SB 1216, as amended, 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. Existing law requires any bill authorizing a new personal income tax or corporation tax credit to contain, among other things, specific goals, purposes, and objectives that the tax credit will achieve, detailed performance indicators, and data collection requirements, as provided.
This bill, under both laws for taxable years beginning on or after January 1, 2017, and before January 1, 2022, would allow a credit against the net tax or tax in an amount equal to 23.5% of qualified wages paid by a qualified taxpayer, as defined, to qualified full-time employees, as defined, which are persons between 18 and 25 years of age who complete a work readiness program, and meet other specified requirements, not to exceed $15,000 per qualified taxpayer per taxable year, as provided. The bill would also include that additional information required for any bill authorizing a new income tax credit.
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:
Section 17053.75 is added to the Revenue and
2Taxation Code, to read:
(a) (1) For each taxable year beginning on or after
4January 1, 2017, and before January 1, 2022, there shall be allowed
5to a qualified taxpayer that hires a qualified full-time employee
6and pays or incurs qualified wages attributable to work performed
7by the qualified full-time employee, and that receives a tentative
8credit reservation for that qualified full-time employee, a credit
9against the “net tax,” as defined in Section 17039, in an amount
10calculated under this section.
11(2) The amount of the credit allowable under this section for a
12taxable year shall be equal to 23.5 percent of all qualified wages
13paid or incurred to the qualified full-time
employee, not to exceed
14fifteen thousand dollars ($15,000) per qualified taxpayer per taxable
15year.
16(3) The credit allowed by this section may be claimed only on
17a timely filed original return of the qualified taxpayer and only
18with respect to a qualified full-time employee for whom the
19qualified taxpayer has received a tentative credit reservation.
20(4) If thebegin insert qualifiedend insert taxpayer is allowed a credit pursuant to this
21section for qualified wages paid or incurred, another credit shall
22not be allowed to thebegin insert qualifiedend insert taxpayer under
this part with respect
23to any wage consisting in whole or in part of those qualified wages.
24(b) For purposes of this section:
25(1) “Acquire” includes any gift, inheritance, transfer incident
26to divorce, or any other transfer, whether or not for consideration.
27(2) “Job training provider” means an entity that delivers a
28combined job readiness and life-skills training program that, at a
29minimum, includes high school or continuing educationbegin insert courses
30or services to connect individuals to high school or continuing
31educationend insert courses. The entity’s program may also offer additional
32services
like job placement, career and mental health counseling,
P3 1prisoner reentry services, and relapse prevention and sober-living
2support.
3(3) “Minimum wage” means the wage established pursuant to
4Chapter 1 (commencing with Section 1171) of Part 4 of Division
52 of the Labor Code.
6(4) (A) “Qualified full-time employee” means an individual
7who meets all of the following requirements:
8(i) Receives starting wages that are at least 150 percent of the
9minimum wage.
10(ii) Is hired by the qualified taxpayer on or after January 1, 2017.
11(iii) Satisfies either of the following conditions:
12(I) Is paid qualified wages by the qualified taxpayer for services
13not less than an average of 35 hours per week.
14(II) Is a salaried employee and was paid compensation during
15the taxable year for full-time employment, within the meaning of
16Section 515 of the Labor Code, by the qualified taxpayer.
17(iv) Is an ex-offender previously convicted of a felony who is,
18at
the time of hiring, between 18 and 25 years of age and who
19demonstrates documented completion of a work readiness program.
20(v) Performs at least 50 percent of his or her services for the
21qualified taxpayer during the taxable year in the state.
22(B) An individual may be considered a qualified full-time
23employee only for the period of time commencing with the date
24the individual is first employed by the qualified taxpayer and
25ending 60 months thereafter.
26(5) (A) “Qualified taxpayer” means a person or entity engaged
27in a trade or business within the state that, during the taxable year,
28pays or incurs qualified wages.
