BILL NUMBER: SB 1391	AMENDED
	BILL TEXT

	AMENDED IN SENATE  MAY 19, 2010
	AMENDED IN SENATE  APRIL 6, 2010

INTRODUCED BY   Senator Yee

                        FEBRUARY 19, 2010

   An act to  to  add Sections 17060 and 23603 to
the Revenue and Taxation Code, relating to taxation  ,  to
take effect immediately, tax levy.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 1391, as amended, Yee. Tax credits: reporting information and
recapture.
   The Personal Income Tax Law and the Corporation Tax Law authorize
various credits against the taxes imposed by those laws.
   This bill would require a taxpayer doing business in California
that claims a tax credit to submit to the Franchise Tax Board on the
original return specified information, including the number of
employees employed by the taxpayer in the state  , the amount
of tax credits claimed by the taxpayer on the return,  and
the number of jobs created by the tax credit.
   The bill would also require, in cases in which a taxpayer 
subject to the above provisions  has a net decrease in the
number of full-time employees for a credit added by statute on or
after January 1, 2011, the credit to be disallowed and the entire
amount of any credit previously allowed to be recaptured and the
taxpayer to be liable for any credits on previous tax returns, as
specified. 
   This bill would result in a change in state taxes for the purpose
of increasing state revenues within the meaning of Section 3 of
Article XIII  A of the California Constitution, and thus would
require for passage the approval of 2/3 of the membership of each
house of the Legislature. 
   This bill would take effect immediately as a tax levy.
   Vote:  2/3   majority  . Appropriation:
no. Fiscal committee: yes. State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

