Senate BillNo. 1216


Introduced by Senator Hueso

February 18, 2016


An act to add and repeal Sections 17053.75 and 23675 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.

LEGISLATIVE COUNSEL’S DIGEST

SB 1216, as introduced, Hueso. Income taxes: credits: qualified employees.

The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws, including hiring credits within the specified economic development areas.

This bill would, under both laws for taxable years beginning on or after January 1, 2016, and before January 1, 2021, allow a credit against tax in an amount equal to 20% of qualified wages paid by a qualified taxpayer, as defined, to qualified employees, which includes persons between 18 and 25 years of age who complete a work readiness program, not to exceed $15,000 per qualified taxpayer per taxable year.

This bill would take effect immediately as a tax levy.

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

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

P1    1

SECTION 1.  

Section 17053.75 is added to the Revenue and
2Taxation Code
, to read:

3

17053.75.  

(a) (1) For each taxable year beginning on or after
4January 1, 2016, and before January 1, 2021, there shall be allowed
5to a qualified taxpayer that hires a qualified full-time employee
P2    1and pays or incurs qualified wages attributable to work performed
2by the qualified full-time employee, and that receives a tentative
3credit reservation for that qualified full-time employee, a credit
4against the “net tax,” as defined in Section 17039, in an amount
5calculated under this section.

6(2) The amount of the credit allowable under this section for a
7taxable year shall be equal to 20 percent of all qualified wages
8paid or incurred to the qualified full-time employee, not to exceed
9$15,000 per qualified taxpayer per taxable year.

10(3) The credit allowed by this section may be claimed only on
11a timely filed original return of the qualified taxpayer and only
12with respect to a qualified full-time employee for whom the
13qualified taxpayer has received a tentative credit reservation.

14(b) For purposes of this section:

15(1)  “Acquire” includes any gift, inheritance, transfer incident
16to divorce, or any other transfer, whether or not for consideration.

17(2) “Job training provider” means an entity that delivers a
18combined job readiness and life-skills training program that, at a
19minimum, includes high school or continuing education courses.
20The entity’s program may also offer additional services like job
21placement, career and mental health counseling, prisoner reentry
22services, and relapse prevention and sober-living support.

23(3)  “Minimum wage” means the wage established pursuant to
24Chapter 1 (commencing with Section 1171) of Part 4 of Division
252 of the Labor Code.

26(4) (A) “Qualified full-time employee” means an individual
27who meets all of the following requirements:

28(i) Receives starting wages that are at least 150 percent of the
29minimum wage.

30(ii) Is hired by the qualified taxpayer on or after January 1, 2016.

31(iii)  Satisfies either of the following conditions:

32(I) Is paid qualified wages by the qualified taxpayer for services
33not less than an average of 35 hours per week.

34(II) Is a salaried employee and was paid compensation during
35the taxable year for full-time employment, within the meaning of
36Section 515 of the Labor Code, by the qualified taxpayer.

37(iv) Is an ex-offender previously convicted of a felony who is,
38at the time of hiring, between 18 and 25 years of age and who
39demonstrates documented completion of a work readiness program.

P3    1(B)  An individual may be considered a qualified full-time
2employee only for the period of time commencing with the date
3the individual is first employed by the qualified taxpayer and
4ending 60 months thereafter.

5(5) (A) “Qualified taxpayer” means a person or entity engaged
6in a trade or business within the state that, during the taxable year,
7pays or incurs qualified wages.

8(B) In the case of any pass-thru entity, the determination of
9whether a taxpayer is a qualified taxpayer under this section shall
10be made at the entity level and any credit under this section or
11Section 23675 shall be allowed to the pass-thru entity and passed
12through to the partners and shareholders in accordance with
13applicable provisions of this part or Part 11 (commencing with
14Section 23001). For purposes of this subdivision, the term
15“pass-thru entity” means any partnership or “S” corporation.

16(C) “Qualified taxpayers” shall not include any of the following:

17(i) Employers that provide temporary help services, as described
18in Code 561320 of the North American Industry Classification
19System (NAICS) published by the United States Office of
20Management and Budget, 2012 edition.

21(ii) Employers that provide retail trade services, as described
22in Sector 44-45 of the North American Industry Classification
23System (NAICS) published by the United States Office of
24Management and Budget, 2012 edition.