29(B) In the case of any pass-thru entity, the determination of
30whether a taxpayer is a qualified taxpayer under this section shall
31be made at the entity level and any credit under this section or
32Section 23675 shall be allowed to the pass-thru entity and passed
33through to the partners and shareholders in accordance with
34applicable provisions of this part or Part 11 (commencing with
35Section 23001). For purposes of this subdivision, the term
36“pass-thru entity” means any partnership or “S” corporation.
37(C) “Qualified taxpayers” shall not include any of the following:
38(i) Employers that provide temporary help
services, as described
39in Code 561320 of the North American Industry Classification
P4 1System (NAICS) published by the United States Office of
2Management and Budget, 2012 edition.
3(ii) Employers that provide retail trade services, as described
4in Sector 44-45 of the North American Industry Classification
5System (NAICS) published by the United States Office of
6Management and Budget, 2012 edition.
7(iii) Employers that are primarily engaged in providing food
8services, as described in Code 711110, 722511, 722513, 722514,
9or 722515 of the North American Industry Classification System
10(NAICS) published by the United States Office of Management
11and Budget, 2012
edition.
12(iv) Employers that are primarily engaged in services as
13described in Code 713210, 721120, or 722410 of the North
14American Industry Classification System (NAICS) published by
15the United States Office of Management and Budget, 2012 edition.
16(v) (I) An employer that is a sexually oriented business.
17(II) For purposes of this clause:
18(ia) “Sexually oriented business” means a nightclub, bar,
19restaurant,
or similar commercial enterprise that provides for an
20audience of two or more individuals live nude entertainment or
21live nude performances where the nudity is a function of everyday
22business operations and where nudity is a planned and intentional
23part of the entertainment or performance.
24(ib) “Nude” means clothed in a manner that leaves uncovered
25or visible, through less than fully opaque clothing, any portion of
26the genitals or, in the case of a female, any portion of the breasts
27
below the top of the areola of the breasts.
28(6) “Qualified wages” means those wages that meet all of the
29following requirements:
30(A) (i) That portion of wages paid or incurred by the qualified
31taxpayer during the taxable year to each qualified full-time
32employee that exceeds 150 percent of minimum wage, but does
33not exceed 350 percent of minimum wage.
34(ii) (I) In the case of a qualified full-time employee
who
35provides services only in a designated pilot area, that portion of
36wages paid or incurred by the qualified taxpayer during the taxable
37year to each qualified full-time employee that exceeds ten dollars
38($10) per hour or an equivalent amount for salaried employees,
39but does not exceed 350 percent of minimum wage. For qualified
40full-time employees described in the preceding sentence, clause
P5 1(i) of subparagraph (A) of paragraph (4) is modified by substituting
2“ten dollars ($10) per hour or an equivalent amount for salaried
3employees” for “150 percent of the minimum wage.”
4(II) For purposes of this clause, “designated pilot area” means
5an area designated as a designated pilot area by the Governor’s
6Office of Business
and Economic Development, pursuant to
7
Sections 17053.73 and 23626.
8(B) Wages paid or incurred during the 60-month period
9beginning with the first day the qualified full-time employee
10commences employment with the qualified taxpayer. In the case
11of any employee who is reemployed, including a regularly
12occurring seasonal increase, in the trade or business operations of
13the qualified taxpayer, this reemployment shall not be treated as
14constituting commencement of employment for purposes of this
15section.
16(7) “Seasonal employment” means employment by a qualified
17taxpayer that has regular and predictable substantial reductions in
18trade or business operations.
19(8) “Work readiness program” means a program offered by a
20job training provider that provides vocational job training,
21educational opportunities, and life skills. A work readiness program
22shall focus on skills acquisition and educational advancement and
23shall foster behavioral changes that promote personal responsibility
24and positive contributions to society. A work readiness program
25shall include all of the following:
26(A) Paid or unpaid on-the-job training opportunities,
27preapprenticeship programs, vocational instruction, or internship
28placement.
29(B) The opportunity for academic advancement.
30(C) The opportunity to earn at least one industry recognized
31
certification.
32(D) A life-skills training component.
