BILL ANALYSIS                                                                                                                                                                                                    



                                                                    SB 1216


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          Date of Hearing:  June 20, 2016


                     ASSEMBLY COMMITTEE ON REVENUE AND TAXATION


                           Sebastian Ridley-Thomas, Chair





          SB  
          1216 (Hueso) - As Amended May 4, 2016





                                      SUSPENSE

          SENATE VOTE:  39-0


          SUBJECT:  Income taxes:  credits:  qualified employees


          SUMMARY:  Establishes an income tax credit, under both the  
          Personal Income Tax (PIT) and the Corporation Tax (CT) laws, for  
          employers that hire certain young individuals who are  
          ex-offenders convicted of a felony, as defined.  Specifically,  
          this bill:  


          1)Allows an income tax credit, for taxable years beginning on or  
            after January 1, 2017, and before January 1, 2022, to a  
            "qualified taxpayer" equal to 20% of the "qualified wages"  
            paid to a "qualified full-time employee." 









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          2)Provides that the amount of credit may not exceed $15,000 per  
            qualified taxpayer per taxable year. 


          3)Defines a "qualified taxpayer" as a person or entity engaged  
            in a trade or business within California that, during the  
            taxable year, pays or incurs qualified wages.  


          4)Specifies that a "qualified taxpayer" does  not  include any of  
            the employers that: 


             a)   Provide temporary help services, as described in the  
               North American Industry Classification System (NAICS) Code  
               561320 published by the United States Office of Management  
               and Budget, 2012 edition;


             b)   Provide retail trade services, as described in the NAICS  
               Section 44-55;


             c)   Are primarily engaged in providing food services, as  
               described in NAICS  Code 711110, 722513, 722514, or 722515;


             d)   Are primarily engaged in services in casinos, casino  
               hotels, or drinking places, as described in NAICS Code  
               713210, 721120, or 722410; or,


             e)   Are "sexually oriented businesses," as defined.


          5)Defines "qualified wages" as wages that meet all of the  
            following requirements: 









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             a)   That portion of the wages paid or incurred by the  
               qualified taxpayer that exceed 150% of minimum wage, but  
               does not exceed 350% of minimum wage.  However, if a  
               qualified full-time employee is employed in a designated  
               pilot area, as defined, qualified wages must exceed $10 per  
               hour or an equivalent amount for salaried employees,  
               instead of the 150% minimum wage requirement. 


             b)   Paid or incurred during the 60-month period beginning  
               with the first day the qualified full-time employee  
               commences employment with the qualified taxpayer.  In the  
               case of any employee who is reemployed, including a  
               regularly occurring seasonal increase, in the trade or  
               business operations of the qualified taxpayer, this  
               reemployment would not be treated as constituting  
               commencement of employment.


          6)Defines a "qualified full-time employee" as an individual who  
            meets all of the following requirements:   


             a)   Receives starting wages that are at least 150 percent of  
               the minimum wage; 


             b)   Is an ex-offender previously convicted of a felony who  
               is, at the time of hiring, between 18 and 25 years of age,  
               and who demonstrates completion of a work readiness  
               program;


             c)   Is hired by the qualified taxpayer on or after January  
               1, 2017; and,


             d)   Satisfies either of the following conditions:  








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               i)     Is paid qualified wage by the qualified taxpayer for  
                 services not less than an average of 35 hours per week. 


               ii)    Is a salaried employee and was paid compensation  
                 during the taxable year for full-time employment by the  
                 qualified taxpayer. 


          7)Defines a "work readiness program" as a program offered by a  
            job training provider that offers vocational job training,  
            education opportunities, and life skills.  


          8)Requires a work readiness program to include all of the  
            following:


             a)   Paid or unpaid on-the-job training opportunities,  
               pre-apprenticeship programs, vocational instruction or  
               internship placement;


             b)   The opportunity for academic advancement;


             c)   The opportunity to earn at least one industry recognized  
               certification; and,


             d)   A life-skills training component.


          9)Requires a qualified employee to be employed full-time for at  
            least 36 months in order for the qualified taxpayer to receive  
            the credit. 









