AB 162: High-occupancy vehicle lanes: County of Riverside.
- Session Year: 2017-2018
- House: Assembly
- Latest Version Date: 2018-05-08
Existing law authorizes the Department of Transportation to designate certain lanes for the exclusive or preferential use of high-occupancy vehicles. When those exclusive or preferential use lanes are established and double parallel solid lines are in place to the right thereof, existing law prohibits any person driving a vehicle from crossing over those double lines to enter into or exit from the lanes, and entrance into or exit from those lanes is authorized only in areas designated for these purposes or where a single broken line is in place to the right of the lanes, except as specified. Existing law authorizes a regional transportation agency, in cooperation with the Department of Transportation, to apply to the California Transportation Commission to develop and operate high-occupancy toll (HOT) lanes, including administration and operation of a value pricing program and exclusive or preferential lane facilities for public transit. Existing law authorizes a value pricing and transit program involving HOT lanes to be developed and operated on State Highway Route 15 in Riverside County by the Riverside County Transportation Commission.
This bill would prohibit all high-occupancy vehicle lanes in the County of Riverside, except for HOT lanes, from using double parallel solid lines to restrict the entrance into or exit from those lanes, and would require any existing double parallel solid lines to be removed from those lanes. removed. The bill would require the department to replace the removed double parallel solid lines of a high-occupancy vehicle lane with the appropriate markings and signage, as specified in the California Manual on Uniform Traffic Control Devices.
This bill would make legislative findings and declarations as to the necessity of a special statute for the County of Riverside.
Existing law authorizes the Department of Transportation to designate certain lanes for the exclusive or preferential use of high-occupancy vehicles. When those exclusive or preferential use lanes are established and double parallel solid lines are in place to the right thereof, existing law prohibits any person driving a vehicle from crossing over those double lines to enter into or exit from the lanes, and entrance into or exit from those lanes is authorized only in areas designated for these purposes or where a single broken line is in place to the right of the lanes, except as specified. Existing law authorizes a regional transportation agency, in cooperation with the Department of Transportation, to apply to the California Transportation Commission to develop and operate high-occupancy toll (HOT) lanes, including administration and operation of a value pricing program and exclusive or preferential lane facilities for public transit. Existing law authorizes a value pricing and transit program involving HOT lanes to be developed and operated on State Highway Route 15 in Riverside County by the Riverside County Transportation Commission.
This bill would prohibit all high-occupancy vehicle lanes in the County of Riverside, except for HOT lanes, from using double parallel solid lines to restrict the entrance into or exit from those lanes, and would require any existing double parallel solid lines to be removed from those lanes.
This bill would make legislative findings and declarations as to the necessity of a special statute for the County of Riverside.
Existing law allows a credit against the taxes imposed under the Corporation Tax Law and the Personal Income Tax Law for each taxable year beginning on or after January 1, 2014, and before January 1, 2025, in an amount as provided in a written agreement between the Governors Office of Business and Economic Development and the taxpayer, agreed upon by the California Competes Tax Credit Committee, and based on specified factors, including the number of jobs the taxpayer will create or retain in the state and the amount of investment in the state by the taxpayer. Existing law provides for the allocation of credit amounts through the 201718 fiscal year and limits the aggregate amount of credit that may be allocated in a fiscal year. Existing law defines small business for these purposes as a trade or business, except as specified, that has an aggregate gross receipts, less returns and allowances reportable to the state, of less than $2,000,000 during the previous taxable year.This bill, to be known as the Small Business Tax Cut Act of 2017, would, for allocations for the 201819 fiscal year and each fiscal year thereafter, define small business as having 50 or fewer full-time equivalent employees, on average, in the current and 2 preceding tax years.Existing law allows a credit against the taxes imposed under the Corporation Tax Law and the Personal Income Tax Law for each taxable year beginning on or after January 1, 2014, and before January 1, 2025, in an amount as provided in a written agreement between the Governors Office of Business and Economic Development and the taxpayer, agreed upon by the California Competes Tax Credit Committee, and based on specified factors, including the number of jobs the taxpayer will create or retain in the state and the amount of investment in the state by the taxpayer. Existing law provides for the allocation of credit amounts through the 201718 fiscal year and limits the aggregate amount of credit that may be allocated in a fiscal year. Existing law defines small business for these purposes as a trade or business, except as specified, that has an aggregate gross receipts, less returns and allowances reportable to the state, of less than $2,000,000 during the previous taxable year.
This bill bill, to be known as the Small Business Tax Cut Act of 2017, would, for allocations for the 201819 fiscal year and each fiscal year thereafter, define small business as having 50 or fewer full-time equivalent employees, on average, in the current and 2 preceding tax years.
Existing law allows a credit against the taxes imposed under the Corporation Tax Law and the Personal Income Tax Law for each taxable year beginning on or after January 1, 2014, and before January 1, 2025, in an amount as provided in a written agreement between the Governors Office of Business and Economic Development and the taxpayer, agreed upon by the California Competes Tax Credit Committee, and based on specified factors, including the number of jobs the taxpayer will create or retain in the state and the amount of investment in the state by the taxpayer. Existing law provides for the allocation of credit amounts through the 201718 fiscal year and limits the aggregate amount of credit that may be allocated in a fiscal year. Existing law defines small business for these purposes as a trade or business, except as specified, that has an aggregate gross receipts, less returns and allowances reportable to the state, of less than $2,000,000 during the previous taxable year.
This bill would, for allocations for the 201819 fiscal year and each fiscal year thereafter, define small business as having 50 or fewer full-time equivalent employees, on average, in the current and 2 preceding tax years.
Existing law allows a credit against the taxes imposed under the Corporation Tax Law and the Personal Income Tax Law for each taxable year beginning on or after January 1, 2014, and before January 1, 2025, in an amount as provided in a written agreement between the Governors Office of Business and Economic Development and the taxpayer, agreed upon by the California Competes Tax Credit Committee, and based on specified factors, including the number of jobs the taxpayer will create or retain in the state and the amount of investment in the state by the taxpayer. Existing law provides for the allocation of credit amounts through the 201718 fiscal year and limits the aggregate amount of credit that may be allocated in a fiscal year. Existing law defines small business for these purposes as a trade or business, except as specified, that has an aggregate gross receipts, less returns and allowances reportable to the state, of less than $2,000,000 during the previous taxable year.
This bill would, for allocations for the 201819 fiscal year and each fiscal year thereafter, define small business as having 50 or fewer full-time equivalent employees, on average, in the current and 2 preceding tax years.
Existing law allows a credit against the taxes imposed under the Corporation Tax Law and the Personal Income Tax Law for each taxable year beginning on or after January 1, 2014, and before January 1, 2025, in an amount as provided in a written agreement between the Governors Office of Business and Economic Development and the taxpayer, agreed upon by the California Competes Tax Credit Committee, and based on specified factors, including the number of jobs the taxpayer will create or retain in the state and the amount of investment in the state by the taxpayer. Existing law limits the aggregate amount of credit that may be allocated in a fiscal year and requires 25% of the aggregate amount of the credit that may be allocated to be reserved for small businesses. Existing law defines small business for purposes of this credit to mean a trade or business that has aggregate gross receipts, less returns and allowances reportable to this state, of less than $2,000,000 during the previous taxable year.This bill would state the intent of the Legislature to enact legislation to amend the definition of small business under the credit described above, by increasing, from less than $2,000,000 to less than $4,000,000, the aggregate gross receipts, less returns and allowances reportable to this state, a trade or business may have during the previous taxable year in order to qualify as a small business.Existing law allows a credit against the taxes imposed under the Corporation Tax Law and the Personal Income Tax Law for each taxable year beginning on or after January 1, 2014, and before January 1, 2025, in an amount as provided in a written agreement between the Governors Office of Business and Economic Development and the taxpayer, agreed upon by the California Competes Tax Credit Committee, and based on specified factors, including the number of jobs the taxpayer will create or retain in the state and the amount of investment in the state by the taxpayer. Existing law limits the aggregate amount of credit that may be allocated in a fiscal year and requires 25% of the aggregate amount of the credit that may be allocated to be reserved for small businesses. Existing law defines small business for purposes of this credit to mean a trade or business that has aggregate gross receipts, less returns and allowances reportable to this state, of less than $2,000,000 during the previous taxable year.
This bill would state the intent of the Legislature to enact legislation to amend the definition of small business under the credit described above, by increasing, from less than $2,000,000 to less than $4,000,000, the aggregate gross receipts, less returns and allowances reportable to this state, a trade or business may have during the previous taxable year in order to qualify as a small business.
All high-occupancy vehicle lanes in the County of Riverside, except for high-occupancy toll lanes established pursuant to Section 149.7 or 149.8 of the Streets and Highways Code, shall not use double parallel solid lines to restrict the entrance into or exit from those lanes, and any existing double parallel solid lines shall be removed from those lanes. removed. The department shall replace the removed double parallel solid lines of a high-occupancy vehicle lane with the appropriate markings and signage, as specified in the California Manual on Uniform Traffic Control Devices.
SEC. 2.The Legislature finds and declares that a special statute is necessary and that a general statute cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution because of the unique traffic circumstances in the County of Riverside.
All high-occupancy vehicle lanes in the County of Riverside, except for high-occupancy toll lanes established pursuant to Section 149.7 or 149.8 of the Streets and Highways Code, shall not use double parallel solid lines to restrict the entrance into or exit from those lanes, and any existing double parallel solid lines shall be removed from those lanes.
SEC. 2.The Legislature finds and declares that a special statute is necessary and that a general statute cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution because of the unique traffic circumstances in the County of Riverside.
All matter omitted in this version of the bill appears in the bill as amended in the Senate, June 26, 2018. (JR11)This act shall be known, and may be cited, as the Small Business Tax Cut Act of 2017.
SECTION 1.SEC. 2.Section 17059.2 of the Revenue and Taxation Code is amended to read:17059.2.(a)(1)For each taxable year beginning on and after January 1, 2014, and before January 1, 2025, there shall be allowed as a credit against the net tax, as defined in Section 17039, an amount as determined by the committee pursuant to paragraph (2) and approved pursuant to Section 18410.2.
(2)The credit under this section shall be allocated by GO-Biz with respect to the 201314 fiscal year through and including the 201718 fiscal year. The amount of credit allocated to a taxpayer with respect to a fiscal year pursuant to this section shall be as set forth in a written agreement between GO-Biz and the taxpayer and shall be based on the following factors:
(A)The number of jobs the taxpayer will create or retain in this state.
(B)The compensation paid or proposed to be paid by the taxpayer to its employees, including wages and fringe benefits.
(C)The amount of investment in this state by the taxpayer.
(D)The extent of unemployment or poverty in the area according to the United States Census in which the taxpayers project or business is proposed or located.
(E)The incentives available to the taxpayer in this state, including incentives from the state, local government, and other entities.
(F)The incentives available to the taxpayer in other states.
(G)The duration of the proposed project and the duration the taxpayer commits to remain in this state.
(H)The overall economic impact in this state of the taxpayers project or business.
(I)The strategic importance of the taxpayers project or business to the state, region, or locality.
(J)The opportunity for future growth and expansion in this state by the taxpayers business.
(K)The extent to which the anticipated benefit to the state exceeds the projected benefit to the taxpayer from the tax credit.
(3)The written agreement entered into pursuant to paragraph (2) shall include:
(A)Terms and conditions that include the taxable year or years for which the credit allocated shall be allowed, a minimum compensation level, and a minimum job retention period.
(B)Provisions indicating whether the credit is to be allocated in full upon approval or in increments based on mutually agreed upon milestones when satisfactorily met by the taxpayer.
(C)Provisions that allow the committee to recapture the credit, in whole or in part, if the taxpayer fails to fulfill the terms and conditions of the written agreement.
(b)For purposes of this section:
(1)Committee means the California Competes Tax Credit Committee established pursuant to Section 18410.2.
(2)GO-Biz means the Governors Office of Business and Economic Development.
(c)For purposes of this section, GO-Biz shall do the following:
(1)Give priority to a taxpayer whose project or business is located or proposed to be located in an area of high unemployment or poverty.
(2)Negotiate with a taxpayer the terms and conditions of proposed written agreements that provide the credit allowed pursuant to this section to a taxpayer.
(3)Provide the negotiated written agreement to the committee for its approval pursuant to Section 18410.2.
(4)Inform the Franchise Tax Board of the terms and conditions of the written agreement upon approval of the written agreement by the committee.
(5)Inform the Franchise Tax Board of any recapture, in whole or in part, of a previously allocated credit upon approval of the recapture by the committee.
(6)Post on its Internet Web site all of the following:
(A)The name of each taxpayer allocated a credit pursuant to this section.
(B)The estimated amount of the investment by each taxpayer.
(C)The estimated number of jobs created or retained.
(D)The amount of the credit allocated to the taxpayer.
(E)The amount of the credit recaptured from the taxpayer, if applicable.
(F)The primary location where the taxpayer has committed to increasing the net number of jobs or make investments. The primary location shall be listed by city or, in the case of unincorporated areas, by county.
(G)Information that identifies each tax credit award that was given a priority for being located in a high unemployment or poverty area, pursuant to paragraph (1).
(H)Information that identifies each tax credit award that is being counted toward the requirement of paragraph (3) of subdivision (g).
(7)When determining whether to enter into a written agreement with a taxpayer pursuant to this section, GO-Biz may consider other factors, including, but not limited to, the following:
(A)The financial solvency of the taxpayer and the taxpayers ability to finance its proposed expansion.
(B)The taxpayers current and prior compliance with federal and state laws.
(C)Current and prior litigation involving the taxpayer.
(D)The reasonableness of the fee arrangement between the taxpayer and any third party providing any services related to the credit allowed pursuant to this section.
(E)Any other factors GO-Biz deems necessary to ensure that the administration of the credit allowed pursuant to this section is a model of accountability and transparency and that the effective use of the limited amount of credit available is maximized.
