HomeMy WebLinkAbout2010-07-13 - AGENDA REPORTS - STATE LEGISLATION (2)Agenda Item:
CITY OF SANTA CLARITA
.AGENDA REPORT
CONSENT CALENDAR City Manager Approval:
Item to be presented by
DATE: July 13, 2010
SUBJECT: STATE LEGISLATION
DEPARTMENT: City Manager's Office
RECOMMENDED ACTION
Patrick Bryant
City Council adopt the recommendation of the City Council Legislative Committee and direct
staff to submit letters to appropriate Members of the California Legislature, in opposition to: SB
974 (Steinberg) and AB 2476 (Perez). Provide staff with authorization to transmit a position of
opposition to State legislation detrimental to the City's Enterprise Zone.
BACKGROUND
During the June 22, 2010, Santa Clarita City Council Legislative Committee meeting,
Councilmember Frank Ferry and Councilmember Laurie Ender recommended that the City
Council take a position in opposition to Senate Bill 974, Assembly Bill 2476, and authorize staff
to submit letters of Council's position on these two pieces of legislation to State legislators and
Governor Schwarzenegger, as appropriate. Councilmember Ferry and Councilmember Ender
also recommended that Council provide staff with the authorization to transmit a position of
opposition to State legislation detrimental to the City's Enterprise Zone, thus eliminating the.need
to bring each individual piece of legislation before the Council for approval during the final days
of the 2009/2010 legislative session, which is scheduled for adjournment on August 31, 2010.
SB 974 (Steinberg)
SB 974 (Steinberg) seeks to make two substantial changes to the Enterprise Zone program which
would greatly decrease its value to employers as a means of funding an unrelated tax credit for
providing vocational training. The changes to the Enterprise Zone program would be two -fold: 1)
the elimination of the Targeted Employment Area (TEA) qualification category; and 2) the
elimination of employers' ability to claim credits retroactively.
QP�IQ�I�D
SB 974 proposes to phase out Targeted Employment Areas altogether by redirecting those credits
to high schools that offer trade programs (specifically directed toward technology). This action
would severely limit a business from receiving tax credits through the Enterprise Zone program
because most tax credits awarded are the result of people hired from Targeted Employment
Areas. In fact, of the 1,864 credit vouchers issued by the City of Santa Clarita, 1,289 or 69% of
those vouchers are the result of employees hired that lived in a TEA. Those vouchers resulted in
a potential tax savings of over $48 million to Santa Clarita businesses.
SB 974 would also eliminate retroactive vouchering. Currently, employers are able to claim tax
credits against qualifying employees who were working with the company prior to Enterprise
Zone designation. Further, for new hires, employers are currently able to defer declaring a tax
credit at the time of hire and delay such a claim for future years. SB 974 would remove
retroactive vouchering and mandate employers claim a credit for all new qualifying hires no later
than 21 days following the hire date.
SB 974 passed in the Senate on June 3, 2010 (Both Senator Runner and Senator Strickland voted
No) and was sent to the Assembly where it was referred to the Committee on Jobs, Economic
Development, and the Economy. A hearing was scheduled for June 30, 2010, but on June 29,
2010, Sen. Pro Tem Steinberg pulled the legislation from committee hearing. At this time, it is
not known when a new hearing will be scheduled.
The Santa Clarita Valley Chamber of Commerce's Board of Directors has voted to oppose this
legislation.
AB 2476 (Perez)
AB 2476 (Perez) proposes to modify the definition of the Targeted Employment Area hiring
credits, raising the percentage threshold of low income persons living in an area from 51 % to
61% in order for that area to qualify as a Targeted Employment Area.
Staff does not currently know the exact impact this or similar future legislation would have upon
the amount of potential credits claimed by Santa Clarita businesses, as TEA's using the 61%
threshold would be based on yet -to -be -released 2010 Census statistics. However, 69% of all
credits claimed by Santa Clarita businesses result from hires made within Targeted Employment
Areas.
On May 12, 2010, AB 2476 was referred to the Assembly Appropriations Committee. On
May 28, 2010, the Assembly Appropriations Committee decided to hold the bill under
submission.
The Santa Clarita Valley Chamber of Commerce's Board of Directors has voted to oppose this
legislation.
e
ALTERNATIVE ACTIONS
1. City Council not adopt the recommendation of the Council Legislative Committee.
2. Other action as determined by Council.
FISCAL IMPACT
All activities required to carry out the recommended action are contained within the City's
adopted 2010/2011 annual budget.
ATTACHMENTS
SB 974 available in the City Clerk's Reading File
AB 2476 available in the City Clerk's Reading File
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AMENDED IN ASSEMBLY .DUNE 15, 2010
AMENDED IN SENATE MAY 19, 2010
AMENDED IN SENATE MAY 3, 2010
AMENDED IN SENATE APRIL 5, 2010
SENATE BILL
No. 974
Introduced by Senator Steinberg
(Coauthors: Senators Alquist, Hancock, and Romero)
February 8, 2010
An act to add Part 38 (commencing with Section 64200) to Division
4 of Title 2 of the Education Code, and to amend Sections 17053.74
and 23622.7 of, and to add Sections 17057.6 and 23610.6 to, the
Revenue and Taxation Code, relating to taxation, to take effect
immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
SB 974, as amended, Steinberg. Income and corporations tax: hiring
and career credits.
(1) The Personal Income Tax Law and The Corporation Tax Law
authorize various credits against the taxes imposed by those laws.
This bill, in accordance with legislative findings contained in this bill
and for calendar years beginning on or after January 1, 2011, would,
for a business entity, as described, that provides career technical
education, authorize a credit against those taxes, subject to specified
limitations, in an amount equal to that reserved and allocated by the
State Depaftment of Edueation Superintendent of Public Instruction.
This bill would impose specified duties on the State DepartMent of.
Edtteation Superintendent of Public Instruction, the Franchise Tax
Board, and the State Board of Equalization; in administering the credits.