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          10)Provides for a recapture of the credit claimed by the  
            qualified taxpayer if the qualified full-time employee is  
            terminated at any time during the first 36 months after  
            commencing employment with the taxpayer.  However, this  
            recapture provision would  not  apply to any of the following  
            types of termination of employment: 


             a)   The employee voluntarily leaves the employment of the  
               qualified taxpayer; 


             b)   Before the close of the 36 month-period, the employee  
               becomes disabled and unable to perform the services of that  
               employment, unless that disability is removed before the  
               close of the 36 months and the qualified taxpayer fails to  
               offer reemployment to that employee;


             c)   The employee was terminated due to the misconduct, as  
               defined;


             d)   The employee was terminated due to a substantial  
               reduction in the trade or business operations of the  
               qualified taxpayer, including reductions due to seasonal  
               employment;


             e)   The employee was replaced by other qualified full-time  
               employees so as to create a net increase in both the number  
               of employees and the hours of employment; or


             f)   Employment is considered "seasonal employment" and the  
               qualified employee is rehired on a seasonal basis.










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          11)Requires a qualified taxpayer to claim the credit only a  
            timely filed original return of the qualified taxpayer. 


          12)Requires a qualified taxpayer to receive a tentative credit  
            reservation from the Franchise Tax Board (FTB) for each  
            qualified full-time employee within 30 days of complying with  
            the Employment Development Department's new hire reporting  
            requirements as provided, in the form and manner prescribed by  
            the FTB.  



          13)Requires FTB to do all of the following:



             a)   Approve a tentative credit reservation with respect to a  
               qualified full-time employee hired during a calendar year;

             b)   Determine the aggregate tentative reservation amount;  
               and,



             c)   Provide as a searchable database on the Internet Web  
               site, for each taxable year beginning on or after January  
               1, 2017, and before January 1, 2022, the employer names,  
               amounts of tax credit claimed, and number of new jobs  
               created for each taxable year, as provided. 


          14)Provides that in the case of a taxpayer that is a pass-thru  
            entity, the determination of whether the taxpayer is a  
            qualified taxpayer would be made at the entity level and any  
            credit would be allowed to pass through to the partners and  
            shareholders.  










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          15)Defines a "pass-thru entity" as any partnership or "S"  
            corporation.


          16)Disallows any other credit to the taxpayer who is allowed the  
            credit for qualified wages paid to a qualified employee, with  
            respect to any wage consisting in whole or in part of those  
            qualified wages. 


          17)Provides that any excess credit may be carried over to reduce  
            the tax, as defined, for the succeeding four years, until the  
            credit is exhausted.  


          18)Requires the FTB to provide annually to the Joint Legislative  
            budget Committee, by no later than March 1, a report of the  
            total dollar amount of the credits claimed with respect to the  
            relevant fiscal year.  If the total dollar amount of credits  
            claimed for the fiscal year is less than the FTB's estimate  
            for that fiscal year, the report shall identify options for  
            increasing annual claims of the credit so as to meet estimated  
            amounts. 


          19)Declares that Revenue and Taxation Code (R&TC) Section  
            41shall not apply. 


          20)Takes effect immediately as a tax levy. 


          EXISTING LAW:   


          1)Allows taxpayers engaged in a trade or business to deduct all  
            expenses that are considered ordinary and necessary in  
            conducting that trade or business.









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          2)Allows, under the CT and the PIT Law, an income tax credit to  
            qualified taxpayers that hire a qualified full-time employee,  
            have an overall net increase in employment, and pay or incur  
            qualified wages attributable to work performed by a qualified  
            full-time employee in a designated census tract or former  
            Enterprise Zone (the New Employment Credit).  The qualified  
            taxpayer must receive a tentative credit reservation from the  
            Franchise Tax Board (FTB) for the qualified full-time  
            employee.  


          3)Provides that a qualified full-time employee must meet at  
            least one of the following conditions upon commencement of  
            employment:


             a)   Unemployed for six months immediately preceding  
               employment;


             b)   Veteran separated from the Armed Forces in the preceding  
               12 months; 


             c)   Recipient of the Earned Income Tax Credit in the  
               previous taxable year;


             d)   Ex-offender convicted of a felony; and,


             e)   Current recipient of California Work Opportunity and  
               Responsibilities to Kids (CalWORKS) or general assistance.


          4)Provides that, as of January 1, 2016, state minimum wage is  
            generally $10 per hour, but employees classified as "learners"  
            may be paid a lesser wage.  Specifies that the minimum wage  
            requirements do not apply to the wages paid by an employer to  








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            the employees who are the employer's parents, spouse, or  
            children.