(d)For purposes of this section, the Franchise Tax Board shall do all of the following:
(1)(A)Except as provided in subparagraph (B), review the books and records of all taxpayers allocated a credit pursuant to this section to ensure compliance with the terms and conditions of the written agreement between the taxpayer and GO-Biz.
(B)In the case of a taxpayer that is a small business, as defined in paragraph (3) of subdivision (g), review the books and records of the taxpayer allocated a credit pursuant to this section to ensure compliance with the terms and conditions of the written agreement between the taxpayer and GO-Biz when, in the sole discretion of the Franchise Tax Board, a review of those books and records is appropriate or necessary in the best interests of the state.
(2)Notwithstanding Section 19542, notify GO-Biz of a possible breach of the written agreement by a taxpayer and provide detailed information regarding the basis for that determination.
(e)In the case where the credit allowed under this section exceeds the net tax, as defined in Section 17039, for a taxable year, the excess credit may be carried over to reduce the net tax in the following taxable year, and succeeding five taxable years, if necessary, until the credit has been exhausted.
(f)Any recapture, in whole or in part, of a credit approved by the committee pursuant to Section 18410.2 shall be treated as a mathematical error appearing on the return. Any amount of tax resulting from that recapture shall be assessed by the Franchise Tax Board in the same manner as provided by Section 19051. The amount of tax resulting from the recapture shall be added to the tax otherwise due by the taxpayer for the taxable year in which the committees recapture determination occurred.
(g)(1)The aggregate amount of credit that may be allocated in any fiscal year pursuant to this section and Section 23689 shall be an amount equal to the sum of subparagraphs (A), (B), and (C), less the amount specified in subparagraphs (D) and (E):
(A)Thirty million dollars ($30,000,000) for the 201314 fiscal year, one hundred fifty million dollars ($150,000,000) for the 201415 fiscal year, and two hundred million dollars ($200,000,000) for each fiscal year from 201516 to 201718, inclusive.
(B)The unallocated credit amount, if any, from the preceding fiscal year.
(C)The amount of any previously allocated credits that have been recaptured.
(D)The amount estimated by the Director of Finance, in consultation with the Franchise Tax Board and the State Board of Equalization, to be necessary to limit the aggregation of the estimated amount of exemptions claimed pursuant to Section 6377.1 and of the amounts estimated to be claimed pursuant to this section and Sections 17053.73, 23626, and 23689 to no more than seven hundred fifty million dollars ($750,000,000) for either the current fiscal year or the next fiscal year.
(i)The Director of Finance shall notify the Chairperson of the Joint Legislative Budget Committee of the estimated annual allocation authorized by this paragraph. Any allocation pursuant to these provisions shall be made no sooner than 30 days after written notification has been provided to the Chairperson of the Joint Legislative Budget Committee and the chairpersons of the committees of each house of the Legislature that consider appropriations, or not sooner than whatever lesser time the Chairperson of the Joint Legislative Budget Committee, or his or her designee, may determine.
(ii)In no event shall the amount estimated in this subparagraph be less than zero dollars ($0).
(E)(i)For the 201516 fiscal year and each fiscal year thereafter, the amount of credit estimated by the Director of Finance to be allowed to all qualified taxpayers for that fiscal year pursuant to subparagraph (A) or subparagraph (B) of paragraph (1) of subdivision (c) of Section 23636.
(ii)If the amount available per fiscal year pursuant to this section and Section 23689 is less than the aggregate amount of credit estimated by the Director of Finance to be allowed to qualified taxpayers pursuant to subparagraph (A) or subparagraph (B) of paragraph (1) of subdivision (c) of Section 23636, the aggregate amount allowed pursuant to Section 23636 shall not be reduced and, in addition to the reduction required by clause (i), the aggregate amount of credit that may be allocated pursuant to this section and Section 23689 for the next fiscal year shall be reduced by the amount of that deficit.
(iii)It is the intent of the Legislature that the reductions specified in this subparagraph of the aggregate amount of credit that may be allocated pursuant to this section and Section 23689 shall continue if the repeal dates of the credits allowed by this section and Section 23689 are removed or extended.
(2)(A)In addition to the other amounts determined pursuant to paragraph (1), the Director of Finance may increase the aggregate amount of credit that may be allocated pursuant to this section and Section 23689 by up to twenty-five million dollars ($25,000,000) per fiscal year through the 201718 fiscal year. The amount of any increase made pursuant to this paragraph, when combined with any increase made pursuant to paragraph (2) of subdivision (g) of Section 23689, shall not exceed twenty-five million dollars ($25,000,000) per fiscal year through the 201718 fiscal year.
(B)It is the intent of the Legislature that the Director of Finance increase the aggregate amount under subparagraph (A) in order to mitigate the reduction of the amount available due to the credit allowed to all qualified taxpayers pursuant to subparagraph (A) or (B) of paragraph (1) of subdivision (c) of Section 23636.
(3)(A)Each fiscal year, 25 percent of the aggregate amount of the credit that may be allocated pursuant to this section and Section 23689 shall be reserved for small business, as defined in Section 17053.73 or 23626 for allocations for fiscal years through 201718, and for small business as defined as having 50 or fewer full-time equivalent employees, on average, in the current and two preceding tax years for allocations for the 201819 fiscal year and each fiscal year thereafter.
(B)This paragraph does not preclude more than 25 percent of the aggregate amount of the credit allocated pursuant to this section and Section 23689 from being allocated to small businesses.
(C)A small business shall in no event include a sexually oriented business as defined in Section 17053.73 or 23626.
(4)Each fiscal year, no more than 20 percent of the aggregate amount of the credit that may be allocated pursuant to this section shall be allocated to any one taxpayer.
(h)GO-Biz may prescribe rules and regulations as necessary to carry out the purposes of this section. Any rule or regulation prescribed pursuant to this section may be by adoption of an emergency regulation in accordance with Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code.
(i)A written agreement between GO-Biz and a taxpayer with respect to the credit authorized by this section shall comply with existing law on the date the agreement is executed.
(j)(1)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 201314 fiscal year to the 202425 fiscal year, inclusive.
(2)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 departments 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.
(k)This section is repealed on December 1, 2025.
SEC. 2.SEC. 3.Section 23689 of the Revenue and Taxation Code is amended to read:23689.(a)(1)For each taxable year beginning on and after January 1, 2014, and before January 1, 2025, there shall be allowed as a credit against the tax, as defined in Section 23036, an amount as determined by the committee pursuant to paragraph (2) and approved pursuant to Section 18410.2.
(2)The credit under this section shall be allocated by GO-Biz with respect to the 201314 fiscal year through and including the 201718 fiscal year. The amount of credit allocated to a taxpayer with respect to a fiscal year pursuant to this section shall be as set forth in a written agreement between GO-Biz and the taxpayer and shall be based on the following factors:
(A)The number of jobs the taxpayer will create or retain in this state.
(B)The compensation paid or proposed to be paid by the taxpayer to its employees, including wages and fringe benefits.
(C)The amount of investment in this state by the taxpayer.
(D)The extent of unemployment or poverty in the area according to the United States Census in which the taxpayers project or business is proposed or located.
(E)The incentives available to the taxpayer in this state, including incentives from the state, local government, and other entities.
(F)The incentives available to the taxpayer in other states.
(G)The duration of the proposed project and the duration the taxpayer commits to remain in this state.
(H)The overall economic impact in this state of the taxpayers project or business.
(I)The strategic importance of the taxpayers project or business to the state, region, or locality.
(J)The opportunity for future growth and expansion in this state by the taxpayers business.
(K)The extent to which the anticipated benefit to the state exceeds the projected benefit to the taxpayer from the tax credit.
(3)The written agreement entered into pursuant to paragraph (2) shall include:
(A)Terms and conditions that include the taxable year or years for which the credit allocated shall be allowed, a minimum compensation level, and a minimum job retention period.
(B)Provisions indicating whether the credit is to be allocated in full upon approval or in increments based on mutually agreed upon milestones when satisfactorily met by the taxpayer.
(C)Provisions that allow the committee to recapture the credit, in whole or in part, if the taxpayer fails to fulfill the terms and conditions of the written agreement.
(b)For purposes of this section:
(1)Committee means the California Competes Tax Credit Committee established pursuant to Section 18410.2.
(2)GO-Biz means the Governors Office of Business and Economic Development.
(c)For purposes of this section, GO-Biz shall do the following:
(1)Give priority to a taxpayer whose project or business is located or proposed to be located in an area of high unemployment or poverty.
(2)Negotiate with a taxpayer the terms and conditions of proposed written agreements that provide the credit allowed pursuant to this section to a taxpayer.
(3)Provide the negotiated written agreement to the committee for its approval pursuant to Section 18410.2.
(4)Inform the Franchise Tax Board of the terms and conditions of the written agreement upon approval of the written agreement by the committee.
(5)Inform the Franchise Tax Board of any recapture, in whole or in part, of a previously allocated credit upon approval of the recapture by the committee.
(6)Post on its Internet Web site all of the following:
(A)The name of each taxpayer allocated a credit pursuant to this section.
(B)The estimated amount of the investment by each taxpayer.
(C)The estimated number of jobs created or retained.
(D)The amount of the credit allocated to the taxpayer.
(E)The amount of the credit recaptured from the taxpayer, if applicable.
(F)The primary location where the taxpayer has committed to increasing the net number of jobs or make investments. The primary location shall be listed by city or, in the case of unincorporated areas, by county.
(G)Information that identifies each tax credit award that was given a priority for being located in a high unemployment or poverty area, pursuant to paragraph (1).
(H)Information that identifies each tax credit award that is being counted toward the requirement of paragraph (3) of subdivision (g).
(7)When determining whether to enter into a written agreement with a taxpayer pursuant to this section, GO-Biz may consider other factors, including, but not limited to, the following:
(A)The financial solvency of the taxpayer and the taxpayers ability to finance its proposed expansion.
(B)The taxpayers current and prior compliance with federal and state laws.
(C)Current and prior litigation involving the taxpayer.
(D)The reasonableness of the fee arrangement between the taxpayer and any third party providing any services related to the credit allowed pursuant to this section.
(E)Any other factors GO-Biz deems necessary to ensure that the administration of the credit allowed pursuant to this section is a model of accountability and transparency and that the effective use of the limited amount of credit available is maximized.
(d)For purposes of this section, the Franchise Tax Board shall do all of the following:
(1)(A)Except as provided in subparagraph (B), review the books and records of all taxpayers allocated a credit pursuant to this section to ensure compliance with the terms and conditions of the written agreement between the taxpayer and GO-Biz.
(B)In the case of a taxpayer that is a small business, as defined in paragraph (3) of subdivision (g), review the books and records of the taxpayer allocated a credit pursuant to this section to ensure compliance with the terms and conditions of the written agreement between the taxpayer and GO-Biz when, in the sole discretion of the Franchise Tax Board, a review of those books and records is appropriate or necessary in the best interests of the state.
(2)Notwithstanding Section 19542, notify GO-Biz of a possible breach of the written agreement by a taxpayer and provide detailed information regarding the basis for that determination.
(e)In the case where the credit allowed under this section exceeds the tax, as defined in Section 23036, for a taxable year, the excess credit may be carried over to reduce the tax in the following taxable year, and succeeding five taxable years, if necessary, until the credit has been exhausted.
(f)Any recapture, in whole or in part, of a credit approved by the committee pursuant to Section 18410.2 shall be treated as a mathematical error appearing on the return. Any amount of tax resulting from that recapture shall be assessed by the Franchise Tax Board in the same manner as provided by Section 19051. The amount of tax resulting from the recapture shall be added to the tax otherwise due by the taxpayer for the taxable year in which the committees recapture determination occurred.
(g)(1)The aggregate amount of credit that may be allocated in any fiscal year pursuant to this section and Section 17059.2 shall be an amount equal to the sum of subparagraphs (A), (B), and (C), less the amount specified in subparagraphs (D) and (E):
(A)Thirty million dollars ($30,000,000) for the 201314 fiscal year, one hundred fifty million dollars ($150,000,000) for the 201415 fiscal year, and two hundred million dollars ($200,000,000) for each fiscal year from 201516 to 201718, inclusive.
(B)The unallocated credit amount, if any, from the preceding fiscal year.
(C)The amount of any previously allocated credits that have been recaptured.
(D)The amount estimated by the Director of Finance, in consultation with the Franchise Tax Board and the State Board of Equalization, to be necessary to limit the aggregation of the estimated amount of exemptions claimed pursuant to Section 6377.1 and of the amounts estimated to be claimed pursuant to this section and Sections 17053.73, 17059.2, and 23626 to no more than seven hundred fifty million dollars ($750,000,000) for either the current fiscal year or the next fiscal year.
(i)The Director of Finance shall notify the Chairperson of the Joint Legislative Budget Committee of the estimated annual allocation authorized by this paragraph. Any allocation pursuant to these provisions shall be made no sooner than 30 days after written notification has been provided to the Chairperson of the Joint Legislative Budget Committee and the chairpersons of the committees of each house of the Legislature that consider appropriations, or not sooner than whatever lesser time the Chairperson of the Joint Legislative Budget Committee, or his or her designee, may determine.
(ii)In no event shall the amount estimated in this subparagraph be less than zero dollars ($0).
(E)(i)For the 201516 fiscal year and each fiscal year thereafter, the amount of credit estimated by the Director of Finance to be allowed to all qualified taxpayers for that fiscal year pursuant to subparagraph (A) or subparagraph (B) of paragraph (1) of subdivision (c) of Section 23636.
(ii)If the amount available per fiscal year pursuant to this section and Section 17059.2 is less than the aggregate amount of credit estimated by the Director of Finance to be allowed to qualified taxpayers pursuant to subparagraph (A) or subparagraph (B) of paragraph (1) of subdivision (c) of Section 23636, the aggregate amount allowed pursuant to Section 23636 shall not be reduced and, in addition to the reduction required by clause (i), the aggregate amount of credit that may be allocated pursuant to this section and Section 17059.2 for the next fiscal year shall be reduced by the amount of that deficit.
