BILL NUMBER: AB 231 INTRODUCED
BILL TEXT
INTRODUCED BY Assembly Members V. Manuel Pérez and Alejo
(Coauthor: Assembly Member Bradford)
FEBRUARY 2, 2011
An act to amend Section 7072 of, and to repeal and add Section
7072.5 of, the Government Code, and to amend Sections 17053.74 and
23622.7 of the Revenue and Taxation Code, relating to economic
development, to take effect immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
AB 231, as introduced, V. Manuel Pérez. Economic development:
enterprise zones: targeted employment areas.
(1) The Enterprise Zone Act provides that its purpose is to
stimulate business and industrial growth in the depressed areas of
the state by relaxing regulatory controls that impede private
investment. The act defines a targeted employment area as an area
composed solely of those census tracts in which at least 51% of the
residents of those census tracts, determined as specified, are of
low- or moderate-income levels.
This bill would modify the definition of a targeted employment
area, as specified.
(2) The act provides that the purpose of a targeted employment
area is to encourage businesses in an enterprise zone to hire
eligible residents of certain geographic areas within a city, county,
or city and county.
This bill would delete that provision of the act and instead
provide that the purpose of a targeted employment area is to help
identify neighborhoods of low- and moderate-income workers for the
purpose of providing those workers with employment assistance,
training, and job placement.
(3) The act requires each governmental entity of each city,
county, or city and county that has jurisdiction over an enterprise
zone to approve, by resolution or ordinance, the boundaries of its
targeted employment area.
This bill would delete that requirement, and instead require the
governing body of the jurisdiction administering the enterprise zone
to adopt a resolution or ordinance designating a targeted employment
area that meets specified conditions. The bill would also require, if
2 or more jurisdictions are jointly administering a zone, each of
the governing bodies of the participating jurisdictions to adopt the
resolution.
(4) The act requires, within 180 days of updated United States
census data becoming available, each governmental entity of each
city, county, or city and county that has jurisdiction over an
enterprise zone to approve, by resolution or ordinance, new
boundaries for the area that reflect the new census data. The act
authorizes an enterprise zone, if no changes to the boundaries of an
area are necessary to conform the area with the most current census
data, to send a letter to the Department of Housing and Community
Development stating that a review has been undertaken and no boundary
changes are required.
This bill would delete those provisions, and instead require the
governmental entity of each city, county, or city and county that has
jurisdiction over an enterprise zone to approve, by resolution or
ordinance, new boundaries for its targeted employment area that
reflect the new household data provided by the United States Census
Bureau in its 5-year American Community Study, and to send that
resolution or ordinance to the Department of Housing and Community
Development. The bill would require the city, county, or city and
county, if no changes to the boundaries of an area are necessary, to
send a letter to the department stating that a review has been
undertaken and no boundary changes are required. The bill would
provide that if the area's boundaries are not updated, and the
department does not receive the letter within 180 days of the release
of new census information, then the area is invalidated for a period
of 2 years, except as specified.
(5) The act sets forth various requirements and limitations
relating to the formation and composition of a targeted employment
area.
This bill would revise and recast these requirements and
limitations, as specified.
(6) The act authorizes a governing body that has already
designated a targeted employment area to request to redesignate the
area using more current census data, as specified, and requires an
area to be comprised of a census tract from only one decennial
census.
This bill would delete that provision.
(7) The Personal Income Tax Law and the Corporation Tax Law
authorize a taxpayer to claim certain tax incentives for activities
conducted in an enterprise zone, including a credit for wages paid
during the taxable year to a qualified employee, as defined, who is
employed by the taxpayer during the taxable year in an enterprise
zone, and those laws each set forth a schedule for the amount of the
credit based on the qualified wages of the qualified employee in each
of the first 5 years of employment.
This bill would modify the requirements that must be met for an
individual to be a qualified employee, as specified, under the
Personal Income Tax Law and the Corporation Tax Law, thereby reducing
the scope of the credits, and make other specified changes relating
to the requirements for a taxpayer to take advantage of the credits.
The bill would require that changes made to the Personal Income Tax
Law and the Corporations Tax Law by its provisions apply to taxable
years beginning on and after January 1, 2011.
(8) This bill would include a change in state statute that would
result in a taxpayer paying a higher tax 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.
(9) This bill would take effect immediately as a tax levy.
Vote: 2/3. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 7072 of the Government Code is amended to read:
7072. For purposes of this chapter, the following definitions
shall apply:
(a) "Department" means the Department of Housing and Community
Development.
(b) "Date of original designation" means the earlier of the
following:
(1) The date the eligible area receives designation as an
enterprise zone by the department pursuant to this chapter.
(2) In the case of an enterprise zone deemed designated pursuant
to subdivision (e) of Section 7073, the date the enterprise zone or
program area received original designation by the former Trade and
Commerce Agency pursuant to Chapter 12.8 (commencing with Section
7070) or Chapter 12.9 (commencing with Section 7080), as those
chapters read prior to January 1, 1997.
(c) "Eligible area" means any of the following:
(1) An area designated as an enterprise zone pursuant to Chapter
12.8 (commencing with Section 7070), as it read prior to January 1,
1997, or as a targeted economic development area, neighborhood
development area, or program area pursuant to Chapter 12.9
(commencing with Section 7080), as it read prior to January 1, 1997.
(2) A geographic area that, based upon the determination of the
department, fulfills at least one of the following criteria:
(A) The proposed geographic area meets the Urban Development
Action Grant criteria of the United States Department of Housing and
Urban Development.
(B) The area within the proposed eligible area has experienced
plant closures within the past two years affecting more than 100
workers.