          5)Applies performance measurement standards to any new tax  
            credit under either the PIT or CT Law if enacted by a bill  
            introduced on or after January 1, 2015.  Specifically,  
            existing law requires the all of the following:



             a)   Specific goals, purposes, and objectives that the tax  
               credit will achieve;



             b)   Detailed performance indicators for the Legislature to  
               use when measuring whether the tax credit meets the goals,  
               purposes, and objectives stated in the bill; and,



             c)   Data collection requirements to enable the Legislature  
               to determine whether the tax credit is meeting, failing to  
               meet, or exceeding those specific goals, purposes, and  
               objectives, including a requirement to specify both of the  
               following:



               i)     The baseline data, to be collected and remitted in  
                 each year the credit is effective, for the Legislature to  
                 measure the change in performance indicators; and,

               ii)    The taxpayers, state agencies, or other entities  
                 required to collect and remit data.

          FISCAL EFFECT:  The FTB staff estimates that this bill will  
          result in an annual General Fund (GF) loss of $0.3 million in  








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          fiscal year (FY) 2016-17, $1.1 million in FY 2017-18, and $1.8  
          million in FY 2018-19.  


          COMMENTS:  


           1)Author's Statement  .  The author has provided the following  
            statement in support of this bill:

          "In recent decades, the number of Americans who have come in  
            contact with the criminal justice system has increased  
            exponentially.  Between 1980 and 2009, California's prison  
            population increased 583%.  As a direct result of the state's  
            increasing incarceration rate the number of Californians with  
            a criminal record has soared.  Currently, there are nearly  
            eight million individuals in the state's criminal history  
            file.

          "Upon release, many Californians have found it increasingly  
            difficult to find employment.  As these Californians have  
            learned a felony conviction or a prison or jail term on an  
            individual's record can have a substantial negative impact on  
            future job procurement for numerous reasons.  Specifically,  
            incarceration or a felony conviction imparts a negative  
            societal stigma that makes employers less likely to hire  
            ex-offenders.

            "Overwhelmingly, ex-offenders have tenuous relationships to  
            the labor market.   Approximately 70% have dropped out of high  
            school, contributing to their un-employability.   Moreover,  
            time spent incarcerated can make the matter worse by depriving  
            those incarcerated the chance to develop the job skills and  
            social capital necessary for success in the labor market later  
            in life.



            "Statistics demonstrate that younger felons have a more  








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            difficult time reintegrating into society post incarceration.   
            A recent California Department of Corrections and  
            Rehabilitation (CDCR) outcome evaluation report indicated that  
            younger felons recidivate at the highest rates.  Inmates  
            released at age 24 or younger return to prison at a rate of  
            67.2 percent.'

            "The Franchise Tax Board has estimated that SB 1216's employer  
            tax incentive will cost the state $600,000 in lost revenue for  
            the 2016-17 fiscal year.  However, it is important to note  
            that analysts estimate that it costs California nearly $60,000  
            annually to incarcerate an inmate in California prisons.

            "If SB 1216's employer tax incentive program keeps 10 high  
            risk-youth from re-offending then this program will cost the  
            state nothing in net revenue (10 x $60,000 = $600,000).   
            Additionally, there are a multitude of additional social  
            benefits associated with an ex-offender successfully  
            reintegrating back into society ultimately resulting in  
            greater savings.'  

            "SB 1216 is a much needed bill that seeks to help a fragile  
            and disadvantaged demographic group successfully transition  
            back into society post-incarceration by reducing the barriers  
            to employment these individuals frequently face."
           2)Arguments in Support  .  The proponents state that this bill  
            "aims to remove a significant barrier to successful re-entry  
            from the lives of young ex-offenders by implementing a tax  
            incentive" and to provide "opportunities for young ex-offender  
            to find employment that pays above minimum wage." The  
            proponents argue that approximately 70% of ex-offenders "have  
            dropped out of high school" and lack the job skills necessary  
            "for success in the labor market later in life."  This bill  
            increases the opportunity for these disenfranchised youth to  
            find employment after incarceration and the training necessary  
            for them to succeed in the future employment.  The proponents  
            contend that this bill would increase real job placement for  
            young ex-offenders and would help "improve their lives."