33(c) All employees of the trades or businesses that are treated as
34related under Section 267, 318, or 707 of the Internal Revenue
35Code shall be treated as employed by a single taxpayer.
36(d) (1) To be eligible for the credit allowed by this section, a
37qualified taxpayer shall, upon hiring a qualified full-time employee,
38request a tentative credit reservation from the Franchise Tax Board
39within 30 days of complying with the Employment Development
40Department’s new hire reporting requirements as provided in
P6 1Section 1088.5 of the Unemployment Insurance Code, in the form
2and
manner prescribed by the Franchise Tax Board.
3(2) To obtain a tentative credit reservation with respect to a
4qualified full-time employee, the qualified taxpayer shall provide
5necessary information, as determined by the Franchise Tax Board,
6including the name, social security number, the start date of
7employment, and the rate of pay of the qualified full-time
8employee.
9(3) The qualified taxpayer shall provide the Franchise Tax Board
10an annual certification of employment with respect to each
11qualified full-time employee hired in a previous taxable year, on
12or before, the 15th day of the third month of the taxable year. The
13certification shall include necessary information, as determined
14by the Franchise Tax Board, including
the name, social security
15number, start date of employment, and rate of pay for each qualified
16full-time employee employed by the qualified taxpayer.
17(4) A tentative credit reservation provided to a taxpayer with
18respect to an employee of that taxpayer shall not constitute a
19determination by the Franchise Tax Board with respect to any of
20the requirements of this section regarding a taxpayer’s eligibility
21for the credit authorized by this section.
22(e) The Franchise Tax Board shall do all of the following:
23(1) Approve a tentative credit
reservation with respect to a
24qualified full-time employee hired during a calendar year.
25(2) Determine the aggregate tentative reservation amount.
26(3) Notwithstanding Section 19542, provide as a searchable
27database on its Internet Web site, for each taxable year beginning
28on or after January 1, 2017, and before January 1, 2022, the
29employer names, amounts of tax credit claimed, and number of
30new jobs created for each taxable year pursuant to this section and
31Section 23675.
32(f) For purposes of this section:
33(1) All employees of trades or
businesses that are not
34incorporated, and that are under common control, shall be treated
35as employed by a single taxpayer.
36(2) The credit, if any, allowable by this section with respect to
37each trade or business shall be determined by reference to its
38proportionate share of the expense of the qualified wages giving
39rise to the credit and shall be allocated to that trade or business in
40that manner.
P7 1(3) Principles that apply in the case of controlled groups of
2corporations, as specified in subdivision (f) of Section 23675, shall
3apply with respect to determining employment.
4(4) If an employer
acquires the major portion of a trade or
5business of another employer, hereinafter in this paragraph referred
6to as the predecessor, or the major portion of a separate unit of a
7trade or business of a predecessor, then, for purposes of applying
8this section, other than subdivision (g), for any taxable year ending
9after that acquisition, the employment relationship between a
10qualified full-time employee and an employer shall not be treated
11as terminated if the employee continues to be employed in that
12trade or business.
13(g) (1) If the employment of any qualified full-time employee,
14with respect to whom qualified wages are taken into account under
15subdivision (a), is terminated by the qualified taxpayer at any time
16during the first 36 months after commencing
employment with
17the qualified taxpayer, whether or not consecutive, the tax imposed
18by this part for the taxable year in which that employment is
19terminated shall be increased by an amount equal to the credit
20allowed under subdivision (a) for that taxable year and all prior
21taxable years attributable to qualified wages paid or incurred with
22respect to that employee.
23(2) Paragraph (1) does not apply to any of the following:
24(A) A termination of employment of a qualified full-time
25employee who voluntarily leaves the employment of the qualified
26taxpayer.
27(B) A termination of employment of a qualified full-time
28employee who, before the close of the period referred to in
29paragraph (1), becomes disabled and unable to perform the services
30of that employment, unless that disability is removed before the
31close of that period and the qualified taxpayer fails to offer
32reemployment to that employee.
