AB 1560, as amended, Quirk-Silva. Income taxes: credits: California Competes Tax Credit.
Existing law allows a credit against the taxes imposed under the Corporation Tax Law and the Personal Income Tax Law for each taxable year beginning on or after January 1, 2014, and before January 1, 2025, in an amount as provided in a written agreement between the Governor’s Office of Business and Economic Development and the taxpayer, agreed upon by the California Competes Tax Credit Committee, and based on specified factors, including the number of jobs the taxpayer will create or retain in the state and the amount of investment in the state by the taxpayer. Existing law limits the aggregate amount of credits allocated to taxpayers to a specified sum per fiscal year.
This bill would authorize the Director of Finance to increase the aggregate amount of the economic development credits that may be allocated to taxpayers each fiscal year by $25 million per fiscal year through the 2017-18 fiscal year.
This bill would take effect immediately as a tax levy.
end deleteThis bill would declare that it is to take effect immediately as an urgency statute.
end insertVote: begin deletemajority end deletebegin insert2⁄3end insert.
Appropriation: no.
Fiscal committee: yes.
State-mandated local program: no.
The people of the State of California do enact as follows:
Section 17059.2 of the Revenue and Taxation
2Code is amended to read:
(a) (1) For each taxable year beginning on and after
4January 1, 2014, and before January 1, 2025, there shall be allowed
5as a credit against the “net tax,” as defined in Section 17039, an
6amount as determined by the committee pursuant to paragraph (2)
7and approved pursuant to Section 18410.2.
8(2) The credit under this section shall be allocated by GO-Biz
9with respect to the 2013-14 fiscal year through and including the
102017-18 fiscal year. The amount of credit allocated to a taxpayer
11with respect to a fiscal year pursuant to this section shall be as set
12forth in a written agreement between GO-Biz and the taxpayer and
13shall be based on the following factors:
14(A) The number of jobs the taxpayer will create or retain in this
15state.
16(B) The compensation paid or proposed to be paid by the
17taxpayer to its employees, including wages and fringe benefits.
18(C) The amount of investment in this state by the taxpayer.
19(D) The extent of unemployment or poverty in the area
20according to the United States Census in which the taxpayer’s
21project or business is proposed or located.
22(E) The incentives available to the taxpayer in this state,
23including incentives from the state, local government, and other
24entities.
25(F) The incentives available to the taxpayer in other states.
P3 1(G) The duration of the proposed project and the duration the
2taxpayer commits to remain in this state.
3(H) The overall economic impact in this state of the taxpayer’s
4project or business.
5(I) The strategic importance of the taxpayer’s project or business
6to the state, region, or locality.
7(J) The opportunity for future growth and expansion in this state
8by the taxpayer’s business.
9(K) The extent to which the anticipated benefit to the state
10exceeds the projected benefit to the taxpayer from the tax credit.
11(3) The written agreement entered into pursuant to paragraph
12(2) shall include:
13(A) Terms and conditions that include the taxable year or years
14for which the credit allocated shall be allowed, a minimum
15compensation level, and a minimum job retention period.
16(B) Provisions indicating whether the credit is to be allocated
17in full upon approval or in increments based on mutually agreed
18upon milestones when satisfactorily met by the taxpayer.
19(C) Provisions that allow the committee to recapture the credit,
20in whole or in part, if the taxpayer fails to fulfill the terms and
21conditions of the written agreement.
22(b) For purposes of this section:
23(1) “Committee” means the California Competes Tax Credit
24Committee established pursuant to Section 18410.2.
25(2) “GO-Biz” means the Governor’s Office of Business and
26Economic Development.
27(c) For purposes of this section, GO-Biz shall do the following:
28(1) Give priority to a taxpayer whose project or business is
29located or proposed to be located in an area of high unemployment
30or poverty.
31(2) Negotiate with a taxpayer the terms and conditions of
32proposed written agreements that provide the credit allowed
33pursuant to this section to a taxpayer.