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SB 974 —2—
(2)
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(2) The Personal Income Tax Law and the Corporation Tax Law
authorize various credits against the taxes imposed by those laws,
including a hiring credit for qualified taxpayers who hire qualified
employees, as defined, within enterprise zones, subject to specific
criteria. Qualified employees includes, for purposes of the credit, an
ex -offender, as defined. Existing law requires a taxpayer to obtain, from
specified agencies, a certification providing that a qualified employee
meets the requirements of the credit.
This bill would, for taxable years beginning on or after January 1,
2011, revise the definition of "qualified employee" for this purpose, by
providing that an ex -offender includes an individual who has been
convicted of a felony or a misdemeanor offense punishable by
incarceration, or a person charged with a felony or misdemeanor
punishable by ,incarceration but placed on probation without a finding
of guilt, with specified exclusions. This bill would also, for taxable
years beginning on or after January 1, 2011, revise the definition of
"qualified employee" by removing, as an element of eligibility as a
qualified employee, residency in a targeted employment or targeted tax
area. Additionally, this bill would require taxpayers to apply for, and
obtain, the certification of a qualified employee within 42 days of the
date of hire of the qualified employee. This bill would also make
technical, nonsubstantive changes to remove obsolete references in the
credit provisions.
This bill would take effect immediately as a tax levy.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State -mandated local program: no.
The people of the State of California do enact as follows:
1 SECTION 1. Part 38 (commencing with Section 64200) is
2 added to Division 4 of Title 2 of the Education Code, to read:
3
4 PART 38. CAREER PATHWAYS INVESTMENT CREDIT
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6 64200. (a) The Legislature finds and declares the following:
7 (1) The deep economic recession that has gripped California
8 requires a timely response and strategic investments to educate
9 and prepare the workforce that will help fuel the next stage of the
10 state's economic growth.
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(2) The swift recovery of the California economy faces an
obstacle in the high numbers of young people dropping out of the
state's middle and high schools. Longitudinal data show that fewer
than 70 percent of 9th graders in California graduate from high
school in four years. According to the
Edueatien Superintendent of Public Instruction, some 85,000
middle and high school pupils are abandoning secondary schools
annually.
(3) If the dropout'crisis is left unchecked, demographic trends
suggest that the rate of future dropouts will increase. The Public
Policy Institute of California predicts there will be twice as many
high school dropouts in California in 2025 as there will be jobs to
support them.
(4) According to a 2007 study by the California Dropout
Research Project, each cohort of dropouts costs California more
than $46 billion in total economic losses over the lifetimes of those
dropouts.
(5) The fastest growing occupations in the coming years are
expected to be those that require scientific, technical, engineering,
or math (STEM) skills, such as jobs in biotechnology, digital media
arts, green technology, or computer-related and health-related
fields.
(6) A 2006 poll of at -risk California 9th and 10th graders by
Peter D. Hart Research Associates found that 6 in 10 pupils were
not motivated to succeed in school. Of those pupils, more than 90
percent said they would be more engaged in their education if
classes helped them acquire skills and knowledge relevant to future
careers.
(7) Comprehensive programs that link challenging academics
with demanding career and technical education create engaging
pathways to further education, advanced training, and productive
jobs in high opportunity careers. They keep students on track to a
diploma, postsecondary credentials, and lasting career success.
(8) New research from the Public Policy Institute of California
suggests that the state's enterprise zone tax credit program has not
significantly increased job creation or the employment of
hard -to -hire individuals, as was intended.
(9) Two aspects of the enterprise zone program that have
produced an especially poor return on investment, Targeted
Employment Areas (TEA) and retroactive vouchering, should be
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phased out in favor of fiscal incentives that enhance workforce
development for the jobs of the future and that have a beneficial
impact on high school graduation rates.
(b) It is the intent of the Legislature to do the following:
(1) Evaluate the state's tax expenditure investments as rigorously
as it evaluates the state's spending programs.
(2) Establish fiscal incentives, such as tax credits, that encourage
California businesses and industry to enter into partnerships with
schools that strengthen middle and high school education statewide.
These partnerships will connect pupils and teachers to real-world
experience that provides sustained exposure to applied academics,.
skill development, work-related education, and potential future
employers. This experience will keep students engaged and on
track to graduation, further education, and productive careers.
(c) As used in this section, "tax expenditure" means a credit,
deduction, exclusion, exemption, or any other tax benefit as may
be provided for by state law.
64201. For purposes of this part:
(a) "Applicant" means a business entity that enters into a
contract or memorandum of understanding with a local educational
agency to provide career technical education that connects pupils
to real-world experience and provides sustained exposure to applied
academics, skill development, work-related education, and potential
future employment, and that applies to the Superintendent of Public
Instruction for the Career Pathways Investment Credit.
(b) "Authentic application" means an activity in the context of
a middle or high school course that requires pupils to work actively
with academic and technical concepts, facts, and skills in a realistic,
work -like setting that emulates the problems encountered by
professionals and the practices they use to address them. These
applications typically require pupils to examine a task from a
variety of perspectives, to draw upon multiple resources, to
collaborate with others, and to accomplish tasks and projects by
working in teams rather than individually.
(c) "Budget" means an estimate of all quaked expenditures
to be paid or incurred in providing the career pathways program
over the period for which the applicant is applying for the career
pathways investment credit.
