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<ns0:Id>20250AB__220599INT</ns0:Id>
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<ns0:ActionText>INTRODUCED</ns0:ActionText>
<ns0:ActionDate>2026-02-19</ns0:ActionDate>
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<ns0:SessionYear>2025</ns0:SessionYear>
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<ns0:AuthorText authorType="LEAD_AUTHOR">Introduced by Assembly Member Quirk-Silva</ns0:AuthorText>
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<ns0:Legislator>
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<ns0:House>ASSEMBLY</ns0:House>
<ns0:Name>Quirk-Silva</ns0:Name>
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<ns0:Title> An act to amend Sections 17053.73 and 23626 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy. </ns0:Title>
<ns0:RelatingClause>taxation, to take effect immediately, tax levy</ns0:RelatingClause>
<ns0:GeneralSubject>
<ns0:Subject>Personal Income Tax Law: Corporation Tax Law: New Employment Credit. </ns0:Subject>
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<html:p>The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws, including, for taxable years beginning on or after January 1, 2014, and before January 1, 2026, a credit for hiring qualified full-time employees, as defined, within a designated census tract or economic development area in an amount equal to 35% of the qualified wages, defined in part as those wages that exceed 150% of minimum wage but do not exceed 350% of minimum wage, paid to those employees multiplied by the applicable percentage for that taxable year. Existing law exempts certain taxpayers from the above-described census tract or economic development area requirement, as specified, and disallows the above-described credit for specified businesses. Existing law repeals the above-described provisions on December 1, 2029.</html:p>
<html:p>This bill would extend the operative date for the above-described tax credits through taxable years beginning before January 1, 2031. The bill would extend the above-described repeal date to December 1, 2034.</html:p>
<html:p>Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals that the tax expenditure will achieve, detailed performance indicators, and data collection requirements.</html:p>
<html:p>This bill also would include additional information required for any bill authorizing a new tax expenditure.</html:p>
<html:p>This bill would take effect immediately as a tax levy.</html:p>
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<ns0:VoteRequired>MAJORITY</ns0:VoteRequired>
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<ns0:FiscalCommittee>YES</ns0:FiscalCommittee>
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<ns0:Preamble>The people of the State of California do enact as follows:</ns0:Preamble>
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<ns0:Num>SECTION 1.</ns0:Num>
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Section 17053.73 of the
<ns0:DocName>Revenue and Taxation Code</ns0:DocName>
is amended to read:
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<ns0:Num>17053.73.</ns0:Num>
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<html:p>
(a)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
For each taxable year beginning on or after January 1, 2014, and before January 1, 2031, there shall be allowed to a qualified taxpayer that hires a qualified full-time employee and pays or incurs qualified wages attributable to work performed by the qualified full-time employee in a designated census tract or economic development area, and that receives a tentative credit reservation for that qualified full-time employee, a credit against the “net tax,” as defined in Section 17039, in an amount calculated under this section.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
For each
taxable year beginning on or after January 1, 2023, and before January 1, 2031, the designated census tract or economic development area requirements shall not apply to a qualified taxpayer described in clause (ii), (iii), (iv), or (v) of subparagraph (A) of paragraph (14) of subdivision (b).
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
The amount of the credit allowable under this section for a taxable year shall be equal to the product of the tentative credit amount for the taxable year and the applicable percentage for that taxable year.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
If a qualified taxpayer relocates to a designated census tract or economic development area, the qualified taxpayer shall be allowed a credit with respect to
qualified wages for each qualified full-time employee employed within the new location only if the qualified taxpayer provides each employee at the previous location or locations a written offer of employment at the new location in the designated census tract or economic development area with comparable compensation.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
For purposes of this paragraph, “relocates to a designated census tract or economic development area” means an increase in the number of qualified full-time employees, employed by a qualified taxpayer, within a designated census tract or tracts or economic development areas within a 12-month period in which there is a decrease in the number of full-time employees, employed by the qualified taxpayer in this state, but outside of designated census tracts or economic development areas.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
This paragraph does not apply to a small business.
</html:p>
<html:p>
(5)
<html:span class="EnSpace"/>
The credit allowed by this section may be claimed only on a timely filed original return of the qualified taxpayer and only with respect to a qualified full-time employee for whom the qualified taxpayer has received a tentative credit reservation.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
For purposes of this section:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
The “tentative credit amount” for a taxable year shall be equal to the product of the applicable credit percentage for each qualified full-time employee and the qualified wages paid by the qualified taxpayer during the taxable year to that qualified full-time employee.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
The “applicable percentage” for a taxable year shall be equal to a fraction, the numerator of which is the net increase in the total number of full-time employees employed in this state during the
taxable year, determined on an annual full-time equivalent basis, as compared with the total number of full-time employees employed in this state during the base year, determined on the same basis, and the denominator of which shall be the total number of qualified full-time employees employed in this state during the taxable year. The applicable percentage shall not exceed 100 percent.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
The “applicable credit percentage” means the credit percentage for the calendar year during which a qualified full-time employee was first employed by the qualified taxpayer. The applicable credit percentage for all calendar years shall be 35 percent.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
“Base year” means the 2013 taxable year, except in the case of a qualified taxpayer who first hires a qualified full-time employee in a taxable year beginning on or after January 1, 2015, the base year means the taxable year immediately
preceding the taxable year in which a qualified full-time employee was first hired by the qualified taxpayer.
</html:p>
<html:p>
(5)
<html:span class="EnSpace"/>
“Acquired” includes any gift, inheritance, transfer incident to divorce, or any other transfer, whether or not for consideration.
</html:p>
<html:p>
(6)
<html:span class="EnSpace"/>
“Annual full-time equivalent” means either of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
In the case of a full-time employee paid hourly qualified wages, “annual full-time equivalent” means the total number of hours worked for the qualified taxpayer by the employee, not to exceed 2,000 hours per employee, divided by 2,000.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
In the case of a salaried full-time employee, “annual full-time equivalent” means the total number of weeks worked for the qualified taxpayer by the employee divided by 52.
</html:p>
<html:p>
(7)
<html:span class="EnSpace"/>
“Designated census tract” means a census tract within the state that is determined by the Department of Finance to have a civilian unemployment rate that is within the top 25 percent of all census tracts within the state and has a poverty rate within the top 25 percent of all census tracts within the state, as prescribed in Section 13073.5 of the Government Code.
</html:p>
<html:p>
(8)
<html:span class="EnSpace"/>
“Economic development area” means either of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
A former enterprise zone. For purposes of this section, “former enterprise zone” means an enterprise zone designated and in effect as of December 31, 2011, any enterprise zone designated during 2012, and any revision of an enterprise zone prior to June 30, 2013, under former Chapter 12.8 (commencing with Section 7070) of Division 7 of Title 1 of the Government Code, as in effect on December
31, 2012, excluding any census tract within an enterprise zone that is identified by the Department of Finance pursuant to Section 13073.5 of the Government Code as a census tract within the lowest quartile of census tracts with the lowest civilian unemployment and poverty.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
A local agency military base recovery area designated as of the effective date of the act adding this subparagraph, in accordance with Section 7114 of the Government Code.
</html:p>
<html:p>
(9)
<html:span class="EnSpace"/>
“Electric airplane manufacturing” means manufacturing of electric airplanes that would be classified under Code 3364 of the North American Industry Classification System (NAICS) published by the United States Office of Management and Budget, 2022 edition.
</html:p>
<html:p>
(10)
<html:span class="EnSpace"/>
“Lithium production” means lithium mining and manufacturing described in Codes 212390 or 325180 of the North
American Industry Classification System (NAICS) published by the United States Office of Management and Budget, 2022 edition.
</html:p>
<html:p>
(11)
<html:span class="EnSpace"/>
“Manufacturing of lithium batteries” means the manufacturing described in Code 335910 of the North American Industry Classification System (NAICS) published by the United States Office of Management and Budget, 2022 edition.
</html:p>
<html:p>
(12)
<html:span class="EnSpace"/>
“Minimum wage” means the wage established pursuant to Chapter 1 (commencing with Section 1171) of Part 4 of Division 2 of the Labor Code.
</html:p>
<html:p>
(13)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
“Qualified full-time employee” means an individual who meets all of the following requirements:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
(I)
<html:span class="EnSpace"/>
Performs at least 50 percent of their services for the qualified taxpayer during the taxable year in a
designated census tract or economic development area.