25(iii) Employers that are primarily engaged in providing food
26services, as described in Code 711110, 722511, 722513, 722514,
27or 722515 of the North American Industry Classification System
28(NAICS) published by the United States Office of Management
29and Budget, 2012 edition.

30(iv) Employers that are primarily engaged in services as
31described in Code 713210, 721120, or 722410 of the North
32American Industry Classification System (NAICS) published by
33the United States Office of Management and Budget, 2012 edition.

34(v) (I)   An employer that is a sexually oriented business.

35(II) For purposes of this clause:

36(ia) “Sexually oriented business” means a nightclub, bar,
37restaurant, or similar commercial enterprise that provides for an
38audience of two or more individuals live nude entertainment or
39live nude performances where the nudity is a function of everyday
P4    1business operations and where nudity is a planned and intentional
2part of the entertainment or performance.

3(ib) “Nude” means clothed in a manner that leaves uncovered
4or visible, through less than fully opaque clothing, any portion of
5the genitals or, in the case of a female, any portion of the breasts
6 below the top of the areola of the breasts.

7(6) “Qualified wages” means those wages that meet all of the
8following requirements:

9(A) That portion of wages paid or incurred by the qualified
10taxpayer during the taxable year to each qualified full-time
11employee that exceeds 150 percent of minimum wage, but does
12not exceed 350 percent of minimum wage.

13(B) Wages paid or incurred during the 60-month period
14beginning with the first day the qualified full-time employee
15commences employment with the qualified taxpayer. In the case
16of any employee who is reemployed, including a regularly
17occurring seasonal increase, in the trade or business operations of
18the qualified taxpayer, this reemployment shall not be treated as
19constituting commencement of employment for purposes of this
20section.

21(7) “Seasonal employment” means employment by a qualified
22taxpayer that has regular and predictable substantial reductions in
23trade or business operations.

24(8) “Work readiness program” means a program offered by a
25job training provider that provides vocational job training,
26educational opportunities, and life skills. A work readiness program
27shall focus on skills acquisition and educational advancement and
28shall foster behavioral changes that promote person responsibility
29and positive contributions to society. A work readiness program
30shall include all of the following:

31(A) Paid or unpaid on-the-job training opportunities,
32preapprenticeship programs, vocational instruction, or internship
33placement.

34(B) The opportunity for academic advancement.

35(C) The opportunity to earn at least one industry recognized
36certification.

37(D) A life-skills training component.

38(c) All employees of the trades or businesses that are treated as
39related under Section 267, 318, or 707 of the Internal Revenue
40Code shall be treated as employed by a single taxpayer.

P5    1(d) (1) To be eligible for the credit allowed by this section, a
2 qualified taxpayer shall, upon hiring a qualified full-time employee,
3request a tentative credit reservation from the Franchise Tax Board
4within 30 days of complying with the Employment Development
5Department’s new hire reporting requirements as provided in
6Section 1088.5 of the Unemployment Insurance Code, in the form
7and manner prescribed by the Franchise Tax Board.

8(2) To obtain a tentative credit reservation with respect to a
9qualified full-time employee, the qualified taxpayer shall provide
10necessary information, as determined by the Franchise Tax Board,
11including the name, social security number, the start date of
12employment, and the rate of pay of the qualified full-time
13employee.

14(3) The qualified taxpayer shall provide the Franchise Tax Board
15an annual certification of employment with respect to each
16 qualified full-time employee hired in a previous taxable year, on
17or before, the 15th day of the third month of the taxable year. The
18certification shall include necessary information, as determined
19by the Franchise Tax Board, including the name, social security
20number, start date of employment, and rate of pay for each qualified
21full-time employee employed by the qualified taxpayer.

22(4) A tentative credit reservation provided to a taxpayer with
23respect to an employee of that taxpayer shall not constitute a
24determination by the Franchise Tax Board with respect to any of
25the requirements of this section regarding a taxpayer’s eligibility
26for the credit authorized by this section.

27(e) The Franchise Tax Board shall do all of the following:

28(1) Approve a tentative credit reservation with respect to a
29qualified full-time employee hired during a calendar year.

30(2) Determine the aggregate tentative reservation amount.

31(3) Notwithstanding Section 19542, provide as a searchable
32database on its Internet Web site, for each taxable year beginning
33on or after January 1, 2016, and before January 1, 2021, the
34employer names, amounts of tax credit claimed, and number of
35new jobs created for each taxable year pursuant to this section and
36Section 23675.