   SECTION 1.    Section 17060 is added to the 
 Revenue and Taxation Code   , to read:  
   17060.  (a) Notwithstanding any other provision of this part, for
taxable years beginning on or after January 1, 2011, a taxpayer doing
business in this state that claims any business credit against the
"net tax," as defined in Section 17039, shall annually include on the
timely filed original return the following information in the form
and manner as required by forms and instructions prescribed by the
Franchise Tax Board:
   (1) The number of full-time, part-time, and temporary employees,
as defined, employed by the taxpayer in the state for the current and
preceding taxable years.
   (2) The number of full-time jobs, part-time jobs, and temporary
jobs created by the tax credit.
   (b) Notwithstanding any other law, for any business credit against
the "net tax," as defined in Section 17039, that is allowed by an
act that takes effect on or after the effective date of the act
adding this section, both of the following shall apply if the
taxpayer has a net decrease, as determined under subdivision (c), in
the number of full-time equivalent employees according to the
information provided pursuant to subdivision (a):
   (1) The entire amount of the credits for all taxable years shall
be disallowed.
   (2) Any previously allowed credits shall be recaptured and the
taxpayer shall be liable for the entire amount of any credits on
previous tax returns.
   (c) (1) The net decrease in full-time equivalent employees shall
be determined, on and after January 1, 2014, on a full-time
equivalent basis by subtracting from the amount determined in
subparagraph (A) the amount determined in subparagraph (B).
   (A) The total number of full-time equivalent employees employed in
the three preceding taxable years by the taxpayer and by any trade
or business acquired by the taxpayer during the current taxable year,
divided by three.
   (B) The total number of full-time equivalent employees employed in
the current taxable year by the taxpayer and by any trade or
business acquired by the taxpayer during the current taxable year.
   (2) "Full-time equivalent" means either of the following:
   (A) In the case of a full-time employee paid hourly qualified
wages, "full-time equivalent" means the total number of hours worked
for the taxpayer by the employee (not to exceed 2,000 hours per
employee) divided by 2,000.
   (B) In the case of a salaried full-time employee, "full-time
equivalent" means the total number of weeks worked for the taxpayer
by the employee divided by 52.
   (3) All employees of the trades or businesses that are treated as
related under either Section 267, 318, or 707 of the Internal Revenue
Code shall be treated as employed by a single taxpayer.
   (4) The amount of business credits recaptured pursuant to
subdivision (b) shall include the business credits reported on
previous tax returns and interest computed using the adjusted annual
rate established in Section 19521 from the due date of the return for
each taxable year in which the business credit was claimed to the
date of the payment of the additional tax resulting from the
application of this section.
   (5) For purposes of this section, all of the following definitions
apply:
   (A) "Business credit" means a credit added to this part on or
after January 1, 2011, and allowed to taxpayers engaged in or
carrying on any trade, business, profession, vocation or calling, or
commercial activity in the state, including activities in the state
that benefit an affiliated entity of the taxpayer.
   (B) "Full-time employee" means an employee who works an average of
35 hours in a week, calculated monthly.
   (C) "Part-time employee" means an employee who works less than an
average of 35 hours in a week, calculated monthly.
   (D) "Temporary employee" means an employee who works less than 120
days per year.
   (d) Nothing in this section shall limit the authority of the
Franchise Tax Board to audit the information provided by the taxpayer
pursuant to subdivision (a).
   (e) Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code shall not apply to any
standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the Franchise Tax Board pursuant
to subdivision (a). 
   SEC. 2.    Section 23603 is added to the  
Revenue and Taxation Code   , to read:  
   23603.  (a) Notwithstanding any other provision of this part, for
taxable years on or after January 1, 2011, a taxpayer doing business
in the state that claims any business credit against the "tax," as
defined in Section 23036, shall annually include on the timely filed
original return the following information in the form and manner as
required by forms and instructions prescribed by the Franchise Tax
Board:
   (1) The number of full-time, part-time, and temporary employees,
as defined, employed by the taxpayer in the state for the current and
preceding taxable years.
   (2) The number of full-time jobs, part-time jobs, and temporary
jobs created by the tax credit.
   (b) Notwithstanding any other law, for any business credit against
the "tax," as defined in Section 23036, that is allowed by an act
that takes effect on or after the effective date of the act adding
this section, both of the following shall apply if the taxpayer has a
net decrease, as determined under subdivision (c), in the number of
full-time equivalent employees according to the information provided
pursuant to subdivision (a):
   (1) The entire amount of the credits for all taxable years shall
be disallowed.
   (2) Any previously allowed credits shall be recaptured and the
taxpayer shall be liable for the entire amount of any credits on
previous tax returns.
   (c) (1) The net decrease in full-time equivalent employees shall
be determined, on and after January 1, 2014, on a full-time
equivalent basis by subtracting from the amount determined in
subparagraph (A) the amount determined in subparagraph (B).
   (A) The total number of full-time equivalent employees employed in
the three preceding taxable years by the taxpayer and by any trade
or business acquired by the taxpayer during the current taxable year,
divided by three.
   (B) The total number of full-time equivalent employees employed in
the current taxable year by the taxpayer and by any trade or
business acquired by the taxpayer during the current taxable year.
   (2) "Full-time equivalent" means either of the following:
   (A) In the case of a full-time employee paid hourly qualified
wages, "full-time equivalent" means the total number of hours worked
for the taxpayer by the employee (not to exceed 2,000 hours per
employee) divided by 2,000.
   (B) In the case of a salaried full-time employee, "full-time
equivalent" means the total number of weeks worked for the taxpayer
by the employee divided by 52.
   (3) All employees of the trades or businesses that are treated as
related under either Section 267, 318, or 707 of the Internal Revenue
Code shall be treated as employed by a single taxpayer.
   (4) The amount of business credits recaptured pursuant to
subdivision (b) shall include the business credits reported on
previous tax returns and interest computed using the adjusted annual
rate established in Section 19521 from the due date of the return for
each taxable year in which the business credit was claimed to the
date of the payment of the additional tax resulting from the
application of this section.
   (5) For purposes of this section, all of the following definitions
apply:
   (A) "Business credit" means a credit added to this part on or
after January 1, 2011, and allowed to taxpayers engaged in or
carrying on any trade, business, profession, vocation or calling, or
commercial activity in the state, including activities in the state
that benefit an affiliated entity of the taxpayer.
   (B) "Full-time employee" means an employee who works an average of
35 hours in a week, calculated monthly.
   (C) "Part-time employee" means an employee who works less than an
average of 35 hours in a week, calculated monthly.
   (D) "Temporary employee" means an employee who works less than 120
days per year.
   (d) Nothing in this section shall limit the authority of the
Franchise Tax Board to audit the information provided by the taxpayer
pursuant to subdivision (a).
   (e) Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code shall not apply to any
standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the Franchise Tax Board pursuant
to subdivision (a). 
   SEC. 3.    This act provides for a tax levy within
the meaning of Article IV of the Constitution and shall go into
immediate effect.  
  SECTION 1.    Section 17060 is added to the
Revenue and Taxation Code, to read:
   17060.  (a) Notwithstanding any provision of this part, a taxpayer
doing business in the state that claims any credit against the "net
tax," as defined in Section 17039, shall annually submit to the
Franchise Tax Board on the timely filed original return the following
information:
   (1) The number of full-time employees, as defined, part-time
employees, and temporary employees employed by the taxpayer in the
state.
   (2) The amount of tax credits claimed by the taxpayer on the
return for each tax credit under this part.
   (3) The number of full-time jobs, part-time jobs, and temporary
jobs created by the tax credit.
   (4) A list of occupations, job classifications, and expected
average wages for the full-time jobs, part-time jobs, and temporary
jobs created by the tax credit.
   (5) A certification by the taxpayer that the information is true
and correct and contains no knowing misrepresentation.
   (6) The taxpayer's office mailing address and office telephone
number.
   (b) Notwithstanding any provision of this part, for any credit
against the "net tax," as defined in Section 17039, added to this
chapter on or after January 1, 2011, the credit shall be disallowed,
and the entire amount of any credit previously allowed under this
part shall be recaptured and the taxpayer shall be liable for any
credits on previous tax returns if the taxpayer has a net decrease in
the number of full-time employees according to the information
specified in (a).
   (1) The net decrease in qualified full-time employees shall be
determined on an annual full-time equivalent basis by subtracting
from the amount determined in subparagraph (A) the amount determined
in subparagraph (B).
   (A) The total number of qualified full-time employees employed in
the preceding taxable year by the taxpayer and by any trade or
business acquired by the taxpayer during the current taxable year.
   (B) The total number of full-time employees employed in the
current taxable year by the taxpayer and by any trade or business
acquired during the current taxable year.
   (2) "Annual full-time equivalent" means either of the following:
   (A) In the case of a full-time employee paid hourly qualified
wages, "annual full-time equivalent" means the total number of hours
worked for the taxpayer by the employee (not to exceed 2,000 hours
per employee) divided by 2,000.
   (B) In the case of a salaried full-time employee, "annual
full-time equivalent" means the total number of weeks worked for the
taxpayer by the employee divided by 52.
   (3) All employees of the trades or businesses that are treated as
related under either Section 267, 318, or 707 of the Internal Revenue
Code shall be treated as employed by a single taxpayer. 