</html:p>
<html:p>
(II)
<html:span class="EnSpace"/>
This clause does not apply to employees of a qualified taxpayer described in clause (ii), (iii), (iv), or (v) of subparagraph (A) of paragraph (14).
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
Receives starting wages that are at least 150 percent of the minimum wage or at least 100 percent of the minimum wage for employees of a qualified taxpayer described in clause (ii), (iii), (iv), or (v) of subparagraph (A) of paragraph (14).
</html:p>
<html:p>
(iii)
<html:span class="EnSpace"/>
Is hired by the qualified taxpayer on or after January 1, 2014.
</html:p>
<html:p>
(iv)
<html:span class="EnSpace"/>
Is hired by the qualified taxpayer after the date the Department of Finance determines that the census tract referred to in clause (i) is a designated census tract or that the census tracts within a former enterprise zone are not
census tracts with the lowest civilian unemployment and poverty.
</html:p>
<html:p>
(v)
<html:span class="EnSpace"/>
Satisfies either of the following conditions:
</html:p>
<html:p>
(I)
<html:span class="EnSpace"/>
Is paid qualified wages by the qualified taxpayer for services not less than an average of 35 hours per week.
</html:p>
<html:p>
(II)
<html:span class="EnSpace"/>
Is a salaried employee and was paid compensation during the taxable year for full-time employment, within the meaning of Section 515 of the Labor Code, by the qualified taxpayer.
</html:p>
<html:p>
(vi)
<html:span class="EnSpace"/>
Upon commencement of employment with the qualified taxpayer, satisfies any of the following conditions:
</html:p>
<html:p>
(I)
<html:span class="EnSpace"/>
Was unemployed for the six months immediately preceding employment with the qualified taxpayer. In the case of an individual that completed a program of study at a college,
university, or other postsecondary educational institution, received a baccalaureate, postgraduate, or professional degree, and was unemployed for the six months immediately preceding employment with the qualified taxpayer, that individual must have completed that program of study at least 12 months prior to the individual’s commencement of employment with the qualified taxpayer.
</html:p>
<html:p>
(II)
<html:span class="EnSpace"/>
Is a veteran who separated from service in the Armed Forces of the United States within the 12 months preceding commencement of employment with the qualified taxpayer.
</html:p>
<html:p>
(III)
<html:span class="EnSpace"/>
Was a recipient of the credit allowed under Section 32 of the Internal Revenue Code, relating to earned income, as applicable for federal purposes, for the previous taxable year.
</html:p>
<html:p>
(IV)
<html:span class="EnSpace"/>
Is an ex-offender previously convicted of a felony.
</html:p>
<html:p>
(V)
<html:span class="EnSpace"/>
Is a recipient of either CalWORKs, in accordance with Article 2 (commencing with Section 11250) of Chapter 2 of Part 3 of Division 9 of the Welfare and Institutions Code, or general assistance, in accordance with Section 17000.5 of the Welfare and Institutions Code.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
An individual may be considered a qualified full-time employee only for the period of time commencing with the date the individual is first employed by the qualified taxpayer and ending 60 months thereafter.
</html:p>
<html:p>
(14)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
“Qualified taxpayer” means any of the following:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
A person or entity engaged in a trade or business within a designated census tract or economic development area that, during the taxable year, pays or incurs qualified wages.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
A person or entity engaged in semiconductor manufacturing or semiconductor research and development that, upon requesting a tentative credit reservation, self-certifies and provides verification, in the form and manner prescribed by the Franchise Tax Board, that they intend to apply or have applied for federal funding pursuant to Sections 101 to 106, inclusive, of, or intend to claim or have claimed the credit pursuant to Section 107 of, Division A of the federal Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act of 2022 (Public Law 117-167), and that pays or incurs qualified wages during the taxable year.
</html:p>
<html:p>
(iii)
<html:span class="EnSpace"/>
A person or entity engaged in electric airplane manufacturing that, upon requesting a tentative credit reservation, self-certifies and provides verification, in the form and manner prescribed by the Franchise Tax Board, that they have received a sales and
use tax exclusion pursuant to Section 6010.8 for an electric vertical takeoff and landing (eVTOL) manufacturer and that pays or incurs qualified wages during the taxable year.
</html:p>
<html:p>
(iv)
<html:span class="EnSpace"/>
A person or entity engaged in lithium production that, upon requesting a tentative credit reservation, self-certifies and provides verification, in the form and manner prescribed by the Franchise Tax Board, that they are a producer, as defined by Section 47002, who pays the tax imposed by Part 25 (commencing with Section 47000) for the taxable year and that pays or incurs qualified wages during the taxable year.
</html:p>
<html:p>
(v)
<html:span class="EnSpace"/>
(I)
<html:span class="EnSpace"/>
A person or entity engaged in manufacturing of lithium batteries that, upon requesting a tentative credit reservation, self-certifies and provides verification, in the form and manner prescribed by the Franchise Tax Board, that their primary business is lithium
battery manufacturing and that pays or incurs qualified wages during the taxable year.
</html:p>
<html:p>
(II)
<html:span class="EnSpace"/>
For purposes of this clause, “primary business” means 50 percent or more of their gross income is derived from lithium battery manufacturing.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
In the case of any pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any credit under this section or Section 23626 shall be allowed to the pass-thru entity and passed through to the partners and shareholders in accordance with applicable provisions of this part or Part 11 (commencing with Section 23001). For purposes of this subdivision, the term “pass-thru entity” means any partnership or “S” corporation.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
“Qualified taxpayers” shall not include any of the following:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
Employers that provide temporary help services, as described in Code 561320 of the North American Industry Classification System (NAICS) published by the United States Office of Management and Budget, 2012 edition.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
Employers that provide retail trade services, as described in Sector 44-45 of the North American Industry Classification System (NAICS) published by the United States Office of Management and Budget, 2012 edition.
</html:p>
<html:p>
(iii)
<html:span class="EnSpace"/>
Employers that are primarily engaged in providing food services, as described in Code 711110, 722511, 722513, 722514, or 722515 of the North American Industry Classification System (NAICS) published by the United States Office of Management and Budget, 2012 edition.
</html:p>
<html:p>
(iv)
<html:span class="EnSpace"/>
Employers that are primarily engaged in services
as described in Code 713210, 721120, or 722410 of the North American Industry Classification System (NAICS) published by the United States Office of Management and Budget, 2012 edition.
</html:p>
<html:p>
(v)
<html:span class="EnSpace"/>
(I)
<html:span class="EnSpace"/>
An employer that is a sexually oriented business.
</html:p>
<html:p>
(II)
<html:span class="EnSpace"/>
For purposes of this clause:
</html:p>
<html:p>
(ia)
<html:span class="EnSpace"/>
“Sexually oriented business” means a nightclub, bar, restaurant, or similar commercial enterprise that provides for an audience of two or more individuals live nude entertainment or live nude performances where the nudity is a function of everyday business operations and where nudity is a planned and intentional part of the entertainment or performance.
</html:p>
<html:p>
(ib)
<html:span class="EnSpace"/>
“Nude” means clothed in a manner that leaves uncovered or visible, through less than fully opaque
clothing, any portion of the genitals or, in the case of a female, any portion of the breasts below the top of the areola of the breasts.
</html:p>
<html:p>
(D)
<html:span class="EnSpace"/>
Subparagraph (C) shall not apply to a taxpayer that is a “small business.”
</html:p>
<html:p>
(15)
<html:span class="EnSpace"/>
“Qualified wages” means those wages subject to withholding pursuant to Division 6 (commencing with Section 13000) of the Unemployment Insurance Code that meet all of the following requirements:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
(i)
<html:span class="EnSpace"/>
Except as provided in clause (ii) or (iii), that portion of wages paid or incurred by the qualified taxpayer during the taxable year to each qualified full-time employee that exceeds 150 percent of minimum wage, but does not exceed 350 percent of minimum wage.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
(I)
<html:span class="EnSpace"/>
In the case of a
qualified full-time employee employed in a designated pilot area, that portion of wages paid or incurred by the qualified taxpayer during the taxable year to each qualified full-time employee that exceeds ten dollars ($10) per hour or an equivalent amount for salaried employees, but does not exceed 350 percent of minimum wage. For qualified full-time employees described in the preceding sentence, clause (ii) of subparagraph (A) of paragraph (13) is modified by substituting “ten dollars ($10) per hour or an equivalent amount for salaried employees” for “150 percent of the minimum wage.”