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1 (d) "Career pathways investment credit ceiling" means the
2 aggregate amount of credit that may be annually allocated by the
3 department pursuant to Sections 17057.6 and 23610.6 of the
4 Revenue and Taxation Code.
5 «
6 (e) "Middle _school or high school programs that create career
7 pathways" means programs that support the following:
8 (1) High school pathways programs delivered through high
9 schools, regional occupation centers or programs, California
10 Partnership Academies and other career academies, alternative
11 education programs, including continuation schools and programs
12 administered by county offices of education, or adult education
13 programs, that integrate academic and technical learning to prepare
14 pupils for both postsecondary education and careers in high-growth
15 or high -need sectors of the economy. These programs include core
16 academic courses emphasizing authentic applications, sequences
17 or clusters of three or more courses that align with the State Board
18 of Education approved career technical education standards and
19 frameworks that also integrate key academic concepts and skills,
20 work -based learning opportunities, additional services like
21 counseling or supplementary instruction in reading, writing, and
22 mathematics. These programs shall also:
23 (A) Focus on occupations requiring comprehensive skills in
24 leading to high entry-level wages or the possibility of significant
25 wage increases after a demonstrated amount of time at the position.
26 (B) Provide prerequisite courses that are needed to enter
27 apprenticeships, or postsecondary vocation certificate or degree
28 programs. Where possible, sequenced courses shall be articulated
29 with, or linked to, postsecondary certificate and degree programs
30 in the region.
31 (C) Offer as many courses as possible that have been approved
32 by the University of California as courses meeting the "A -G"
33 admissions requirements.
34 (2) Curriculum and professional development.
35 (3) Middle school career exploration activities.
36 (4) Externship opportunities that expose middle school and high
37 school teachers to the skills and competencies that pupils need for
38 successful employment in high-growth sectors of the California
39 economy.
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1 (5) Active engagement by business and industry in pathway
2 design and implementation, work -based learning, assessment of
3 student work, and other aspects of effective preparation for success
4 in further postsecondary education and careers.
5 (/) "Quaked expenditures " includes the following:
6 (1) Equipment and.instructional materials.
7 (2) Employees to provide instruction, in partnership with
8 credentialed teachers employed by the school district, at the
9 schoolsite.
10 (3) Paid jobs or internships.
11 (4) Teacher externships.
12 (5) Contributions to programs administered by postsecondary
13 institutions that provide support to middle or high school programs
14 that create career pathways. This support may include, but shall
15 not be limited to, teacher training, curriculum development, and
16 other forms of technical assistance.
17 (g) "Superintendent" means the Superintendent of Public
18 Instruction.
19 64202. For calendar years beginning on or after January 1;
20 2011, the depart Superintendent shalldetermine reserve and
21 allocate the career pathways investment credit ceiling. The
22
23 . For
24 purposes of this section, thedepafftnen Superintendent shall do
25 all of the following:
26 (a) Allocate the career pathways investment credit ceiling on a
27 regular basis consisting of two or more periods in a calendar year
28 in which applications may be filed and considered. The
29 Superintendent may reserve credits for up to 5 calendar years for
30 each application he or she approves. The amount of credit reserved
31 in any calendar year shall be applied against the career pathways
32 program. The amount of career pathway credit reserved in each
33 calendar year shall equal the amounts specified in subdivision (d)
34 of Section 17057.6 of the Revenue and Taxation Code, as added
35 by this act.
36 (b) (1) Establish a procedure for applicants to file with the
37 dem Superintendent a written application for the alloeation
38 reservation of the taxeredi-t, credit and establish application filing
39 deadlittes,
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1 eredit eeiling that the department may alloeate f6f that period,
2 the approximate date on whieh the alloeations are ma deadlines.
3 (2) Theden Superintendent may contract with other
4 entities to aid in the processing and review of applications.
5 (c) (1) Give priority in allocating tax credits to the following:
6 (A) Applicants that have entered into a contract or memorandum
7 of understanding with local educational agencies in communities
8 that have an unemployment rate higher than the statewide
9 unemployment rate, as determined by the United States Census,
10 and a high school graduation rate lower than the statewide high
11 school graduation rate, as determined by the --dem
12 Superintendent using the California Longitudinal Pupil
13 Achievement Data System.
14 (B) Applicants that have entered into a contract or memorandum
15 of understanding with local educational agencies with proportions
16 of private funding support that exceed the one-to-one match
17 requirement described in paragraph (1) of subdivision (e).
18 (C) Applicants that have entered into a contract or memorandum
19 of understanding with local educational agencies that are articulated
20 with postsecondary certificate and degree programs in their region.
21 (D) Applicants that are not seeking tax credits for existing
22 activities. However, priority shall be given to applicants that seek
23 to expand or augment existing investments in career pathway
24 programs.
25 (2) To the maximum extent practicable, subject to paragraph
26 (1), give priority in allocating career pathways investment credits
27 to applicants serving socioeconomically diverse student populations
28 and on a geographically equitable basis.
29 (3) The dem Superintendent shall not give priority to any
30 applicant by virtue of the date of submission of its application,
31 except to allocate credits where two or more applicants have the
32 same rating.
33 (d) Onlyalloeate reserve the, career pathways investment credit
34 ceiling to an applicant that agrees to enter into an enforceable
35 contract or memorandum of understanding with the department to
36 comply with the requirements of this part, Sections 17057.6 and
37 23610.6 of the Revenue and Taxation Code, any applicable state
38 laws, and any additional requirements the department deems
39 necessary or appropriate to serve the purposes of this part. The
40 contract or memorandum of understanding shall also provide for
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SB 974 —8
1 legal action to obtain specified performance or monetary damages
2 for breach of contract and shall require regular programmatic
3 audits.
4 (e) Adopt awl reserve criteria that awards, credits to
5 applicants that demonstrate that either the applicant or the local
6 educational agency meets the following criteria:
7 (1) At least a one to one mateh of private to pttblie ifyvestment
8
9 Pathways or similar pfogr
10 (2
11 (1) The effectiveness of the career pathway program toward
12 preparing students for productive, high -wage employment in
13 growing or high -need sectors of the California economy.
14 Effectiveness criteria shall include:
15 (A) Pathway completion rates.
16 (B) High school graduation rates.
17 (C) Percentages of students attaining an industry certification.
18 (D) Percentages of students transitioning successfully to
19 postsecondary education.
20 (E) Employment and earnings after high school.