(iii)It is the intent of the Legislature that the reductions specified in this subparagraph of the aggregate amount of credit that may be allocated pursuant to this section and Section 17059.2 shall continue if the repeal dates of the credits allowed by this section and Section 17059.2 are removed or extended.
(2)(A)In addition to the other amounts determined pursuant to paragraph (1), the Director of Finance may increase the aggregate amount of credit that may be allocated pursuant to this section and Section 17059.2 by up to twenty-five million dollars ($25,000,000) per fiscal year through the 201718 fiscal year. The amount of any increase made pursuant to this paragraph, when combined with any increase made pursuant to paragraph (2) of subdivision (g) of Section 17059.2, shall not exceed twenty-five million dollars ($25,000,000) per fiscal year through the 201718 fiscal year.
(B)It is the intent of the Legislature that the Director of Finance increase the aggregate amount under subparagraph (A) in order to mitigate the reduction of the amount available due to the credit allowed to all qualified taxpayers pursuant to subparagraph (A) or (B) of paragraph (1) of subdivision (c) of Section 23636.
(3)(A)Each fiscal year, 25 percent of the aggregate amount of the credit that may be allocated pursuant to this section and Section 17059.2 shall be reserved for small business, as defined in Section 17053.73 or 23626 for allocations for fiscal years through 201718 and for small business as defined as having 50 or fewer full-time equivalent employees, on average, in the current and two preceding tax years for allocations for the 201819 fiscal year and each fiscal year thereafter.
(B)This paragraph does not preclude more than 25 percent of the aggregate amount of the credit allocated pursuant to this section and Section 17059.2 from being allocated to small businesses.
(C)A small business shall in no event include a sexually oriented business as defined in Section 17053.73 or 23626.
(4)Each fiscal year, no more than 20 percent of the aggregate amount of the credit that may be allocated pursuant to this section shall be allocated to any one taxpayer.
(h)GO-Biz may prescribe rules and regulations as necessary to carry out the purposes of this section. Any rule or regulation prescribed pursuant to this section may be by adoption of an emergency regulation in accordance with Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code.
(i)(1)A written agreement between GO-Biz and a taxpayer with respect to the credit authorized by this section shall not restrict, broaden, or otherwise alter the ability of the taxpayer to assign that credit or any portion thereof in accordance with Section 23663.
(2)A written agreement between GO-Biz and a taxpayer with respect to the credit authorized by this section must comply with existing law on the date the agreement is executed.
(j)(1)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 201314 fiscal year to the 202425 fiscal year, inclusive.
(2)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 departments 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.
(k)This section is repealed on December 1, 2025.
(a)(1)For each taxable year beginning on and after January 1, 2014, and before January 1, 2025, there shall be allowed as a credit against the net tax, as defined in Section 17039, an amount as determined by the committee pursuant to paragraph (2) and approved pursuant to Section 18410.2.
(2)The credit under this section shall be allocated by GO-Biz with respect to the 201314 fiscal year through and including the 201718 fiscal year. The amount of credit allocated to a taxpayer with respect to a fiscal year pursuant to this section shall be as set forth in a written agreement between GO-Biz and the taxpayer and shall be based on the following factors:
(A)The number of jobs the taxpayer will create or retain in this state.
(B)The compensation paid or proposed to be paid by the taxpayer to its employees, including wages and fringe benefits.
(C)The amount of investment in this state by the taxpayer.
(D)The extent of unemployment or poverty in the area according to the United States Census in which the taxpayers project or business is proposed or located.
(E)The incentives available to the taxpayer in this state, including incentives from the state, local government, and other entities.
(F)The incentives available to the taxpayer in other states.
(G)The duration of the proposed project and the duration the taxpayer commits to remain in this state.
(H)The overall economic impact in this state of the taxpayers project or business.
(I)The strategic importance of the taxpayers project or business to the state, region, or locality.
(J)The opportunity for future growth and expansion in this state by the taxpayers business.
(K)The extent to which the anticipated benefit to the state exceeds the projected benefit to the taxpayer from the tax credit.
(3)The written agreement entered into pursuant to paragraph (2) shall include:
(A)Terms and conditions that include the taxable year or years for which the credit allocated shall be allowed, a minimum compensation level, and a minimum job retention period.
(B)Provisions indicating whether the credit is to be allocated in full upon approval or in increments based on mutually agreed upon milestones when satisfactorily met by the taxpayer.
(C)Provisions that allow the committee to recapture the credit, in whole or in part, if the taxpayer fails to fulfill the terms and conditions of the written agreement.
(b)For purposes of this section:
(1)Committee means the California Competes Tax Credit Committee established pursuant to Section 18410.2.
(2)GO-Biz means the Governors Office of Business and Economic Development.
(c)For purposes of this section, GO-Biz shall do the following:
(1)Give priority to a taxpayer whose project or business is located or proposed to be located in an area of high unemployment or poverty.
(2)Negotiate with a taxpayer the terms and conditions of proposed written agreements that provide the credit allowed pursuant to this section to a taxpayer.
(3)Provide the negotiated written agreement to the committee for its approval pursuant to Section 18410.2.
(4)Inform the Franchise Tax Board of the terms and conditions of the written agreement upon approval of the written agreement by the committee.
(5)Inform the Franchise Tax Board of any recapture, in whole or in part, of a previously allocated credit upon approval of the recapture by the committee.
(6)Post on its Internet Web site all of the following:
(A)The name of each taxpayer allocated a credit pursuant to this section.
(B)The estimated amount of the investment by each taxpayer.
(C)The estimated number of jobs created or retained.
(D)The amount of the credit allocated to the taxpayer.
(E)The amount of the credit recaptured from the taxpayer, if applicable.
(F)The primary location where the taxpayer has committed to increasing the net number of jobs or make investments. The primary location shall be listed by city or, in the case of unincorporated areas, by county.
(G)Information that identifies each tax credit award that was given a priority for being located in a high unemployment or poverty area, pursuant to paragraph (1).
(H)Information that identifies each tax credit award that is being counted toward the requirement of paragraph (3) of subdivision (g).
(7)When determining whether to enter into a written agreement with a taxpayer pursuant to this section, GO-Biz may consider other factors, including, but not limited to, the following:
(A)The financial solvency of the taxpayer and the taxpayers ability to finance its proposed expansion.
(B)The taxpayers current and prior compliance with federal and state laws.
(C)Current and prior litigation involving the taxpayer.
(D)The reasonableness of the fee arrangement between the taxpayer and any third party providing any services related to the credit allowed pursuant to this section.
(E)Any other factors GO-Biz deems necessary to ensure that the administration of the credit allowed pursuant to this section is a model of accountability and transparency and that the effective use of the limited amount of credit available is maximized.
(d)For purposes of this section, the Franchise Tax Board shall do all of the following:
(1)(A)Except as provided in subparagraph (B), review the books and records of all taxpayers allocated a credit pursuant to this section to ensure compliance with the terms and conditions of the written agreement between the taxpayer and GO-Biz.
(B)In the case of a taxpayer that is a small business, as defined in paragraph (3) of subdivision (g), review the books and records of the taxpayer allocated a credit pursuant to this section to ensure compliance with the terms and conditions of the written agreement between the taxpayer and GO-Biz when, in the sole discretion of the Franchise Tax Board, a review of those books and records is appropriate or necessary in the best interests of the state.
(2)Notwithstanding Section 19542, notify GO-Biz of a possible breach of the written agreement by a taxpayer and provide detailed information regarding the basis for that determination.
(e)In the case where the credit allowed under this section exceeds the net tax, as defined in Section 17039, for a taxable year, the excess credit may be carried over to reduce the net tax in the following taxable year, and succeeding five taxable years, if necessary, until the credit has been exhausted.
(f)Any recapture, in whole or in part, of a credit approved by the committee pursuant to Section 18410.2 shall be treated as a mathematical error appearing on the return. Any amount of tax resulting from that recapture shall be assessed by the Franchise Tax Board in the same manner as provided by Section 19051. The amount of tax resulting from the recapture shall be added to the tax otherwise due by the taxpayer for the taxable year in which the committees recapture determination occurred.
(g)(1)The aggregate amount of credit that may be allocated in any fiscal year pursuant to this section and Section 23689 shall be an amount equal to the sum of subparagraphs (A), (B), and (C), less the amount specified in subparagraphs (D) and (E):
(A)Thirty million dollars ($30,000,000) for the 201314 fiscal year, one hundred fifty million dollars ($150,000,000) for the 201415 fiscal year, and two hundred million dollars ($200,000,000) for each fiscal year from 201516 to 201718, inclusive.
(B)The unallocated credit amount, if any, from the preceding fiscal year.
(C)The amount of any previously allocated credits that have been recaptured.
(D)The amount estimated by the Director of Finance, in consultation with the Franchise Tax Board and the State Board of Equalization, to be necessary to limit the aggregation of the estimated amount of exemptions claimed pursuant to Section 6377.1 and of the amounts estimated to be claimed pursuant to this section and Sections 17053.73, 23626, and 23689 to no more than seven hundred fifty million dollars ($750,000,000) for either the current fiscal year or the next fiscal year.
(i)The Director of Finance shall notify the Chairperson of the Joint Legislative Budget Committee of the estimated annual allocation authorized by this paragraph. Any allocation pursuant to these provisions shall be made no sooner than 30 days after written notification has been provided to the Chairperson of the Joint Legislative Budget Committee and the chairpersons of the committees of each house of the Legislature that consider appropriations, or not sooner than whatever lesser time the Chairperson of the Joint Legislative Budget Committee, or his or her designee, may determine.
(ii)In no event shall the amount estimated in this subparagraph be less than zero dollars ($0).
(E)(i)For the 201516 fiscal year and each fiscal year thereafter, the amount of credit estimated by the Director of Finance to be allowed to all qualified taxpayers for that fiscal year pursuant to subparagraph (A) or subparagraph (B) of paragraph (1) of subdivision (c) of Section 23636.
(ii)If the amount available per fiscal year pursuant to this section and Section 23689 is less than the aggregate amount of credit estimated by the Director of Finance to be allowed to qualified taxpayers pursuant to subparagraph (A) or subparagraph (B) of paragraph (1) of subdivision (c) of Section 23636, the aggregate amount allowed pursuant to Section 23636 shall not be reduced and, in addition to the reduction required by clause (i), the aggregate amount of credit that may be allocated pursuant to this section and Section 23689 for the next fiscal year shall be reduced by the amount of that deficit.
(iii)It is the intent of the Legislature that the reductions specified in this subparagraph of the aggregate amount of credit that may be allocated pursuant to this section and Section 23689 shall continue if the repeal dates of the credits allowed by this section and Section 23689 are removed or extended.
(2)(A)In addition to the other amounts determined pursuant to paragraph (1), the Director of Finance may increase the aggregate amount of credit that may be allocated pursuant to this section and Section 23689 by up to twenty-five million dollars ($25,000,000) per fiscal year through the 201718 fiscal year. The amount of any increase made pursuant to this paragraph, when combined with any increase made pursuant to paragraph (2) of subdivision (g) of Section 23689, shall not exceed twenty-five million dollars ($25,000,000) per fiscal year through the 201718 fiscal year.
(B)It is the intent of the Legislature that the Director of Finance increase the aggregate amount under subparagraph (A) in order to mitigate the reduction of the amount available due to the credit allowed to all qualified taxpayers pursuant to subparagraph (A) or (B) of paragraph (1) of subdivision (c) of Section 23636.
(3)(A)Each fiscal year, 25 percent of the aggregate amount of the credit that may be allocated pursuant to this section and Section 23689 shall be reserved for small business, as defined in Section 17053.73 or 23626 for allocations for fiscal years through 201718, and for small business as defined as having 50 or fewer full-time equivalent employees, on average, in the current and two preceding tax years for allocations for the 201819 fiscal year and each fiscal year thereafter. A
(B)This paragraph does not preclude more than 25 percent of the aggregate amount of the credit allocated pursuant to this section and Section 23689 from being allocated to small businesses.
(C)A small business shall in no event include a sexually oriented business as defined in Section 17053.73 or 23626.
(4)Each fiscal year, no more than 20 percent of the aggregate amount of the credit that may be allocated pursuant to this section shall be allocated to any one taxpayer.
(h)GO-Biz may prescribe rules and regulations as necessary to carry out the purposes of this section. Any rule or regulation prescribed pursuant to this section may be by adoption of an emergency regulation in accordance with Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code.
(i)A written agreement between GO-Biz and a taxpayer with respect to the credit authorized by this section shall comply with existing law on the date the agreement is executed.
(j)(1)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 201314 fiscal year to the 202425 fiscal year, inclusive.
(2)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 departments 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.
(k)This section is repealed on December 1, 2025.
SEC. 2.Section 23689 of the Revenue and Taxation Code is amended to read:23689.(a)(1)For each taxable year beginning on and after January 1, 2014, and before January 1, 2025, there shall be allowed as a credit against the tax, as defined in Section 23036, an amount as determined by the committee pursuant to paragraph (2) and approved pursuant to Section 18410.2.
(2)The credit under this section shall be allocated by GO-Biz with respect to the 201314 fiscal year through and including the 201718 fiscal year. The amount of credit allocated to a taxpayer with respect to a fiscal year pursuant to this section shall be as set forth in a written agreement between GO-Biz and the taxpayer and shall be based on the following factors:
(A)The number of jobs the taxpayer will create or retain in this state.
(B)The compensation paid or proposed to be paid by the taxpayer to its employees, including wages and fringe benefits.
(C)The amount of investment in this state by the taxpayer.
(D)The extent of unemployment or poverty in the area according to the United States Census in which the taxpayers project or business is proposed or located.
(E)The incentives available to the taxpayer in this state, including incentives from the state, local government, and other entities.
