BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 931|
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THIRD READING
Bill No: AB 931
Author: Irwin (D), et al.
Amended: 7/1/15 in Senate
Vote: 27
SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 7/8/15
AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach,
Pavley
SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/27/15
AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen
ASSEMBLY FLOOR: 79-0, 6/1/15 - See last page for vote
SUBJECT: Taxation: credit: hiringTaxation: credit: hiring.
SOURCE: Author
DIGEST: This bill extends the separation period from military
service for veterans to qualify their employers for a hiring tax
credit from 12 months to 36 months.
ANALYSIS:
Existing law:
1)Allows various income tax credits, deductions, and sales and
use tax exemptions to provide incentives to compensate
taxpayers that incur certain expenses, such as child adoption,
or to influence behavior, including business practices and
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decisions, such as research and development credits.
2)Allows a tax credit for wages paid by taxpayers to qualified
employees within former enterprise zones, and other areas that
suffer from high levels of poverty and unemployment (AB 93,
Committee on Budget, Chapter 69, Statutes of 2013). The
credit lasts from the 2014 taxable year until the 2019 taxable
year.
3)Requires taxpayers be engaged in specified industries and have
a net increase in full-time employment within census areas
designated by the Department of Finance (DOF) with
unemployment and poverty rates within the top 25% of all
census tracts within the state, in a former enterprise zone
unless its unemployment and poverty rates are within the
bottom quartile statewide, or a former local agency military
base recovery area (LAMBRA), to claim the wage credit.
4)Sets the value of the credit as 35% of qualified wages paid to
qualified employees, defined as employees who meets all of the
following criteria:
a) Performs at least 50% of the work within the census
tract, former enterprise zone, or former LAMBRA,
b) Is paid wages that exceed 150% of the minimum wage,
c) Is hired on or after January 1, 2014,
d) Is hired after the date which DOF determines that the
census tract in which his or her work is performed has
unemployment and poverty rates within the top 25% of all
census tracts within the state, or within a former
enterprise zone that DOF determines doesn't have
unemployment and poverty rates within the bottom quartile
statewide,
e) Is either paid wages for at least 35 hours per week, or
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is a fulltime salaried employee,
f) Was either unemployed for the past six months, was a
veteran separated from service in the last 12 months, was a
recipient of the federal earned income tax credit, was an
ex-offender formerly convicted of a felony, or was a
CalWORKs (California Work Opportunity and Responsibility to
Kids) or general assistance recipient.
This bill allows veterans separated from military service within
the last 36 months to qualify their employers for credit,
commencing in the 2016 taxable year.
Background
In 2013, the Legislature enacted AB 93 (Committee on Budget),
which reformed California's economic development policies by
eliminating enterprise zones and other geographically-targeted
economic development areas, and replaced them with three new tax
benefits:
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 the 2014 taxable year until the 2019 taxable year.
For calendar year 2014, there were 8,828 reservations with a
tentative credit amount of $14,707,832, with most reservation
claims coming in November and December.
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, and ending 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.
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.
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Veterans separated from military service within the last 12
months qualify their employers for the hiring credit, so long as
they meet all the other requirements in the law. However,
veterans with longer separation periods are often unemployed or
underemployed, but don't qualify their employers for the credit
under current law.
Comments
Tax benefits directed for specific purposes do two things:
First, they reward behavior that would have occurred without the
subsidy, so-called "deadweight loss." Some firms will hire
veterans separated from the military for more than a year
because they're the best candidate for the position, or because
it's the right thing to do. In these instances, the state
receives no marginal benefit, and transfers wealth from purposes
it would otherwise spend money on for government purposes to the
firm. Second, this bill may lead to more veterans being
employed in California that wouldn't have occurred but for the
credit; the financial incentive provides enough of a marginal
benefit for the taxpayer to hire the veteran. A successful tax
credit leads to higher employment rates for veterans separated
from the military for more than a year at the margin than its
deadweight loss, but no tax credit has yet conclusively
demonstrated that its benefits outweigh its costs.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
According to the Senate Appropriations Committee, the Franchise
Tax Board (FTB) estimates that this bill will result in General
Fund losses of $20,000 in 2015-16, $150,000 in 2016-17, and
$250,000 in 2017-18. This bill will not impact FTB's
administration costs.
SUPPORT: (Verified8/28/15)
American Legion - Department of California
AMVETS - Department of California
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California Association of County Veterans Services Officers
California Council of Chapters
California State Commanders Veterans Council
Goodwill of California
Military Officers Association of America
VFW Department of California
Vietnam Veterans of America - California State Council
OPPOSITION: (Verified8/28/15)
None received
ARGUMENTS IN SUPPORT: According to the author, "AB 931 will
expand the timeframe for Veterans who have separated from active
duty to be eligible for a hiring tax credit which makes them a
more attractive hire for potential employers. This bill will
also increase the total amount of veterans in California who are
included in this group which will help employers identify more
unemployed veterans. California is home to a growing population
of over 1.8 million veterans. As two overseas operations are
concluding, the employment needs for veterans in California will
continue to increase. According to a Congressional Joint
Economic Committee report, the unemployment rate for
California's veterans continues to be substantially larger than
the national average. The state's unemployment rate is also
higher for post-9/11 veterans. There is not yet sufficient tax
data on the effectiveness of the New Employment Credit because
it began on January 1, 2014. However, based on early project
based on tax reservation the hiring tax credit appears to be
going underutilized. Less than 50 employers in the state have
applied for tax reservation for hiring a veteran eligible for
the tax credit. AB 931 will address this by allowing more
veterans to be hired under the New Employment Credit. This tax
credit also ensures that those hired are paid at least 150% of
the minimum wage and for no less than 35 hours per week. This
bill will increase incentives for employers to connect Veterans
with quality, high-paying jobs."
ASSEMBLY FLOOR: 79-0, 6/1/15
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AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,
Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang,
Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle,
Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina
Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez,
Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden,
Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Low,
Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin,
Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea,
Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago,
Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber,
Wilk, Williams, Wood, Atkins
NO VOTE RECORDED: Lopez
Prepared by:Colin Grinnell / GOV. & F. / (916) 651-4119
8/31/15 9:06:06
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