</html:p>
<html:p>
(II)
<html:span class="EnSpace"/>
For purposes of this clause:
</html:p>
<html:p>
(ia)
<html:span class="EnSpace"/>
“Designated pilot area” means an area designated as a designated pilot area by the Governor’s Office of Business and Economic Development.
</html:p>
<html:p>
(ib)
<html:span class="EnSpace"/>
Areas that may be designated as a designated pilot
area are limited to areas within a designated census tract or an economic development area with average wages less than the statewide average wages, based on information from the Labor Market Division of the Employment Development Department, and areas within a designated census tract or an economic development area based on high poverty or high unemployment.
</html:p>
<html:p>
(ic)
<html:span class="EnSpace"/>
The total number of designated pilot areas that may be designated is limited to five, one or more of which must be an area within five or fewer designated census tracts within a single county based on high poverty or high unemployment or an area within an economic development area based on high poverty or high unemployment.
</html:p>
<html:p>
(id)
<html:span class="EnSpace"/>
The designation of a designated pilot area shall be applicable for a period of four calendar years, commencing with the first calendar year for which the designation of a designated pilot area is
effective. The applicable period of a designated pilot area may be extended, in the sole discretion of the Governor’s Office of Business and Economic Development, for an additional period of up to three calendar years. The applicable period, and any extended period, shall not extend beyond December 31, 2020.
</html:p>
<html:p>
(III)
<html:span class="EnSpace"/>
The designation of an area as a designated pilot area and the extension of the applicable period of a designated pilot area shall be at the sole discretion of the Governor’s Office of Business and Economic Development and shall not be subject to administrative appeal or judicial review.
</html:p>
<html:p>
(iii)
<html:span class="EnSpace"/>
For qualified full-time employees of a qualified taxpayer described in clause (ii), (iii), (iv), or (v) of subparagraph (A) of paragraph (14), that portion of wages paid or incurred by the qualified taxpayer during the taxable year to each qualified full-time employee that exceeds
100 percent of the minimum wage, but does not exceed 350 percent of the minimum wage.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
Wages paid or incurred during the 60-month period beginning with the first day the qualified full-time employee commences employment with the qualified taxpayer. In the case of any employee who is reemployed, including a regularly occurring seasonal increase, in the trade or business operations of the qualified taxpayer, this reemployment shall not be treated as constituting commencement of employment for purposes of this section.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
Except as provided in paragraph (3) of subdivision (n), qualified wages shall not include any wages paid or incurred by the qualified taxpayer on or after the date that the Department of Finance’s redesignation of designated census tracts is effective, as provided in paragraph (2) of subdivision (g), so that a census tract is no longer a designated census
tract.
</html:p>
<html:p>
(16)
<html:span class="EnSpace"/>
“Seasonal employment” means employment by a qualified taxpayer that has regular and predictable substantial reductions in trade or business operations.
</html:p>
<html:p>
(17)
<html:span class="EnSpace"/>
“Semiconductor manufacturing or semiconductor research and development” means manufacturing described in Code 3344 of the North American Industry Classification System (NAICS) published by the United States Office of Management and Budget, 2022 edition.
</html:p>
<html:p>
(18)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
“Small business” means a trade or business that has aggregate gross receipts, less returns and allowances reportable to this state, of less than two million dollars ($2,000,000) during the previous taxable year.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
(i)
<html:span class="EnSpace"/>
For purposes of this paragraph, “gross receipts, less returns and
allowances reportable to this state,” means the sum of the gross receipts from the production of business income, as defined in subdivision (a) of Section 25120, and the gross receipts from the production of nonbusiness income, as defined in subdivision (d) of Section 25120.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
In the case of any trade or business activity conducted by a partnership or an “S” corporation, the limitations set forth in subparagraph (A) shall be applied to the partnership or “S” corporation and to each partner or shareholder.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
(i)
<html:span class="EnSpace"/>
“Small business” shall not include a sexually oriented business.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
For purposes of this subparagraph:
</html:p>
<html:p>
(I)
<html:span class="EnSpace"/>
“Sexually oriented business” means a nightclub, bar, restaurant, or similar commercial enterprise that
provides for an audience of two or more individuals live nude entertainment or live nude performances where the nudity is a function of everyday business operations and where nudity is a planned and intentional part of the entertainment or performance.
</html:p>
<html:p>
(II)
<html:span class="EnSpace"/>
“Nude” means clothed in a manner that leaves uncovered or visible, through less than fully opaque clothing, any portion of the genitals or, in the case of a female, any portion of the breasts below the top of the areola of the breasts.
</html:p>
<html:p>
(19)
<html:span class="EnSpace"/>
An individual is “unemployed” for any period for which the individual is all of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
Not in receipt of wages subject to withholding under Section 13020 of the Unemployment Insurance Code for that period.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
Not a self-employed individual (within the
meaning of Section 401(c)(1)(B) of the Internal Revenue Code, relating to self-employed individual) for that period.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
Not a registered full-time student at a high school, college, university, or other postsecondary educational institution for that period.
</html:p>
<html:p>
(c)
<html:span class="EnSpace"/>
The net increase in full-time employees of a qualified taxpayer shall be determined as provided by this subdivision:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
The net increase in full-time employees shall be determined on an annual full-time equivalent basis by subtracting from the amount determined in subparagraph (C) the amount determined in subparagraph (B).
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
The total number of full-time employees employed in the base year by the taxpayer and by any trade or business acquired by the taxpayer during
the current taxable year.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
The total number of full-time employees employed in the current taxable year by the taxpayer and by any trade or business acquired during the current taxable year.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
For taxpayers who first commence doing business in this state during the taxable year, the number of full-time employees for the base year shall be zero.
</html:p>
<html:p>
(d)
<html:span class="EnSpace"/>
For purposes of this section:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
All employees of the trades or businesses that are treated as related under Section 267, 318, or 707 of the Internal Revenue Code shall be treated as employed by a single taxpayer.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
In determining whether the taxpayer has first commenced doing business in this state during the taxable year, the
provisions of subdivision (f) of Section 17276, without application of paragraph (7) of that subdivision, shall apply.
</html:p>
<html:p>
(e)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
Except as provided in subparagraph (B), to be eligible for the credit allowed by this section, a qualified taxpayer shall, upon hiring a qualified full-time employee, request a tentative credit reservation from the Franchise Tax Board within 30 days of complying with the Employment Development Department’s new hire reporting requirements as provided in Section 1088.5 of the Unemployment Insurance Code, in the form and manner prescribed by the Franchise Tax Board.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
For taxable years beginning on or after January 1, 2023, and before January 1, 2024, to be eligible for the credit allowed by this section, a qualified taxpayer described in clause (ii), (iii), (iv), or (v) of subparagraph (A) of paragraph (14)
of subdivision (b) shall, upon hiring a qualified full-time employee, request a tentative credit reservation from the Franchise Tax Board on or before the last day of the month following the close of the taxable year for which the credit is claimed, in the form and manner prescribed by the Franchise Tax Board.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
To obtain a tentative credit reservation with respect to a qualified full-time employee, the qualified taxpayer shall provide necessary information, as determined by the Franchise Tax Board, including the name, social security number, the start date of employment, the rate of pay of the qualified full-time employee, the qualified taxpayer’s gross receipts, less returns and allowances, for the previous taxable year, and whether the qualified full-time employee is a resident of a targeted employment area, as defined in former Section 7072 of the Government Code, as in effect on December 31, 2013.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
The qualified taxpayer shall provide the Franchise Tax Board an annual certification of employment with respect to each qualified full-time employee hired in a previous taxable year, on or before, the 15th day of the third month of the taxable year. The certification shall include necessary information, as determined by the Franchise Tax Board, including the name, social security number, start date of employment, and rate of pay for each qualified full-time employee employed by the qualified taxpayer.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
A qualified taxpayer, as defined under clause (ii), (iii), (iv), or (v) of subparagraph (A) of paragraph (14) of subdivision (b), shall, upon request, provide to the Franchise Tax Board the applicable verification specified in subparagraph (A) of paragraph (14) of subdivision (b).