34(3) Provide the negotiated written agreement to the committee
35for its approval pursuant to Section 18410.2.
36(4) Inform the Franchise Tax Board of the terms and conditions
37of the written agreement upon approval of the written agreement
38by the committee.
P4 1(5) Inform the Franchise Tax Board of any recapture, in whole
2or in part, of a previously allocated credit upon approval of the
3recapture by the committee.
4(6) Post on its Internet Web site all of the following:
5(A) The name of each taxpayer allocated a credit pursuant to
6this section.
7(B) The estimated amount of the investment by each taxpayer.
8(C) The estimated number of jobs created or retained.
9(D) The amount of the credit allocated to the taxpayer.
10(E) The amount of the credit recaptured from the taxpayer, if
11applicable.
12(d) For purposes of this section, the Franchise Tax Board shall
13do all of the following:
14(1) (A) Except as provided in subparagraph (B), review the
15books and records of all taxpayers allocated a credit pursuant to
16this section to ensure compliance with the terms and conditions
17of the written agreement between the taxpayer and GO-Biz.
18(B) In the case of a taxpayer that is a “small business,” as
19defined in Section 17053.73, review the books and records of the
20taxpayer allocated a credit pursuant to this section to ensure
21compliance with the terms and conditions of the written agreement
22between the taxpayer and GO-Biz when, in the sole discretion of
23the Franchise Tax Board, a review of those books and records is
24appropriate or necessary in the best interests of the state.
25(2) Notwithstanding Section 19542:
26(A) Notify GO-Biz of a possible breach of the written agreement
27by a taxpayer and provide detailed information regarding the basis
28for that determination.
29(B) Provide information to GO-Biz with respect to whether a
30taxpayer is a “small
business,” as defined in Section 17053.73.
31(e) In the case where the credit allowed under this section
32exceeds the “net tax,” as defined in Section 17039, for a taxable
33year, the excess credit may be carried over to reduce the “net tax”
34in the following taxable year, and succeeding five taxable years,
35if necessary, until the credit has been exhausted.
36(f) Any recapture, in whole or in part, of a credit approved by
37the committee pursuant to Section 18410.2 shall be treated as a
38mathematical error appearing on the return. Any amount of tax
39resulting from that recapture shall be assessed by the Franchise
40Tax Board in the same manner as provided by Section 19051. The
P5 1amount of tax resulting from the recapture shall be added to the
2tax otherwise due by the taxpayer for the taxable year in
which
3the committee’s recapture determination occurred.
4(g) (1) The aggregate amount of credit that may be allocated
5in any fiscal year pursuant to this section and Section 23689 shall
6be an amount equal to the sum of subparagraphs (A), (B), and (C),
7less the amount specified in subparagraphs (D) and (E):
8(A) Thirty million dollars ($30,000,000) for the 2013-14 fiscal
9year, one hundred fifty million dollars ($150,000,000) for the
102014-15 fiscal year, and two hundred million dollars
11($200,000,000) for each fiscal year from 2015-16 to 2017-18,
12inclusive.
13(B) The unallocated credit amount, if any, from the preceding
14fiscal year.
15(C) The amount of any previously allocated credits that have
16been recaptured.
17(D) The amount estimated by the Director of Finance, in
18consultation with the Franchise Tax Board and the State Board of
19Equalization, to be necessary to limit the aggregation of the
20estimated amount of exemptions claimed pursuant to Section
216377.1 and of the amounts estimated to be claimed pursuant to
22this section and Sections 17053.73, 23626, and 23689 to no more
23than seven hundred fifty million dollars ($750,000,000) for either
24the current fiscal year or the next fiscal year.
25(i) The Director of Finance shall notify the Chairperson of the
26Joint Legislative Budget Committee of the estimated annual
27allocation authorized by this paragraph. Any allocation pursuant
28to these provisions shall
be made no sooner than 30 days after
29written notification has been provided to the Chairperson of the
30Joint Legislative Budget Committee and the chairpersons of the
31committees of each house of the Legislature that consider
32appropriation, or not sooner than whatever lesser time the
33Chairperson of the Joint Legislative Budget Committee, or his or
34her designee, may determine.