37(f) For purposes of this section:

38(1) All employees of trades or businesses that are not
39incorporated, and that are under common control, shall be treated
40as employed by a single taxpayer.

P6    1(2) The credit, if any, allowable by this section with respect to
2each trade or business shall be determined by reference to its
3proportionate share of the expense of the qualified wages giving
4rise to the credit and shall be allocated to that trade or business in
5that manner.

6(3) Principles that apply in the case of controlled groups of
7corporations, as specified in subdivision (f) of Section 23675, shall
8apply with respect to determining employment.

9(5) If an employer acquires the major portion of a trade or
10business of another employer, hereinafter in this paragraph referred
11to as the predecessor, or the major portion of a separate unit of a
12trade or business of a predecessor, then, for purposes of applying
13this section, other than subdivision (g), for any taxable year ending
14after that acquisition, the employment relationship between a
15qualified full-time employee and an employer shall not be treated
16as terminated if the employee continues to be employed in that
17trade or business.

18(g) (1) If the employment of any qualified full-time employee,
19with respect to whom qualified wages are taken into account under
20subdivision (a), is terminated by the qualified taxpayer at any time
21during the first 36 months after commencing employment with
22the qualified taxpayer, whether or not consecutive, the tax imposed
23by this part for the taxable year in which that employment is
24terminated shall be increased by an amount equal to the credit
25allowed under subdivision (a) for that taxable year and all prior
26taxable years attributable to qualified wages paid or incurred with
27respect to that employee.

28(2) Paragraph (1) does not apply to any of the following:

29(A) A termination of employment of a qualified full-time
30employee who voluntarily leaves the employment of the qualified
31taxpayer.

32(B) A termination of employment of a qualified full-time
33employee who, before the close of the period referred to in
34paragraph (1), becomes disabled and unable to perform the services
35of that employment, unless that disability is removed before the
36close of that period and the qualified taxpayer fails to offer
37reemployment to that employee.

38(C) A termination of employment of a qualified full-time
39employee if it is determined that the termination was due to the
P7    1misconduct, as defined in Sections 1256-30 to 1256-43, inclusive,
2of Title 22 of the California Code of Regulations, of that employee.

3(D) A termination of employment of a qualified full-time
4employee due to a substantial reduction in the trade or business
5operations of the qualified taxpayer, including reductions due to
6seasonal employment.

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

11(F) A termination of employment of a qualified full-time
12employee when that employment is considered seasonal
13employment and the qualified employee is rehired on a seasonal
14basis.

15(3) For purposes of paragraph (1), the employment relationship
16between the qualified taxpayer and a qualified full-time employee
17shall not be treated as terminated by reason of a mere change in
18the form of conducting the trade or business of the qualified
19taxpayer if the qualified full-time employee continues to be
20employed in that trade or business and the qualified taxpayer retains
21 a substantial interest in that trade or business.

22(4) An increase in tax under paragraph (1) shall not be treated
23as tax imposed by this part for purposes of determining the amount
24of any credit allowable under this part.

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

26(1) The qualified wages for a taxable year shall be apportioned
27between the estate or trust and the beneficiaries on the basis of the
28income of the estate or trust allocable to each.

29(2) A beneficiary to whom any qualified wages have been
30apportioned under paragraph (1) shall be treated, for purposes of
31this part, as the employer with respect to those wages.

32(i) In the case in which the credit allowed by this section exceeds
33the “net tax,” the excess may be carried over to reduce the “net
34tax” in the following year, and the succeeding four years if
35necessary, until the credit is exhausted.

36(j) The Franchise Tax Board may prescribe rules, guidelines,
37or procedures necessary or appropriate to carry out the purposes
38of this section, including any guidelines regarding the allocation
39of the credit allowed under this section. Chapter 3.5 (commencing
40with Section 11340) of Part 1 of Division 3 of Title 2 of the
P8    1Government Code shall not apply to any rule, guideline, or
2procedure prescribed by the Franchise Tax Board pursuant to this
3section.

4(k) The Franchise Tax Board shall annually provide to the Joint
5Legislative Budget Committee, in compliance with Section 9795
6of the Government Code, by no later than March 1, a report of the
7total dollar amount of the credits claimed under this section with
8respect to the relevant fiscal year. The report shall compare the
9total dollar amount of credits claimed under this section with
10respect to that fiscal year with the department’s estimate with
11respect to that same fiscal year. If the total dollar amount of credits
12claimed for the fiscal year is less than the estimate for that fiscal
13year, the report shall identify options for increasing annual claims
14of the credit so as to meet estimated amounts.