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
The
verification shall be provided in the form and manner prescribed by the Franchise Tax Board.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
Any disallowance of a credit claimed due to a failure to provide verification under this paragraph shall be treated as a mathematical error appearing on the return. Any amount of tax resulting from such disallowance may be assessed by the Franchise Tax Board in the same manner as provided by Section 19051.
</html:p>
<html:p>
(5)
<html:span class="EnSpace"/>
A tentative credit reservation provided to a taxpayer with respect to an employee of that taxpayer shall not constitute a determination by the Franchise Tax Board with respect to any of the requirements of this section regarding a taxpayer’s eligibility for the credit authorized by this section.
</html:p>
<html:p>
(f)
<html:span class="EnSpace"/>
The Franchise Tax Board shall do all of the following:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
Approve a tentative credit reservation with respect to a qualified full-time employee hired during a calendar year.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
Determine the aggregate tentative reservation amount and the aggregate small business tentative reservation amount for a calendar year.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
A tentative credit reservation request from a qualified taxpayer with respect to a qualified full-time employee who is a resident of a targeted employment area, as defined in former Section 7072 of the Government Code, as in effect on December 31, 2013, shall be expeditiously processed by the Franchise Tax Board. The residence of a qualified full-time employee in a targeted employment area shall have no other effect on the eligibility of an individual as a qualified full-time employee or the eligibility of a qualified taxpayer for the credit authorized by this section.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
Notwithstanding Section 19542, provide as a searchable database on its internet website, for each taxable year beginning on or after January 1, 2014, and before January 1, 2031, the employer names, amounts of tax credit claimed, and number of new jobs created for each taxable year pursuant to this section and Section 23626.
</html:p>
<html:p>
(g)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
The Department of Finance shall, by January 1, 2014, and by January 1 of every fifth year thereafter, provide the Franchise Tax Board with a list of the designated census tracts and a list of census tracts with the lowest civilian unemployment rate.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
The redesignation
of designated census tracts and lowest civilian unemployment census tracts by the Department of Finance as provided in Section 13073.5 of the Government Code shall be effective, for purposes of this credit, one year after the date the Department of Finance redesignates the designated census tracts.
</html:p>
<html:p>
(h)
<html:span class="EnSpace"/>
For purposes of this section:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
All employees of the trades or businesses that are treated as related under Section 267, 318, or 707 of the Internal Revenue Code shall be treated as employed by a single taxpayer.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
All employees of trades or businesses that are not incorporated, and that are under common control, shall be treated as employed by a single taxpayer.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
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 to that trade or business in that manner.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
Principles that apply in the case of controlled groups of corporations, as specified in subdivision (h) of Section 23626, shall apply with respect to determining employment.
</html:p>
<html:p>
(5)
<html:span class="EnSpace"/>
If an employer acquires the major portion of a trade or business of another employer, hereinafter in this paragraph referred to as the predecessor, or the major portion of a separate unit of a trade or business of a predecessor, then, for purposes of applying this section, other than subdivision (i), for any taxable year ending after that acquisition, the employment relationship between a qualified full-time employee and an employer shall not be treated as terminated if the employee continues to be employed in that
trade or business.
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
If the employment of any qualified full-time employee, with respect to whom qualified wages are taken into account under subdivision (a), is terminated by the qualified taxpayer at any time during the first 36 months after commencing employment with the qualified taxpayer, whether or not consecutive, 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.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
Paragraph (1) does not apply to any of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
A termination of employment of a qualified full-time employee who voluntarily leaves the employment of the
qualified taxpayer.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
A termination of employment of a qualified full-time 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 qualified taxpayer fails to offer reemployment to that employee.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
A termination of employment of a qualified full-time 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.
</html:p>
<html:p>
(D)
<html:span class="EnSpace"/>
A termination of employment of a qualified full-time employee due to a substantial reduction in the trade or business operations of the qualified taxpayer, including reductions due to seasonal
employment.
</html:p>
<html:p>
(E)
<html:span class="EnSpace"/>
A termination of employment of a qualified full-time employee, if that employee is replaced by other qualified full-time employees so as to create a net increase in both the number of employees and the hours of employment.
</html:p>
<html:p>
(F)
<html:span class="EnSpace"/>
A termination of employment of a qualified full-time employee, when that employment is considered seasonal employment and the qualified employee is rehired on a seasonal basis.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
For purposes of paragraph (1), the employment relationship between the qualified taxpayer and a qualified full-time employee shall not be treated as terminated by reason of a mere change in the form of conducting the trade or business of the qualified taxpayer, if the qualified full-time employee continues to be employed in that trade or business and the qualified taxpayer retains a substantial
interest in that trade or business.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
An 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.
</html:p>
<html:p>
(j)
<html:span class="EnSpace"/>
In the case of an estate or trust, both of the following apply:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
The qualified wages for a 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.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
A 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.
</html:p>
<html:p>
(k)
<html:span class="EnSpace"/>
In the case in which the credit allowed by this section
exceeds the “net tax,” the excess may be carried over to reduce the “net tax” in the following year, and the succeeding four years if necessary, until the credit is exhausted.
</html:p>
<html:p>
(
<html:i>l</html:i>
)
<html:span class="EnSpace"/>
The Franchise Tax Board may prescribe rules, guidelines, or procedures necessary or appropriate to carry out the purposes of this section, including any guidelines regarding the allocation of the credit allowed under this section. Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code shall not apply to any rule, guideline, or procedure prescribed by the Franchise Tax Board pursuant to this section.
</html:p>
<html:p>
(m)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
Upon the effective date of this section, the Department of Finance shall estimate the total dollar amount of credits that will be claimed under this section with respect to each fiscal year from the 2013–14 fiscal year to the
2020–21 fiscal year, inclusive.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
The Franchise Tax Board shall annually provide to the Joint Legislative Budget Committee, by no later than March 1, a report of the total dollar amount of the credits claimed under this section with respect to the relevant fiscal year. The report shall compare the total dollar amount of credits claimed under this section with respect to that fiscal year with the department’s estimate with respect to that same fiscal year. If the total dollar amount of credits claimed for the fiscal year is less than the estimate for that fiscal year, the report shall identify options for increasing annual claims of the credit so as to meet estimated amounts.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
Beginning March 1, 2025, the report required by this paragraph shall include information relating to the total dollar amount of the credits claimed under this section by
qualified taxpayers described in clause (ii), (iii), (iv), or (v) of subparagraph (A) of paragraph (14) of subdivision (b).
</html:p>
<html:p>
(n)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
This section shall remain in effect only until December 1, 2034, and as of that date is repealed.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
Notwithstanding paragraph (1) of subdivision (a), this section shall continue to be operative for taxable years beginning on or after January 1,
2031, but only with respect to qualified full-time employees who commenced employment with a qualified taxpayer in a designated census tract or economic development area in a taxable year beginning before January 1, 2031.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
This section shall remain operative for any qualified taxpayer with respect to any qualified full-time employee after the designated census tract is no longer designated or an economic development area ceases to be an economic development area, as defined in this section, for the remaining period, if any, of the 60-month period after the original date of hiring of an otherwise qualified full-time employee and any wages paid or incurred with respect to those qualified full-time employees
after the designated census tract is no longer designated or an economic development area ceases to be an economic development area, as defined in this section, shall be treated as qualified wages under this section, provided the employee satisfies any other requirements of paragraphs (13) and (15) of subdivision (b), as if the designated census tract was still designated and binding or the economic development area was still in existence.
</html:p>
<html:p>
(o)
<html:span class="EnSpace"/>
For purposes of complying with Section 41 as it relates to the amendments made to this section and Section 23626 by the act adding this subdivision, hereafter the “expansion of the credit,” the Legislature finds as follows:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
The specific goal, purpose, and objective of the expansion of the credit is to incentivize semiconductor, lithium production and manufacturing, and electric airplane companies to invest in California-based
operations.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
The performance indicator for the Legislature to use in determining whether the expansion of the credit is achieving the stated goal, purpose, and objective is the total dollar amount of credits claimed by taxpayers engaged in semiconductor manufacturing, semiconductor research and development, lithium production and manufacturing, and electric airplane manufacturing, as reported pursuant to subparagraph (B) of paragraph (2) of subdivision (m) of this section and subparagraph (B) of paragraph (2) of subdivision (l) of Section 23626.