(C) The city or county has submitted material to the department
for a finding that the proposed geographic area meets criteria of
economic distress related to those used in determining eligibility
under the Urban Development Action Grant Program and is therefore an
eligible area.
(D) The area within the proposed zone has a history of
gang-related activity, whether or not crimes of violence have been
committed.
(3) A geographic area that meets at least two of the following
criteria:
(A) The census tracts within the proposed eligible area have an
unemployment rate not less than 3 percentage points above the
statewide average for the most recent calendar year as determined by
the Employment Development Department.
(B) The county of the proposed eligible area has more than 70
percent of the children enrolled in public school participating in
the federal free lunch program.
(C) The median household income for a family of four within the
census tracts of the proposed eligible area does not exceed 80
percent of the statewide median income for the most recently
available calendar year.
(d) "Enterprise zone" means any area within a city, county, or
city and county that is designated as an enterprise zone by the
department in accordance with Section 7073.
(e) "Governing body" means a county board of supervisors or a city
council, as appropriate.
(f) "G-TEDA" means a geographically targeted economic development
area, which is an area designated as an enterprise zone, a
Manufacturing Enhancement Area, a targeted tax area, or a local
agency military base recovery area.
(g) "High-technology industries" includes, but is not limited to,
the computer, biological engineering, electronics, and
telecommunications industries.
(h) "Resident," unless otherwise defined, means a person whose
principal place of residence is within a targeted employment area.
(i) (1) "Targeted employment
area" means an area within a city, county, or city and county that
is composed solely of those census tracts designated by the United
States Department of Housing and Urban Development as having at least
51 percent of its residents of low- or moderate-income levels, using
either the most recent United States
Department of Census Bureau data available at
the time of the original enterprise zone application or the
most recent census data available at the time the targeted
employment area is designated to determine that eligibility.
The purpose of a "targeted employment area" is to encourage
businesses in an enterprise zone to hire eligible residents of
certain geographic areas within a city, county, or city and county. A
targeted employment area may be, but is not required to be, the same
as all or part of an enterprise zone. A targeted employment area's
boundaries need not be contiguous. A targeted employment area does
not need to encompass each eligible census tract within a city,
county, or city and county. The governing body of each city, county,
or city and county that has jurisdiction of the enterprise zone shall
identify those census tracts whose residents are in the most need of
this employment targeting. Only those census tracts within the
jurisdiction of the city, county, or city and county that has
jurisdiction of the enterprise zone may be included in a targeted
employment area.
(2) At least a part of each eligible census tract within a
targeted employment area shall be within the territorial jurisdiction
of the city, county, or city and county that has jurisdiction for an
enterprise zone. If an eligible census tract encompasses the
territorial jurisdiction of two or more local governmental entities,
all of those entities shall be a party to the designation of a
targeted employment area. However, any one or more of those entities,
by resolution or ordinance, may specify that it shall not
participate in the application as an applicant, but shall agree to
complete all actions stated within the application that apply to its
jurisdiction, if the area is designated.
(3) Each local governmental entity of each city, county, or city
and county that has jurisdiction of an enterprise zone shall approve,
by resolution or ordinance, the boundaries of its targeted
employment area, regardless of whether a census tract within the
proposed targeted employment area is outside the jurisdiction of the
local governmental entity.
(4) (A) Within 180 days of updated United States census data
becoming available, each local governmental entity of each city,
county, or city and county that has jurisdiction of an enterprise
zone shall approve, by resolution or ordinance, boundaries of its
targeted employment area reflecting the new census data. If no
changes are necessary to the boundaries based on the most current
census data, the enterprise zone may send a letter to the department
stating that a review has been undertaken by the respective local
governmental entities and no boundary changes are required.
(B) A targeted employment area boundary approved prior to the 2000
United States census data becoming available that has not been
reviewed and its boundaries revised to reflect the most recent census
data, shall be reviewed and updated, and a new resolution or
ordinance submitted by the appropriate local governmental entity to
the department, by July 1, 2007. However, enterprise zones that
expire on or prior to December 31, 2008, shall be exempt from the
update requirement.
SEC. 2. Section 7072.5 of the Government Code is repealed.
7072.5. By April 1, 1998, a governing body that has already
designated a target employment area may request, by a resolution of
all cities or counties having jurisdiction over the enterprise zone,
to redesignate the targeted employment area using more current census
data. A targeted employment area shall be comprised of census tracts
from only one decennial census.
SEC. 3. Section 7072.5 is added to the Government Code, to read:
7072.5. (a) After receiving notification from the department of
being conditionally designated as an enterprise zone, the governing
body of the jurisdiction administering the zone shall adopt a
resolution or ordinance designating a targeted employment area that
meets all the conditions of this section and those set forth in
subdivision (i) of Section 7072, and is consistent with the purpose
set forth in this section. If two or more jurisdictions are jointly
administering a zone, a resolution or ordinance designating the
targeted employment area shall be adopted by each governing body.
(b) A targeted employment area serves as the residential base of
potential low- and moderate-income workers who are available to work
in businesses located in an enterprise zone. The purpose of a
targeted employment area is to help identify neighborhoods of low-
and moderate-income workers for the purpose of providing those
workers with employment assistance, training, and job placement.
Businesses located in a zone are encouraged to hire locally to help
address some of the poverty and economic dislocation that led to the
area's designation as a zone.
(c) (1) A targeted employment area may be, but is not required to
be, the same as all or part of an enterprise zone. A targeted
employment area's boundaries need not be contiguous. A targeted
employment area does not need to encompass each eligible census tract
or block group within a city, county, or city and county. The
governing body of each city, county, or city and county that has
jurisdiction over the zone shall identify those census tracts whose
residents are in the most need of this employment targeting. Only
those census tracts within the jurisdiction of the city, county, or
city and county that have jurisdiction over the zone may be included
in a targeted employment area.
