BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
1391 (Yee)
Hearing Date: 5/24/2010 Amended: 5/19/2010
Consultant: Bob Franzoia Policy Vote: Rev & Tax 3-1
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BILL SUMMARY: SB 1391, which would take effect immediately as a
tax levy, would require a taxpayer doing business in the state
that claims a tax credit to submit to the Franchise Tax Board
(FTB) on the original return specified information, including
the number of employees employed by the taxpayer in the state
and the number of jobs created by the tax credit. In addition,
this bill would require, in cases in which a taxpayer 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 allowed
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.
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
FTB administration Minor, absorbable costs annually General
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STAFF COMMENTS: As noted by the FTB, the state provides various
tax credits designed to provide tax relief for taxpayers who
incur certain expenses e.g., child adoption or to influence
behavior, including business practices and decisions e.g.,
research credits or economic development area hiring credits.
These credits generally are designed to provide incentives for
taxpayers to perform various actions or activities that they may
not otherwise undertake.
This bill would disallow certain credits that reduce taxes if
the taxpayer fails to achieve specified employment requirements.
This bill would require a taxpayer doing business in the state
under personal income tax statutes or corporation tax statutes
to submit to the FTB on a timely filed original return the
following information:
- The number of full time, part time, and temporary employees
employed by the taxpayer in the state.
- The amount of tax credits claimed by the taxpayer on the
return for each tax credit.
This bill would provide that for any tax credits added into law
on or after January 1, 2011, the credit would be disallowed and
any credits previously allowed would be recaptured and the
taxpayer would 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 submitted to the FTB.
The net decrease in qualified full time employees would be
determined on an annual full-time equivalent basis by
subtracting the total number of qualified full time employees
employed in the preceding taxable year by the taxpayer and by
any trade or business
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SB 1391 (Yee)
acquired by the taxpayer during the current taxable year from
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.
This bill would define "full-time equivalent" to mean either of
the following:
(1) In the case of a full time employee paid hourly wages, the
total number of hours worked for the taxpayer by the employee
(not to exceed 2,000 hours per employee) divided by 2,000.
(2) In the case of a salaried full time employee, the total
number of weeks worked for the taxpayer by the employee divided
by 52.
A part time employee means an employee who works less than an
average of 35 hours in a week, calculated monthly. A temporary
employee means an employee who works less than 120 days
annually.
The revision of forms and instructions needed to permit the
filing of the necessary information would result in minor,
absorbable costs to the FTB.
Legislative Counsel identifies a bill that imposes, repeals, or
materially alters a state tax as a tax levy. According to the
FTB, this bill does not have any revenue effect because it does
not alter any provisions of current tax law.