</html:p>
<html:p>
(p)
<html:span class="EnSpace"/>
The amendments made to this section by the act adding this subdivision shall be operative for taxable years beginning on or after January 1, 2023.
</html:p>
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</ns0:LawSectionVersion>
</ns0:LawSection>
</ns0:Fragment>
</ns0:BillSection>
<ns0:BillSection id="id_786C591C-37F3-4758-B8C8-17E6B3331746">
<ns0:Num>SEC. 2.</ns0:Num>
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Section 23626 of the
<ns0:DocName>Revenue and Taxation Code</ns0:DocName>
is amended to read:
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<ns0:Fragment>
<ns0:LawSection id="id_5E5C3854-626D-453C-98BA-39233645EF74">
<ns0:Num>23626.</ns0:Num>
<ns0:LawSectionVersion id="id_249A0312-68C2-42DC-B6BE-939EA899D6B1">
<ns0:Content>
<html:p>
(a)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
For each taxable year beginning on or after January 1, 2014, and before January 1, 2031, there shall be allowed to a qualified taxpayer that hires a qualified full-time employee and pays or incurs qualified wages attributable to work performed by the qualified full-time employee in a designated census tract or economic development area, and that receives a tentative credit reservation for that qualified full-time employee, a credit against the “tax,” as defined by Section 23036, in an amount calculated under this section.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
For each taxable
year beginning on or after January 1, 2023, and before January 1,
2031, the designated census tract or economic development area requirements shall not apply to a qualified taxpayer described in clause (ii), (iii), (iv), or (v) of subparagraph (A) of paragraph (14) of subdivision (b).
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
The amount of the credit allowable under this section for a taxable year shall be equal to the product of the tentative credit amount for the taxable year and the applicable percentage for the taxable year.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
If a qualified taxpayer relocates to a designated census tract or economic development area, the qualified taxpayer shall be allowed a credit with respect to qualified wages for each qualified full-time employee who is employed within the new location only if the qualified taxpayer provides each employee at the previous location or locations a written offer of employment at the new location
in the designated census tract or economic development area with comparable compensation.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
For purposes of this paragraph, “relocates to a designated census tract or economic development area” means an increase in the number of qualified full-time employees, employed by a qualified taxpayer, within a designated census tract or tracts or economic development areas within a 12-month period in which there is a decrease in the number of full-time employees, employed by the qualified taxpayer in this state, but outside of designated census tracts or economic development areas.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
This paragraph does not apply to a small business.
</html:p>
<html:p>
(5)
<html:span class="EnSpace"/>
The credit allowed by this section may only be claimed on a timely filed original return of the qualified taxpayer and only with respect to a qualified full-time employee for whom the
qualified taxpayer has received a tentative credit reservation.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
For purposes of this section:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
The “tentative credit amount” for a taxable year shall be equal to the product of the applicable credit percentage for each qualified full-time employee and the qualified wages paid by the qualified taxpayer during the taxable year to that qualified full-time employee.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
The “applicable percentage” for a taxable year shall be equal to a fraction, the numerator of which is the net increase in the total number of full-time employees employed in this state during the taxable year, determined on an annual full-time equivalent basis, as compared with the total number of full-time employees employed in this state during the base year, determined on the same basis, and the denominator of which shall be the total number of
qualified full-time employees employed in this state during the taxable year. The applicable percentage shall not exceed 100 percent.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
The “applicable credit percentage” means the credit percentage for the calendar year during which a qualified full-time employee was first employed by the qualified taxpayer. The applicable credit percentage for all calendar years shall be 35 percent.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
“Base year” means the 2013 taxable year, or in the case of a qualified taxpayer who first hires a qualified full-time employee in a taxable year beginning on or after January 2015, the taxable year immediately preceding the taxable year in which the qualified full-time employee was hired.
</html:p>
<html:p>
(5)
<html:span class="EnSpace"/>
“Acquired” includes any gift, inheritance, transfer incident to divorce, or any other transfer, whether or not for consideration.
</html:p>
<html:p>
(6)
<html:span class="EnSpace"/>
“Annual full-time equivalent” means either of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
In the case of a full-time employee paid hourly qualified wages, “annual full-time equivalent” means the total number of hours worked for the qualified taxpayer by the employee (not to exceed 2,000 hours per employee) divided by 2,000.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
In the case of a salaried full-time employee, “annual full-time equivalent” means the total number of weeks worked for the qualified taxpayer by the employee divided by 52.
</html:p>
<html:p>
(7)
<html:span class="EnSpace"/>
“Designated census tract” means a census tract within the state that is determined by the Department of Finance to have a civilian unemployment rate that is within the top 25 percent of all census tracts within the state and has a poverty rate within the top 25 percent of all
census tracts within the state, as prescribed in Section 13073.5 of the Government Code.
</html:p>
<html:p>
(8)
<html:span class="EnSpace"/>
“Economic development area” means either of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
A former enterprise zone. For purposes of this section, “former enterprise zone” means an enterprise zone designated and in effect as of December 31, 2011, any enterprise zone designated during 2012, and any revision of an enterprise zone prior to June 30, 2013, under former Chapter 12.8 (commencing with Section 7070) of Division 7 of Title 1 of the Government Code, as in effect on December 31, 2012, excluding any census tract within an enterprise zone that is identified by the Department of Finance pursuant to Section 13073.5 of the Government Code as a census tract within the lowest quartile of census tracts with the lowest civilian unemployment and poverty.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
A local agency military base recovery area designated as of the effective date of the act adding this subparagraph, in accordance with Section 7114 of the Government Code.
</html:p>
<html:p>
(9)
<html:span class="EnSpace"/>
“Electric airplane manufacturing” means manufacturing of electric airplanes that would be classified under Code 3364 of the North American Industry Classification System (NAICS) published by the United States Office of Management and Budget, 2022 edition.
</html:p>
<html:p>
(10)
<html:span class="EnSpace"/>
“Lithium production” means lithium mining and manufacturing described in Codes 212390 or 325180 of the North American Industry Classification System (NAICS) published by the United States Office of Management and Budget, 2022 edition.
</html:p>
<html:p>
(11)
<html:span class="EnSpace"/>
“Manufacturing of lithium batteries” means the manufacturing described in Code 335910 of the North American Industry Classification
System (NAICS) published by the United States Office of Management and Budget, 2022 edition.
</html:p>
<html:p>
(12)
<html:span class="EnSpace"/>
“Minimum wage” means the wage established pursuant to Chapter 1 (commencing with Section 1171) of Part 4 of Division 2 of the Labor Code.
</html:p>
<html:p>
(13)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
“Qualified full-time employee” means an individual who meets all of the following requirements:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
(I)
<html:span class="EnSpace"/>
Performs at least 50 percent of their services for the qualified taxpayer during the taxable year in a designated census tract or economic development area.
</html:p>
<html:p>
(II)
<html:span class="EnSpace"/>
This clause does not apply to employees of a qualified taxpayer described in clause (ii), (iii), (iv), or (v) of subparagraph (A) of paragraph (14).
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
Receives starting wages that are at least 150 percent of the minimum wage or at least 100 percent of the minimum wage for employees of a qualified taxpayer described in clause (ii), (iii), (iv), or (v) of subparagraph (A) of paragraph (14).
</html:p>
<html:p>
(iii)
<html:span class="EnSpace"/>
Is hired by the qualified taxpayer on or after January 1, 2014.
</html:p>
<html:p>
(iv)
<html:span class="EnSpace"/>
Is hired by the qualified taxpayer after the date the Department of Finance determines that the census tract referred to in clause (i) is a designated census tract or that the census tracts within a former enterprise zone are not census tracts with the lowest civilian unemployment and poverty.
</html:p>
<html:p>
(v)
<html:span class="EnSpace"/>
Satisfies either of the following conditions:
</html:p>
<html:p>
(I)
<html:span class="EnSpace"/>
Is paid qualified wages by the qualified taxpayer for services not less than an
average of 35 hours per week.
</html:p>
<html:p>
(II)
<html:span class="EnSpace"/>
Is a salaried employee and was paid compensation during the taxable year for full-time employment, within the meaning of Section 515 of the Labor Code, by the qualified taxpayer.
