit, where taxpayers
apply to the California Competes Tax Credit Committee, who
can then award various tax credits up to an annually capped
amount to ensure revenue neutrality. The Committee can
grant $30 million in tax credits in 2013-14, $150 million
in 2014-15, and $200 million for the 2015-16, 2016-17, and
2017-18 fiscal years, plus unallocated or recaptured
credits from previous years.
For the wage credit, taxpayers in specified industries with a
net increase in full-time employment within specified census
areas and unemployment/poverty rates, or in a former enterprise
zone with specified exceptions may claim a tax credit equal to
35 percent of qualified wages paid to qualified employees,
defined as employees who meet specified criteria, one of which
pertains to military veterans. Specifically, veterans separated
from service in the last twelve months qualify their employers
for the hiring credit, so long as they meet all the other
requirements under current law. Veterans with longer separation
periods are often unemployed or underemployed. This bill would
permit veterans with up to 36-month separation periods to also
qualify their employers for the wage credit.
AB 931 (Irwin) Page 2 of
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Proposed Law:
This bill would allow veterans separated from military service
within the last 36 months to qualify their employers for the AB
93 hiring tax credit, commencing in taxable year 2016.
Staff
Comments: It is estimated that $17.7 million in credits have
been reserved for the hiring credit for the 2014 taxable year.
Using data from the Department of Veterans Affairs and Bureau of
Labor Statistics, 5 percent of the amount of credit reserved is
attributed to qualified veterans. By allowing veterans separated
for up to 36 months, FTB estimates that 15 percent would be new
hires. The estimate includes a 3 percent reduction each year for
attrition. This results in a revenue loss of $100,000 for
taxable year 2016. The additional credit usage will peak when
there is a five year combined period in 2020, at approximately
$600,000.
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