21 (3�
22 (2) The level of the applicant's investment in, oversight of, and
23 ability to leverage and sustain current career pathways programs
24 and current career technical education programs.
25 (f) Develop and provide forms for the purposes of informing
26 potential applicants of the purposes of this part.
27 (g) (1) Certify to each applicant the amount of the career
28 pathways credit ceiling alloeated reserved to it for the calendar
29 year. The amount of the credit reserved for a calendar year shall
30 not exceed 50 percent of the quaked expenditures estimated by
31 the applicant for the calendar year The department may allocate
32 the career pathways tax credit to the applicant after it audits and
33 verifies that the amount of qualified expenditures the applicant
34 actually incurs in the performance of the career pathways program
35 is accurate. The certificate shall include the amount of the credit
36 allocation that may be distributed and applied by the applicant
37 against tax liability.
38 (2) Therms Superintendent shall provide a copy of the
39 certification to the applicant.
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(3) The Superintendent shall report to the Franchise Tax Board,
once each year, the identity of the quaked taxpayers for whom
the career pathways credits are reserved or allocated each year.
(h) The depaftment Superintendent may, inerts his or her
discretion, consult with the Treasurer and the California Tax Credit
Allocation Committee regarding the allocation of tax credits. If a
request for consultation is made, the Treasurer and the California
Tax Credit Allocation Committee shall aid the dem
Superintendent.
(i) Establish audit requirements. The departmen Superintendent
may share information established during an audit with the
Franchise Tax Board.
64203. For calendar years beginning on or after January 1,
2011, the -dept Superintendent shall develop and provide
forms for use by applicants and adopt uniform procedures for
submission and review of applications. The application shall
include, but not be limited to, the following:
(a) A copy of the contract or memorandum of understanding
between the applicant and the local educational agency that
includes, but is not limited to, the following:
(1) A clear and comprehensive plan for each middle school or
high school program that creates career pathways.
prefessional development pfograms, and middle sehool or high
sehool programs Otat efeate eareer pathways that integrate aeadetnie
(B) Employees to pfot4de instmetion, in paffnefship with
(G) Opportunities f;Df pupils to be mentored br, of to ,
employees at private entity.
(E) Paidjobt.
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1 not be limited to, teaehef tmitting, ettffiettlum development, and
2 other f6ri.. s o f t..,.L...iea assistanee.
3 (2) The budget for. the career pathways investment program
4 over the period for which the applicant is applying for the career
5 pathways investment credit.
6 (b) Details about the strength and relevance of the education
7 plan to the needs of industry for qualified technical employees
8 applicable to the economic development needs .of the region in
9 which the local education agency and partnering private entity are
10 located.
11 (c) Projections of program participant enrollment.
12 (d) The method by which accountability for program participant
13 enrollments and outcomes will be maintained. Outcomes shall
14 include the criteria listed in paragraph (2) of subdivision (e) of
15 Section 64202.
16 (e) Any other information deemed relevant by the depaftment
17 Superintendent.
18 64204. (a) The-depaftment Superintendent may charge a fee
19 for the submission of applications for allocations of the current
20 calendar year's career pathways investment credit ceiling,
21 reservation of the following year's career pathways investment
22 credit ceiling, and for monitoring the compliance of applicants
23 receiving a credit under this part. If thedepartmett Superintendent
24 chooses to impose a fee, it shall establish and charge fees in an
25 amount which it determines are reasonably sufficient to cover the
26 costs of the department, the State Board of Equalization, and the
27 Franchise Tax Board in carrying out the administrative
28 responsibilities required by this part.
29 (b) Fees collected pursuant to this subdivision shall be deposited
30 in the Career Pathways Investment Credit Fee Account, which is
31 hereby created in the State Treasury, and shall be available, upon
32 appropriation by the Legislature to cover the administrative costs
33 of the dot Superintendent, the State Board of Equalization,
34 and the Franchise Tax Board in administering this part.
35 (c) Until the time sufficient fee revenue is received by the
36 department to fully cover the administrative costs of administering
37 this part, the department Superintendent may borrow moneys as
38 may be required for the purposes of meeting necessary
39 administrative expenses of the Superintendent in
40 administering this part. Any loan made to the
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Superintendent pursuant to this section shall be repayable solely
from the moneys appropriated to the -dem Superintendent
and shall not constitute a general obligation for which the faith
and credit of the state are pledged.
64205. The-depaftment Superintendent may prescribe rules
and regulations to carry out the purposes of this part, including
any rules and regulations necessary to establish procedures,
processes, requirements, and rules identified or required to
implement this part, including any rules and regulations necessary
to establish a fee schedule necessary to offset .the costs of
administering this part.
SEC. 2. 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 published by the United States Office of
Management and Budget, 1987 edition, "qualified wages" means
that portion of hourly wages that does not exceed 202 percent of
the minimum wage.
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(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
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1 eligible to be a voluntary or mandatory registrant under the Greater
2 Avenues for Independence Act of 1985 (GAIN) provided for
3 pursuant to Article 3.2 (commencing with Section 11320) of
4 Chapter 2 of Part 3 of Division 9 of the Welfare and Institutions
5 Code, or its successor.
6 (III) Immediately preceding the qualified employee's
7 commencement of employment with the taxpayer, was an
8 economically disadvantaged individual 14 years of age or older.
9 (IV) Immediately preceding the qualified employee's
10 commencement of employment with the taxpayer, was a dislocated
11 worker who meets any of the following:
12 (ia) Has been terminated or laid off or who has received a notice
13 of termination or layoff from employment, is eligible for or has
14 exhausted entitlement to unemployment insurance benefits, and
15 is unlikely to return to,his or her previous industry or occupation.
16 (ib) Has been terminated or has received a notice of termination
17 of employment as a result of any permanent closure or any
18 substantial -layoff at a plant, facility, or enterprise, including an
19 individual who has not received written notification but whose
20 employer has made a public announcement of the closure or layoff.