15(l) Section 41 shall not apply to the credit allowed by this
16section.

17(m)   This section shall remain in effect only until December 1,
182021, and as of that date is repealed.

19

SEC. 2.  

Section 23675 is added to the Revenue and Taxation
20Code
, to read:

21

23675.  

(a) (1) For each taxable year beginning on or after
22January 1, 2016, and before January 1, 2021, there shall be allowed
23to a qualified taxpayer that hires a qualified full-time employee
24and pays or incurs qualified wages attributable to work performed
25by the qualified full-time employee, and that receives a tentative
26credit reservation for that qualified full-time employee, a credit
27against the “net tax,” as defined in Section 23036, in an amount
28calculated under this section.

29(2) The amount of the credit allowable under this section for a
30taxable year shall be equal to 20 percent of all qualified wages
31paid or incurred to the qualified full-time employee, not to exceed
32$15,000 per qualified taxpayer per taxable year.

33(3) The credit allowed by this section may be claimed only on
34a timely filed original return of the qualified taxpayer and only
35with respect to a qualified full-time employee for whom the
36qualified taxpayer has received a tentative credit reservation.

37(b) For purposes of this section:

38(1)  “Acquire” includes any gift, inheritance, transfer incident
39to divorce, or any other transfer, whether or not for consideration.

P9    1(2) “Job training provider” means an entity that delivers a
2combined job readiness and life-skills training program that, at a
3minimum, includes high school or continuing education courses.
4The entity’s program may also offer additional services like job
5placement, career and mental health counseling, prisoner reentry
6services, and relapse prevention and sober-living support.

7(3)  “Minimum wage” means the wage established pursuant to
8Chapter 1 (commencing with Section 1171) of Part 4 of Division
92 of the Labor Code.

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

12(i) Receives starting wages that are at least 150 percent of the
13minimum wage.

14(ii) Is hired by the qualified taxpayer on or after January 1, 2016.

15(iii)  Satisfies either of the following conditions:

16(I) Is paid qualified wages by the qualified taxpayer for services
17not less than an average of 35 hours per week.

18(II) Is a salaried employee and was paid compensation during
19the taxable year for full-time employment, within the meaning of
20Section 515 of the Labor Code, by the qualified taxpayer.

21(iv) Is an ex-offender previously convicted of a felony who is,
22at the time of hiring, between 18 and 25 years of age and who
23demonstrates documented completion of a work readiness program.

24(B)  An individual may be considered a qualified full-time
25employee only for the period of time commencing with the date
26the individual is first employed by the qualified taxpayer and
27ending 60 months thereafter.

28(5) (A) “Qualified taxpayer” means a corporation engaged in
29a trade or business within the state that, during the taxable year,
30pays or incurs qualified wages.

31(B) In the case of any pass-thru entity, the determination of
32whether a taxpayer is a qualified taxpayer under this section shall
33be made at the entity level and any credit under this section or
34Section 17053.75 shall be allowed to the pass-thru entity and
35passed through to the partners and shareholders in accordance with
36applicable provisions of this part or Part 10 (commencing with
37Section 17001). For purposes of this subdivision, the term
38“pass-thru entity” means any partnership or “S” corporation.

39(C) “Qualified taxpayers” shall not include any of the following:

P10   1(i) Employers that provide temporary help services, as described
2in Code 561320 of the North American Industry Classification
3System (NAICS) published by the United States Office of
4Management and Budget, 2012 edition.

5(ii) Employers that provide retail trade services, as described
6in Sector 44-45 of the North American Industry Classification
7System (NAICS) published by the United States Office of
8Management and Budget, 2012 edition.

9(iii) Employers that are primarily engaged in providing food
10services, as described in Code 711110, 722511, 722513, 722514,
11or 722515 of the North American Industry Classification System
12(NAICS) published by the United States Office of Management
13and Budget, 2012 edition.

14(iv) Employers that are primarily engaged in services as
15described in Code 713210, 721120, or 722410 of the North
16American Industry Classification System (NAICS) published by
17the United States Office of Management and Budget, 2012 edition.

18(v) (I)   An employer that is a sexually oriented business.