(2) At least part of each eligible census tract within a targeted
employment area shall be within the territorial jurisdiction of the
city, county, or city and county that has jurisdiction over an
enterprise zone. If an eligible census tract encompasses the
territorial jurisdiction of two or more local governmental entities,
all of those entities shall be a party to the designation of the
targeted employment area. However any one or more of those entities,
by resolution or ordinance, may specify that it shall not participate
in the application as an applicant, but shall agree to complete all
actions stated within the application that apply to its jurisdiction,
if the area is designated.
(d) (1) A targeted employment area shall be designated based on
data from the most current household income data published by the
United States Census Bureau at the time that the targeted employment
area is designated or modified, including being updated pursuant to
paragraph (2).
(2) Every targeted employment area boundary shall be reviewed and
updated to the extent necessary to accommodate the new household
income data provided by the United States Census Bureau in its
five-year American Community Survey. Each governmental entity of each
city, county, or city and county that has jurisdiction over an
enterprise zone shall approve, by resolution or ordinance, the
boundaries of its targeted employment area reflecting the new
household data and send a copy of its resolution with the changes
that are necessary to the boundaries based on the most current census
data, or the governmental entity that has jurisdiction over the zone
shall send a letter to the department stating that the review has
been undertaken by the respective local governmental entities and no
boundary changes are required.
(3) (A) A targeted employment area boundary that is not updated,
or for which a letter indicating that no changes are necessary has
not been received by the department within 180 days of the release of
new household data, is invalidated for a period of two years, except
as modified by subparagraph (C).
(B) The department shall send a notice to the Franchise Tax Board
and the local enterprise zone administrator that the targeted
employment area is invalid and that no additional employees will be
certified based on an employee living in a targeted employment area,
other than a business that has already had one or more vouchers
certified by the zone using the targeted employment area as the
qualifying criterion under subparagraph (A) of paragraph (4) of
subdivision (b) of Sections 17053.74 and 23622.7 of the Revenue and
Taxation Code.
(C) A business that has previously received certification of an
employee is exempt from subparagraph (A). The vouchering exemption is
nontransferable to any other business.
SEC. 4. Section 17053.74 of the Revenue and Taxation Code is
amended to read:
17053.74. (a) There shall be allowed a credit against the "net
tax" (as defined in Section 17039) to a taxpayer who employs a
qualified employee in an enterprise zone during the taxable year. The
credit shall be equal to the sum of each of the following:
(1) Fifty percent of qualified wages in the first year of
employment.
(2) Forty percent of qualified wages in the second year of
employment.
(3) Thirty percent of qualified wages in the third year of
employment.
(4) Twenty percent of qualified wages in the fourth year of
employment.
(5) Ten percent of qualified wages in the fifth year of
employment.
(b) For purposes of this section:
(1) "Qualified wages" means:
(A) (i) Except as provided in clause (ii), that portion of wages
paid or incurred by the taxpayer during the taxable year to qualified
employees that does not exceed 150 percent of the minimum wage.
(ii) For up to 1,350 qualified employees who are employed by the
taxpayer in the Long Beach Enterprise Zone in aircraft manufacturing
activities described in Codes 3721 to 3728, inclusive, and
Code 3812 of the Standard Industrial Classification (SIC) Manual
311 to 339, inclusive, of the North American Industry
Classification System published by the United States Office of
Management and Budget, 1987 2007
edition, "qualified wages" means that portion of hourly wages that
does not exceed 202 percent of the minimum wage.
(B) Wages received during the 60-month period beginning with the
first day the employee commences employment with the taxpayer.
Reemployment in connection with any increase, including a regularly
occurring seasonal increase, in the trade or business operations of
the taxpayer does not constitute commencement of employment for
purposes of this section.
(C) Qualified wages do not include any wages paid or incurred by
the taxpayer on or after the zone expiration date. However, wages
paid or incurred with respect to qualified employees who are employed
by the taxpayer within the enterprise zone within the 60-month
period prior to the zone expiration date shall continue to qualify
for the credit under this section after the zone expiration date, in
accordance with all provisions of this section applied as if the
enterprise zone designation were still in existence and binding.
(2) "Minimum wage" means the wage established by the Industrial
Welfare Commission as provided for in Chapter 1 (commencing with
Section 1171) of Part 4 of Division 2 of the Labor Code.
(3) "Zone expiration date" means the date the enterprise zone
designation expires, is no longer binding, or becomes inoperative.
(4) (A) "Qualified employee" means an individual who meets all of
the following requirements:
(i) At least 90 percent of whose services for the taxpayer during
the taxable year are directly related to the conduct of the taxpayer'
s trade or business located in an enterprise zone.
(ii) Performs at least 50 percent of his or her services for the
taxpayer during the taxable year in an enterprise zone.
(iii) Is hired by the taxpayer after the date of original
designation of the area in which services were performed as an
enterprise zone.
(iv) Is any of the following:
(I) Immediately preceding the qualified employee's commencement of
employment with the taxpayer, was a person eligible for services
under the federal Job Training Partnership Act (29 U.S.C. Sec. 1501
et seq.), or its successor, who is receiving, or is eligible to
receive, subsidized employment, training, or services funded by the
federal Job Training Partnership Act, or its successor.
(II) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a person eligible to be a
voluntary or mandatory registrant under the Greater Avenues for
Independence Act of 1985 (GAIN) provided for pursuant to Article 3.2
(commencing with Section 11320) of Chapter 2 of Part 3 of Division 9
of the Welfare and Institutions Code, or its successor.