21 (ic) Is long-term unemployed and has limited opportunities for
22 employment or reemployment in the same or a similar occupation
23 in the area in which the individual resides, including an individual
24 55 years of age or older who may have substantial barriers to
25 employment by reason of age.
26 (id) Was self-employed (including farmers and ranchers) and
27 is unemployed as a result of general economic conditions in the
28 community in which he or she resides or because of natural
29 disasters.
30 (ie) Was a civilian employee of the Department of Defense
31 employed at a military installation being closed or realigned under
32 the Defense Base Closure and Realignment Act of 1990.
33 (if) Was an active member of the Armed Forces or National
34 Guard as of September 30, 1990, and 'was either involuntarily
35 separated or separated pursuant to a special benefits program.
36 (ig) Is a seasonal or migrant worker who experiences chronic
37 seasonal unemployment and underemployment in the agriculture
38 industry, aggravated by continual advancements in technology and
39 mechanization.
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1 (ih) Has been terminated or laid off, or has received a notice of
2 termination or layoff, as a consequence of compliance with the
3 Clean Air Act.
4 (V) Immediately preceding the qualified employee's
5 commencement of employment with the taxpayer, was a disabled
6 individual who is eligible for or enrolled in, or has completed a
7 state rehabilitation plan or is a service -connected disabled veteran,
8 veteran of the Vietnam era, or veteran who is recently separated
9 from military service.
10 (VI) Immediately preceding the qualified employee's
11 commencement of employment with the taxpayer, was an
12 ex -offender. An ex -offender means an individual who has been
13 convicted of a felony or a misdemeanor offense punishable by
14 incarceration or a person charged with a felony offense or a
15 misdemeanor offense punishable by incarceration but placed on
16 probation by a state court without a finding of guilt. Ex -offender
17 shall not include an individual whose record has been expunged.
AS (VII) Immediately preceding the qualified employee's
19 commencement of employment with the taxpayer, was a person
20 eligible for or a recipient of any of the following:
21 (ia) Federal Supplemental Security Income benefits.
22 (ib) Temporary Assistance for Needy Families.
23 (ic) Food stamps.
24 (id) State and local general assistance.
25 (VIII) Immediately preceding the qualified employee's
26 commencement of employment with the taxpayer, was a member
27 of a federally recognized Indian tribe, band, or other group of
28 Native American descent.
29 (IX) An employee who qualified the taxpayer for the enterprise
30 zone hiring credit under former Section 17053.8 or the program
31 area hiring credit under former Section 17053.11.
32 (X) Immediately preceding the qualified employee's
33 commencement of employment with the taxpayer, was a member
34 of a targeted group, as defined in Section 51(d) of the Internal
35 Revenue Code, or its successor.
36 (B) Priority for employment shall be provided to an individual
37 who is enrolled in a qualified program under the federal Workforce
38 Investment Act or the California Work Opportunity and
39 Responsibility to Kids Act (CalWORKS) or who is eligible as a
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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) (A) Obtain, within 42 days from the commencement date
of employment, from the Employment Development Department,
as permitted by federal law, the local county or city Workforce
Investment Act administrative entity, the local county CalWORKS
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. 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.
(B) Applications for certification shall be submitted to the
certifying agency within 28 days of the commencement date of
employment for the employee. The certifying agency shall not
provide a certification for any employee whose employment
commenced more than 28 days before the taxpayer requests a
certification.
(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.
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(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 (hereafter 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.
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(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.
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(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.
0) (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
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1 determined as if that attributable income represented all of the
2 income of the taxpayer subject to tax under this part.
3 (2) Attributable income shall be that portion of the taxpayer's
4 California source business income that is apportioned to the
5 enterprise zone. For that purpose, the taxpayer's business income
6 attributable to sources in this state first shall be determined in
7 accordance -with Chapter 17 (commencing with Section 25 10 1) of
8 Part 11. That business income shall be further apportioned to the
9 enterprise zone in accordance with Article 2 (commencing with
10 Section 25120) of Chapter 17 of Part 11, modified for purposes
11 of this section in accordance with paragraph (3).
12 (3) Business income shall be apportioned to the enterprise zone
13 by multiplying the total California business income of the taxpayer
14 by a fraction, the numerator of which is the property factor plus
15 the payroll factor, and the denominator of which is two. For
16 purposes of this paragraph:
17 (A) The property. factor is a fraction, the numerator of which is
18 the average value of the taxpayer's real and tangible personal
19 property owned or rented and used in the enterprise zone during
20 the taxable year, and the denominator of which is the average value
21 of all the taxpayer's real and tangible personal property owned or
22 rented and used in this state during the taxable year.
23 (B) The payroll factor is a fraction, the numerator of which is
24 the total amount paid by the taxpayer in the enterprise zone during
25 the taxable year for compensation, and the denominator of which
26 is the total compensation paid by the taxpayer in this state during
27 the taxable year.
28 (4) The portion of any credit remaining, if any, after application
29 of this subdivision, shall be carried over to succeeding taxable
30 years, as if it were an amount exceeding the "net tax" for the
31 taxable year, as provided in subdivision (i).
32 (k) The changes made to this section by the act adding this
33 subdivision shall apply to taxable years beginning on or after
34 January 1, 1997.
35 (0 The changes made to this section by the act adding this
36 subdivision shall apply to any qualified employee who commences
37 employment on or after January 1, 2011.