33(C) A termination of employment of a qualified full-time
34employee if it is determined that the termination was due to the
35misconduct, as defined in Sections 1256-30 to 1256-43, inclusive,
36of Title 22 of the California Code of Regulations, of that employee.
37(D) A termination of employment of a qualified full-time
38employee
due to a substantial reduction in the trade or business
39operations of the qualified taxpayer, including reductions due to
40seasonal employment.
P8 1(E) A termination of employment of a qualified full-time
2employee if that employee is replaced by other qualified full-time
3employees so as to create a net increase in both the number of
4employees and the hours of employment.
5(F) A termination of employment of a qualified full-time
6employee when that employment is considered seasonal
7employment and the qualified employee is rehired on a seasonal
8basis.
9(3) For purposes of paragraph (1), the employment relationship
10between the qualified taxpayer and a qualified full-time employee
11shall not be treated as terminated by reason of a mere change in
12the form of conducting the trade or business of the qualified
13taxpayer if the qualified full-time employee continues to be
14employed in that trade or business and the qualified taxpayer retains
15a substantial interest in that trade or business.
16(4) An increase in tax under paragraph (1) shall not be treated
17as tax imposed by this part for purposes of determining the amount
18of any credit allowable under this part.
19(h) In the case of an estate or trust, both of the following apply:
20(1) The qualified wages for a taxable year shall be apportioned
21between the estate or trust and the beneficiaries on the basis of the
22income of the estate or trust allocable to each.
23(2) A beneficiary to whom any qualified wages have been
24apportioned under paragraph (1) shall be treated, for purposes of
25this part, as the employer with respect to those wages.
26(i) In the case in which the credit allowed by this section exceeds
27the “net tax,” the excess may be carried over to reduce the “net
28tax” in the following year, and the
succeeding four years if
29necessary, until the credit is exhausted.
30(j) The Franchise Tax Board may prescribe rules, guidelines,
31or procedures necessary or appropriate to carry out the purposes
32of this section, including any guidelines regarding the allocation
33of the credit allowed under this section. Chapter 3.5 (commencing
34with Section 11340) of Part 1 of Division 3 of Title 2 of the
35Government Code shall not apply to any rule, guideline, or
36procedure prescribed by the Franchise Tax Board pursuant to this
37section.
38(k) The Franchise Tax Board shall annually provide to the Joint
39Legislative Budget Committee, in compliance with Section 9795
40of the
Government Code, by no later than March 1, a report of the
P9 1total dollar amount of the credits claimed under this section with
2respect to the relevant fiscal year. The report shall compare the
3total dollar amount of credits claimed under this section with
4respect to that fiscal year with the department’s estimate with
5respect to that same fiscal year. If the total dollar amount of credits
6claimed for the fiscal year is less than the estimate for that fiscal
7year, the report shall identify options for increasing annual claims
8of the credit so as to meet estimated amounts.
9(l) No deduction shall be allowed under this part for wages paid
10or incurred in a taxable year to the extent that those wages are
11qualified wages with respect to calculating a credit under this
12section for that taxable year.
13(m) This section shall remain in effect only until December 1,
142022, and as of that date is repealed.
Section 23675 is added to the Revenue and Taxation
16Code, to read:
(a) (1) For each taxable year beginning on or after
18January 1, 2017, and before January 1, 2022, there shall be allowed
19to a qualified taxpayer that hires a qualified full-time employee
20and pays or incurs qualified wages attributable to work performed
21by the qualified full-time employee, and that receives a tentative
22credit reservation for that qualified full-time employee, a credit
23against the “tax,” as defined in Section 23036, in an amount
24calculated under this section.
25(2) The amount of the credit allowable under this section for a
26taxable year shall be equal to 23.5 percent of all qualified wages
27paid or incurred to the qualified full-time
employee, not to exceed
28fifteen thousand dollars ($15,000) per qualified taxpayer per taxable
29year.