35(ii) In no event shall the amount estimated in this subparagraph
36be less than zero dollars ($0).
37(E) (i) For the 2015-16 fiscal year and each fiscal year
38thereafter, the amount of credit estimated by the Director of Finance
39to be allowed to all qualified taxpayers for that fiscal year pursuant
P6 1to subparagraph (A) or subparagraph (B) of paragraph (1) of
2subdivision (c)
of Section 23636.
3(ii) If the amount available per fiscal year pursuant to this section
4and Section 23689 is less than the aggregate amount of credit
5estimated by the Director of Finance to be allowed to qualified
6taxpayers pursuant to subparagraph (A) or subparagraph (B) of
7
paragraph (1) of subdivision (c) of Section 23636, the aggregate
8amount allowed pursuant to Section 23636 shall not be reduced
9and, in addition to the reduction required by clause (i), the
10aggregate amount of credit that may be allocated pursuant to this
11section and Section 23689 for the next fiscal year shall be reduced
12by the amount of that deficit.
13(iii) It is the intent of the Legislature that the reductions specified
14in this subparagraph of the aggregate amount of credit that may
15be allocated pursuant to this section and Section 23689 shall
16continue if the repeal dates of the credits allowed by this section
17and Section 23689 are removed or extended.
18(2) (A) In addition to the other amounts determined pursuant
19begin insert
to end insert paragraph (1), the Director of Finance may increase the
20aggregate amount of credit that may be allocated pursuant to this
21section and Section 23689 by up to twenty-five million dollars
22($25,000,000) per fiscal year through the 2017-18 fiscal year. The
23amount of any increase made pursuant to this paragraph, when
24combined with any increase made pursuant to paragraph (2) of
25subdivision (g) of Section 23689, shall not exceed twenty-five
26million dollars ($25,000,000) per fiscal year through the 2017-18
27fiscal year.
28(B) It is the intent of the Legislature that the Director of Finance
29increase the aggregate amount under subparagraph (A) in order to
30mitigate the reduction of the amount available due to the credit
31allowed to all qualified taxpayers pursuant to
subparagraph (A) or
32(B) of paragraph (1) of subdivision (c) of Section 23636.
33(3) Each fiscal year, 25 percent of the aggregate amount of the
34credit that may be allocated pursuant to this section and Section
3523689 shall be reserved for small business, as defined in Section
3617053.73 or 23626.
37(4) Each fiscal year, no more than 20 percent of the aggregate
38amount of the credit that may be allocated pursuant to this section
39shall be allocated to any one taxpayer.
P7 1(h) GO-Biz may prescribe rules and regulations as necessary to
2carry out the purposes of this section. Any rule or regulation
3prescribed pursuant to this section may be by adoption of an
4emergency regulation in accordance with Chapter 3.5
(commencing
5with Section 11340) of Part 1 of Division 3 of Title 2 of the
6Government Code.
7(i) A written agreement between GO-Biz and a taxpayer with
8respect to the credit authorized by this section shall comply with
9existing law on the date the agreement is executed.
10(j) (1) Upon the effective date of this section, the Department
11of Finance shall estimate the total dollar amount of credits that
12will be claimed under this section with respect to each fiscal year
13from the 2013-14 fiscal year to the 2024-25 fiscal year, inclusive.
14(2) The Franchise Tax Board shall annually provide to the Joint
15Legislative Budget Committee, by no later than March 1, a report
16of the total dollar amount of the credits
claimed under this section
17with respect to the relevant fiscal year. The report shall compare
18the total dollar amount of credits claimed under this section with
19respect to that fiscal year with the department’s estimate with
20respect to that same fiscal year. If the total dollar amount of credits
21claimed for the fiscal year is less than the estimate for that fiscal
22year, the report shall identify options for increasing annual claims
23of the credit so as to meet estimated amounts.