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           3)California's Existing Hiring Tax Credit Programs:  Background  .  
             In 2014, Governor Brown signed legislation that reformed  
            California's economic development policies.  [AB 93 (Committee  
            on Budget) Chapter 69, Statutes of 2014.]  The new law  
            eliminated enterprise zones and other geographically targeted  
            economic development areas and, instead, created three new  
            economic development tax incentives:  (a) a temporary 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 (the "New  
            Employment Credit"); (b) a temporary sales and use tax  
            exemption on purchases of manufacturing equipment made by  
            qualified taxpayers, capped at $200 million annually per  
            taxpayer; and (c) the California Competes Tax Credit program -  
            a negotiated incentive administered by the Governor's Office  
            of Business and Economic Development (GO-Biz).  The total  
            annual amount of these three tax incentives - the wage credit,  
            the sales and use tax exemption, and the California Competes  
            Tax Credit - was limited to $750 million.  Existing law also  
            requires that each fiscal year at least 25% of the aggregate  
            credit amount be reserved for small businesses, i.e., a  
            business with $2 million or less in gross receipts, minus  
            returns and allowances. 



           4)The New Employment Credit Program  .  Pursuant to AB 93, the  
            hiring tax credit is established under both the PIT and CT  
            laws, from January 1, 2014 to January 1, 2021, for additional  
            hiring of employees in defined geographic areas (DGAs) in  
            California.  The hiring credit is generally available in the  
            geographic areas largely covered by the former enterprise  
            zones (EZs), except certain census tracts with low  
            unemployment, two recently expired EZs, and in designated  
            census tracts that have a civilian unemployment rate and a  
            poverty rate in the top 25% of all census tracts in the state.  
             In order to qualify for the credit, the taxpayer must have  
            experienced an increase in total jobs throughout the state  








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            from one year to the next.  Taxpayers are only allowed the  
            credit for the number of new jobs provided in California. 



          The New Employment Credit is available for wages paid by  
            taxpayers to full-time employees, including ex-offenders  
            convicted of a felony, who perform at least 50% of their  
            activities in the designated areas.  The credit percentages  
            are 35% per year for five years, for wages between 150% and  
            350% of the minimum wage.  For a qualified employee working in  
            a pilot area, the applicable wages are those wages exceeding  
            $10 per hour, up to 350% of the minimum wage.  Pilot areas are  
            areas within the DGA that have been designated by GO-Biz.  Up  
            to five pilot areas may be designated for a period of four  
            calendar years.  On April 24, 2014, GO-Biz designated three  
            pilot areas:  (a) Fresno Pilot Area, which is the former  
            Fresno City Enterprise Zone, except within census tracts with  
            the lowest unemployment and poverty; (b) Merced Pilot Area,  
            which is the former Merced Enterprise Zone, except within  
            census tracts with the lowest unemployment and poverty, and  
            (c) Riverside Pilot Area - census tracts 303, 401.01, 402.03,  
            429.04, and 467 in Riverside County.  These pilot areas are in  
            effect until December 31, 2017.  However, the pilot area  
            designation may be extended by GO-Biz for an additional period  
            of up to three calendar years.

          Except for small businesses, certain employers otherwise  
            qualified for the New Employment Credit are prohibited from  
            receiving this credit.  For example, excluded businesses  
            consist of those in temporary help services, as defined in the  
            NAICS Code 561320, retail trades services (NAICS Sector  
            44-45), and those primarily engaged in food services (Codes  
            722511, 722513, 722514, and 722515).  In addition, theater  
            companies and dinner theaters (Codes 711110), drinking places  
            (alcoholic beverages) (Code 722410) and casinos and casino  
            hotels (Codes 713210, 721120) are disqualified as well.   
            Finally, all sexually-oriented businesses are excluded from  
            being a qualified taxpayer regardless of their status as a  








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            small business. A sexually oriented business includes a  
            nightclub, bar, or similar commercial enterprise that provides  
            for an audience of two or more individuals live nude  
            entertainment or live nude performances where the nudity is a  
            function of everyday business operations and where nudity is a  
            planned and intentional part of the entertainment or  
            performance.



           5)What Does this Bill Do  ?   This bill would create a new income  
            tax credit for employers who hire an ex-offender previously  
            convicted on a felony, who at the time of hiring is between 18  
            and 25 year of age, and who demonstrates documented completion  
            of a work readiness program.  The worker must be paid at least  
            150% of the state minimum wage during the taxable year.  The  
            proposed credit amount would equal 20% of the difference  
            between 150% and 350% of minimum wage.  However, in the case  
            of a qualified employee employed in a pilot area the credit  
            would be allowed for wages that exceed $10 per hour or an  
            equivalent amount for salaried employees.  The 350% of minimum  
            wage cap would still apply.  The total amount of credit  
            available per qualified taxpayer per taxable year is limited  
            to $15,000.  Similarly to the existing New Employment Credit  
            program, the qualified employer must receive a tentative  
            credit reservation from the FTB and must claim the credit on  
            an original filed timely return.  