(F)The incentives available to the taxpayer in other states.
(G)The duration of the proposed project and the duration the taxpayer commits to remain in this state.
(H)The overall economic impact in this state of the taxpayers project or business.
(I)The strategic importance of the taxpayers project or business to the state, region, or locality.
(J)The opportunity for future growth and expansion in this state by the taxpayers business.
(K)The extent to which the anticipated benefit to the state exceeds the projected benefit to the taxpayer from the tax credit.
(3)The written agreement entered into pursuant to paragraph (2) shall include:
(A)Terms and conditions that include the taxable year or years for which the credit allocated shall be allowed, a minimum compensation level, and a minimum job retention period.
(B)Provisions indicating whether the credit is to be allocated in full upon approval or in increments based on mutually agreed upon milestones when satisfactorily met by the taxpayer.
(C)Provisions that allow the committee to recapture the credit, in whole or in part, if the taxpayer fails to fulfill the terms and conditions of the written agreement.
(b)For purposes of this section:
(1)Committee means the California Competes Tax Credit Committee established pursuant to Section 18410.2.
(2)GO-Biz means the Governors Office of Business and Economic Development.
(c)For purposes of this section, GO-Biz shall do the following:
(1)Give priority to a taxpayer whose project or business is located or proposed to be located in an area of high unemployment or poverty.
(2)Negotiate with a taxpayer the terms and conditions of proposed written agreements that provide the credit allowed pursuant to this section to a taxpayer.
(3)Provide the negotiated written agreement to the committee for its approval pursuant to Section 18410.2.
(4)Inform the Franchise Tax Board of the terms and conditions of the written agreement upon approval of the written agreement by the committee.
(5)Inform the Franchise Tax Board of any recapture, in whole or in part, of a previously allocated credit upon approval of the recapture by the committee.
(6)Post on its Internet Web site all of the following:
(A)The name of each taxpayer allocated a credit pursuant to this section.
(B)The estimated amount of the investment by each taxpayer.
(C)The estimated number of jobs created or retained.
(D)The amount of the credit allocated to the taxpayer.
(E)The amount of the credit recaptured from the taxpayer, if applicable.
(F)The primary location where the taxpayer has committed to increasing the net number of jobs or make investments. The primary location shall be listed by city or, in the case of unincorporated areas, by county.
(G)Information that identifies each tax credit award that was given a priority for being located in a high unemployment or poverty area, pursuant to paragraph (1).
(H)Information that identifies each tax credit award that is being counted toward the requirement of paragraph (3) of subdivision (g).
(7)When determining whether to enter into a written agreement with a taxpayer pursuant to this section, GO-Biz may consider other factors, including, but not limited to, the following:
(A)The financial solvency of the taxpayer and the taxpayers ability to finance its proposed expansion.
(B)The taxpayers current and prior compliance with federal and state laws.
(C)Current and prior litigation involving the taxpayer.
(D)The reasonableness of the fee arrangement between the taxpayer and any third party providing any services related to the credit allowed pursuant to this section.
(E)Any other factors GO-Biz deems necessary to ensure that the administration of the credit allowed pursuant to this section is a model of accountability and transparency and that the effective use of the limited amount of credit available is maximized.
(d)For purposes of this section, the Franchise Tax Board shall do all of the following:
(1)(A)Except as provided in subparagraph (B), review the books and records of all taxpayers allocated a credit pursuant to this section to ensure compliance with the terms and conditions of the written agreement between the taxpayer and GO-Biz.
(B)In the case of a taxpayer that is a small business, as defined in paragraph (3) of subdivision (g), review the books and records of the taxpayer allocated a credit pursuant to this section to ensure compliance with the terms and conditions of the written agreement between the taxpayer and GO-Biz when, in the sole discretion of the Franchise Tax Board, a review of those books and records is appropriate or necessary in the best interests of the state.
(2)Notwithstanding Section 19542, notify GO-Biz of a possible breach of the written agreement by a taxpayer and provide detailed information regarding the basis for that determination.
(e)In the case where the credit allowed under this section exceeds the tax, as defined in Section 23036, for a taxable year, the excess credit may be carried over to reduce the tax in the following taxable year, and succeeding five taxable years, if necessary, until the credit has been exhausted.
(f)Any recapture, in whole or in part, of a credit approved by the committee pursuant to Section 18410.2 shall be treated as a mathematical error appearing on the return. Any amount of tax resulting from that recapture shall be assessed by the Franchise Tax Board in the same manner as provided by Section 19051. The amount of tax resulting from the recapture shall be added to the tax otherwise due by the taxpayer for the taxable year in which the committees recapture determination occurred.
(g)(1)The aggregate amount of credit that may be allocated in any fiscal year pursuant to this section and Section 17059.2 shall be an amount equal to the sum of subparagraphs (A), (B), and (C), less the amount specified in subparagraphs (D) and (E):
(A)Thirty million dollars ($30,000,000) for the 201314 fiscal year, one hundred fifty million dollars ($150,000,000) for the 201415 fiscal year, and two hundred million dollars ($200,000,000) for each fiscal year from 201516 to 201718, inclusive.
(B)The unallocated credit amount, if any, from the preceding fiscal year.
(C)The amount of any previously allocated credits that have been recaptured.
(D)The amount estimated by the Director of Finance, in consultation with the Franchise Tax Board and the State Board of Equalization, to be necessary to limit the aggregation of the estimated amount of exemptions claimed pursuant to Section 6377.1 and of the amounts estimated to be claimed pursuant to this section and Sections 17053.73, 17059.2, and 23626 to no more than seven hundred fifty million dollars ($750,000,000) for either the current fiscal year or the next fiscal year.
(i)The Director of Finance shall notify the Chairperson of the Joint Legislative Budget Committee of the estimated annual allocation authorized by this paragraph. Any allocation pursuant to these provisions shall be made no sooner than 30 days after written notification has been provided to the Chairperson of the Joint Legislative Budget Committee and the chairpersons of the committees of each house of the Legislature that consider appropriations, or not sooner than whatever lesser time the Chairperson of the Joint Legislative Budget Committee, or his or her designee, may determine.
(ii)In no event shall the amount estimated in this subparagraph be less than zero dollars ($0).
(E)(i)For the 201516 fiscal year and each fiscal year thereafter, the amount of credit estimated by the Director of Finance to be allowed to all qualified taxpayers for that fiscal year pursuant to subparagraph (A) or subparagraph (B) of paragraph (1) of subdivision (c) of Section 23636.
(ii)If the amount available per fiscal year pursuant to this section and Section 17059.2 is less than the aggregate amount of credit estimated by the Director of Finance to be allowed to qualified taxpayers pursuant to subparagraph (A) or subparagraph (B) of paragraph (1) of subdivision (c) of Section 23636, the aggregate amount allowed pursuant to Section 23636 shall not be reduced and, in addition to the reduction required by clause (i), the aggregate amount of credit that may be allocated pursuant to this section and Section 17059.2 for the next fiscal year shall be reduced by the amount of that deficit.
(iii)It is the intent of the Legislature that the reductions specified in this subparagraph of the aggregate amount of credit that may be allocated pursuant to this section and Section 17059.2 shall continue if the repeal dates of the credits allowed by this section and Section 17059.2 are removed or extended.
(2)(A)In addition to the other amounts determined pursuant to paragraph (1), the Director of Finance may increase the aggregate amount of credit that may be allocated pursuant to this section and Section 17059.2 by up to twenty-five million dollars ($25,000,000) per fiscal year through the 201718 fiscal year. The amount of any increase made pursuant to this paragraph, when combined with any increase made pursuant to paragraph (2) of subdivision (g) of Section 17059.2, shall not exceed twenty-five million dollars ($25,000,000) per fiscal year through the 201718 fiscal year.
(B)It is the intent of the Legislature that the Director of Finance increase the aggregate amount under subparagraph (A) in order to mitigate the reduction of the amount available due to the credit allowed to all qualified taxpayers pursuant to subparagraph (A) or (B) of paragraph (1) of subdivision (c) of Section 23636.
(3)(A)Each fiscal year, 25 percent of the aggregate amount of the credit that may be allocated pursuant to this section and Section 17059.2 shall be reserved for small business, as defined in Section 17053.73 or 23626 for allocations for fiscal years through 201718 and for small business as defined as having 50 or fewer full-time equivalent employees, on average, in the current and two preceding tax years for allocations for the 201819 fiscal year and each fiscal year thereafter. A
(B)This paragraph does not preclude more than 25 percent of the aggregate amount of the credit allocated pursuant to this section and Section 17059.2 from being allocated to small businesses.
(C)A small business shall in no event include a sexually oriented business as defined in Section 17053.73 or 23626.
(4)Each fiscal year, no more than 20 percent of the aggregate amount of the credit that may be allocated pursuant to this section shall be allocated to any one taxpayer.
(h)GO-Biz may prescribe rules and regulations as necessary to carry out the purposes of this section. Any rule or regulation prescribed pursuant to this section may be by adoption of an emergency regulation in accordance with Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code.
(i)(1)A written agreement between GO-Biz and a taxpayer with respect to the credit authorized by this section shall not restrict, broaden, or otherwise alter the ability of the taxpayer to assign that credit or any portion thereof in accordance with Section 23663.
(2)A written agreement between GO-Biz and a taxpayer with respect to the credit authorized by this section must comply with existing law on the date the agreement is executed.
(j)(1)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 201314 fiscal year to the 202425 fiscal year, inclusive.
(2)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 departments 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.
(k)This section is repealed on December 1, 2025.
(a)(1)For each taxable year beginning on and after January 1, 2014, and before January 1, 2025, there shall be allowed as a credit against the net tax, as defined in Section 17039, an amount as determined by the committee pursuant to paragraph (2) and approved pursuant to Section 18410.2.
(2)The credit under this section shall be allocated by GO-Biz with respect to the 201314 fiscal year through and including the 201718 fiscal year. The amount of credit allocated to a taxpayer with respect to a fiscal year pursuant to this section shall be as set forth in a written agreement between GO-Biz and the taxpayer and shall be based on the following factors:
(A)The number of jobs the taxpayer will create or retain in this state.
(B)The compensation paid or proposed to be paid by the taxpayer to its employees, including wages and fringe benefits.
(C)The amount of investment in this state by the taxpayer.
(D)The extent of unemployment or poverty in the area according to the United States Census in which the taxpayers project or business is proposed or located.
(E)The incentives available to the taxpayer in this state, including incentives from the state, local government, and other entities.
(F)The incentives available to the taxpayer in other states.
(G)The duration of the proposed project and the duration the taxpayer commits to remain in this state.
(H)The overall economic impact in this state of the taxpayers project or business.
(I)The strategic importance of the taxpayers project or business to the state, region, or locality.
(J)The opportunity for future growth and expansion in this state by the taxpayers business.
(K)The extent to which the anticipated benefit to the state exceeds the projected benefit to the taxpayer from the tax credit.
(3)The written agreement entered into pursuant to paragraph (2) shall include:
(A)Terms and conditions that include the taxable year or years for which the credit allocated shall be allowed, a minimum compensation level, and a minimum job retention period.
(B)Provisions indicating whether the credit is to be allocated in full upon approval or in increments based on mutually agreed upon milestones when satisfactorily met by the taxpayer.
(C)Provisions that allow the committee to recapture the credit, in whole or in part, if the taxpayer fails to fulfill the terms and conditions of the written agreement.
(b)For purposes of this section:
(1)Committee means the California Competes Tax Credit Committee established pursuant to Section 18410.2.
(2)GO-Biz means the Governors Office of Business and Economic Development.
(c)For purposes of this section, GO-Biz shall do the following:
(1)Give priority to a taxpayer whose project or business is located or proposed to be located in an area of high unemployment or poverty.
(2)Negotiate with a taxpayer the terms and conditions of proposed written agreements that provide the credit allowed pursuant to this section to a taxpayer.
(3)Provide the negotiated written agreement to the committee for its approval pursuant to Section 18410.2.
(4)Inform the Franchise Tax Board of the terms and conditions of the written agreement upon approval of the written agreement by the committee.
(5)Inform the Franchise Tax Board of any recapture, in whole or in part, of a previously allocated credit upon approval of the recapture by the committee.
(6)Post on its Internet Web site all of the following:
(A)The name of each taxpayer allocated a credit pursuant to this section.
(B)The estimated amount of the investment by each taxpayer.
(C)The estimated number of jobs created or retained.
(D)The amount of the credit allocated to the taxpayer.
(E)The amount of the credit recaptured from the taxpayer, if applicable.
(F)The primary location where the taxpayer has committed to increasing the net number of jobs or make investments. The primary location shall be listed by city or, in the case of unincorporated areas, by county.
(G)Information that identifies each tax credit award that was given a priority for being located in a high unemployment or poverty area, pursuant to paragraph (1).
(H)Information that identifies each tax credit award that is being counted toward the requirement of paragraph (3) of subdivision (g).
(7)When determining whether to enter into a written agreement with a taxpayer pursuant to this section, GO-Biz may consider other factors, including, but not limited to, the following:
(A)The financial solvency of the taxpayer and the taxpayers ability to finance its proposed expansion.
(B)The taxpayers current and prior compliance with federal and state laws.
(C)Current and prior litigation involving the taxpayer.
(D)The reasonableness of the fee arrangement between the taxpayer and any third party providing any services related to the credit allowed pursuant to this section.
(E)Any other factors GO-Biz deems necessary to ensure that the administration of the credit allowed pursuant to this section is a model of accountability and transparency and that the effective use of the limited amount of credit available is maximized.
(d)For purposes of this section, the Franchise Tax Board shall do all of the following:
(1)(A)Except as provided in subparagraph (B), review the books and records of all taxpayers allocated a credit pursuant to this section to ensure compliance with the terms and conditions of the written agreement between the taxpayer and GO-Biz.