</html:p>
<html:p>
(vi)
<html:span class="EnSpace"/>
Upon commencement of employment with the qualified taxpayer, satisfies any of the following conditions:
</html:p>
<html:p>
(I)
<html:span class="EnSpace"/>
Was unemployed for the six months immediately preceding employment with the qualified taxpayer. In the case of an individual who completed a program of study at a college, university, or other postsecondary educational institution, received a baccalaureate, postgraduate, or professional degree, and was unemployed for the six months immediately preceding employment with the qualified taxpayer, that individual must have completed that program of study at least 12 months prior to the individual’s
commencement of employment with the qualified taxpayer.
</html:p>
<html:p>
(II)
<html:span class="EnSpace"/>
Is a veteran who separated from service in the Armed Forces of the United States within the 12 months preceding commencement of employment with the qualified taxpayer.
</html:p>
<html:p>
(III)
<html:span class="EnSpace"/>
Was a recipient of the credit allowed under Section 32 of the Internal Revenue Code, relating to earned income, as applicable for federal purposes, for the previous taxable year.
</html:p>
<html:p>
(IV)
<html:span class="EnSpace"/>
Is an ex-offender previously convicted of a felony.
</html:p>
<html:p>
(V)
<html:span class="EnSpace"/>
Is a recipient of either CalWORKs, in accordance with Article 2 (commencing with Section 11250) of Chapter 2 of Part 3 of Division 9 of the Welfare and Institutions Code, or general assistance, in accordance with Section 17000.5 of the Welfare and Institutions Code.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
An individual may only be considered a qualified full-time employee for the period of time commencing with the date the individual is first employed by the qualified taxpayer and ending 60 months thereafter.
</html:p>
<html:p>
(14)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
“Qualified taxpayer” means any of the following:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
A corporation engaged in a trade or business within designated census tract or economic development area that, during the taxable year, pays or incurs qualified wages.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
A person or entity engaged in semiconductor manufacturing or semiconductor research and development that, upon requesting a tentative credit reservation, self-certifies and provides verification, in the form and manner prescribed by the Franchise Tax Board, that they intend to apply or have
applied for federal funding pursuant to Sections 101 to 106, inclusive, of, or intend to claim or have claimed the credit pursuant to Section 107 of, Division A of the federal Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act of 2022 (Public Law 117-167), and that pays or incurs qualified wages during the taxable year.
</html:p>
<html:p>
(iii)
<html:span class="EnSpace"/>
A person or entity engaged in electric airplane manufacturing that, upon requesting a tentative credit reservation, self-certifies and provides verification, in the form and manner prescribed by the Franchise Tax Board, that they have received a sales and use tax exclusion pursuant to Section 6010.8 for an electric vertical takeoff and landing (eVTOL) manufacturer and that pays or incurs qualified wages during the taxable year.
</html:p>
<html:p>
(iv)
<html:span class="EnSpace"/>
A person or entity engaged in lithium production that, upon requesting a tentative credit reservation,
self-certifies and provides verification, in the form and manner prescribed by the Franchise Tax Board, that they are a producer, as defined by Section 47002, who pays the tax imposed by Part 25 (commencing with Section 47000) for the taxable year and that pays or incurs qualified wages during the taxable year.
</html:p>
<html:p>
(v)
<html:span class="EnSpace"/>
(I)
<html:span class="EnSpace"/>
A person or entity engaged in manufacturing of lithium batteries that, upon requesting a tentative credit reservation, self-certifies and provides verification, in the form and manner prescribed by the Franchise Tax Board, that their primary business is lithium battery manufacturing and that pays or incurs qualified wages during the taxable year.
</html:p>
<html:p>
(II)
<html:span class="EnSpace"/>
For purposes of this clause, “primary business” means 50 percent or more of their gross income is derived from lithium battery manufacturing.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
In the case of any pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any credit under this section or Section 17053.73 shall be allowed to the pass-thru entity and passed through to the partners and shareholders in accordance with applicable provisions of this part or Part 10 (commencing with Section 17001). For purposes of this subdivision, the term “pass-thru entity” means any partnership or “S” corporation.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
“Qualified taxpayer” shall not include any of the following:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
Employers that provide temporary help services, as described in Code 561320 of the North American Industry Classification System (NAICS) published by the United States Office of Management and Budget, 2012 edition.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
Employers that
provide retail trade services, as described in Sector 44-45 of the North American Industry Classification System (NAICS) published by the United States Office of Management and Budget, 2012 edition.
</html:p>
<html:p>
(iii)
<html:span class="EnSpace"/>
Employers that are primarily engaged in providing food services, as described in Code 711110, 722511, 722513, 722514, or 722515 of the North American Industry Classification System (NAICS) published by the United States Office of Management and Budget, 2012 edition.
</html:p>
<html:p>
(iv)
<html:span class="EnSpace"/>
Employers that are primarily engaged in services as described in Code 713210, 721120, or 722410 of the North American Industry Classification System (NAICS) published by the United States Office of Management and Budget, 2012 edition.
</html:p>
<html:p>
(v)
<html:span class="EnSpace"/>
(I)
<html:span class="EnSpace"/>
An employer that is a sexually oriented business.
</html:p>
<html:p>
(II)
<html:span class="EnSpace"/>
For purposes of this clause:
</html:p>
<html:p>
(ia)
<html:span class="EnSpace"/>
“Sexually oriented business” means a nightclub, bar, restaurant, or similar commercial enterprise that provides for an audience of two or more individuals live nude entertainment or live nude performances where the nudity is a function of everyday business operations and where nudity is a planned and intentional part of the entertainment or performance.
</html:p>
<html:p>
(ib)
<html:span class="EnSpace"/>
“Nude” means clothed in a manner that leaves uncovered or visible, through less than fully opaque clothing, any portion of the genitals or, in the case of a female, any portion of the breasts below the top of the areola of the breasts.
</html:p>
<html:p>
(D)
<html:span class="EnSpace"/>
Subparagraph (C) shall not apply to a taxpayer that is a “small business.”
</html:p>
<html:p>
(15)
<html:span class="EnSpace"/>
“Qualified wages” means those wages subject to withholding pursuant to Division 6 (commencing with Section 13000) of the Unemployment Insurance Code that meet all of the following requirements:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
(i)
<html:span class="EnSpace"/>
Except as provided in clause (ii) or (iii), that portion of wages paid or incurred by the qualified taxpayer during the taxable year to each qualified full-time employee that exceeds 150 percent of minimum wage, but does not exceed 350 percent of the minimum wage.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
(I)
<html:span class="EnSpace"/>
In the case of a qualified full-time employee employed in a designated pilot area, that portion of wages paid or incurred by the qualified taxpayer during the taxable year to each qualified full-time employee that exceeds ten dollars ($10) per hour or an equivalent amount for salaried employees, but does not
exceed 350 percent of the minimum wage. For qualified full-time employees described in the preceding sentence, clause (ii) of subparagraph (A) of paragraph (13) is modified by substituting “ten dollars ($10) per hour or an equivalent amount for salaried employees” for “150 percent of the minimum wage.”
</html:p>
<html:p>
(II)
<html:span class="EnSpace"/>
For purposes of this clause:
</html:p>
<html:p>
(ia)
<html:span class="EnSpace"/>
“Designated pilot area” means an area designated as a designated pilot area by the Governor’s Office of Business and Economic Development.
</html:p>
<html:p>
(ib)
<html:span class="EnSpace"/>
Areas that may be designated as a designated pilot area are limited to areas within a designated census tract or an economic development area with average wages less than the statewide average wages, based on information from the Labor Market Division of the Employment Development Department, and areas within a designated census tract or
an economic development area based on high poverty or high unemployment.
</html:p>
<html:p>
(ic)
<html:span class="EnSpace"/>
The total number of designated pilot areas that may be designated is limited to five, one or more of which must be an area within five or fewer designated census tracts within a single county based on high poverty or high unemployment or an area within an economic development area based on high poverty or high unemployment.
</html:p>
<html:p>
(id)
<html:span class="EnSpace"/>
The designation of a designated pilot area shall be applicable for a period of four calendar years, commencing with the first calendar year for which the designation of a designated pilot area is effective. The applicable period of a designated pilot area may be extended, in the sole discretion of the Governor’s Office of Business and Economic Development, for an additional period of up to three calendar years. The applicable period, and any extended period, shall not extend
beyond December 31, 2020.