(III)
(I ) Immediately preceding the qualified
employee's commencement of employment with the taxpayer, was an
economically disadvantaged individual 14 years of age or older.
(IV)
(II) Immediately preceding the qualified employee's
commencement of employment with the taxpayer, was a dislocated worker
who meets any of the following:
(aa) Has been terminated or laid off or who has received a notice
of termination or layoff from employment, is eligible for or has
exhausted entitlement to unemployment insurance benefits, and is
unlikely to return to his or her previous industry or occupation.
(bb) Has been terminated or has received a notice of termination
of employment as a result of any permanent closure or any substantial
layoff at a plant, facility, or enterprise, including an individual
who has not received written notification but whose employer has made
a public announcement of the closure or layoff.
(cc) Is long-term unemployed and has limited opportunities for
employment or reemployment in the same or a similar occupation in the
area in which the individual resides, including an individual 55
years of age or older who may have substantial barriers to employment
by reason of age.
(dd) Was self-employed (including farmers and ranchers) and is
unemployed as a result of general economic conditions in the
community in which he or she resides or because of natural disasters.
(ee) Was a civilian employee of the Department of Defense employed
at a military installation being closed or realigned under the
Defense Base Closure and Realignment Act of 1990.
(ff) Was an active member of the armed forces or National Guard as
of September 30, 1990, and was either involuntarily separated or
separated pursuant to a special benefits program.
(gg) Is a seasonal or migrant worker who experiences chronic
seasonal unemployment and underemployment in the agriculture
industry, aggravated by continual advancements in technology and
mechanization.
(hh) Has been terminated or laid off, or has received a notice of
termination or layoff, as a consequence of compliance with the Clean
Air Act.
(V)
(III) Immediately preceding the qualified employee's
commencement of employment with the taxpayer, was a disabled
individual who is eligible for or enrolled in, or has completed a
state rehabilitation plan or is .
(IV) Immediately preceding the
qualified employee's commencement of employment with the taxpayer,
was a service-connected disabled veteran, veteran of the
Vietnam era, or veteran who is recently separated from military
service.
(VI)
(V ) Immediately preceding the qualified
employee's commencement of employment with the taxpayer, was an
ex-offender. An individual shall be treated as convicted if he or she
was placed on probation by a state court without a finding of guilt.
(VII)
(VI ) Immediately preceding the qualified
employee's commencement of employment with the taxpayer, was a person
eligible for or a recipient of any of the following:
(aa) Federal Supplemental Security Income benefits.
(bb) Aid to Families with Dependent Children
Temporary Assistance for Needy Families .
(cc) Medi-Cal or Healthy Families.
(cc)
(dd) Food stamps.
(dd)
(ee) State and local general assistance.
(ff) Intensive services including employment training services
funded through the federal Workforce Investment Act (Public Law
105-220).
(gg) Voluntary or mandatory services under the California Work
Opportunity and Responsibility to Kids (CalWORKs) program (Chapter 2
(commencing with Section 11200) of Part 3 of Division 9 of the
Welfare and Institutions Code).
(hh) Federal Work Opportunity Tax Credit (Section 51 of the
Internal Revenue Code).
(VIII)
(VII ) Immediately preceding the qualified
employee's commencement of employment with the taxpayer, was a member
of a federally recognized Indian tribe, band, or other group of
Native American descent.
(IX)
(VIII) Immediately preceding the qualified employee's
commencement of employment with the taxpayer, was a resident of a
targeted employment area, as defined in Section 7072 of the
Government Code , and the employee is receiving a
wage that does not exceed moderate income for a family of four based
on the countywide household income .
(X)
(IX) An employee who qualified the taxpayer for the
enterprise zone hiring credit under former Section 17053.8 or the
program area hiring credit under former Section 17053.11.
(XI) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a member of a targeted group, as
defined in Section 51(d) of the Internal Revenue Code, or its
successor.
(B) Priority for employment shall be provided to an individual who
is enrolled in a qualified program under the federal Job
Training Partnership Act or the Greater Avenues for Independence Act
of 1985 Workforce Investment Act or the CalWORKs
program or who is eligible as a member of a targeted group
under the Work Opportunity Tax Credit (Section 51 of the Internal
Revenue Code), or its successor.
(5) "Taxpayer" means a person or entity engaged in a trade or
business within an enterprise zone designated pursuant to Chapter
12.8 (commencing with Section 7070) of the Government Code.
(6) "Seasonal employment" means employment by a taxpayer that has
regular and predictable substantial reductions in trade or business
operations.
(c) The taxpayer shall do both of the following:
(1) Obtain from the Employment Development Department, as
permitted by federal law, the local county or city Job
Training Partnership Act administrative entity, the local county GAIN
federal Workforce Investment Act administrative
entity, the local county CalWORKs program office or social
services agency, or the local government administering the enterprise
zone, a certification which provides that a qualified employee meets
the eligibility requirements specified in clause (iv) of
subparagraph (A) of paragraph (4) of subdivision (b). The Employment
Development Department may provide preliminary screening and referral
to a certifying agency. The Employment Development
Department shall develop a form for this purpose
businesses located in an enterprise zone as of the department's
implementation of the intensive services activities funded through
the federal Workforce Investment Act . The Department of
Housing and Community Development shall develop regulations governing
the issuance of certificates by local governments pursuant to
subdivision (a) of Section 7086 of the Government Code.
(2) Retain a copy of the certification and provide it upon request
to the Franchise Tax Board.
(d) (1) For purposes of this section:
(A) All employees of trades or businesses, which are not
incorporated, that are under common control shall be treated as
employed by a single taxpayer.
(B) The credit, if any, allowable by this section with respect to
each trade or business shall be determined by reference to its
proportionate share of the expense of the qualified wages giving rise
to the credit, and shall be allocated in that manner.