(B)In the case of a taxpayer that is a small business, as defined in Section 17053.73, paragraph (3) of subdivision (g), review the books and records of the taxpayer allocated a credit pursuant to this section to ensure compliance with the terms and conditions of the written agreement between the taxpayer and GO-Biz when, in the sole discretion of the Franchise Tax Board, a review of those books and records is appropriate or necessary in the best interests of the state.
(2)Notwithstanding Section 19542: (A)Notify(2)Notwithstanding Section 19542, notify GO-Biz of a possible breach of the written agreement by a taxpayer and provide detailed information regarding the basis for that determination.
(B)Provide information to GO-Biz with respect to whether a taxpayer is a small business, as defined in Section 17053.73.(e)In the case where the credit allowed under this section exceeds the net tax, as defined in Section 17039, for a taxable year, the excess credit may be carried over to reduce the net tax in the following taxable year, and succeeding five taxable years, if necessary, until the credit has been exhausted.
(f)Any recapture, in whole or in part, of a credit approved by the committee pursuant to Section 18410.2 shall be treated as a mathematical error appearing on the return. Any amount of tax resulting from that recapture shall be assessed by the Franchise Tax Board in the same manner as provided by Section 19051. The amount of tax resulting from the recapture shall be added to the tax otherwise due by the taxpayer for the taxable year in which the committees recapture determination occurred.
(g)(1)The aggregate amount of credit that may be allocated in any fiscal year pursuant to this section and Section 23689 shall be an amount equal to the sum of subparagraphs (A), (B), and (C), less the amount specified in subparagraphs (D) and (E):
(A)Thirty million dollars ($30,000,000) for the 201314 fiscal year, one hundred fifty million dollars ($150,000,000) for the 201415 fiscal year, and two hundred million dollars ($200,000,000) for each fiscal year from 201516 to 201718, inclusive.
(B)The unallocated credit amount, if any, from the preceding fiscal year.
(C)The amount of any previously allocated credits that have been recaptured.
(D)The amount estimated by the Director of Finance, in consultation with the Franchise Tax Board and the State Board of Equalization, to be necessary to limit the aggregation of the estimated amount of exemptions claimed pursuant to Section 6377.1 and of the amounts estimated to be claimed pursuant to this section and Sections 17053.73, 23626, and 23689 to no more than seven hundred fifty million dollars ($750,000,000) for either the current fiscal year or the next fiscal year.
(i)The Director of Finance shall notify the Chairperson of the Joint Legislative Budget Committee of the estimated annual allocation authorized by this paragraph. Any allocation pursuant to these provisions shall be made no sooner than 30 days after written notification has been provided to the Chairperson of the Joint Legislative Budget Committee and the chairpersons of the committees of each house of the Legislature that consider appropriations, or not sooner than whatever lesser time the Chairperson of the Joint Legislative Budget Committee, or his or her designee, may determine.
(ii)In no event shall the amount estimated in this subparagraph be less than zero dollars ($0).
(E)(i)For the 201516 fiscal year and each fiscal year thereafter, the amount of credit estimated by the Director of Finance to be allowed to all qualified taxpayers for that fiscal year pursuant to subparagraph (A) or subparagraph (B) of paragraph (1) of subdivision (c) of Section 23636.
(ii)If the amount available per fiscal year pursuant to this section and Section 23689 is less than the aggregate amount of credit estimated by the Director of Finance to be allowed to qualified taxpayers pursuant to subparagraph (A) or subparagraph (B) of paragraph (1) of subdivision (c) of Section 23636, the aggregate amount allowed pursuant to Section 23636 shall not be reduced and, in addition to the reduction required by clause (i), the aggregate amount of credit that may be allocated pursuant to this section and Section 23689 for the next fiscal year shall be reduced by the amount of that deficit.
(iii)It is the intent of the Legislature that the reductions specified in this subparagraph of the aggregate amount of credit that may be allocated pursuant to this section and Section 23689 shall continue if the repeal dates of the credits allowed by this section and Section 23689 are removed or extended.
(2)(A)In addition to the other amounts determined pursuant to paragraph (1), the Director of Finance may increase the aggregate amount of credit that may be allocated pursuant to this section and Section 23689 by up to twenty-five million dollars ($25,000,000) per fiscal year through the 201718 fiscal year. The amount of any increase made pursuant to this paragraph, when combined with any increase made pursuant to paragraph (2) of subdivision (g) of Section 23689, shall not exceed twenty-five million dollars ($25,000,000) per fiscal year through the 201718 fiscal year.
(B)It is the intent of the Legislature that the Director of Finance increase the aggregate amount under subparagraph (A) in order to mitigate the reduction of the amount available due to the credit allowed to all qualified taxpayers pursuant to subparagraph (A) or (B) of paragraph (1) of subdivision (c) of Section 23636.
(3)Each fiscal year, 25 percent of the aggregate amount of the credit that may be allocated pursuant to this section and Section 23689 shall be reserved for small business, as defined in Section 17053.73 or 23626 for allocations for fiscal years through 201718, and for small business as defined as having 50 or fewer full-time equivalent employees, on average, in the current and two preceding tax years for allocations for the 201819 fiscal year and each fiscal year thereafter. A small business shall in no event include a sexually oriented business as defined in Section 17053.73 or 23626.
(4)Each fiscal year, no more than 20 percent of the aggregate amount of the credit that may be allocated pursuant to this section shall be allocated to any one taxpayer.
(h)GO-Biz may prescribe rules and regulations as necessary to carry out the purposes of this section. Any rule or regulation prescribed pursuant to this section may be by adoption of an emergency regulation in accordance with Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code.
(i)A written agreement between GO-Biz and a taxpayer with respect to the credit authorized by this section shall comply with existing law on the date the agreement is executed.
(j)(1)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 201314 fiscal year to the 202425 fiscal year, inclusive.
(2)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 departments 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.
(k)This section is repealed on December 1, 2025.
SEC. 2.Section 23689 of the Revenue and Taxation Code is amended to read:23689.(a)(1)For each taxable year beginning on and after January 1, 2014, and before January 1, 2025, there shall be allowed as a credit against the tax, as defined in Section 23036, an amount as determined by the committee pursuant to paragraph (2) and approved pursuant to Section 18410.2.
(2)The credit under this section shall be allocated by GO-Biz with respect to the 201314 fiscal year through and including the 201718 fiscal year. The amount of credit allocated to a taxpayer with respect to a fiscal year pursuant to this section shall be as set forth in a written agreement between GO-Biz and the taxpayer and shall be based on the following factors:
(A)The number of jobs the taxpayer will create or retain in this state.
(B)The compensation paid or proposed to be paid by the taxpayer to its employees, including wages and fringe benefits.
(C)The amount of investment in this state by the taxpayer.
(D)The extent of unemployment or poverty in the area according to the United States Census in which the taxpayers project or business is proposed or located.
(E)The incentives available to the taxpayer in this state, including incentives from the state, local government, and other entities.
(F)The incentives available to the taxpayer in other states.
(G)The duration of the proposed project and the duration the taxpayer commits to remain in this state.
(H)The overall economic impact in this state of the taxpayers project or business.
(I)The strategic importance of the taxpayers project or business to the state, region, or locality.
(J)The opportunity for future growth and expansion in this state by the taxpayers business.
(K)The extent to which the anticipated benefit to the state exceeds the projected benefit to the taxpayer from the tax credit.
(3)The written agreement entered into pursuant to paragraph (2) shall include:
(A)Terms and conditions that include the taxable year or years for which the credit allocated shall be allowed, a minimum compensation level, and a minimum job retention period.
(B)Provisions indicating whether the credit is to be allocated in full upon approval or in increments based on mutually agreed upon milestones when satisfactorily met by the taxpayer.
(C)Provisions that allow the committee to recapture the credit, in whole or in part, if the taxpayer fails to fulfill the terms and conditions of the written agreement.
(b)For purposes of this section:
(1)Committee means the California Competes Tax Credit Committee established pursuant to Section 18410.2.
(2)GO-Biz means the Governors Office of Business and Economic Development.
(c)For purposes of this section, GO-Biz shall do the following:
(1)Give priority to a taxpayer whose project or business is located or proposed to be located in an area of high unemployment or poverty.
(2)Negotiate with a taxpayer the terms and conditions of proposed written agreements that provide the credit allowed pursuant to this section to a taxpayer.
(3)Provide the negotiated written agreement to the committee for its approval pursuant to Section 18410.2.
(4)Inform the Franchise Tax Board of the terms and conditions of the written agreement upon approval of the written agreement by the committee.
(5)Inform the Franchise Tax Board of any recapture, in whole or in part, of a previously allocated credit upon approval of the recapture by the committee.
(6)Post on its Internet Web site all of the following:
(A)The name of each taxpayer allocated a credit pursuant to this section.
(B)The estimated amount of the investment by each taxpayer.
(C)The estimated number of jobs created or retained.
(D)The amount of the credit allocated to the taxpayer.
(E)The amount of the credit recaptured from the taxpayer, if applicable.
(F)The primary location where the taxpayer has committed to increasing the net number of jobs or make investments. The primary location shall be listed by city or, in the case of unincorporated areas, by county.
(G)Information that identifies each tax credit award that was given a priority for being located in a high unemployment or poverty area, pursuant to paragraph (1).
(H)Information that identifies each tax credit award that is being counted toward the requirement of paragraph (3) of subdivision (g).
(7)When determining whether to enter into a written agreement with a taxpayer pursuant to this section, GO-Biz may consider other factors, including, but not limited to, the following:
(A)The financial solvency of the taxpayer and the taxpayers ability to finance its proposed expansion.
(B)The taxpayers current and prior compliance with federal and state laws.
(C)Current and prior litigation involving the taxpayer.
(D)The reasonableness of the fee arrangement between the taxpayer and any third party providing any services related to the credit allowed pursuant to this section.
(E)Any other factors GO-Biz deems necessary to ensure that the administration of the credit allowed pursuant to this section is a model of accountability and transparency and that the effective use of the limited amount of credit available is maximized.
(d)For purposes of this section, the Franchise Tax Board shall do all of the following:
(1)(A)Except as provided in subparagraph (B), review the books and records of all taxpayers allocated a credit pursuant to this section to ensure compliance with the terms and conditions of the written agreement between the taxpayer and GO-Biz.
(B)In the case of a taxpayer that is a small business, as defined in Section 23626, paragraph (3) of subdivision (g), review the books and records of the taxpayer allocated a credit pursuant to this section to ensure compliance with the terms and conditions of the written agreement between the taxpayer and GO-Biz when, in the sole discretion of the Franchise Tax Board, a review of those books and records is appropriate or necessary in the best interests of the state.
(2)Notwithstanding Section 19542: (A)Notify(2)Notwithstanding Section 19542, notify GO-Biz of a possible breach of the written agreement by a taxpayer and provide detailed information regarding the basis for that determination.
(B)Provide information to GO-Biz with respect to whether a taxpayer is a small business, as defined in Section 23626.(e)In the case where the credit allowed under this section exceeds the tax, as defined in Section 23036, for a taxable year, the excess credit may be carried over to reduce the tax in the following taxable year, and succeeding five taxable years, if necessary, until the credit has been exhausted.
(f)Any recapture, in whole or in part, of a credit approved by the committee pursuant to Section 18410.2 shall be treated as a mathematical error appearing on the return. Any amount of tax resulting from that recapture shall be assessed by the Franchise Tax Board in the same manner as provided by Section 19051. The amount of tax resulting from the recapture shall be added to the tax otherwise due by the taxpayer for the taxable year in which the committees recapture determination occurred.
(g)(1)The aggregate amount of credit that may be allocated in any fiscal year pursuant to this section and Section 17059.2 shall be an amount equal to the sum of subparagraphs (A), (B), and (C), less the amount specified in subparagraphs (D) and (E):
(A)Thirty million dollars ($30,000,000) for the 201314 fiscal year, one hundred fifty million dollars ($150,000,000) for the 201415 fiscal year, and two hundred million dollars ($200,000,000) for each fiscal year from 201516 to 201718, inclusive.
(B)The unallocated credit amount, if any, from the preceding fiscal year.
(C)The amount of any previously allocated credits that have been recaptured.
(D)The amount estimated by the Director of Finance, in consultation with the Franchise Tax Board and the State Board of Equalization, to be necessary to limit the aggregation of the estimated amount of exemptions claimed pursuant to Section 6377.1 and of the amounts estimated to be claimed pursuant to this section and Sections 17053.73, 17059.2, and 23626 to no more than seven hundred fifty million dollars ($750,000,000) for either the current fiscal year or the next fiscal year.
(i)The Director of Finance shall notify the Chairperson of the Joint Legislative Budget Committee of the estimated annual allocation authorized by this paragraph. Any allocation pursuant to these provisions shall be made no sooner than 30 days after written notification has been provided to the Chairperson of the Joint Legislative Budget Committee and the chairpersons of the committees of each house of the Legislature that consider appropriations, or not sooner than whatever lesser time the Chairperson of the Joint Legislative Budget Committee, or his or her designee, may determine.
(ii)In no event shall the amount estimated in this subparagraph be less than zero dollars ($0).
(E)(i)For the 201516 fiscal year and each fiscal year thereafter, the amount of credit estimated by the Director of Finance to be allowed to all qualified taxpayers for that fiscal year pursuant to subparagraph (A) or subparagraph (B) of paragraph (1) of subdivision (c) of Section 23636.
(ii)If the amount available per fiscal year pursuant to this section and Section 17059.2 is less than the aggregate amount of credit estimated by the Director of Finance to be allowed to qualified taxpayers pursuant to subparagraph (A) or subparagraph (B) of paragraph (1) of subdivision (c) of Section 23636, the aggregate amount allowed pursuant to Section 23636 shall not be reduced and, in addition to the reduction required by clause (i), the aggregate amount of credit that may be allocated pursuant to this section and Section 17059.2 for the next fiscal year shall be reduced by the amount of that deficit.