30(3) The credit allowed by this section may be claimed only on
31a timely filed original return of the qualified taxpayer and only
32with respect to a qualified full-time employee for whom the
33qualified taxpayer has received a tentative credit reservation.
34(4) If thebegin insert qualifiedend insert taxpayer is allowed a credit pursuant to this
35section for qualified wages paid or incurred, another credit shall
36not be allowed to thebegin insert qualifiedend insert taxpayer under
this part with respect
37to any wage consisting in whole or in part of those qualified wages.
38(b) For purposes of this section:
39(1) “Acquire” includes any gift, inheritance, transfer incident
40to divorce, or any other transfer, whether or not for consideration.
P10 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 educationbegin insert courses
4or services to connect individuals to high school or continuing
5educationend insert courses. The entity’s program may also offer additional
6
services like job placement, career and mental health counseling,
7prisoner reentry services, and relapse prevention and sober-living
8support.
9(3) “Minimum wage” means the wage established pursuant to
10Chapter 1 (commencing with Section 1171) of Part 4 of Division
112 of the Labor Code.
12(4) (A) “Qualified full-time employee” means an individual
13who meets all of the following requirements:
14(i) Receives starting wages that are at least 150 percent of the
15minimum wage.
16(ii) Is hired by the qualified taxpayer on or after January 1, 2017.
17(iii) Satisfies either of the following conditions:
18(I) Is paid qualified wages by the qualified taxpayer for services
19not less than an average of 35 hours per week.
20(II) Is a salaried employee and was paid compensation during
21the taxable year for full-time employment, within the meaning of
22Section 515 of the Labor Code, by the qualified taxpayer.
23(iv) Is an ex-offender previously convicted of a felony who is,
24at
the time of hiring, between 18 and 25 years of age and who
25
demonstrates documented completion of a work readiness program.
26(v) Performs at least 50 percent of his or her services for the
27qualified taxpayer during the taxable year in the state.
28(B) An individual may be considered a qualified full-time
29employee only for the period of time commencing with the date
30the individual is first employed by the qualified taxpayer and
31ending 60 months thereafter.
32(5) (A) “Qualified taxpayer” means a corporation engaged in
33a trade or business within the state that, during the taxable year,
34pays or incurs qualified wages.
35(B) In the case
of any pass-thru entity, the determination of
36whether a taxpayer is a qualified taxpayer under this section shall
37be made at the entity level and any credit under this section or
38Section 17053.75 shall be allowed to the pass-thru entity and
39passed through to the partners and shareholders in accordance with
40applicable provisions of this part or Part 10 (commencing with
P11 1Section 17001). For purposes of this subdivision, the term
2“pass-thru entity” means any partnership.
3(C) “Qualified taxpayers” shall not include any of the following:
4(i) Employers that provide temporary help services, as described
5in Code 561320 of the North American Industry Classification
6System (NAICS) published by the United States Office of
7Management
and Budget, 2012 edition.
8(ii) Employers that provide retail trade services, as described
9in Sector 44-45 of the North American Industry Classification
10System (NAICS) published by the United States Office of
11Management and Budget, 2012 edition.
12(iii) Employers that are primarily engaged in providing food
13services, as described in Code 711110, 722511, 722513, 722514,
14or 722515 of the North American Industry Classification System
15(NAICS) published by the United States Office of Management
16and Budget, 2012 edition.
17(iv) Employers that are
primarily engaged in services as
18described in Code 713210, 721120, or 722410 of the North
19American Industry Classification System (NAICS) published by
20the United States Office of Management and Budget, 2012 edition.
21(v) (I) An employer that is a sexually oriented business.
22(II) For purposes of this clause:
23(ia) “Sexually oriented business” means a nightclub, bar,
24restaurant, or similar commercial enterprise that provides for an
25audience of two or more individuals live nude entertainment or
26live nude performances where the
nudity is a function of everyday
27business operations and where nudity is a planned and intentional
28part of the entertainment or performance.
29(ib) “Nude” means clothed in a manner that leaves uncovered
30or visible, through less than fully opaque clothing, any portion of
31the genitals or, in the case of a female, any portion of the breasts
32below the top of the areola of the breasts.
