BILL ANALYSIS
AB 2630
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Date of Hearing: May 28, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 2630 (Emmerson) - As Amended: May 18, 2010
Policy Committee: Revenue and
Taxation Vote: 9-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill authorizes, beginning in 2011, businesses with up to
50 employees to claim the $3,000 employer hiring credit
authorized last year for businesses with up to 20 employees. It
retains the existing $400 million cap on the total amount of
credits that may be awarded.
FISCAL EFFECT
1)No impact on the $400 million cumulative amount of hiring
credits authorized under current law.
2)However, if the $400 million is not fully allocated by the end
of 2010-11, the bill could result in some acceleration in
credits taken during 2011-12, reducing revenues in that year
by tens of millions of dollars. The revenues losses would be
offset in 2012-13 and beyond.
COMMENTS
1)Purpose . The author contends this credit will help offset the
costs of doing business in this state, and help stimulate
hiring.
2)Background . Legislation passed as part of the 2009-10 budget
agreement - AB 15 X3 (Krekorian), Chapter 10, Statutes of 2009
- implemented a small business hiring credit for taxable years
beginning on or after January 1, 2009. The credit is $3,000
per employee for increases in the number of qualified full
time workers (more than 35 hours per week) employed by the
firm compared to the prior year. The credit is limited to
AB 2630
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taxpayers with 20 or fewer employees as of the last day of the
preceding taxable year, and is capped at a cumulative total of
$400 million for all years. The credit applies to taxpayers
filing under both the personal income tax and corporate tax
laws and is provided on a first-come-first- served basis to
businesses that claim the credit on their timely filed income
tax returns.
3)Fiscal Issue. FTB reports that only about $24 million worth of
hiring credits had been claimed on returns processed through
mid-May 2010. Given that many returns are not filed until the
extension date in October, FTB continues to believe the full
$400 million in authorized credits will be exhausted before
the higher employee limits of this bill take effect for the
2011 taxable year. If that is the case, this bill will have no
impact since the credits will have been exhausted by the time
it takes effect. However, the slow pace of claims so far could
mean that it will take longer for the $400 million to be
claimed than FTB currently anticipates. If so, the bill will
result in more firms making claims for the 2011 tax year than
otherwise, thereby accelerating the revenue losses that would
not occur until 2012-13 and beyond into 2011-12. Thus, the
bill results in a trade-off. It would broaden the impact of
the hiring credit by making it available to larger businesses,
but at the expense of a potential revenue loss in 2011-12.
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081