  SEC. 2.    Section 23603 is added to the Revenue
and Taxation Code, to read:
   23603.  (a) Notwithstanding any provision of this part, a taxpayer
doing business in the state that claims any credit against the "tax"
, as defined in Section 23036, shall submit to the Franchise Tax
Board on the timely filed original return the following information
annually when filing a return:
   (1) The number of full-time employees, as defined, part-time
employees, and temporary employees employed by the taxpayer in the
state.
   (2) The amount of tax credits claimed by the taxpayer on the
return for each tax credit under this part.
   (3) The number of full-time jobs, part-time jobs, and temporary
jobs created by the tax credit.
   (4) A list of occupations, job classifications, and expected
average wages for the full-time jobs, part-time jobs, and temporary
jobs created by the tax credit.
   (5) A certification by the taxpayer that the information is true
and correct and contains no knowing misrepresentation.
   (6) The taxpayer's office mailing address and office telephone
number.
   (b) Notwithstanding any provision of this part, for any credit
against the "net tax," as defined in Section 17039, added to this
chapter on or after January 1, 2011, the credit shall be disallowed,
and the entire amount of any credit previously allowed under this
part shall be recaptured and the taxpayer shall be liable for any
credits on previous tax returns if the taxpayer has a net decrease in
the number of full-time employees according to the information
specified in (a).
   (1) The net decrease in qualified full-time employees shall be
determined on an annual full-time equivalent basis by subtracting
from the amount determined in subparagraph (A) the amount determined
in subparagraph (B).
   (A) The total number of qualified full-time employees employed in
the preceding taxable year by the taxpayer and by any trade or
business acquired by the taxpayer during the current taxable year.
   (B) The total number of full-time employees employed in the
current taxable year by the taxpayer and by any trade or business
acquired during the current taxable year.
   (2) "Annual full-time equivalent" means either of the following:
   (A) In the case of a full-time employee paid hourly qualified
wages, "annual full-time equivalent" means the total number of hours
worked for the taxpayer by the employee (not to exceed 2,000 hours
per employee) divided by 2,000.
   (B) In the case of a salaried full-time employee, "annual
full-time equivalent" means the total number of weeks worked for the
taxpayer by the employee divided by 52.
   (3) All employees of the trades or businesses that are treated as
related under either Section 267, 318, or 707 of the Internal Revenue
Code shall be treated as employed by a single taxpayer. 

  SEC. 3.    This act provides for a tax levy within
the meaning of Article IV of the Constitution and shall go into
immediate effect.