24(k) This section is repealed on December 1, 2025.
Section 23689 of the Revenue and Taxation Code is
26amended to read:
(a) (1) For each taxable year beginning on and after
28January 1, 2014, and before January 1, 2025, there shall be allowed
29as a credit against the “tax,” as defined in Section 23036, an amount
30as determined by the committee pursuant to paragraph (2) and
31approved pursuant to Section 18410.2.
32(2) The credit under this section shall be allocated by GO-Biz
33with respect to the 2013-14 fiscal year through and including the
342017-18 fiscal year. The amount of credit allocated to a taxpayer
35with respect to a fiscal year pursuant to this section shall be as set
36forth in a written agreement between GO-Biz and the taxpayer and
37shall be based on the following factors:
38(A) The number of jobs the taxpayer will create or retain in this
39state.
P8 1(B) The compensation paid or proposed to be paid by the
2taxpayer to its employees, including wages and fringe benefits.
3(C) The amount of investment in this state by the taxpayer.
4(D) The extent of unemployment or poverty in the area
5according to the United States Census in which the taxpayer’s
6project or business is proposed or located.
7(E) The incentives available to the taxpayer in this state,
8including incentives from the state, local government, and other
9entities.
10(F) The incentives available to the taxpayer in other states.
11(G) The duration of the proposed project and the duration the
12taxpayer commits to remain in this state.
13(H) The overall economic impact in this state of the taxpayer’s
14project or business.
15(I) The strategic importance of the taxpayer’s project or business
16to the state, region, or locality.
17(J) The opportunity for future growth and expansion in this state
18by the taxpayer’s business.
19(K) The extent to which the anticipated benefit to the state
20exceeds the projected benefit to the taxpayer from the tax credit.
21(3) The written agreement entered into pursuant to paragraph
22(2) shall include:
23(A) Terms and conditions that include the taxable year or years
24for which the credit allocated shall be allowed, a minimum
25compensation level, and a minimum job retention period.
26(B) Provisions indicating whether the credit is to be allocated
27in full upon approval or in increments based on mutually agreed
28upon milestones when satisfactorily met by the taxpayer.
29(C) Provisions that allow the committee to recapture the credit,
30in whole or in part, if the taxpayer fails to fulfill the terms and
31conditions of the written agreement.
32(b) For purposes of this section:
33(1) “Committee” means the California Competes Tax Credit
34Committee established pursuant to Section 18410.2.
35(2) “GO-Biz” means the Governor’s Office of Business and
36Economic Development.
37(c) For purposes of this section, GO-Biz shall do the following:
38(1) Give priority to a taxpayer whose project or business is
39located or proposed to be located in an area of high unemployment
40or poverty.
P9 1(2) Negotiate with a taxpayer the terms and conditions of
2proposed written agreements that provide the credit allowed
3pursuant to this section to a taxpayer.
4(3) Provide the negotiated written agreement to the committee
5for its approval pursuant to Section 18410.2.
6(4) Inform the Franchise Tax Board of the terms and conditions
7of the written agreement upon approval of the written agreement
8by the committee.
9(5) Inform the Franchise Tax Board of any recapture, in whole
10or in part, of a previously allocated credit upon approval of the
11recapture by the committee.
12(6) Post on its Internet Web site all of the following:
13(A) The name of each taxpayer allocated a credit pursuant to
14this section.
15(B) The estimated amount of the investment by each taxpayer.
16(C) The estimated number of jobs created or retained.
17(D) The amount of the credit allocated to the taxpayer.
18(E) The amount of the credit recaptured from the taxpayer, if
19applicable.
20(d) For purposes of this section, the Franchise Tax Board shall
21do all of the following:
22(1) (A) Except as provided in subparagraph (B), review the
23books and records of all taxpayers allocated a credit pursuant to
24this section to ensure compliance with the terms and conditions
25of the written agreement between the taxpayer and
GO-Biz.