38 SEC. 3. Section 17057.6 is added to the Revenue and Taxation
39 Code, to read:
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1 17057.6. (a) For taxable years beginning on or after January
2 1, 2011, there shall be allowed to a qualified taxpayer as a credit
3 against the "net tax," as defined in Section 17039, an amount equal
4 to that allocated to a qualified taxpayer by the State Depaftment,
5 of rr Superintendent of Public Instruction pursuant to
6 Section 64202 of the Education Code.
7 (b) For purposes of this section a "qualified taxpayer" means
8 an applicant, as defined in Section 64201 of the Education Code,
9 who is either the sole owner if an individual, partners if the
10 taxpayer is a partnership, or shareholders if the taxpayer is an "S"
11 corporation, and who was awarded an allocation of the career
12 pathways investment credit by the Superintendent of Public
13 Instruction.
14 (c) Upon the request of the Franchise Tax Board, the qualified
15 taxpayer shall provide a copy of the certification provided pursuant
16 to Section 64202 of the Education Code to the Franchise Tax
17 Board.
18 (d) The aggregate amount of credits that may be allocated in
19 any calendar year pursuant to this section and Section 23610.6
20 shall be an amount equal to the sum of the following:
21 (1) Seventy-eight million dollars ($78,000,000) for the 2011
22 calendar year.
23 (2) (A) One hundred million dollars ($100,000,000) for the
24 2012 calendar year, hereafter the baseline amount, and each
25 calendar year thereafter. For each subsequent calendar year, the
26 baseline amount shall be adjusted by the Franchise Tax Board to
27 reflect the rate of inflation or deflation from the previous date that
28 the baseline amount was established, as measured by the Consumer
29 Price Index or other method of measuring the rate of inflation or
30 deflation which the Franchise Tax Board determines is reliable
31 and generally accepted.
32 (B) The unused credit allocation amount, if any, for the
33 preceding calendar year, or years.
34 (e) In the case where the credit allowed under this section
35 exceeds the "net tax," the excess credit may be carried over to
36 reduce the "net tax" in the following taxable year, and succeeding
37 taxable years, if necessary, until the credit has been exhausted.
38 (f) If a qualified taxpayer fails to comply with the requirements
39 of this section or with Part 38 (commencing with Section 64200)
40 of Division 4 of Title 2 of the Education Code, the credit shall be
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disallowed and assessed and collected under Section 19051 until
the requirements are satisfied.
SEC. 4. Section 23610.6 is added to the Revenue and Taxation
Code, to read:
23610.6. (a) For taxable years beginning on or after January
1, 2011, there shall be allowed to a qualified taxpayer as a credit
against the "tax," as defined in Section 23036, an amount equal
to that allocated to a qualified taxpayer by the
4 Edttezion Superintendent of Public Instruction pursuant to
Section 64202 of the Education Code.
(b) For purposes of this section a "qualified taxpayer" means
an applicant, as defined in Section 64201 of the Education Code,
that is subject to the taxes imposed by this part.
(c) Upon the request of the Franchise Tax Board, the qualified
taxpayer shall provide a copy of the certification provided pursuant
to Section 64202 of the Education Code to the Franchise Tax
Board.
(d) The aggregate amount of credits that may be allocated in
any calendar year pursuant to this section and Section 17057.6
shall be an amount equal to the sum of the following:
(1) Seventy-eight million dollars ($78,000,000) for the 2011
calendar year.
(2) (A) One hundred million dollars ($100,000,000) for the
2012 calendar year, hereafter the baseline amount, and each
calendar year thereafter. For each subsequent calendar year, the
baseline amount shall be adjusted by the Franchise Tax Board to
reflect the rate of inflation or deflation from the previous date that
the baseline amount was established, as measured by the Consumer
Price Index or other method of measuring the rate of inflation or
deflation which the Franchise Tax Board determines is reliable
and generally accepted.
(B) The unused credit allocation amount, if any, for the
preceding fiscal year, or years.
(e) In the case where the credit allowed under this section
exceeds the "tax," the excess credit may be carried over to reduce
the "tax" in the following taxable year, and succeeding taxable
years, if necessary, until the credit has been exhausted.
(f) If a qualified taxpayer fails to comply with the requirements
of this section or with Part 38 (commencing with Section 64200)
of Division 4 of Title 2 of the Education Code, the credit shall be
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1 disallowed and assessed and collected under Section 19051 until
2 the requirements are satisfied.
3 SEC. 5. Section 23622.7 of the Revenue and Taxation Code
4 is amended to read:
5 23622.7. (a) There shall be allowed a credit against the "tax"
6 (as defined by Section 23036) to a taxpayer who employs a
7 qualified employee in an enterprise zone during the taxable year.
8 The credit shall be equal to the sum of each of the following:
9 (1) Fifty percent of qualified wages in the first year of
10 employment.
11 (2) Forty percent of qualified wages in the second year of
12 employment.
13 (3) Thirty percent of qualified wages in the third year of
14 employment.
15 (4) Twenty percent of qualified wages in the fourth year of
16 employment.
17 (5) Ten percent of qualified wages in the fifth year of
18 employment.
19 (b) For purposes of this section:
20 (1) "Qualified wages" means:
21 (A) (i) Except as provided in clause (ii), that portion of wages
22 paid or incurred by the taxpayer during the taxable year to qualified
23 employees that does not exceed 150 percent of the minimum wage.
24 (ii) For up to 1,350 qualified employees who are employed by
25 the taxpayer in the Long Beach Enterprise Zone in aircraft
26 manufacturing activities described in Codes 3721 to 3728,
27 inclusive, and Code 3812 of the Standard Industrial Classification
28 (SIC) Manual published by the United States Office of
29 Management and Budget, 1987 edition, "qualified wages" means
30 that portion of hourly wages that does not exceed 202 percent of
31 the minimum wage.
32 (B) Wages received during the 60 -month period beginning with
33 the first day the employee commences employment with the
34 taxpayer. Reemployment in connection with any increase, including
35 a regularly occurring seasonal increase, in the trade or business
36 operations of the taxpayer does not constitute commencement of
37 employment for purposes of this section.
38 (C) Qualified wages do not include any wages paid or incurred
39 by the taxpayer on or after the zone expiration date. However,
40 wages paid or incurred with respect to qualified employees who
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1 are employed by the taxpayer within the enterprise zone within
2 the 60 -month period prior to the zone expiration date shall continue
3 to qualify for the credit under this section after the zone expiration
4 date, in accordance with all provisions of this section applied as
5 if the enterprise zone designation were still in existence and
6 binding.