(C) Principles that apply in the case of controlled groups of
corporations, as specified in subdivision (d) of Section 23622.7,
shall apply with respect to determining employment.
(2) If an employer acquires the major portion of a trade or
business of another employer (hereinafter in this paragraph referred
to as the "predecessor") or the major portion of a separate unit of a
trade or business of a predecessor, then, for purposes of applying
this section (other than subdivision (e)) for any calendar year
ending after that acquisition, the employment relationship between a
qualified employee and an employer shall not be treated as terminated
if the employee continues to be employed in that trade or business.
(e) (1) (A) If the employment, other than seasonal employment, of
any qualified employee, with respect to whom qualified wages are
taken into account under subdivision (a) is terminated by the
taxpayer at any time during the first 270 days of that employment
(whether or not consecutive) or before the close of the 270th
calendar day after the day in which that employee completes 90 days
of employment with the taxpayer, the tax imposed by this part for the
taxable year in which that employment is terminated shall be
increased by an amount equal to the credit allowed under subdivision
(a) for that taxable year and all prior taxable years attributable to
qualified wages paid or incurred with respect to that employee.
(B) If the seasonal employment of any qualified employee, with
respect to whom qualified wages are taken into account under
subdivision (a) is not continued by the taxpayer for a period of 270
days of employment during the 60-month period beginning with the day
the qualified employee commences seasonal employment with the
taxpayer, the tax imposed by this part, for the taxable year that
includes the 60th month following the month in which the qualified
employee commences seasonal employment with the taxpayer, shall be
increased by an amount equal to the credit allowed under subdivision
(a) for that taxable year and all prior taxable years attributable to
qualified wages paid or incurred with respect to that qualified
employee.
(2) (A) Subparagraph (A) of paragraph (1) shall not apply to any
of the following:
(i) A termination of employment of a qualified
employee who voluntarily leaves the employment of the taxpayer.
(ii) A termination of employment of a qualified employee who,
before the close of the period referred to in paragraph (1), becomes
disabled and unable to perform the services of that employment,
unless that disability is removed before the close of that period and
the taxpayer fails to offer reemployment to that employee.
(iii) A termination of employment of a qualified employee, if it
is determined that the termination was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that employee.
(iv) A termination of employment of a qualified employee due to a
substantial reduction in the trade or business operations of the
taxpayer.
(v) A termination of employment of a qualified employee, if that
employee is replaced by other qualified employees so as to create a
net increase in both the number of employees and the hours of
employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of
the following:
(i) A failure to continue the seasonal employment of a qualified
employee who voluntarily fails to return to the seasonal employment
of the taxpayer.
(ii) A failure to continue the seasonal employment of a qualified
employee who, before the close of the period referred to in
subparagraph (B) of paragraph (1), becomes disabled and unable to
perform the services of that seasonal employment, unless that
disability is removed before the close of that period and the
taxpayer fails to offer seasonal employment to that qualified
employee.
(iii) A failure to continue the seasonal employment of a qualified
employee, if it is determined that the failure to continue the
seasonal employment was due to the misconduct (as defined in Sections
1256-30 to 1256-43, inclusive, of Title 22 of the California Code of
Regulations) of that qualified employee.
(iv) A failure to continue seasonal employment of a qualified
employee due to a substantial reduction in the regular seasonal trade
or business operations of the taxpayer.
(v) A failure to continue the seasonal employment of a qualified
employee, if that qualified employee is replaced by other qualified
employees so as to create a net increase in both the number of
seasonal employees and the hours of seasonal employment.
(C) For purposes of paragraph (1), the employment relationship
between the taxpayer and a qualified employee shall not be treated as
terminated by reason of a mere change in the form of conducting the
trade or business of the taxpayer, if the qualified employee
continues to be employed in that trade or business and the taxpayer
retains a substantial interest in that trade or business.
(3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
(f) In the case of an estate or trust, both of the following
apply:
(1) The qualified wages for any taxable year shall be apportioned
between the estate or trust and the beneficiaries on the basis of the
income of the estate or trust allocable to each.
(2) Any beneficiary to whom any qualified wages have been
apportioned under paragraph (1) shall be treated, for purposes of
this part, as the employer with respect to those wages.
(g) For purposes of this section, "enterprise zone" means an area
designated as an enterprise zone pursuant to Chapter 12.8 (commencing
with Section 7070) of Division 7 of Title 1 of the Government Code.
(h) The credit allowable under this section shall be reduced by
the credit allowed under Sections 17053.10, 17053.17 and 17053.46
claimed for the same employee. The credit shall also be reduced by
the federal credit allowed under Section 51 of the Internal Revenue
Code.
In addition, any deduction otherwise allowed under this part for
the wages or salaries paid or incurred by the taxpayer upon which the
credit is based shall be reduced by the amount of the credit, prior
to any reduction required by subdivision (i) or (j).
(i) In the case where the credit otherwise allowed under this
section exceeds the "net tax" for the taxable year, that portion of
the credit that exceeds the "net tax" may be carried over and added
to the credit, if any, in succeeding taxable years, until the credit
is exhausted. The credit shall be applied first to the earliest
taxable years possible.
(j) (1) The amount of the credit otherwise allowed under this
section and Section 17053.70, including any credit carryover from
prior years, that may reduce the "net tax" for the taxable year shall
not exceed the amount of tax which would be imposed on the taxpayer'
s business income attributable to the enterprise zone determined as
if that attributable income represented all of the income of the
taxpayer subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the
enterprise zone. For that purpose, the taxpayer's business income
attributable to sources in this state first shall be determined in
accordance with Chapter 17 (commencing with Section 25101) of Part
11. That business income shall be further apportioned to the
enterprise zone in accordance with Article 2 (commencing with Section
25120) of Chapter 17 of Part 11, modified for purposes of this
section in accordance with paragraph (3).