26(B) In the case of a taxpayer that is a “small business,” as
27defined in Section 23626, review the books and records of the
28taxpayer allocated a credit pursuant to this section to ensure
29compliance with the terms and conditions of the written agreement
30between the taxpayer and GO-Biz when, in the sole discretion of
31the Franchise Tax Board, a review of those books and records is
32appropriate or necessary in the best interests of the state.
33(2) Notwithstanding Section 19542:
34(A) Notify GO-Biz of a possible breach of the written agreement
35by a taxpayer and provide detailed information regarding the basis
36for that determination.
37(B) Provide
information to GO-Biz with respect to whether a
38taxpayer is a “small business,” as defined in Section 23626.
39(e) In the case where the credit allowed under this section
40exceeds the “tax,” as defined in Section 23036, for a taxable year,
P10 1the excess credit may be carried over to reduce the “tax” in the
2following taxable year, and succeeding five taxable years, if
3necessary, until the credit has been exhausted.
4(f) Any recapture, in whole or in part, of a credit approved by
5the committee pursuant to Section 18410.2 shall be treated as a
6mathematical error appearing on the return. Any amount of tax
7
resulting from that recapture shall be assessed by the Franchise
8Tax Board in the same manner as provided by Section 19051. The
9amount of tax resulting from the recapture shall be added to the
10tax otherwise due by the taxpayer for the taxable year in which
11the committee’s recapture determination occurred.
12(g) (1) The aggregate amount of credit that may be allocated
13in any fiscal year pursuant to this section and Section 17059.2 shall
14be an amount equal to the sum of subparagraphs (A), (B), and (C),
15less the amount specified in subparagraphs (D) and (E):
16(A) Thirty million dollars ($30,000,000) for the 2013-14 fiscal
17
year, one hundred fifty million dollars ($150,000,000) for the
182014-15 fiscal year, and two hundred million dollars
19($200,000,000) for each fiscal year from 2015-16 to 2017-18,
20inclusive.
21(B) The unallocated credit amount, if any, from the preceding
22fiscal year.
23(C) The amount of any previously allocated credits that have
24been recaptured.
25(D) The amount estimated by the Director of Finance, in
26consultation with the Franchise Tax Board and the State Board of
27Equalization, to be necessary to limit the aggregation of the
28estimated amount of exemptions claimed pursuant to Section
296377.1 and of the amounts estimated to be claimed pursuant to
30this section and Sections 17053.73, 17059.2, and 23626 to no
more
31than seven hundred fifty million dollars ($750,000,000) for either
32the current fiscal year or the next fiscal year.
33(i) The Director of Finance shall notify the Chairperson of the
34Joint Legislative Budget Committee of the estimated annual
35allocation authorized by this paragraph. Any allocation pursuant
36to these provisions shall be made no sooner than 30 days after
37written notification has been provided to the Chairperson of the
38Joint Legislative Budget Committee and the chairpersons of the
39committees of each house of the Legislature that consider
40appropriation, or not sooner than whatever lesser time the
P11 1Chairperson of the Joint Legislative Budget Committee, or his or
2her designee, may determine.
3(ii) In no event shall the amount estimated in this subparagraph
4be
less than zero dollars ($0).
5(E) (i) For the 2015-16 fiscal year and each fiscal year
6thereafter, the amount of credit estimated by the Director of Finance
7to be allowed to all qualified taxpayers for that fiscal year pursuant
8to subparagraph (A) or subparagraph (B) of paragraph (1) of
9subdivision (c) of Section 23636.
10(ii) If the amount available per fiscal year pursuant to this section
11and Section 17059.2 is less than the aggregate amount of credit
12estimated by the Director of Finance to be allowed to qualified
13taxpayers pursuant to subparagraph (A) or subparagraph (B) of
14paragraph (1) of subdivision (c) of Section 23636, the aggregate
15amount allowed pursuant to Section 23636 shall not be reduced
16and, in addition to the reduction required by clause (i),
the
17aggregate amount of credit that may be allocated pursuant to this
18section and Section 17059.2 for the next fiscal year shall be reduced
19by the amount of that deficit.