33(6) “Qualified wages” means those wages that meet all of the
34following requirements:
35(A) (i) That portion of wages paid or incurred by the
qualified
36taxpayer during the taxable year to each qualified full-time
37employee that exceeds 150 percent of minimum wage, but does
38not exceed 350 percent of minimum wage.
39(ii) (I) In the case of a qualified full-time employee
who
40provides services only in a designated pilot area, that portion of
P12 1wages paid or incurred by the qualified taxpayer during the taxable
2year to each qualified full-time employee that exceeds ten dollars
3($10) per hour or an equivalent amount for salaried employees,
4but does not exceed 350 percent of minimum wage. For qualified
5full-time employees described in the preceding sentence, clause
6(i) of subparagraph (A) of paragraph (4) is modified by substituting
7“ten dollars ($10) per hour or an equivalent amount for salaried
8employees” for “150 percent of the minimum wage.”
9(II) For purposes of this clause, “designated pilot area” means
10an area designated as a designated pilot area by the Governor’s
11Office of Business and
Economic Development, pursuant to
12Sections 17053.73 and 23626.
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 personal 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.
P13 1(d) (1) To be eligible for the credit allowed by this section, a
2qualified 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
16qualified 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, 2017, and before January 1, 2022, the
34employer names, amounts of tax credit claimed, and number of
35new jobs created for each taxable year pursuant to this section and
36Section 17053.75.
37(f) (1) For purposes of this section:
38(A) All employees of corporations that are
members of the same
39controlled group of corporations shall be treated as employed by
40a single taxpayer.
P14 1(B) The credit, if any, allowable by this section to each member
2shall be determined by reference to its proportionate share of the
3expense of the qualified wages giving rise to the credit and shall
4be allocated in that manner.
5(C) If a qualified taxpayer acquires the major portion of a trade
6or business of another taxpayer, hereinafter in this paragraph
7referred to as the predecessor, or the major portion of a separate
8unit of a trade or business of a predecessor, then, for purposes of
9applying this section, for any taxable year ending after that
10acquisition, the employment relationship between a qualified
11full-time employee and an qualified taxpayer shall not be treated
12as
terminated if the employee continues to be employed in that
13trade or business.
14(2) For purposes of this subdivision, “controlled group of
15corporations” means a controlled group of corporations as defined
16in Section 1563(a) of the Internal Revenue Code, except that:
17(A) “More than 50 percent” shall be substituted for “at least 80
18percent” each place it appears in Section 1563(a)(1) of the Internal
19Revenue Code.
20(B) The determination shall be made without regard to
21subsections (a)(4) and (e)(3)(C) of Section 1563 of the Internal
22Revenue Code.
23(3) Rules similar to the rules provided in Sections 46(e) and
2446(h) of the Internal Revenue Code, as in effect on November 4,
251990, shall apply to both of the following:
26(A) An organization to which Section 593 of the Internal
27Revenue Code applies.
28(B) A regulated investment company or a real estate investment
29trust subject to taxation under this part.
30(g) (1) If the employment of any qualified full-time employee,
31with respect to whom qualified wages are taken into
account under
32subdivision (a), is terminated by the qualified taxpayer at any time
33during the first 36 months after commencing employment with
34the qualified taxpayer, whether or not consecutive, the tax imposed
35by this part for the taxable year in which that employment is
36terminated shall be increased by an amount equal to the credit
37allowed under subdivision (a) for that taxable year and all prior
38taxable years attributable to qualified wages paid or incurred with
39respect to that employee.
40(2) Paragraph (1) does not apply to any of the following:
P15 1(A) A termination of employment of a qualified full-time
2employee who voluntarily leaves the employment of the
qualified
3taxpayer.
4(B) A termination of employment of a qualified full-time
5employee who, before the close of the period referred to in
6paragraph (1), becomes disabled and unable to perform the services
7of that employment, unless that disability is removed before the
8close of that period and the qualified taxpayer fails to offer
9reemployment to that employee.