19(II) For purposes of this clause:

20(ia) “Sexually oriented business” means a nightclub, bar,
21restaurant, or similar commercial enterprise that provides for an
22audience of two or more individuals live nude entertainment or
23live nude performances where the nudity is a function of everyday
24business operations and where nudity is a planned and intentional
25part of the entertainment or performance.

26(ib) “Nude” means clothed in a manner that leaves uncovered
27or visible, through less than fully opaque clothing, any portion of
28the genitals or, in the case of a female, any portion of the breasts
29below the top of the areola of the breasts.

30(6) “Qualified wages” means those wages that meet all of the
31following requirements:

32(A) That portion of wages paid or incurred by the qualified
33taxpayer during the taxable year to each qualified full-time
34employee that exceeds 150 percent of minimum wage, but does
35not exceed 350 percent of minimum wage.

36(B) Wages paid or incurred during the 60-month period
37beginning with the first day the qualified full-time employee
38commences employment with the qualified taxpayer. In the case
39of any employee who is reemployed, including a regularly
40occurring seasonal increase, in the trade or business operations of
P11   1the qualified taxpayer, this reemployment shall not be treated as
2constituting commencement of employment for purposes of this
3section.

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

7(8) “Work readiness program” means a program offered by a
8job training provider that provides vocational job training,
9educational opportunities, and life skills. A work readiness program
10shall focus on skills acquisition and educational advancement and
11shall foster behavioral changes that promote person responsibility
12and positive contributions to society. A work readiness program
13shall include all of the following:

14(A) Paid or unpaid on-the-job training opportunities,
15 preapprenticeship programs, vocational instruction, or internship
16placement.

17(B) The opportunity for academic advancement.

18(C) The opportunity to earn at least one industry recognized
19certification.

20(D) A life-skills training component.

21(c) All employees of the trades or businesses that are treated as
22related under Section 267, 318, or 707 of the Internal Revenue
23Code shall be treated as employed by a single taxpayer.

24(d) (1) To be eligible for the credit allowed by this section, a
25qualified taxpayer shall, upon hiring a qualified full-time employee,
26request a tentative credit reservation from the Franchise Tax Board
27within 30 days of complying with the Employment Development
28Department’s new hire reporting requirements as provided in
29Section 1088.5 of the Unemployment Insurance Code, in the form
30and manner prescribed by the Franchise Tax Board.

31(2) To obtain a tentative credit reservation with respect to a
32qualified full-time employee, the qualified taxpayer shall provide
33necessary information, as determined by the Franchise Tax Board,
34including the name, social security number, the start date of
35employment, and the rate of pay of the qualified full-time
36employee.

37(3) The qualified taxpayer shall provide the Franchise Tax Board
38an annual certification of employment with respect to each
39qualified full-time employee hired in a previous taxable year, on
40or before, the 15th day of the third month of the taxable year. The
P12   1certification shall include necessary information, as determined
2by the Franchise Tax Board, including the name, social security
3number, start date of employment, and rate of pay for each qualified
4full-time employee employed by the qualified taxpayer.

5(4) A tentative credit reservation provided to a taxpayer with
6respect to an employee of that taxpayer shall not constitute a
7determination by the Franchise Tax Board with respect to any of
8the requirements of this section regarding a taxpayer’s eligibility
9for the credit authorized by this section.

10(e) The Franchise Tax Board shall do all of the following:

11(1) Approve a tentative credit reservation with respect to a
12qualified full-time employee hired during a calendar year.

13(2) Determine the aggregate tentative reservation amount.

14(3) Notwithstanding Section 19542, provide as a searchable
15database on its Internet Web site, for each taxable year beginning
16on or after January 1, 2016, and before January 1, 2021, the
17employer names, amounts of tax credit claimed, and number of
18new jobs created for each taxable year pursuant to this section and
19Section 17053.75.

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

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

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

28(C) If a qualified taxpayer acquires the major portion of a trade
29or business of another taxpayer, hereinafter in this paragraph
30referred to as the predecessor, or the major portion of a separate
31unit of a trade or business of a predecessor, then, for purposes of
32applying this section, for any taxable year ending after that
33acquisition, the employment relationship between a qualified
34full-time employee and an qualified taxpayer shall not be treated
35as terminated if the employee continues to be employed in that
36trade or business.