(3) Business income shall be apportioned to the enterprise zone by
multiplying the total California business income of the taxpayer by
a fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is two. For purposes of
this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the enterprise zone during the
taxable year, and the denominator of which is the average value of
all the taxpayer's real and tangible personal property owned or
rented and used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the enterprise zone during
the taxable year for compensation, and the denominator of which is
the total compensation paid by the taxpayer in this state during the
taxable year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "net tax" for the
taxable year, as provided in subdivision (i).
(k) The changes made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 1997.
(l) The changes made to this section by the act adding this
subdivision shall apply only to taxable years beginning on and after
January 1, 2011.
SEC. 5. Section 23622.7 of the Revenue and Taxation Code is
amended to read:
23622.7. (a) There shall be allowed a credit against the "tax"
(as defined by Section 23036) to a taxpayer who employs a qualified
employee in an enterprise zone during the taxable year. The credit
shall be equal to the sum of each of the following:
(1) Fifty percent of qualified wages in the first year of
employment.
(2) Forty percent of qualified wages in the second year of
employment.
(3) Thirty percent of qualified wages in the third year of
employment.
(4) Twenty percent of qualified wages in the fourth year of
employment.
(5) Ten percent of qualified wages in the fifth year of
employment.
(b) For purposes of this section:
(1) "Qualified wages" means:
(A) (i) Except as provided in clause (ii), that portion of wages
paid or incurred by the taxpayer during the taxable year to qualified
employees that does not exceed 150 percent of the minimum wage.
(ii) For up to 1,350 qualified employees who are employed by the
taxpayer in the Long Beach Enterprise Zone in aircraft manufacturing
activities described in Codes 3721 to 3728, inclusive, and
Code 3812 of the Standard Industrial Classification (SIC) Manual
311 to 339, inclusive, of the North American Industry
Classification System published by the United States Office of
Management and Budget, 1987 2007
edition, "qualified wages" means that portion of hourly wages that
does not exceed 202 percent of the minimum wage.
(B) Wages received during the 60-month period beginning with the
first day the employee commences employment with the taxpayer.
Reemployment in connection with any increase, including a regularly
occurring seasonal increase, in the trade or business operations of
the taxpayer does not constitute commencement of employment for
purposes of this section.
(C) Qualified wages do not include any wages paid or incurred by
the taxpayer on or after the zone expiration date. However, wages
paid or incurred with respect to qualified employees who are employed
by the taxpayer within the enterprise zone within the 60-month
period prior to the zone expiration date shall continue to qualify
for the credit under this section after the zone expiration date, in
accordance with all provisions of this section applied as if the
enterprise zone designation were still in existence and binding.
(2) "Minimum wage" means the wage established by the Industrial
Welfare Commission as provided for in Chapter 1 (commencing with
Section 1171) of Part 4 of Division 2 of the Labor Code.
(3) "Zone expiration date" means the date the enterprise zone
designation expires, is no longer binding, or becomes inoperative.
(4) (A) "Qualified employee" means an individual who meets all of
the following requirements:
(i) At least 90 percent of whose services for the taxpayer during
the taxable year are directly related to the conduct of the taxpayer'
s trade or business located in an enterprise zone.
(ii) Performs at least 50 percent of his or her services for the
taxpayer during the taxable year in an enterprise zone.
(iii) Is hired by the taxpayer after the date of original
designation of the area in which services were performed as an
enterprise zone.
(iv) Is any of the following:
(I) Immediately preceding the qualified employee's commencement of
employment with the taxpayer, was a person eligible for services
under the federal Job Training Partnership Act (29 U.S.C. Sec. 1501
et seq.), or its successor, who is receiving, or is eligible to
receive, subsidized employment, training, or services funded by the
federal Job Training Partnership Act, or its successor.
(II) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a person eligible to be a
voluntary or mandatory registrant under the Greater Avenues for
Independence Act of 1985 (GAIN) provided for pursuant to Article 3.2
(commencing with Section 11320) of Chapter 2 of Part 3 of Division 9
of the Welfare and Institutions Code, or its successor.
(III)
( I) Immediately preceding the qualified
employee's commencement of employment with the taxpayer, was an
economically disadvantaged individual 14 years of age or older.
(IV)
(II) Immediately preceding the qualified employee's
commencement of employment with the taxpayer, was a dislocated worker
who meets any of the following:
(aa) Has been terminated or laid off or who has received a notice
of termination or layoff from employment, is eligible for or has
exhausted entitlement to unemployment insurance benefits, and is
unlikely to return to his or her previous industry or occupation.
(bb) Has been terminated or has received a notice of termination
of employment as a result of any permanent closure or any substantial
layoff at a plant, facility, or enterprise, including an individual
who has not received written notification but whose employer has made
a public announcement of the closure or layoff.
(cc) Is long-term unemployed and has limited opportunities for
employment or reemployment in the same or a similar occupation in the
area in which the individual resides, including an individual 55
years of age or older who may have substantial barriers to employment
by reason of age.
(dd) Was self-employed (including farmers and ranchers) and is
unemployed as a result of general economic conditions in the
community in which he or she resides or because of natural disasters.
(ee) Was a civilian employee of the Department of Defense employed
at a military installation being closed or realigned under the
Defense Base Closure and Realignment Act of 1990.
(ff) Was an active member of the armed forces or National Guard as
of September 30, 1990, and was either involuntarily separated or
separated pursuant to a special benefits program.