(iii)It is the intent of the Legislature that the reductions specified in this subparagraph of the aggregate amount of credit that may be allocated pursuant to this section and Section 17059.2 shall continue if the repeal dates of the credits allowed by this section and Section 17059.2 are removed or extended.
(2)(A)In addition to the other amounts determined pursuant to paragraph (1), the Director of Finance may increase the aggregate amount of credit that may be allocated pursuant to this section and Section 17059.2 by up to twenty-five million dollars ($25,000,000) per fiscal year through the 201718 fiscal year. The amount of any increase made pursuant to this paragraph, when combined with any increase made pursuant to paragraph (2) of subdivision (g) of Section 17059.2, shall not exceed twenty-five million dollars ($25,000,000) per fiscal year through the 201718 fiscal year.
(B)It is the intent of the Legislature that the Director of Finance increase the aggregate amount under subparagraph (A) in order to mitigate the reduction of the amount available due to the credit allowed to all qualified taxpayers pursuant to subparagraph (A) or (B) of paragraph (1) of subdivision (c) of Section 23636.
(3)Each fiscal year, 25 percent of the aggregate amount of the credit that may be allocated pursuant to this section and Section 17059.2 shall be reserved for small business, as defined in Section 17053.73 or 23626 for allocations for fiscal years through 201718 and for small business as defined as having 50 or fewer full-time equivalent employees, on average, in the current and two preceding tax years for allocations for the 201819 fiscal year and each fiscal year thereafter. A small business shall in no event include a sexually oriented business as defined in Section 17053.73 or 23626.
(4)Each fiscal year, no more than 20 percent of the aggregate amount of the credit that may be allocated pursuant to this section shall be allocated to any one taxpayer.
(h)GO-Biz may prescribe rules and regulations as necessary to carry out the purposes of this section. Any rule or regulation prescribed pursuant to this section may be by adoption of an emergency regulation in accordance with Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code.
(i)(1)A written agreement between GO-Biz and a taxpayer with respect to the credit authorized by this section shall not restrict, broaden, or otherwise alter the ability of the taxpayer to assign that credit or any portion thereof in accordance with Section 23663.
(2)A written agreement between GO-Biz and a taxpayer with respect to the credit authorized by this section must comply with existing law on the date the agreement is executed.
(j)(1)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 201314 fiscal year to the 202425 fiscal year, inclusive.
(2)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 departments 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.
(k)This section is repealed on December 1, 2025.
SECTION 1.It is the intent of the Legislature to enact legislation to amend the definition of small business under the credit allowed pursuant to Sections 17059.2 and 23689 of the Revenue and Taxation Code, also known as the California Competes Tax Credit, by increasing, from less than two million dollars (2,0000,000) to less than four million dollars ($4,000,000), the amount of aggregate gross receipts, less returns and allowances reportable to this state, a trade or business may have during the previous taxable year in order to qualify as a small business. REVISIONS: HeadingLine 4.It is the intent of the Legislature to enact legislation to amend the definition of small business under the credit allowed pursuant to Sections 17059.2 and 23689 of the Revenue and Taxation Code, also known as the California Competes Tax Credit, by increasing, from less than two million dollars (2,0000,000) to less than four million dollars ($4,000,000), the amount of aggregate gross receipts, less returns and allowances reportable to this state, a trade or business may have during the previous taxable year in order to qualify as a small business.
|
Date
|
Status
|
|---|---|
| Aug 31, 2018 | Ordered to inactive file at the request of Senator Roth. |
| Aug 6, 2018 | Ordered to third reading. |
| Aug 1, 2018 | Ordered to special consent calendar. |
| Jul 3, 2018 | Read second time. Ordered to third reading. |
| Jul 2, 2018 | From committee: Do pass. (Ayes 7. Noes 0.) (July 2). |
| Jun 25, 2018 | In committee: Set, first hearing. Hearing canceled at the request of author. |
| May 15, 2018 | From committee: Do pass and re-refer to Com. on APPR. (Ayes 12. Noes 0.) (May 15). Re-referred to Com. on APPR. |
| May 8, 2018 | From committee chair, with author's amendments: Amend, and re-refer to committee. Read second time, amended, and re-referred to Com. on T. & H. |
| Apr 19, 2018 | Re-referred to Com. on T. & H. |
| Apr 10, 2018 | Withdrawn from committee. |
| Apr 9, 2018 | From committee chair, with author's amendments: Amend, and re-refer to committee. Read second time, amended, and re-referred to Com. on GOV. & F. |
| Jun 26, 2017 | From committee chair, with author's amendments: Amend, and re-refer to committee. Read second time, amended, and re-referred to Com. on GOV. & F. |
| Jun 8, 2017 | Referred to Com. on GOV. & F. |
| May 30, 2017 | In Senate. Read first time. To Com. on RLS. for assignment. |
| May 30, 2017 | Read third time. Passed. Ordered to the Senate. (Ayes 75. Noes 0. Page 1807.) |
| May 26, 2017 | From committee: Do pass. (Ayes 17. Noes 0.) (May 26). |
| May 10, 2017 | In committee: Set, first hearing. Referred to APPR. suspense file. |
| May 3, 2017 | Re-referred to Com. on APPR. |
| May 2, 2017 | Read second time and amended. |
| May 1, 2017 | From committee: Amend, and do pass as amended and re-refer to Com. on APPR. (Ayes 7. Noes 0.) (April 25). |
| Apr 17, 2017 | Coauthors revised. |
| Mar 28, 2017 | Coauthors revised. |
| Mar 20, 2017 | In committee: Hearing postponed by committee. |
| Mar 13, 2017 | In committee: Set, first hearing. Hearing canceled at the request of author. |
| Mar 6, 2017 | Coauthors revised. |
| Mar 1, 2017 | Re-referred to Com. on REV. & TAX. |
| Feb 28, 2017 | From committee chair, with author's amendments: Amend, and re-refer to Com. on REV. & TAX. Read second time and amended. |
| Feb 27, 2017 | Referred to Coms. on REV. & TAX. and J., E.D., & E. |
| Jan 17, 2017 | From printer. May be heard in committee February 16. |
| Jan 13, 2017 | Read first time. To print. |
|
Date
|
Description
|
Location
|
Votes
|
|
|---|---|---|---|---|
| Jul 2, 2018 | Do pass | Senate Standing Committee on Appropriations |
Passed |
|
| May 15, 2018 | Do pass, but first be re-referred to the Committee on [Appropriations] | Senate Standing Committee on Transportation and Housing |
Passed |
|
| May 30, 2017 | AB 162 CERVANTES Assembly Third Reading | Assembly Floor |
Passed |
|
| May 26, 2017 | Do pass. | Assembly Standing Committee on Appropriations |
Passed |
|
| Apr 25, 2017 | Do pass as amended and be re-referred to the Committee on [Appropriations] | Assembly Standing Committee on Jobs, Economic Development, and the Economy |
Passed |
|
| Mar 27, 2017 | Do pass and be re-referred to the Committee on [Jobs, Economic Development, and the Economy] | Assembly Standing Committee on Revenue and Taxation |
Passed |
This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.
Positions by individuals are not included.
|
Organization
|
Position
|
Date
|
|---|---|---|
| National Association of Women Business Owners | * Support | Mar 27, 2017 |
| Riverside County Board of Supervisors | ** Support | Jul 3, 2018 |
| Riverside County Transportation Commission | * Indeterminate | May 15, 2018 |
Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 | AB |
THIRD READING
Bill No: AB 162
:
SENATE TRANS. & HOUSING COMMITTEE: 12-0, 5/15/18
AYES: Beall, Allen, Dodd, Gaines, Galgiani, McGuire, Morrell, Roth, Skinner, Vidak, Wieckowski, Wiener
NO VOTE RECORDED: Cannella
SENATE APPROPRIATIONS COMMITTEE: 7-0, 7/2/18
AYES: Portantino, Bates, Beall, Bradford, Hill, Nielsen, Wiener
ASSEMBLY FLOOR: 75-0, 5/30/17 - See last page for vote
DIGEST:
This bill eliminates the use of double parallel solid lines on high-occupancy vehicle (HOV) lanes in Riverside County, as specified.
Existing law:
- Identifies the California state highway system through a description of segments of the state’s regional and interregional roads that are owned and operated by the California Department of Transportation (Caltrans).
- Authorizes Caltrans to designate certain highway lanes for the exclusive or preferential use of HOVs.
- Requires, with respect to HOV lanes, Caltrans or a local agency responsible for the lanes to place and maintain the appropriate signage and/or traffic control devices to properly identify designated HOV lanes and further advise motorist of the applicable vehicle occupancy levels and hours of enforcement.
- Prohibits a vehicle from crossing over double parallel solid lines to enter or exit an HOV lane and further specifies that a vehicle may enter or exit in designated segments only where a single broken line is in place.
- Authorizes a regional transportation agency, in cooperation with Caltrans, to apply to the California Transportation Commission to develop and operate high-occupancy toll (HOT) lanes, as specified.
This bill:
- Eliminates the use of double parallel solid lines on HOV lanes in Riverside County.
- Exempts any HOT lane in Riverside County from removing or prohibiting the striping of double parallel solid lines.
- Requires any HOV lane marking modifications to follow requirements as specified in the California Manual Uniform of Traffic Control Devices.
Comments
- Purpose. According to the author, “allowing vehicles to enter and exit carpool lanes at any point would be a win-win situation for Riverside County commuters. In other parts of our state, this has led to better safety for commuters, better traffic flow, and cleaner air. It is time for Riverside County to also make this change through the enactment of Assembly Bill 162.”
- Continuous vs. Limited. Research studying the effectiveness of continuous versus limited access on HOV lanes has produced mixed results. Whereas studies have indicated accident rates are in fact lower or have been reduced when limited access lanes are converted to continuous access, other studies have indicated that when certain modifications are made to either configuration, such as widened shoulder width, accident rates are decreased regardless of the type of access provided. Additionally, a 2012 Caltrans study on HOV lanes in Southern California found that while continuous access HOV lanes under certain conditions provided higher average travel speed, limited access HOV lanes were found to provide higher maximum throughput. This study also found that when an HOV lane was converted from limited to continuous for study purposes, HOV lane violation rates considerably increased; however, the study also found that collisions decreased in certain segments.
Over the last 10 years, efforts have been made by transportation agencies to convert limited access HOV lanes to continuous access lanes. In Orange County, the Orange County Transportation Authority (OCTA) has led the charge. In 2007, OCTA opened continuous access lanes on State Route (SR) 22 as part of their Measure M local sales tax measure expenditure plan. Additionally, AB 2906 (Tran, Chapter 27, Statutes of 2008) removed specific HOV lane marking requirements for SR 55 which has allowed OCTA to operate continuous access on certain portions of SR 55. This bill will provide direction to Caltrans to convert any limited access HOV lane in Riverside County that is not a HOT lane into a continuous access lane.
FISCAL EFFECT: Appropriation: Fiscal Com.: Local:
According to the Senate Appropriations Committee, no new costs as a result of this bill. Senate Appropriations Committee staff notes that only one limited-access HOV lane remains in Riverside County, and $825,000 in funding has already been programmed for that project. (State Highway Account, Road Maintenance and Rehabilitation Account)
Riverside County Board of Supervisors
ASSEMBLY FLOOR: 75-0, 5/30/17
AYES: Acosta, Aguiar-Curry, Travis Allen, Arambula, Baker, Berman, Bigelow, Bloom, Bocanegra, Bonta, Brough, Burke, Caballero, Calderon, Cervantes, Chávez, Chiu, Chu, Cooley, Cooper, Cunningham, Dababneh, Daly, Flora, Fong, Frazier, Friedman, Gallagher, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gomez, Gonzalez Fletcher, Gray, Grayson, Harper, Holden, Irwin, Jones-Sawyer, Kalra, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Obernolte, O'Donnell, Patterson, Quirk, Quirk-Silva, Reyes, Ridley-Thomas, Rodriguez, Rubio, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Voepel, Waldron, Weber, Wood, Rendon
NO VOTE RECORDED: Chau, Chen, Choi, Dahle, Eggman
7/3/18 15:27:13
SENATE COMMITTEE ON
Senator Anthony Portantino, Chair
2017 - 2018 Regular Session
AB 162 (Cervantes) - High-occupancy vehicle lanes: County of Riverside
Version: | Policy Vote: |
Urgency: | Mandate: |
Hearing Date: | Consultant: |
This bill does not meet the criteria for referral to the Suspense File.
Bill Summary:
AB 162 would prohibit the use of parallel solid lines that restrict the entrance into or and exit from high-occupancy vehicle (HOV) lanes in Riverside County, and require the Department of Transportation (Caltrans) to convert any existing limited access HOV lanes to provide for continuous access, as specified.
Fiscal Impact:
No new costs as a result of this bill. Staff notes that only one limited-access HOV lane remains in Riverside County, and $825,000 in funding has already been programmed for that project. See staff comments. (State Highway Account, Road Maintenance and Rehabilitation Account)
Background:
Existing law authorizes Caltrans and local authorities to permit preferential use of highway lanes for HOVs under specified conditions, which grants access to vehicles with more than one occupant. Prior to establishing an HOV lane, Caltrans or the local entity must perform engineering studies to evaluate the impacts of the lane designation on safety, congestion, and highway capacity.
In northern California, HOV lanes are only operational Monday through Friday during posted peak congestion hours when commuter traffic is heaviest. All other vehicles may use the lanes during off-peak hours. In southern California, HOV lanes are generally separated from other lanes by a buffer zone, and are operational at all times. These distinct operational practices are due to different traffic volumes and commuter patterns in the two regions. Northern California highways usually experience congestion only during weekday peak commute hours, so full full-time operation would leave the HOV lane relatively unoccupied during off-peak hours and thus not constitute efficient use of the roadway. Southern California normally experiences very long hours of congestion, typically between six to eleven hours per day, with short off-peak traffic hours. Part-time operation of HOV lanes under these conditions is generally considered infeasible.