           6)How Different Is the Proposed Hiring Credit  ?  The New  
            Employment Credit already provides a hiring tax credit to  
            employers who employ ex-offenders convicted of a felony, among  
            others.  However, the proposed credit program is targeted  
            towards hiring only young ex-offenders convicted of a felony  
                    who have completed a work readiness program.  Furthermore,  
            this bill would make the credit available to qualified  
            employers on a statewide basis, instead of limiting it only to  
            former enterprise zones, local agency military bases,  
            designated pilot areas, and designated census tracts.  Both  








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            credit programs require a qualified employee to work full time  
            and require a qualified employer to pay wages between 150% and  
            350% of minimum wage, unless the qualified employee is working  
            in a designated pilot area.  The existing credit percentage is  
            35% of qualified wages in contrast to 20% proposed by this  
            bill.  The aggregate annual amount of the credit is further  
            limited by this bill to $15,000 per qualified taxpayer per  
            taxable year.  Finally, unlike the New Employment Credit, the  
            new tax incentive would target individuals between 18 and 25  
            years of age and does not require qualified employers to show  
            a net increase in employment.  Stated differently, an  
            otherwise eligible employer would be not disqualified to  
            receive the proposed credit if the employer hires a qualified  
            ex-offender and fires another employee. 



           7)A Subsidy or an Incentive  ?  According to the author's office,  
            between 1980 and 2009, California's prison population  
            increased 583%.  As a result, the number of Californians with  
            a criminal record has soared.  Currently, there are nearly  
            eight million individuals in the state's criminal history  
            file.  It appears that younger felons have a more difficult  
            time reintegrating into society post incarceration.  A recent  
            California Department of Corrections and Rehabilitation  
            outcome evaluation report indicates that inmates released at  
            age 24 or younger return to prison at a rate of 67.2%.  The  
            author also points out that the majority of incarcerated  
            individuals have fewer marketable skills and less education  
            than the general population.      



          As a way of encouraging the hiring of ex-offenders and  
            consequently helping them to rehabilitate, this bill proposes  
            a tax incentive.  It is unclear, however, whether this bill  
            would create an incentive for employers to hire individuals  
            who otherwise would not be hired or a subsidy for hiring  
            individuals who would have been hired even in the absence of  








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            this credit.  The Committee may wish to consider whether this  
            credit is an effective tool in incentivizing additional hiring  
            of young individuals with criminal record.
           8)Do Hiring Tax Credits Work  ?  In previous years, some have  
            advocated job creation tax credits as a means of revitalizing  
            the struggling economy.  The question, however, is whether  
            such credits actually work, and whether they are an  
            appropriate tool in light of substantial declines in  
            unemployment over the last five years.  Mr. Daniel Wilson,  
            assistant director of the Center for the Study of Innovation  
            and Productivity at the Federal Reserve Bank of San Francisco,  
            attempted to answer this question.  In a paper co-authored  
            with Robert Chirinko of the University of Illinois at Chicago,  
            Wilson examined the period between January 1990 and August  
            2009 and found that among states where employers could qualify  
            for credits immediately after enactment of the credit  
            legislation there was a slight employment increase of 0.12%.   
            These findings suggest that hiring credits, at least at the  
            state level, have some impact but appear to be very a blunt  
            tool for stimulating job growth.  Additionally, it is unclear  
            if the hiring tax credit provides an incentive or reward.  The  
            state's unemployment rate has been steadily declining over the  
            last few years to a rate of 5.4%, as of March 2016.  An  
            improved economy is more likely to lead to additional hiring  
            of all individuals in all industries, irrespective of state  
            incentives such as a hiring tax credit.  As a result, a hiring  
            tax credit could potentially provide an employer with a  
            windfall for actions that would have already taken place  
            because of improvements in the economy and job market.  