(gg) Is a seasonal or migrant worker who experiences chronic
seasonal unemployment and underemployment in the agriculture
industry, aggravated by continual advancements in technology and
mechanization.
(hh) Has been terminated or laid off, or has received a notice of
termination or layoff, as a consequence of compliance with the Clean
Air Act.
(V)
(III) Immediately preceding the qualified employee's
commencement of employment with the taxpayer, was a disabled
individual who is eligible for or enrolled in, or has completed a
state rehabilitation plan or is .
(IV) Immediately preceding the
qualified employee's commencement of employment with the taxpayer,
was a service-connected disabled veteran, veteran of the
Vietnam era, or veteran who is recently separated from military
service.
(VI)
(V ) Immediately preceding the qualified
employee's commencement of employment with the taxpayer, was an
ex-offender. An individual shall be treated as convicted if he or she
was placed on probation by a state court without a finding of guilt.
(VII)
(VI ) Immediately preceding the qualified
employee's commencement of employment with the taxpayer, was a person
eligible for or a recipient of any of the following:
(aa) Federal Supplemental Security Income benefits.
(bb) Aid to Families with Dependent Children
Temporary Assistance for Needy Families .
(cc) Medi-Cal or Healthy Families.
(cc)
(dd) Food stamps.
(dd)
(ee) State and local general assistance.
(ff) Intensive services including employment training services
funded through the federal Workforce Investment Act (Public Law
105-220).
(gg) Voluntary or mandatory services under the California Work
Opportunity and Responsibility to Kids (CalWORKs) program (Chapter 2
(commencing with Section 11200) of Part 3 of Division 9 of the
Welfare and Institutions Code).
(hh) Federal Work Opportunity Tax Credit (Section 51 of the
Internal Revenue Code).
(VIII)
(VII ) Immediately preceding the qualified
employee's commencement of employment with the taxpayer, was a member
of a federally recognized Indian tribe, band, or other group of
Native American descent.
(IX)
(VIII) Immediately preceding the qualified employee's
commencement of employment with the taxpayer, was a resident of a
targeted employment area (as defined in Section 7072 of the
Government Code) , and the employee is receiving a
wage that does not exceed mode rate income for a family of
four based on the countywide average household income .
(X)
(IX) An employee who qualified the taxpayer for the
enterprise zone hiring credit under former Section 23622 or the
program area hiring credit under former Section 23623.
(XI) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a member of a targeted group, as
defined in Section 51(d) of the Internal Revenue Code, or its
successor.
(B) Priority for employment shall be provided to an individual who
is enrolled in a qualified program under the federal Job
Training Partnership Act or the Greater Avenues for Independence Act
of 1985 Workforce Investment Act or the CalWORKs
program or who is eligible as a member of a targeted group
under the Work Opportunity Tax Credit (Section 51 of the Internal
Revenue Code), or its successor.
(5) "Taxpayer" means a corporation engaged in a trade or business
within an enterprise zone designated pursuant to Chapter 12.8
(commencing with Section 7070) of Division 7 of Title 1 of the
Government Code.
(6) "Seasonal employment" means employment by a taxpayer that has
regular and predictable substantial reductions in trade or business
operations.
(c) The taxpayer shall do both of the following:
(1) Obtain from the Employment Development Department, as
permitted by federal law, the local county or city Job
Training Partnership Act administrative entity, the local county GAIN
federal Workforce Investment Act administrative
entity, the local county CalWORKs program office or social
services agency, or the local government administering the enterprise
zone, a certification that provides that a qualified employee meets
the eligibility requirements specified in clause (iv) of subparagraph
(A) of paragraph (4) of subdivision (b). The Employment Development
Department may provide preliminary screening and referral to
a certifying agency. The Employment Development Department shall
develop a form for this purpose businesses located in
a zone as part of the department's implementation of the intensive
services activities funded through the federal Workforce Investment
Act . The Department of Housing and Community Development shall
develop regulations governing the issuance of certificates by local
governments pursuant to subdivision (a) of Section 7086 of the
Government Code.
(2) Retain a copy of the certification and provide it upon request
to the Franchise Tax Board.
(d) (1) For purposes of this section:
(A) All employees of all corporations which are members of the
same controlled group of corporations shall be treated as employed by
a single taxpayer.
(B) The credit, if any, allowable by this section to each member
shall be determined by reference to its proportionate share of the
expense of the qualified wages giving rise to the credit, and shall
be allocated in that manner.
(C) For purposes of this subdivision, "controlled group of
corporations" means "controlled group of corporations" as defined in
Section 1563(a) of the Internal Revenue Code, except that:
(i) "More than 50 percent" shall be substituted for "at least 80
percent" each place it appears in Section 1563(a)(1) of the Internal
Revenue Code.
(ii) The determination shall be made without regard to subsections
(a)(4) and (e)(3)(C) of Section 1563 of the Internal Revenue Code.
(2) If an employer acquires the major portion of a trade or
business of another employer (hereinafter in this paragraph referred
to as the "predecessor") or the major portion of a separate unit of a
trade or business of a predecessor, then, for purposes of applying
this section (other than subdivision (e)) for any calendar year
ending after that acquisition, the employment relationship between a
qualified employee and an employer shall not be treated as terminated
if the employee continues to be employed in that trade or business.
(e) (1) (A) If the employment, other than seasonal employment, of
any qualified employee with respect to whom qualified wages are taken
into account under subdivision (a) is terminated by the taxpayer at
any time during the first 270 days of that employment, whether or not
consecutive, or before the close of the 270th calendar day after the
day in which that employee completes 90 days of employment with the
taxpayer, the tax imposed by this part for the taxable year in which
that employment is terminated shall be increased by an amount equal
to the credit allowed under subdivision (a) for that taxable year and
all prior taxable years attributable to qualified wages paid or
incurred with respect to that employee.