</html:p>
<html:p>
(III)
<html:span class="EnSpace"/>
The designation of an area as a designated pilot area and the extension of the applicable period of a designated pilot area shall be at the sole discretion of the Governor’s Office of Business and Economic Development and shall not be subject to administrative appeal or judicial review.
</html:p>
<html:p>
(iii)
<html:span class="EnSpace"/>
For qualified full-time employees of a qualified taxpayer described in clause (ii), (iii), (iv), or (v) of subparagraph (A) of paragraph (14), that portion of wages paid or incurred by the qualified taxpayer during the taxable year to each qualified full-time employee that exceeds 100 percent of minimum wage, but does not exceed 350 percent of the minimum wage.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
Wages paid or incurred during the 60-month period beginning with the first day the qualified full-time employee commences employment
with the qualified taxpayer. In the case of any employee who is reemployed, including regularly occurring seasonal increase, in the trade or business operations of the qualified taxpayer, this reemployment shall not be treated as constituting commencement of employment for purposes of this section.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
Except as provided in paragraph (3) of subdivision (m), qualified wages shall not include any wages paid or incurred by the qualified taxpayer on or after the date that the Department of Finance’s redesignation of designated census tracts is effective, as provided in paragraph (2) of subdivision (g), so that a census tract is no longer determined to be a designated census tract.
</html:p>
<html:p>
(16)
<html:span class="EnSpace"/>
“Seasonal employment” means employment by a qualified taxpayer that has regular and predictable substantial reductions in trade or business operations.
</html:p>
<html:p>
(17)
<html:span class="EnSpace"/>
“Semiconductor manufacturing or semiconductor research and development” means manufacturing described in Code 3344 of the North American Industry Classification System (NAICS) published by the United States Office of Management and Budget, 2022 edition.
</html:p>
<html:p>
(18)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
“Small business” means a trade or business that has aggregate gross receipts, less returns and allowances reportable to this state, of less than two million dollars ($2,000,000) during the previous taxable year.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
(i)
<html:span class="EnSpace"/>
For purposes of this paragraph, “gross receipts, less returns and allowances reportable to this state,” means the sum of the gross receipts from the production of business income, as defined in subdivision (a) of Section 25120, and the gross receipts from the production of nonbusiness income, as
defined in subdivision (d) of Section 25120.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
In the case of any trade or business activity conducted by a partnership or an “S” corporation, the limitations set forth in subparagraph (A) shall be applied to the partnership or “S” corporation and to each partner or shareholder.
</html:p>
<html:p>
(iii)
<html:span class="EnSpace"/>
For taxpayers that are required to be included in a combined report under Section 25101 or authorized to be included in a combined report under Section 25101.15, the dollar amount specified in subparagraph (A) shall apply to the aggregate gross receipts of all taxpayers that are required to be or authorized to be included in a combined report.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
(i)
<html:span class="EnSpace"/>
“Small business” shall not include a sexually oriented business.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
For purposes of this
subparagraph:
</html:p>
<html:p>
(I)
<html:span class="EnSpace"/>
“Sexually oriented business” means a nightclub, bar, restaurant, or similar commercial enterprise that provides for an audience of two or more individuals live nude entertainment or live nude performances where the nudity is a function of everyday business operations and where nudity is a planned and intentional part of the entertainment or performance.
</html:p>
<html:p>
(II)
<html:span class="EnSpace"/>
“Nude” means clothed in a manner that leaves uncovered or visible, through less than fully opaque clothing, any portion of the genitals or, in the case of a female, any portion of the breasts below the top of the areola of the breasts.
</html:p>
<html:p>
(19)
<html:span class="EnSpace"/>
An individual is “unemployed” for any period for which the individual is all of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
Not in receipt of wages subject to
withholding under Section 13020 of the Unemployment Insurance Code for that period.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
Not a self-employed individual (within the meaning of Section 401(c)(1)(B) of the Internal Revenue Code, relating to self-employed individual) for that period.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
Not a registered full-time student at a high school, college, university, or other postsecondary educational institution for that period.
</html:p>
<html:p>
(c)
<html:span class="EnSpace"/>
The net increase in full-time employees of a qualified taxpayer shall be determined as provided by this subdivision:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
The net increase in full-time employees shall be determined on an annual full-time equivalent basis by subtracting from the amount determined in subparagraph (C) the amount determined in subparagraph (B).
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
The total number of full-time employees employed in the base year by the taxpayer and by any trade or business acquired by the taxpayer during the current taxable year.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
The total number of full-time employees employed in the current taxable year by the taxpayer and by any trade or business acquired during the current taxable year.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
For taxpayers who first commence doing business in this state during the taxable year, the number of full-time employees for the base year shall be zero.
</html:p>
<html:p>
(d)
<html:span class="EnSpace"/>
For purposes of this section:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
All employees of the trades or businesses that are treated as related under Section 267, 318, or 707 of the Internal Revenue Code shall be treated as employed by a
single taxpayer.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
In determining whether the taxpayer has first commenced doing business in this state during the taxable year, the provisions of subdivision (g) of Section 24416, without application of paragraph (7) of that subdivision, apply.
</html:p>
<html:p>
(e)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
Except as provided in subparagraph (B), to be eligible for the credit allowed by this section, a qualified taxpayer shall, upon hiring a qualified full-time employee, request a tentative credit reservation from the Franchise Tax Board within 30 days of complying with the Employment Development Department’s new hire reporting requirement as provided in Section 1088.5 of the Unemployment Insurance Code, in the form and manner prescribed by the Franchise Tax Board.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
For taxable years beginning on or after January 1,
2023, and before January 1, 2024, to be eligible for the credit allowed by this section, a qualified taxpayer described in clause (ii), (iii), (iv), or (v) of subparagraph (A) of paragraph (14) of subdivision (b) shall, upon hiring a qualified full-time employee, request a tentative credit reservation from the Franchise Tax Board on or before the last day of the month following the close of the taxable year for which the credit is claimed, in the form and manner prescribed by the Franchise Tax Board.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
To obtain a tentative credit reservation with respect to a qualified full-time employee, the qualified taxpayer shall provide necessary information, as determined by the Franchise Tax Board, including the name, the social security number, the start date of employment, the rate of pay of the qualified full-time employee, the qualified taxpayer’s gross receipts, less returns and allowances, for the previous taxable year, and whether the qualified
full-time employee is a resident of a targeted employment area, as defined in former Section 7072 of the Government Code, as in effect on December 31, 2013.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
The qualified taxpayer shall provide the Franchise Tax Board an annual certification of employment with respect to each qualified full-time employee hire in a previous taxable year, on or before the 15th day of the third month of the taxable year. The certification shall include necessary information, as determined by the Franchise Tax Board, including the name, social security number, start date of employment, and rate of pay for each qualified full-time employee employed by the qualified taxpayer.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
A qualified taxpayer, as defined under clause (ii), (iii), (iv), or (v) of subparagraph (A) of paragraph (14) of subdivision (b), shall, upon request, provide to the Franchise Tax Board the
applicable verification specified in subparagraph (A) of paragraph (14) of subdivision (b).
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
The verification shall be provided in the form and manner prescribed by the Franchise Tax Board.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
Any disallowance of a credit claimed due to a failure to provide verification under this paragraph shall be treated as a mathematical error appearing on the return. Any amount of tax resulting from such disallowance may be assessed by the Franchise Tax Board in the same manner as provided by Section 19051.
</html:p>
<html:p>
(5)
<html:span class="EnSpace"/>
A tentative credit reservation provided to a taxpayer with respect to an employee of that taxpayer shall not constitute a determination by the Franchise Tax Board with respect to any of the requirements of this section regarding a taxpayer’s eligibility for the credit authorized by this section.