20(iii) It is the intent of the Legislature that the reductions specified
21in this subparagraph of the aggregate amount of credit that may
22be allocated pursuant to this section and Section 17059.2 shall
23continue if the repeal dates of the credits allowed by this section
24and Section 17059.2 are removed or extended.
25(2) (A) In addition to the other amounts determined pursuant
26to paragraph (1), the Director of Finance may increase the
27aggregate amount of credit that may be allocated pursuant to this
28section and Section 17059.2 by up to twenty-five million dollars
29($25,000,000) per fiscal year
through the 2017-18 fiscal year. The
30amount of any increase made pursuant to this paragraph, when
31combined with any increase made pursuant to paragraph (2) of
32subdivision (g) of Section 17059.2, shall not exceed twenty-five
33million dollars ($25,000,000) per fiscal year through the 2017-18
34fiscal year.
35(B) It is the intent of the Legislature that the Director of Finance
36increase the aggregate amount under subparagraph (A) in order to
37mitigate the reduction of the amount available due to the credit
38allowed to all qualified taxpayers pursuant to subparagraph (A) or
39(B) of paragraph (1) of subdivision (c) of Section 23636.
P12 1(3) Each fiscal year, 25 percent of the aggregate amount of the
2credit that may be allocated pursuant
to this section and Section
317059.2 shall be reserved for “small business,” as defined in
4Section 17053.73 or 23626.
5(4) Each fiscal year, no more than 20 percent of the aggregate
6amount of the credit that may be allocated pursuant to this section
7shall be allocated to any one taxpayer.
8(h) GO-Biz may prescribe rules and regulations as necessary to
9carry out the purposes of this section. Any rule or regulation
10prescribed pursuant to this section may be by adoption of an
11emergency regulation in accordance with Chapter 3.5 (commencing
12with Section 11340) of Part 1 of Division 3 of Title 2 of the
13Government Code.
14(i) (1) A written agreement between GO-Biz and a taxpayer
15with respect to the credit
authorized by this section shall not
16restrict, broaden, or otherwise alter the ability of the taxpayer to
17assign that credit or any portion thereof in accordance with Section
1823663.
19(2) A written agreement between GO-Biz and a taxpayer with
20respect to the credit authorized by this section must comply with
21existing law on the date the agreement is executed.
22(j) (1) Upon the effective date of this section, the Department
23of Finance shall estimate the total dollar amount of credits that
24will be claimed under this section with respect to each fiscal year
25from the 2013-14 fiscal year to the 2024-25 fiscal year, inclusive.
26(2) The Franchise Tax Board shall annually provide to the Joint
27Legislative
Budget Committee, by no later than March 1, a report
28of the total dollar amount of the credits claimed under this section
29with respect to the relevant fiscal year. The report shall compare
30the total dollar amount of credits claimed under this section with
31respect to that fiscal year with the department’s estimate with
32respect to that same fiscal year. If the total dollar amount of credits
33claimed for the fiscal year is less than the estimate for that fiscal
34year, the report shall identify options for increasing annual claims
35of the credit so as to meet estimated amounts.
36(k) This section is repealed on December 1, 2025.
This act provides for a tax levy within the meaning of
38Article IV of the Constitution and shall go into immediate effect.
This act is an urgency statute necessary for the
40immediate preservation of the public peace, health, or safety within
P13 1the meaning of Article IV of the Constitution and shall go into
2immediate effect. The facts constituting the necessity are:
3Because the program of tax credits approved by the California
4Competes Tax Credit Committee was oversubscribed in its first
5year, it is vital to ensure that as much funding as possible is
6available to the program at the earliest possible time in order to
7have California be a competitive state and attract business and
8
guarantee that small businesses have the tools that they need to
9succeed.
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