In addition to operational differences, HOV lane configurations generally differ between the regions. In northern California, part-time HOV lanes offer “continuous access,” allowing vehicles to enter or exit the HOV lane continuously during enforcement hours. Conversely, full-time HOV lanes in southern California are typically “limited access,” allowing vehicles to enter and exit HOV lanes at specified ingress and egress locations. Limited access HOV lanes are generally separated from general purpose lanes by double line markings, buffer zones, or physical barriers.
Proposed Law:
AB 162 would prohibit the use of double parallel solid lines to restrict entrance to or exit from HOV lanes in Riverside County, except for HOV lanes operating as toll lanes, and require the removal of any existing double parallel solid lines, as specified. The bill would also require Caltrans to replace any HOV “limited access” markings with appropriate markings and signage, as specified in the California Manual on Uniform Traffic Control Devices.
Staff Comments:
Caltrans indicates that only one limited access HOV lane that would be subject to the bill’s requirements remains in Riverside County. The 2018 State Highway Operation and Protection Program (SHOPP), which was adopted by the California Transportation Commission on March 22, 2018, includes a project on State Highway Route 91 in Riverside County to convert existing limited access HOV lanes to continuous access HOV lanes to allow for safer ingress and egress to those lanes. The total costs programmed into the SHOPP for this project are $825,000 and construction will commence in 2019-20. Staff notes that these costs are expected to be incurred whether or not this bill is enacted, but the bill would prevent the future use of limited access HOV lanes in Riverside County.
-- END --
SENATE COMMITTEE ON TRANSPORTATION AND HOUSING
Senator Jim Beall, Chair
2017 - 2018 Regular
Bill No: Hearing Date: 5/15/2018
Author: | Cervantes | ||
Version: | 5/8/2018 | ||
Urgency: | No | Fiscal: | Yes |
Consultant: | Manny Leon | ||
SUBJECT:
DIGEST: This bill eliminates the use of double parallel solid lines on high-occupancy vehicle (HOV) lanes in Riverside County, as specified.
ANALYSIS:
HOV lanes, also known as carpool or diamond lanes, are a traffic management strategy to promote and encourage ridesharing which, in turn, aims to alleviate vehicle congestion and maximize the people-carrying capacity of the state’s highways. Motorcycles, transit vehicles (i.e. public transit buses) and passenger vehicles with two or more (2+) occupants are allowed to access HOV lanes during their operational hours. Furthermore, an "occupant" is considered any person who occupies a safety restraint device, i.e. seat-belt. The most recent data from the Department of Transportation (Caltrans) notes that the state highway system now has over 1,700 miles of HOV lanes in California.
HOV operational hours vary in northern and southern parts of the state:
In Northern California, HOV lanes are only operational on Monday through Friday during posted peak congestion hours, for example: between 6 - 10 a.m. and 3 - 7 p.m. All other vehicles may use the lanes during off-peak hours. This is referred to as "part-time" operation.
In Southern California, HOV lanes are generally separated from other lanes by a buffer zone. The HOV lanes are in effect 24-hours a day, seven-days a week, referred to as "full-time" operation.
The difference in north and south operational periods is a result of varied traffic and commute patterns. Northern California highways usually experience two weekday congestion periods during peak morning and afternoon commute hours, followed by a long period of non-congestion. Full-time operation would leave the HOV lane relatively unoccupied during off-peak hours and would not constitute an efficient use of the roadway. On the other hand, Southern California highways typically experience very long hours of congestion, generally between six to eleven hours per day, with short off-peak traffic hours. Part-time operation under these conditions is generally considered impractical.
Additionally, HOV lane configurations differ in Northern and Southern California. In Northern California, part-time HOV lanes offer “continuous access” where vehicles are allowed to enter or exit the HOV lane continuously along the freeway thereby allowing vehicles to lane change continuously during HOV enforcement hours. Conversely, full-time HOV lanes in Southern California are typically “limited access,” where HOV lanes have specified ingress and egress locations that allow vehicles to enter and exit only in those limited designations. Limited access HOV lanes are generally separated from general purpose lanes by double line markings, buffer zones, or physical barriers.
Existing law:
- Identifies the California state highway system through a description of segments of the state’s regional and interregional roads that are owned and operated by the Caltrans.
- Authorizes Caltrans to designate certain highway lanes for the exclusive or preferential use of high-occupancy vehicles.
- With respects to HOV lanes, requires Caltrans or a local agency responsible for the lanes to place and maintain the appropriate signage and/or traffic control devices to properly identify designated HOV lanes and further advise motorist of the applicable vehicle occupancy levels and hours of enforcement.
- Prohibits a vehicle from crossing over double parallel solid lines to enter or exit a HOV lane and further specifies that a vehicle may enter or exit in designated segments only where a single broken line is in place.
- Authorizes a regional transportation agency, in cooperation with Caltrans, to apply to the California Transportation Commission (CTC) to develop and operate high-occupancy toll (HOT) lanes, as specified.
This bill:
- Eliminates the use of double parallel solid lines on HOV lanes in Riverside County.
- Exempts any HOT lane in Riverside County from removing or prohibiting the striping of double parallel solid lines.
- Requires any HOV lane marking modifications to follow requirements as specified in the California Manual Uniform of Traffic Control Devices (MUTCD).
COMMENTS
- Purpose. According to the author, “allowing vehicles to enter and exit carpool lanes at any point would be a win-win situation for Riverside County commuters. In other parts of our state, this has led to better safety for commuters, better traffic flow, and cleaner air. It is time for Riverside County to also make this change through the enactment of Assembly Bill 162.”
- Continuous vs. Limited. Research studying the effectiveness of continuous versus limited access on HOV lanes has produced mixed results. Whereas studies have indicated accident rates are in fact lower or have been reduced when limited access lanes are converted to continuous access, other studies have indicated that when certain modifications are made to either configuration, such as widened shoulder width, accident rates are decreased regardless of the type of access provided. Additionally, a 2012 Caltrans study on HOV lanes in Southern California found that while continuous access HOV lanes under certain conditions provided higher average travel speed, limited access HOV lanes were found to provide higher maximum throughput. This study also found that when an HOV lane was converted from limited to continuous for study purposes, HOV lane violation rates considerably increased; however, the study also found that collisions decreased in certain segments.
Over the last 10 years, efforts have been made by transportation agencies to convert limited access HOV lanes to continuous access lanes. In Orange County, the Orange County Transportation Authority (OCTA) has led the charge. In 2007, OCTA opened continuous access lanes on State Route 22 (SR-22) as part of their Measure M local sales tax measure expenditure plan. Additionally, AB 2906 (Chapter 27, Statutes of 2008, Tran) removed specific HOV lane marking requirements for State Route 55 (SR-55) which has allowed OCTA to operate continuous access on certain portions of SR-55. This bill will provide direction to Caltrans to convert any limited access HOV lane in Riverside County that is not a HOT lane into a continuous access lane.
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No
POSITIONS: (Communicated to the committee before noon on Wednesday,
May 9, 2018.)
SUPPORT:
Riverside County Board of Supervisors
OPPOSITION:
None received.
-- END --
ASSEMBLY THIRD READING
ATR Bill Id:AB 162
Author:(Cervantes and Quirk-Silva)
As Amended Ver:May 2, 2017
Majority vote
Committee | Votes | Ayes | Noes |
Revenue & Taxation | 8-0 | Ridley-Thomas, Travis Allen, Bocanegra, Burke, Chen, Dababneh, Gipson, Mullin | |
Jobs | 7-0 | Quirk-Silva, Travis Allen, Berman, Cervantes, Grayson, Rodriguez, Steinorth | |
Appropriations | 17-0 | Gonzalez Fletcher, Bigelow, Bloom, Bocanegra, Bonta, Brough, Calderon, McCarty, Quirk, Fong, Friedman, Gallagher, Eduardo Garcia, Gray, Muratsuchi, Obernolte, Reyes |
|
SUMMARY: Defines, under the California Competes Tax Credit (CCTC) Program, a "small business"as one having no more than 50 full-time employees in the current and preceding two years. Specifically, this bill:
- Defines, under the Personal Income Tax (PIT) Law and the Corporation Tax (CT) Law, a "small business" as one having 50 or fewer full-time equivalent employees, on average, in the current and two preceding tax years.
- Provides that "small businesses" are not precluded from receiving more than 25% of the aggregate credit that may be allocated.
- Provides that a "small business' shall not include a sexually oriented business.
- Applies to credits allocated by the CCTC Committee for the 2018–19 fiscal year (FY) and each FY thereafter.
EXISTING LAW:
- Allows a credit against the taxes imposed under the CT Law and the PIT Law for each taxable year beginning on or after January 1, 2014, and before January 1, 2025, in an amount as provided in a written agreement between the Governor's Office of Business and Economic Development (GO-Biz) and the taxpayer, based on certain specified factors, including the number of jobs the taxpayer will create or retain in the state and the amount of investment in the state by the taxpayer. The credit is generally referred to as the "California Competes Tax Credit."
- Authorizes GO-Biz to allocate the CCTC with respect to the FY 2013-14 and each FY thereafter, through and including FY 2017-18.
- Limits the aggregate amount of the CCTC that may be allocated to taxpayers under both the CT and PIT laws to a certain specified sum per FY.
- Authorizes the Director of Finance to increase the aggregate amount of the economic development credits that may be allocated to taxpayers each FY by $25 million per FY through the 2017-18 FY, as specified.
- Requires that 25% of the aggregate amount of the credit that may be allocated each FY be reserved for small businesses, as defined.
- Defines a "small business" as a trade or business that has aggregate gross receipts, less returns and allowances reportable to this state, of less than $2 million during the previous taxable year.
FISCAL EFFECT: According to the Assembly Appropriations Committee:
- No additional revenue loss from the CCTC. This bill does not increase the total amount of dollars allocated for the program overall.
- One-time administrative costs to the Governor's Office of Business and Economic Development (Go-Biz) in excess of $200,000 to modify applications, change the existing review processes and checklist, and conduct outreach to affected taxpayers.
COMMENTS:
- Author's Statement: The author has provided the following statement in support of this bill:
Small and medium sized businesses are a key component to the economic foundation to the California economy. Ensuring that small businesses have the necessary resources to be successful in leveraging state dollars is critical. However, access to capital is often a barrier in advancing business development and job creation. AB 162 would help alleviate obstacles and continue to encourage small business owners to grow and retain business in California.
- Committee Staff Comments:
- Too Soon? GO-Biz has provided the following statement with respect to any changes made to the CCTC, the New Employment Credit, and the Partial Sales and Use Tax Exemption:
Due to the uncertainty of potential federal policy changes and any corresponding impacts to the economy, as well as potential future state budget constraints, the Administration is not pursuing modifications to the California Competes Tax Credit, the New Employment Tax Credit, or the Partial Sales and Use Tax Exemption at this time. These incentives will continue to be available under current law for FY 17/18, and in the case of the New Employment Tax Credit and the Partial Sales and Use Tax Exemption, for the next several years.
In light of the position taken by the GO-Biz, the changes outlined in this bill may be premature.
- Allocation of Credits: The CCTC is an income tax credit available to businesses who want to come, stay, or grow in California. Tax credit agreements are negotiated between GO-Biz and the taxpayer, and approved by the CCTC Committee, consisting of the State Treasurer, the Director of the Department of Finance, the Director of GO-Biz, and one appointee each by the Speaker of the Assembly and Senate Committee on Rules. Allocations are based on certain specified factors, but mainly focus on the amount of investment, the impact of a project, and the number of jobs the taxpayer will create or retain in California. The CCTC program is open to taxpayers of all sizes but creates preferential treatment for those that are “small businesses”, defined as those making less than $2 million in revenue per year. In fact, the CCTC Committee is required to allocate at least 25% of the aggregate amount of credits available in each FY to small businesses. Small businesses then compete against each other, and applications are ranked according to the investments that show the greatest amount of return for California. The CCTC Committee, however, has recently been unable to fully allocate that 25% set aside for small businesses. Despite not being able to meet the allocation threshold, any unallocated tax credits will be reallocated and used in subsequent years.
- Defining "Small Business": There are various ways of defining a "small business." The U.S. Small Business Administration (SBA) provides a long list of definitions that vary by industry and use a wide range of factors such as revenues, number of employees, or assets. It is, therefore, not unusual to have a small business definition that uses the number of employees as a standard. However, defining a "small business" as an entity with less than 50 employees may include some very profitable companies. For example, Headset.com, an audio company, has annual revenue of $26 million but only 44 employees, and Cue Ball Group, a financial firm, has $200 million in annual revenue and only 12 employees.
- Will this bill help more small businesses obtain a tax credit? As noted above, the CCTC Committee has recently been unable to fully allocate the 25% of tax credits set aside for small businesses. The 2015-16 FY was the first year that the CCTC Committee failed to allocate at least 90% of the funds set aside for small businesses. Out of the $50,225,000 that was made available to small businesses, the CCTC Committee only allocated $30,468,163, or about 60.6% of available funds. Modifying the definition of a “small business” to include businesses with 50 or fewer full time employees has the potential of dramatically increasing the number of businesses that qualify for preferential treatment, and would likely make it easier for the CCTC Committee to allocate the full 25%. Larger companies, on average, tend to receive larger allocations of credits. Therefore, modifying the definition in the manner proposed by this bill could unintentionally allow a very large “small business” to receive a disproportionate share of the 25% set aside for small businesses. Alternatively, instead of allowing very large companies to compete for funds specifically set aside for "small businesses," the author may consider making it easier for small businesses, as currently defined, to obtain a CCTC.