10(C) A termination of employment of a qualified full-time
11employee if it is determined that the termination was due to the
12misconduct, as defined in Sections 1256-30 to 1256-43, inclusive,
13of Title 22 of the California Code of Regulations, of that employee.
14(D) A termination of employment of a qualified full-time
15employee due to a substantial reduction in the trade or business
16operations of the qualified taxpayer, including reductions due to
17seasonal employment.
18(E) A termination of employment of a qualified full-time
19employee if that employee is replaced by other qualified full-time
20employees so as to create a net increase in both the number of
21employees and the hours of employment.
22(F) A termination of employment of a qualified full-time
23employee when that employment is considered seasonal
24employment and the qualified employee is rehired on a
seasonal
25basis.
26(3) For purposes of paragraph (1), the employment relationship
27between the qualified taxpayer and a qualified full-time employee
28shall not be treated as terminated by reason of a mere change in
29the form of conducting the trade or business of the qualified
30taxpayer if the qualified full-time employee continues to be
31employed in that trade or business and the qualified taxpayer retains
32a substantial interest in that trade or business.
33(4) An increase in tax under paragraph (1) shall not be treated
34as tax imposed by this part for purposes of determining the amount
35of any credit allowable under this part.
36(h) In the case in which the credit allowed by this section
37exceeds the “tax,” the excess may be carried over to reduce the
38“tax” in the following year, and the succeeding four years if
39necessary, until the credit is exhausted.
P16 1(i) The Franchise Tax Board may prescribe rules, guidelines,
2or procedures necessary or appropriate to carry out the purposes
3of this section, including any guidelines regarding the allocation
4of the credit allowed under this section. Chapter 3.5 (commencing
5with Section 11340) of Part 1 of Division 3 of Title 2 of the
6Government Code shall not apply to any rule, guideline, or
7procedure prescribed by the Franchise Tax Board pursuant to this
8section.
9(j) The Franchise Tax Board shall annually provide to the Joint
10Legislative Budget Committee, in compliance with Section 9795
11of the Government Code, by no later than March 1, a report of the
12total dollar amount of the credits claimed under this section with
13respect to the relevant fiscal year. The report shall compare the
14total dollar amount of credits claimed under this section with
15respect to that fiscal year with the department’s estimate with
16respect to that same fiscal year. If the total dollar amount of credits
17claimed for the fiscal year is less than the estimate for that fiscal
18year, the report shall identify options for increasing annual claims
19of the credit so as to meet estimated amounts.
20(k) No deduction shall be allowed under this part for wages paid
21or incurred in a taxable year to the extent that those wages are
22
qualified wages with respect to calculating a credit under this
23section for that taxable year.
24(l) This section shall remain in effect only until December 1,
252022, and as of that date is repealed.
For purposes of complying with Section 41 of the
27Revenue and Taxation Code, relating to Sections 17053.75 and
2823675 of the Revenue and Taxation Code, the Legislature finds
29and declares as follows:
30(a) Specific goals, purposes, and objectives: Provide an
31economic incentive for qualified employers to hire qualified
32employees, which includes persons between 18 and 25 years of
33age who have felony convictions and have completed a work
34readiness program, in an effort to help them overcome barriers to
35employment and promote their successful transition back into
36society.
37(b) Performance indicators: The Franchise Tax Board shall
38annually report to the Joint Legislative Budget Committee the total
39dollar amount of the credits claimed under Sections 17053.75 and
4023675 of the Revenue and Taxation Code with respect to the
P17 1relevant fiscal year, as well as the growth or decline of credits
2claimed under these sections each successive fiscal year from
3January 1, 2017, to January 1, 2022, so that the Legislature can
4monitor the overall progress of the economic incentive.begin insert The report
5shall be submitted in compliance with Section 9795 of the
6Government Code. end insert
This act provides for a tax levy within the meaning of
8Article IV of the California Constitution and shall go into
9immediate effect.
O
96