           9)Excluded Businesses  .  According to the author's office, this  
            bill is written to be consistent with the policy underlying  
            the New Employment Credit and therefore is drafted to emulate  
            - albeit on a broader scale - the New Employment Credit.   
            Thus, this bill excludes certain otherwise qualified employers  
            from receiving the proposed credit for hiring youth  
            ex-offenders unless those employers are "small businesses."   
            Similar to the New Employment Credit, excluded businesses  








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            would be those in temporary help services, retail trade  
            services, and those primarily engaged in food services.   
            Furthermore, theater companies and dinner theaters, drinking  
            places, casinos and casino hotels, and all sexually oriented  
            businesses would be disqualified.  However, the proposed  
            credit targets only those employers who hire youth  
            ex-offenders under the age of 25 and it is unclear how many  
            businesses - besides food and retail services - would employ  
            this group of individuals in large numbers.  It seems that  
            allowing the "excluded businesses" to qualify for the new  
            credit may provide more jobs opportunities to this demographic  
            group.  At the same time, it is questionable how many of these  
            "excluded businesses" (such as for example, "big box"  
            retailers or fast-food chains) would hire these individuals at  
            more than 150% of minimum wage.  


           
          10)Double Dipping:  Allowing Credit and Deduction  .  Existing law  
            already provides a tax incentive, in the form of a deduction  
            for business expenses, for wages and benefits paid by  
            employers to employees.  A deduction decreases the taxpayer's  
            gross income and its value depends on the taxpayer's tax  
            bracket.  For example, if a taxpayer is in the 25% bracket, a  
            $1,000 deduction would lower the taxpayer's tax bill by $250.   
            In contrast, a $1,000 credit decreases the tax liability by  
            the full $1,000, regardless of the tax bracket.  Thus, the  
            value of a tax credit is the same, regardless of the tax rate  
            and, therefore, it is generally more appealing to taxpayers.   
            A tax credit is more valuable because it lowers the tax  
            liability dollar-for-dollar.  



          This bill does not prohibit an employer from deducting qualified  
            wages as a business expense, as well as obtaining the credit  
            for the same wages.  The Committee may wish to consider  
            disallowing a deduction for the wages paid or incurred by a  
            qualified employer if the employer claims the new tax credit  








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            for the same wages.

           11)R&TC Section 41  .  SB 1335 (Leno), Chapter 845, Statutes of  
            2014 added R&TC Section 41, which recognized that the  
            Legislature should apply the same level of review used for  
            government spending programs to tax preference programs,  
            including tax credits.  Thus, Section 41 requires any bill  
            that is introduced on or after January 1, 2015 and allows a  
            new PIT credit to contain specific goals, purposes, and  
            objectives that the tax credit will achieve.  In addition,  
            Section 41 requires detailed performance indicators for the  
            Legislature to use when measuring whether the tax credit meets  
            the goals, purposes, and objectives so-identified.





            This bill creates a new tax credit program but does not  
            articulate its objective or goal.  Nor does this bill include  
            the performance indicators to measure the effectiveness of the  
            credit.  Since performance indicators are critical in  
            measuring the effectiveness of the tax credit, the Committee  
            may wish to consider amendments to articulate the specific  
            goal, purpose or objective of the proposed tax credit as well  
            as the performance indicators to measure its effectiveness.  



           12)California Wages  .  This bill fails to specify that qualified  
            wages must be paid to qualified employees for work performed  
            in California.  As such, an employer that pays non-California  
            wages to the otherwise qualified employees would be eligible  
            for the credit.  In practice, it is unlikely that many  
            qualified employees who completed a "work readiness program"  
            administered in California would be hired to perform services  
            outside of California.  Nonetheless, the absence of clarity  
            may lead to disputes between the FTB and taxpayers.   
            Therefore, the Committee may wish to consider amendments to  








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            ensure that California does not subsidize wages paid for work  
            performed outside California.


           13)Implementation Concerns  .  The bill has several requirements  
            for FTB to administer this credit, including a searchable  
            database and a tax credit reservation system. These  
            requirements would result in substantial administrative costs  
            for the FTB.



          The FTB staff has also noted that the phrase "employed in a  
            pilot area" is undefined.  It is unclear whether an hour of  
            employment in a pilot area would be enough to allow a taxpayer  
            to qualify for the credit.  The absence of definitions could  
            lead to disputes with taxpayers and would complicate the  
            administration of this credit.   The Committee may wish to  
            consider defining this phrase to ensure that the qualified  
            wages incurred by the taxpayer are for services performed in a  
            pilot area. 
          REGISTERED SUPPORT / OPPOSITION:




          Support


          Anti-Recidivism Coalition (ARC)


          Children's Defense Fund - California


          California Association of Local Conservation Corps (CALCC)











                                                                    SB 1216


                                                                    Page  20






          Opposition


          None on file




          Analysis Prepared by:Oksana Jaffe / REV. & TAX. / (916)  
          319-2098