37(2) For purposes of this subdivision, “controlled group of
38corporations” means a controlled group of corporations as defined
39in Section 1563(a) of the Internal Revenue Code, except that:

P13   1(A) “More than 50 percent” shall be substituted for “at least 80
2percent” each place it appears in Section 1563(a)(1) of the Internal
3Revenue Code.

4(B) The determination shall be made without regard to
5subsections (a)(4) and (e)(3)(C) of Section 1563 of the Internal
6Revenue Code.

7(3) Rules similar to the rules provided in Sections 46(e) and
846(h) of the Internal Revenue Code, as in effect on November 4,
91990, shall apply to both of the following:

10(A) An organization to which Section 593 of the Internal
11Revenue Code applies.

12(B) A regulated investment company or a real estate investment
13trust subject to taxation under this part.

14(g) (1) If the employment of any qualified full-time employee,
15with respect to whom qualified wages are taken into account under
16subdivision (a), is terminated by the qualified taxpayer at any time
17during the first 36 months after commencing employment with
18the qualified taxpayer, whether or not consecutive, the tax imposed
19by this part for the taxable year in which that employment is
20terminated shall be increased by an amount equal to the credit
21allowed under subdivision (a) for that taxable year and all prior
22taxable years attributable to qualified wages paid or incurred with
23respect to that employee.

24(2) Paragraph (1) does not apply to any of the following:

25(A) A termination of employment of a qualified full-time
26employee who voluntarily leaves the employment of the qualified
27taxpayer.

28(B) A termination of employment of a qualified full-time
29employee who, before the close of the period referred to in
30paragraph (1), becomes disabled and unable to perform the services
31of that employment, unless that disability is removed before the
32close of that period and the qualified taxpayer fails to offer
33reemployment to that employee.

34(C) A termination of employment of a qualified full-time
35employee if it is determined that the termination was due to the
36misconduct, as defined in Sections 1256-30 to 1256-43, inclusive,
37of Title 22 of the California Code of Regulations, of that employee.

38(D) A termination of employment of a qualified full-time
39employee due to a substantial reduction in the trade or business
P14   1operations of the qualified taxpayer, including reductions due to
2seasonal employment.

3(E) A termination of employment of a qualified full-time
4employee if that employee is replaced by other qualified full-time
5employees so as to create a net increase in both the number of
6employees and the hours of employment.

7(F) A termination of employment of a qualified full-time
8employee when that employment is considered seasonal
9employment and the qualified employee is rehired on a seasonal
10basis.

11(3) For purposes of paragraph (1), the employment relationship
12between the qualified taxpayer and a qualified full-time employee
13shall not be treated as terminated by reason of a mere change in
14the form of conducting the trade or business of the qualified
15taxpayer if the qualified full-time employee continues to be
16employed in that trade or business and the qualified taxpayer retains
17a substantial interest in that trade or business.

18(4) An increase in tax under paragraph (1) shall not be treated
19as tax imposed by this part for purposes of determining the amount
20of any credit allowable under this part.

21(h) In the case in which the credit allowed by this section
22exceeds the “tax,” the excess may be carried over to reduce the
23“tax” in the following year, and the succeeding four years if
24necessary, until the credit is exhausted.

25(i) The Franchise Tax Board may prescribe rules, guidelines,
26or procedures necessary or appropriate to carry out the purposes
27of this section, including any guidelines regarding the allocation
28of the credit allowed under this section. Chapter 3.5 (commencing
29with Section 11340) of Part 1 of Division 3 of Title 2 of the
30Government Code shall not apply to any rule, guideline, or
31procedure prescribed by the Franchise Tax Board pursuant to this
32section.

33(j) The Franchise Tax Board shall annually provide to the Joint
34Legislative Budget Committee, in compliance with Section 9795
35of the Government Code, by no later than March 1, a report of the
36total dollar amount of the credits claimed under this section with
37respect to the relevant fiscal year. The report shall compare the
38total dollar amount of credits claimed under this section with
39respect to that fiscal year with the department’s estimate with
40respect to that same fiscal year. If the total dollar amount of credits
P15   1claimed for the fiscal year is less than the estimate for that fiscal
2year, the report shall identify options for increasing annual claims
3of the credit so as to meet estimated amounts.

4(k) Section 41 shall not apply to the credit allowed by this
5section.

6(l)   This section shall remain in effect only until December 1,
72021, and as of that date is repealed.

8

SEC. 3.  

This act provides for a tax levy within the meaning of
9Article IV of the Constitution and shall go into immediate effect.



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