7 (2) "Minimum wage" means the wage established by the
8 Industrial Welfare Commission as provided for in Chapter 1
9 (commencing with Section 1171) of Part 4 of Division 2 of the
10 Labor Code.
11 (3) "Zone expiration date" means the date the enterprise zone
12 designation expires, is no longer binding, or becomes inoperative.
13 (4) (A) "Qualified employee" means an individual who meets
14 all of the following requirements:
15 (i) At least 90 percent of whose services for the taxpayer during
16 the taxable year are directly related to the conduct of the taxpayer's
17 trade or business located in an enterprise zone.
18 (ii) Performs at least 50 percent of his or her services for the
19 taxpayer during the taxable year in an enterprise zone.
20 (iii) Is hired by the taxpayer after the date of original designation
21 of the area in which services were performed as an enterprise zone.
22 (iv) Is any of the following:
23 (1) Immediately preceding the qualified employee's
24 commencement of employment with the taxpayer, was a person
25 eligible for services under the federal Job Training Partnership
26 Act (29 U.S.C. Sec. 1501 et seq.), or its successor, who is receiving,
27 or is eligible to receive, subsidized employment, training, or
28 services funded by the federal Job Training Partnership Act, or its
29 successor.
30 (11) Immediately preceding the qualified employee's
31 commencement of employment with the taxpayer, was a person
32 eligible to be a voluntary or mandatory registrant under the Greater
33 Avenues for Independence Act of 1985 (GAIN) provided for
34 pursuant to Article 3.2 (commencing with Section 11320) of
35 Chapter 2 of Part 3 of Division 9 of the Welfare and Institutions
36 Code, or its successor.
37 (111) Immediately preceding the qualified employee's
38 commencement of employment with the taxpayer, was an
39 economically disadvantaged individual 14 years of age or older.
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(IV) Immediately preceding the qualified employee's
commencement of employment with the taxpayer, was a dislocated
worker who meets any of the following:
(ia) 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.
(ib) 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.
(ic) 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.
(id) 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.
(ie) 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.
(if) 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.
(ig) 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.
(ih) 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) 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 a service -connected disabled veteran,
veteran of the Vietnam era, or veteran who is recently separated
from military service.
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(VI) Immediately preceding the qualified employee's
commencement of employment with ' the taxpayer, was an
ex -offender. An ex -offender means an individual who has been
convicted of a felony or a misdemeanor offense punishable by
incarceration or a person charged with a felony offense or a
misdemeanor offense punishable by incarceration but placed on
probation by a state court without a finding of guilt. Ex -offender
shall not include an individual whose record has been expunged.
(VII) 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:
(ia) Federal Supplemental Security Income benefits.
(ib) Temporary Assistance for Needy Families.
(ic) Food stamps.
(id) State and local general assistance.
(VIII) 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) 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.
(X) 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 Workforce
Investment Act or the California Work Opportunity and
Responsibility to Kids Act (Ca1WORKs) 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 I 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:
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(1) (A) Obtain, within 42 days from the commencement date
of employment, from the Employment Development Department,
as permitted by federal law, the local county or city Workforce
Investment Act administrative entity, the local county Ca1WORKs
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. 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.
(B) Applications for certification shall be submitted to the
certifying agency within 28 days of the commencement date of
employment for the employee. The certifying agency shall not
provide a certification for any employee whose employment
commenced more than 28 days before the taxpayer requests a
certification.
(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.
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1 (2) If an employer acquires the major portion of a trade or
2 business of another employer (hereafter in this paragraph referred
3 to as the "predecessor") or the major portion of a separate unit of
4 a trade or business of a predecessor, then, for purposes of applying
5 this section (other than subdivision (e)) for any calendar year
6 ending after that acquisition, the employment relationship between
7 a qualified employee and an employer shall not be treated as
8 terminated if the employee continues to be employed in that trade
9 or business.
10 (e) (1) (A) If the employment, other than seasonal employment,
11 of any qualified employee with respect to whom qualified wages
12 are taken into account under subdivision (a) is terminated by the
13 taxpayer at any time during the first 270 days of that employment,
14 whether or not consecutive, or before the close of the 270th
15 calendar day after the day in which that employee completes 90
16 days of employment with the taxpayer, the tax imposed by this
17 part for the taxable year in which that employment is terminated
18 shall be increased by an amount equal to the credit allowed under
19 subdivision (a) for that taxable year and all prior taxable years
20 attributable to qualified wages paid or incurred with respect to that
21 employee.
22 (B) If the seasonal employment of any qualified employee, with
23 respect to whom qualified wages are taken into account under
24 subdivision (a) is not continued by the taxpayer for a period of
25 270 days of employment during the 60 -month period beginning
26 with the day the qualified employee commences seasonal
27 employment with the taxpayer, the tax imposed by this part, for
28 the taxable year that includes the 60th month following the month
29 in which the qualified employee commences seasonal employment
30 with the taxpayer, shall be increased by an amount equal to the
31 credit allowed under subdivision (a) for that taxable year and all
32 prior taxable years attributable to qualified wages paid or incurred
33 with respect to that qualified employee.
34 (2) (A) Subparagraph (A) of paragraph (1) shall not apply to
35 any of the following:
36 (i) A termination of employment of a qualified employee who
37 voluntarily leaves the employment of the taxpayer.
38 (ii) A termination of employment of a qualified employee who,
39 before the close of the period referred to in subparagraph (A) of
40 paragraph (1), becomes disabled and unable to perform the services
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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.
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(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 0).
(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
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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, modifiedfor 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.
(0 The changes made to this section by the act adding this
subdivision shall apply to any qualified employee who commences
employment on or after January 1, 2011.