</html:p>
<html:p>
(f)
<html:span class="EnSpace"/>
The Franchise Tax Board shall do all of the following:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
Approve a tentative credit reservation with respect to a qualified full-time employee hired during a calendar year.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
Determine the aggregate tentative reservation amount and the aggregate small business tentative reservation amount for a calendar year.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
A tentative credit reservation request from a qualified taxpayer with respect to a qualified full-time employee who is a resident of a targeted employment area, as defined in former Section 7072 of the Government Code, as in effect on December 31, 2013, shall be expeditiously processed by the Franchise Tax Board. The residence of a qualified full-time employee in a targeted employment area shall have no other effect on the eligibility of
an individual as a qualified full-time employee or the eligibility of a qualified taxpayer for the credit authorized by this section.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
Notwithstanding Section 19542, provide as a searchable database on its internet website, for each taxable year beginning on or after January 1, 2014, and before January 1, 2031, the employer names, amounts of tax credit claimed, and number of new jobs created for each taxable year pursuant to this section and Section 17053.73.
</html:p>
<html:p>
(g)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
The Department of Finance shall, by January 1, 2014, and by January 1 of every fifth year thereafter, provide the Franchise Tax Board with a list of the designated census tracts and a list of census
tracts with the lowest civilian unemployment rate.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
The redesignation of designated census tracts and lowest civilian unemployment census tracts by the Department of Finance as provided in Section 13073.5 of the Government Code shall be effective, for purposes of this credit, one year after the date that the Department of Finance redesignates the designated census tracts.
</html:p>
<html:p>
(h)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
For purposes of this section:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
All employees of the trades or businesses that are treated as related under Section 267, 318, or 707 of the Internal Revenue Code shall be treated as employed by a single qualified taxpayer.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
All employees of all corporations that are members of the same controlled group of corporations shall be treated as employed
by a single qualified taxpayer.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
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.
</html:p>
<html:p>
(D)
<html:span class="EnSpace"/>
If a qualified taxpayer acquires the major portion of a trade or business of another taxpayer, hereinafter in this paragraph referred to as the predecessor, or the major portion of a separate unit of a trade or business of a predecessor, then, for purposes of applying this section for any taxable year ending after that acquisition, the employment relationship between a qualified full-time employee and a qualified taxpayer shall not be treated as terminated if the employee continues to be employed in that trade or business.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
For purposes of this
subdivision, “controlled group of corporations” means a controlled group of corporations as defined in Section 1563(a) of the Internal Revenue Code, except that:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
“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.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
The determination shall be made without regard to subsections (a)(4) and (e)(3)(C) of Section 1563 of the Internal Revenue Code.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
Rules similar to the rules provided in Sections 46(e) and 46(h) of the Internal Revenue Code, as in effect on November 4, 1990, shall apply to both of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
An organization to which Section 593 of the Internal Revenue Code applies.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
A
regulated investment company or a real estate investment trust subject to taxation under this part.
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
If the employment of any qualified full-time employee, with respect to whom qualified wages are taken into account under subdivision (a), is terminated by the qualified taxpayer at any time during the first 36 months after commencing employment with the qualified taxpayer, whether or not consecutive, 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.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
Paragraph (1) does not apply to any of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
A termination of employment of a
qualified full-time employee who voluntarily leaves the employment of the qualified taxpayer.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
A termination of employment of a qualified full-time 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 qualified taxpayer fails to offer reemployment to that employee.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
A termination of employment of a qualified full-time 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.
</html:p>
<html:p>
(D)
<html:span class="EnSpace"/>
A termination of employment of a qualified full-time employee due to a substantial reduction in the trade or business operations
of the qualified taxpayer, including reductions due to seasonal employment.
</html:p>
<html:p>
(E)
<html:span class="EnSpace"/>
A termination of employment of a qualified full-time employee, if that employee is replaced by other qualified full-time employees so as to create a net increase in both the number of employees and the hours of employment.
</html:p>
<html:p>
(F)
<html:span class="EnSpace"/>
A termination of employment of a qualified full-time employee, when that employment is considered seasonal employment and the qualified employee is rehired on a seasonal basis.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
For purposes of paragraph (1), the employment relationship between the qualified taxpayer and a qualified full-time employee shall not be treated as terminated by reason of a mere change in the form of conducting the trade or business of the qualified taxpayer, if the qualified full-time employee continues to be employed in that trade or
business and the qualified taxpayer retains a substantial interest in that trade or business.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
An 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.
</html:p>
<html:p>
(j)
<html:span class="EnSpace"/>
In the case where the credit allowed by this section exceeds the “tax,” the excess may be carried over to reduce the “tax” in the following year, and the succeeding four years if necessary, until exhausted.
</html:p>
<html:p>
(k)
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The Franchise Tax Board may prescribe rules, guidelines, or procedures necessary or appropriate to carry out the purposes of this section, including any guidelines regarding the allocation of the credit allowed under this section. Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code shall not
apply to any rule, guideline, or procedure prescribed by the Franchise Tax Board pursuant to this section.
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<html:p>
(
<html:i>l</html:i>
)
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(1)
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Upon the effective date of this section, the Department of Finance shall estimate the total dollar amount of credits that will be claimed under this section with respect to each fiscal year from the 2013–14 fiscal year to the 2020–21 fiscal year, inclusive.
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<html:p>
(2)
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(A)
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The Franchise Tax Board shall annually provide to the Joint Legislative Budget Committee, by no later than March 1, a report of the total dollar amount of the credits claimed under this section with respect to the relevant fiscal year. The report shall compare the total dollar amount of credits claimed under this section with respect to that fiscal year with the department’s estimate with respect to that same fiscal year. If the total dollar amount of
credits claimed for the fiscal year is less than the estimate for that fiscal year, the report shall identify options for increasing annual claims of the credit so as to meet estimated amounts.
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<html:p>
(B)
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Beginning March 1, 2025, the report required by this paragraph shall include information relating to the total dollar amount of the credits claimed under this section by taxpayers described in clause (ii), (iii), (iv), or (v) of subparagraph (A) of paragraph (14) of subdivision (b).
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<html:p>
(m)
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(1)
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This section shall remain in effect only until December 1, 2034, and as of that date is repealed.
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<html:p>
(2)
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Notwithstanding
paragraph (1) of subdivision (a), this section shall continue to be operative for taxable years beginning on or after January 1, 2031, but only with respect to qualified full-time employees who commenced employment with a qualified taxpayer in a designated census tract or economic development area in a taxable year beginning before January 1, 2031.
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<html:p>
(3)
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This section shall remain operative for any qualified taxpayer with respect to any qualified full-time employee after the designated census tract is no longer designated or an economic development area
ceases to be an economic development area, as defined in this section, for the remaining period, if any, of the 60-month period after the original date of hiring of an otherwise qualified full-time employee and any wages paid or incurred with respect to those qualified full-time employees after the designated census tract is no longer designated or an economic development area ceases to be an economic development area, as defined in this section, shall be treated as qualified wages under this section, provided the employee satisfies any other requirements of paragraphs (13) and (15) of subdivision (b), as if the designated census tract was still designated and binding or the economic development area was still in existence.
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<html:p>
(n)
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The amendments made to this section by the act adding this subdivision shall be operative for taxable years beginning on or after January 1, 2023.
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<html:p>
(o)
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(1)
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For purposes of complying with Section 41 as it relates to the amendments made to this section and Section 17053.73 by the act adding this subdivision, the Legislature finds and declares all of the following:
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<html:p>
(A)
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The specific goal of the credit allowed by this section and Section 17053.73 is to create new job opportunities for those workers facing barriers to employment including, but not limited to, those with criminal history and veterans.
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<html:p>
(B)
<html:span class="EnSpace"/>
The performance indicators for the Legislature to use in determining whether the credit is achieving its stated goal shall be the number of taxpayers receiving the credit allowed by this section and Section 17053.73 and the average dollar amount of credits allowed, as well as the number of employees hired under these credits.
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<html:p>
(2)
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(A)
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Notwithstanding Section 10231.5 of the Government Code, the Franchise Tax Board shall submit a report to the Legislature, in compliance with Section 9795 of the Government Code, by January 1, 2030, and annually thereafter, detailing the number of taxpayers allowed a credit pursuant to this section and Section 17053.73, the average dollar value of credits allowed pursuant to this section and Section 17053.73 for the most recent taxable year, and the number of employees hired during the most recent taxable year, to the extent data is available.
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<html:p>
(B)
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The disclosure requirements of this paragraph shall be treated as an exception to Section 19542.
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<ns0:Num>SEC. 3.</ns0:Num>
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<html:p>This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.</html:p>
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