(B) If the seasonal employment of any qualified employee, with
respect to whom qualified wages are taken into account under
subdivision (a) is not continued by the taxpayer for a period of 270
days of employment during the 60-month period beginning with the day
the qualified employee commences seasonal employment with the
taxpayer, the tax imposed by this part, for the taxable year that
includes the 60th month following the month in which the qualified
employee commences seasonal employment with the taxpayer, shall be
increased by an amount equal to the credit allowed under subdivision
(a) for that taxable year and all prior taxable years attributable to
qualified wages paid or incurred with respect to that qualified
employee.
(2) (A) Subparagraph (A) of paragraph (1) shall not apply to any
of the following:
(i) A termination of employment of a qualified employee who
voluntarily leaves the employment of the taxpayer.
(ii) A termination of employment of a qualified employee who,
before the close of the period referred to in subparagraph (A) of
paragraph (1), becomes disabled and unable to perform the services of
that employment, unless that disability is removed before the close
of that period and the taxpayer fails to offer reemployment to that
employee.
(iii) A termination of employment of a qualified employee, if it
is determined that the termination was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that employee.
(iv) A termination of employment of a qualified employee due to a
substantial reduction in the trade or business operations of the
taxpayer.
(v) A termination of employment of a qualified employee, if that
employee is replaced by other qualified employees so as to create a
net increase in both the number of employees and the hours of
employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of
the following:
(i) A failure to continue the seasonal employment of a qualified
employee who voluntarily fails to return to the seasonal employment
of the taxpayer.
(ii) A failure to continue the seasonal employment of a qualified
employee who, before the close of the period referred to in
subparagraph (B) of paragraph (1), becomes disabled and unable to
perform the services of that seasonal employment, unless that
disability is removed before the close of that period and the
taxpayer fails to offer seasonal employment to that qualified
employee.
(iii) A failure to continue the seasonal employment of a qualified
employee, if it is determined that the failure to continue the
seasonal employment was due to the misconduct (as defined in Sections
1256-30 to 1256-43, inclusive, of Title 22 of the California Code of
Regulations) of that qualified employee.
(iv) A failure to continue seasonal employment of a qualified
employee due to a substantial reduction in the regular seasonal trade
or business operations of the taxpayer.
(v) A failure to continue the seasonal employment of a qualified
employee, if that qualified employee is replaced by other qualified
employees so as to create a net increase in both the number of
seasonal employees and the hours of seasonal employment.
(C) For purposes of paragraph (1), the employment relationship
between the taxpayer and a qualified employee shall not be treated as
terminated by either of the following:
(i) By a transaction to which Section 381(a) of the Internal
Revenue Code applies, if the qualified employee continues to be
employed by the acquiring corporation.
(ii) By reason of a mere change in the form of conducting the
trade or business of the taxpayer, if the qualified employee
continues to be employed in that trade or business and the taxpayer
retains a substantial interest in that trade or business.
(3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
(f) Rules similar to the rules provided in Section 46(e) and (h)
of the Internal Revenue Code shall apply to both of the following:
(1) An organization to which Section 593 of the Internal Revenue
Code applies.
(2) A regulated investment company or a real estate investment
trust subject to taxation under this part.
(g) For purposes of this section, "enterprise zone" means an area
designated as an enterprise zone pursuant to Chapter 12.8 (commencing
with Section 7070) of Division 7 of Title 1 of the Government Code.
(h) The credit allowable under this section shall be reduced by
the credit allowed under Sections 23623.5, 23625, and 23646 claimed
for the same employee. The credit shall also be reduced by the
federal credit allowed under Section 51 of the Internal Revenue Code.
In addition, any deduction otherwise allowed under this part for
the wages or salaries paid or incurred by the taxpayer upon which the
credit is based shall be reduced by the amount of the credit, prior
to any reduction required by subdivision (i) or (j).
(i) In the case where the credit otherwise allowed under this
section exceeds the "tax" for the taxable year, that portion of the
credit that exceeds the "tax" may be carried over and added to the
credit, if any, in succeeding taxable years, until the credit is
exhausted. The credit shall be applied first to the earliest taxable
years possible.
(j) (1) The amount of the credit otherwise allowed under this
section and Section 23612.2, including any credit carryover from
prior years, that may reduce the "tax" for the taxable year shall not
exceed the amount of tax which would be imposed on the taxpayer's
business income attributable to the enterprise zone determined as if
that attributable income represented all of the income of the
taxpayer subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the
enterprise zone. For that purpose, the taxpayer's business
attributable to sources in this state first shall be determined in
accordance with Chapter 17 (commencing with Section 25101). That
business income shall be further apportioned to the enterprise zone
in accordance with Article 2 (commencing with Section 25120) of
Chapter 17, modified for purposes
of this section in accordance with paragraph (3).
(3) Business income shall be apportioned to the enterprise zone by
multiplying the total California business income of the taxpayer by
a fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is two. For purposes of
this paragraph:
(A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the enterprise zone during the
income year, and the denominator of which is the average value of all
the taxpayer's real and tangible personal property owned or rented
and used in this state during the income year.
(B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the enterprise zone during
the income year for compensation, and the denominator of which is the
total compensation paid by the taxpayer in this state during the
income year.
(4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "tax" for the taxable
year, as provided in subdivision (i).
(k) The changes made to this section by the act adding this
subdivision shall apply to taxable years on or after January 1, 1997.
(l) The changes made to this section by the act adding this
subdivision shall apply only to taxable years beginning on and after
January 1, 2011.
SEC. 6. This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.