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1 SEC. 6. This act provides for a tax levy within the meaning of
2 Article IV of the Constitution and shall go into immediate effect.
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AMENDED IN ASSEMBLY APRIL 13, 2010
CALIFORNIA LEGISLATURE -2009-10 REGULAR SESSION
ASSEMBLY BILL No. 2476
Introduced by Assembly -r: ember Members V. Manuel Perez and
Caballero
February 19, 2010
An act to amend Sections 7072 and 7072.5 of the Government Code,
relating to enterprise zones.
LEGISLATIVE COUNSEL'S DIGEST
AB 2476, as amended, V. Manuel Perez. Enterprise zones: targeted
employment area.
The Enterprise Zone Act authorizes a governing body to include a
targeted employment area in an enterprise zone to encourage businesses
to hire eligible residents of certain geographic areas.
This bill would modify the definition of a targeted employment area.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State -mandated local program: no.
The people of the State of California do enact as follows:
I SECTION 1. Section 7072 of the Government Code is amended
2 to read:
3 7072. For purposes of this chapter, the following definitions
4 shall apply:
5 (a) "Department" means the Department of Housing and
6 Community Development.
7 (b) "Date of original designation" means the earlier of the
8 following:
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AB 2476 —2-
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1 (1) The date the eligible area receives designation as an
2 enterprise zone by the department pursuant to this chapter.
3 (2) In the case of an enterprise zone deemed designated pursuant
4 to subdivision (e) of Section 7073, the date the enterprise zone or
5 program area received original designation by the former Trade
6 and Commerce Agency pursuant to Chapter 12.8 (commencing
7 with Section 7070) or Chapter 12.9 (commencing with Section
8 7080), as those chapters read prior to January 1, 1997.
9 (c) "Eligible area" means any of the following:
10 (1) An area designated as an enterprise zone pursuant to Chapter
11 12.8 (commencing with Section 7070), as it read prior to January
12 1, 1997, or as a targeted economic development area, neighborhood
13 development area, or program area pursuant to Chapter 12.9
14 (commencing with Section 7080), as it read prior to January 1,
15 1997.
16 (2) A geographic area that, based upon the determination of the
17 department, fulfills at least one of the following criteria:
18 (A) The proposed geographic area meets the Urban Development
19 Action Grant criteria of the United States Department of Housing
20 and Urban Development.
21 (B) The area within the proposed eligible area has experienced
22 plant closures within the past two years affecting more than 100
23 workers.
24 (C) The city or county has submitted material to the department
25 for a finding that the proposed geographic area meets criteria of
26 economic distress related to those used in determining eligibility
27 under the Urban Development Action Grant Program and is
28 therefore an eligible area.
29 (D) The area within the proposed zone has a history of
30 gang -related activity, whether or not crimes of violence have been
31 committed.
32 (3) A geographic area that meets at least two of the following
33 criteria:
34 (A) The census tracts within the proposed eligible area have an
35 unemployment rate not less than 3 percentage points above the
36 statewide average for the most recent calendar year as determined
37 by the Employment Development Department.
38 (B) The county of the proposed eligible area has more than 70
39 percent of the children enrolled in public school participating in
40 the federal free lunch program.
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1 (C) The median household income for a family of four within
2 the census tracts of the proposed eligible area does not exceed 80
3 percent of the statewide median income for the most recently
4 available calendar year.
5 (d) "Enterprise zone" means any area within a city, county, or
6 city and county that is designated as an enterprise zone by the
7 department in accordance with Section 7073.
8 (e) "Governing body" means a county board of supervisors or
9 a city council, as appropriate.
10 (f) "G-TEDA means a geographically targeted economic
11 development area, which is an area designated as an enterprise
12 zone, a Manufacturing Enhancement Area, a targeted tax area, or
13 a local agency military base recovery area.
14 (g) "High-technology industries" includes, but is not limited to,
15 the computer, biological engineering, electronics, and
16 telecommunications industries.
17 (h) "Resident," unless otherwise defined, means a person whose
18 principal place of residence is within a targeted employment area.
19 (i) (1) "Targeted employment area" means either of the
20 following:
21 (A) For an area designated on or before December 31, 2010, an
22 area within a city, county, or city and county that is composed
23 solely of those census tracts designated by the United States
24 Department of Housing and Urban Development as having at least
25 51 percent of its residents of low- or moderate -income levels, using
26 either the most recent United States Department of Census data
27 available at the time of the original enterprise zone application or
28 the most recent census data available at the time the targeted
29 employment area is designated to determine that eligibility.
30 (B) For an area designated on or after January 1, 2011, or for a
31 targeted employment area designated before January 1, 2011,
32 following the release of 2010 census data; and subject to the update
33 deadline in paragraph (5), means an area within a city, county, or
34 city and county that is composed solely of those census block
35 groups designated by the United States Department of Housing
36 and Urban Development as having at least 61 percent of its
37 residents as low- or moderate income levels, using the most recent
38 census data available at the time the targeted employment area is
39 designated to determine that eligibility.
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(2) 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 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
of over the enterprise zone shall identify those census tracts or
block groups whose residents are in the most need of this
employment targeting. Only those census tracts or block groups
within the jurisdiction of the city, county, or city and county that
has jurisdiction -of over the enterprise zone may be included in a
targeted employment area.
(3) At least a part of each eligible census tract or block group
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 or
block group 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.
(4) 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 or block
group within the proposed targeted employment area is outside
the jurisdiction of the local governmental entity.
(5) (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 shall send a letter to the
department stating that a review has been undertaken by the
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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 amended
to read:
7072.5. (a) For a targeted employment area designated on or
before December 31, 2010, a targeted employment area shall be
comprised of census tracts from only one decennial census.
Flof
(b) For a targeted employment area designated on or after
January 1, 2011, or for a targeted employment area designated
before January 1, 2011, following the release of the 2010 census
data, subject to the deadlines in paragraph (5) of subdivision (i)
of Section 7072, a targeted employment area shall be comprised
of census block groups from only one decennial census.
CORRECTIONS:
Text—Pages 3 and 4.
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