Analysis Prepared by: Carlos Anguiano / REV. & TAX. / (916) 319-2098 FN: 0000567
Date of Hearing: May 10, 2017
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez Fletcher, Chair
ABPCA Bill Id:AB 162
Author:(Cervantes) – As Amended Ver:May 2, 2017
Policy Committee: | Revenue and Taxation | Vote: | 8 - 0 |
Jobs, Economic Development, and the Economy | 7 - 0 | ||
|
|
Urgency: No State Mandated Local Program: No Reimbursable: No
SUMMARY:
This bill modifies the definition of a small business under the California Competes Tax Credit (CCTC) to mean any business with 50 or fewer full-time equivalent employees, on average, in the current and two preceding tax years.
FISCAL EFFECT:
- No additional revenue loss from the CCTC. This bill does not increase the total amount of dollars allocated for the program overall.
- One-time administrative costs to the Governor’s Office of Business and Economic Development (Go-Biz) in excess of $200,000 to modify applications, change the existing review processes and checklist, and conduct outreach to affected taxpayers.
COMMENTS:
- Background. In 2014, Governor Brown signed AB 93 (Committee on Budget), Chapter 69, Statutes of 2014, which among other things created the CCTC program. Tax credit agreements are negotiated between GO-Biz and the taxpayer, and allocations are based on certain specified factors such as the impact of a project, and the number of jobs the taxpayer will create or retain in California. The total amount of credits that can be allocated is capped, with $200 million in credits available for 2017-18.
- Small businesses and the CCTC. Existing law requires that each fiscal year at least 25% of the aggregate credit amount be reserved for small businesses, i.e., a business with $2 million or less in gross receipts, minus returns and allowances. Since inception, GO-Biz has awarded 24.4% of the tax credits to small businesses. The CCTC Committee, however, has recently been unable to fully allocate that 25% set aside to small businesses. Despite not being able to meet the allocation threshold, any unallocated tax credits will be reallocated and used in subsequent years.
- Purpose. According to the author, AB 162 will help alleviate financial obstacles for small businesses by ensuring that they have the resources necessary to be successful. The author notes that being able to leverage state dollars is critical, and AB 162 redefines the “small business” with the aim of getting more state dollars to more businesses that need it.
- Too Soon? GO-Biz has provided the following statement with respect to any changes made to the CCTC, the New Employment Credit, and the Partial Sales and Use Tax Exemption:
“Due to the uncertainty of potential federal policy changes and any corresponding impacts to the economy, as well as potential future state budget constraints, the Administration is not pursuing modifications to the California Competes Tax Credit, the New Employment Tax Credit, or the Partial Sales and Use Tax Exemption at this time. These incentives will continue to be available under current law for FY 17/18, and in the case of the New Employment Tax Credit and the Partial Sales and Use Tax Exemption, for the next several years.”
- Prior legislation. AB 2055 (Gipson), of the 2015-16 Legislative Session, which would have required that 25% of the CCTC allocation be reserved for taxpayers making sustainable freight investments, was held in this committee’s Suspense File.
Analysis Prepared by: Luke Reidenbach / APPR. / (916) 319-2081
Date of Hearing: April 25, 2017
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT, AND THE ECONOMY
Sharon Quirk-Silva, Chair
ABPCA Bill Id:AB 162 (
Author:Cervantes and Quirk-Silva) – As Amended Ver:February 28, 2017
SUBJECT: Income taxation: credits
SUMMARY: Modifies the definition of a small business under the California Competes Tax Credit to mean any business with 50 or fewer full-time equivalent employees, on average, in the current and two preceding tax years.
EXISTING LAW:
- Establishes the California Competes Tax Credit for the purpose of awarding individually negotiated tax credits to businesses that operate in California.
- Requires at least 25% of the tax credits be awarded to small businesses on an annual basis.
- Defines a "small business" as having net revenues reportable to the state of less than $2 million in the prior tax year. The FTB is responsible for providing GO-Biz with the information as to whether a taxpayer qualifies as a “small business.”
FISCAL EFFECT: Unknown
POLICY FRAME:
During the 2015-16 legislative session, the Assembly Committee on Jobs, Economic Development, and the Economy (JEDE) undertook a comprehensive review of GO-Biz programs, including the California Competes Tax Credit Program. Among other issues raised was the reluctance of some smaller size companies, particularly those in the tech sector, to have their specific revenues highlighted online and in other public venues. There was a concern that this information could impede the businesses' ability to attract private capital in the future.
Given that the California Competes Tax Credit was specifically developed to serve businesses that provide higher wages, program elements that exclude or discourage technology firms is counter to the credit's purpose. This issue could be addressed in one of two ways, reduce the public reporting and disclosure requirements or establish a new way to define small business that doesn’t serve as a deterrent to certain high growth start-ups. This bill proposes to identify small businesses by number of employees. The analysis includes information on the California small business economy, the California Competes Tax Credit Program, and related legislation. Amendments are noted in Comment 4.
COMMENTS:
- The Role of Small Businesses within the California Economy: California's dominance in many economic areas is based, in part, on the significant role small businesses play in the state's $2.4 trillion economy. Two separate studies, one by the U.S. Census Bureau and another by the Kaufman Foundation, found that net job growth was strongest among businesses with less than 20 employees. Among other advantages, small businesses are crucial in the state's international competitiveness and are an important means for dispersing the positive economic impacts of trade within the California economy.
Sole proprietorships comprise the single largest component of businesses in California, 3.1 million out of an estimated 4 million firms in 2014, representing over $162 billion in revenues with the highest number of businesses (over 539,000) in the professional, scientific, and technical services industry sector.
Excluding sole proprietorships, businesses with less than 20 employees comprise over 86% of all businesses and employ approximately 24% of all workers. Businesses with less than 100 employees represent 97% of all businesses and employ 54% of the workforce. These non-employer and small employer firms create jobs, generate taxes, support important industry sectors, and revitalize communities. Since the recession, these businesses have become increasingly important because of their ability to be more flexible and adaptive to both foreign and domestic market needs.
- California Competes Tax Credit: The California Competes Tax Credit, the Sales and Use Tax Exemption, and the New Employment Credit were established in 2013 as part of a $750 million replacement package of incentives for the California Enterprise Zones Program. Key statutory program requirements for California Competes Tax Credit include:
- Allocation Years: 2013-2014 through and including 2017-18.
- Applicable Tax Years: January 1, 2014, and before January 1, 2025.
- Total Tax Credit Awards: $780 million for 5 years of credits - $30 million (2013–14); $150 million (2014–15); $200 million (2015-16, 2016-17, 2017-18).
- Value of the Individual Credit: Each credit award is individually negotiated with GO-Biz staff and approved by the California Competes Tax Credit Committee. Awards are based on the committed dollars of investment and net new jobs, as compared to the dollar amount of tax credits requested. No taxpayer may receive more than 20% of the total annual allocation.
- Program Priority: Applications from taxpayers whose project or business is located or proposed to be located in an area of high unemployment or high poverty are required to be treated as a priority. This is the only statutory priority under the California Competes Tax Credit. High poverty areas are those that are at or above the federal poverty rate at the time of the tax credit award. High unemployment areas are those that are at or above the state unemployment rate at the time of the tax credit award.
- Carryforward: Six years from the initial application of the credit, as specified in the written agreement.
- Competitive Award Criteria: The California Competes Tax Credit is a competitively awarded credit based on the following criteria:
- The number of anticipated California jobs created or retained;
- The compensation paid or proposed to be paid to its employees, including wages and fringe benefits;
- The amount of investment in this state by the taxpayer;
- The extent of unemployment or poverty in the area in which the taxpayer’s project or business is proposed or located;
- The incentives available to the taxpayer in this state, including incentives from the state, local government, and other entities;
- The incentives available to the taxpayer in other states;
- The duration of the proposed project and the duration the taxpayer commits to remain in this state;
- The overall economic impact in this state of the taxpayer’s project or business;
- The strategic importance of the taxpayer’s project or business to the state, region, or locality;
- The opportunity for future growth and expansion in this state by the taxpayer’s business; and
- The extent to which the anticipated benefit to the state exceeds the projected benefit to the taxpayer from the tax credit.
- Written Agreements: Each award is documented through a written agreement between GO-Biz and the taxpayer. Enforcement of the individual commitment is the responsibility of the Franchise Tax Board (FTB), which is directed to review the books and records of every non-small business taxpayer who receives a credit. FTB has the authority to review the books and records of small business tax payers, but it is not mandatory.
- Small Business Mandate: At least 25% of the tax credits are required to be reserved for small businesses on an annual basis. A small business is defined as having gross receipts (less returns and allowances) of greater than $0 but less than $2 million in the prior tax year. FTB is responsible for providing GO-Biz with the information as to whether a taxpayer qualifies as a “small business.” Since inception, GO-Biz has awarded 24.4% of the tax credits to small businesses. Relative to the number of taxpayers receiving credits, 33.7% were small businesses.
- General Fund Protection: Although statute generally sets a specific schedule for awarding the credits, GO-Biz works in partnership with the state's tax entities to ensure the financial impact on the General Fund does not exceed $750 million in the current and next fiscal year, including all incentives awarded through the California Competes Tax Credit, the Sales and Use Tax Exclusion, and the New Hire Credit.
The Franchise Tax Board is required to annually provide a report to the Joint Legislative Budget Committee that identifies the actual total dollar amount of the credits claimed under the California Competes Tax Credit.
- Number of Businesses Served: Below are charts displaying information on the tax credit awards, including numbers of small businesses and non-small businesses who received credits, applied for credits, average credit award, and median credit award.
As of April 13, 2017 | Number of Awardees | Number of Jobs Committed | Amount of Investment Committed | Credit Awarded |
Non-Small Businesses | 427 | 61,722 | $12,850,395,599 | $394,910,487 |
Small Businesses | 261 | 9,025 | $1,643,635,316 | $97,601,794 |
Total Businesses | 688 | 70,747 | 14,494,030,915 | $492,512,281 |
Data Source: GO-Biz | ||||
Fiscal Year (FY) | Total Credits Available | Total Credit Requests | Number of Non-Small Business Applications | Number of Small Business Applications | Number of Non-Small Businesses Awarded | Number Small Businesses Awarded |
FY 13-14: Application Period 1 | $30,000,000 | $561,454,983 | 262 | 134 | 18 | 11 |
FY 14-15: Application Period 1 | $45,000,000 | $329,333,538 | 228 | 58 | 31 | 25 |
FY 14-15: Application Period 2 | $75,000,000 | $289,800,949 | 177 | 76 | 66 | 27 |
FY 14-15: Application Period 3 | $30,000,000 | $320,181,186 | 187 | 80 | 38 | 25 |
FY 15-16: Application Period 1 | $75,000,000 | $268,876,560 | 205 | 136 | 59 | 30 |
FY 15-16: Application Period 2 | $75,000,000 | $300,244,159 | 193 | 105 | 68 | 35 |
FY 15-16: Application Period 3 | $50,900,000 | $239,730,901 | 170 | 87 | 44 | 23 |
FY 16-17: Application Period 1 | $100,000,000 | $430,280,902 | 187 | 105 | 41 | 33 |
FY 16-17: Application Period 2 | $68,300,000 | $429,277,967 | 208 | 123 | 62 | 52 |
Data Source: GO-Biz | ||||||
As of April 13, 2017 | Average Credit Award | Median Credit Award |
Non-Small Businesses | $924,849 | $320,000 |
Small Businesses | $373,953 | $100,000 |
Total Businesses | $715,861 | $200,000 |
Data Source: GO-Biz | ||
- Proposed Amendments: The Committee may wish to consider if it is necessary and appropriate to clarify that nothing in the statute prohibits a small businesses from receiving a tax credit allocation from the non-small business portion of the program.
- Related Legislation: Below is a list of bills from the current and prior sessions.
- AB 93 (Assembly Committee on Budget) California Competes Tax Credit and State Sales and Use Tax Exemption: This bill institutes three new tax programs, a Sales and Use Tax exemption for manufacturing and bio-tech equipment and similar purchases; a California Competes tax credit for attracting and retaining major employers; and a hiring credit under the Personal Income Tax and Corporation Tax for employment in specified geographic areas. Additionally, the bill results in the phasing-out and ending of certain tax provisions related Enterprise Zones and similar tax incentive areas, and ending the current Small Business New Jobs Credit tax incentive program. The bill also provides for allocating the California Competes tax credit through the Governor's Office of Business and Economic Development to assist in retaining existing and attracting new business activity in the state. Status: Signed by the Governor, Chapter 69, Statutes of 2013.
- AB 106 (Assembly Committee on Budget) California Competes: Technical Changes 2 of 3*: This bill makes technical clarification to the Enterprise Zone Program that is set to expire on December 31, 2013, according to SB 90 and AB 93. Status: Signed by the Governor, Chapter 355, Statutes of 2013.
- AB 437 (Atkins) Small Business Research and Development Grant Program: This bill would have allowed a qualified small business to convert into cash grants up to 10% of the value of research and development credits carried over from the 2015 and 2016 taxable years to the 2017 year, or 15% for credits generated in the 2017 to 2022 taxable years. The bill would have provided for the acceleration of the taxpayer’s ability to monetize the credits. Status: Vetoed by the Governor, 2015. Governor’s veto message: I am returning the following nine bills without my signature: Assembly Bill 35; Assembly Bill 88; Assembly Bill 99; Assembly Bill 428; Assembly Bill 437; Assembly Bill 515; Assembly Bill 931; Senate Bill 251; and Senate Bill 377. Each of these bills creates a new tax credit or expands an existing tax credit. Despite strong revenue performance over the past few years, the state's budget has remained precariously balanced due to unexpected costs and the provision of new services. Now, without the extension of the managed care organization tax that I called for in special session, next year's budget faces the prospect of over $1 billion in cuts. Given these financial uncertainties, I cannot support providing additional tax credits that will make balancing the state's budget even more difficult. Tax credits, like new spending on programs, need to be considered comprehensively as part of the budget deliberations.
- AB 999 (Burke) Small Business Tax Credit: This bill authorizes the allocation of $15 million of tax credits to qualifying small businesses in a qualifying high-technology field based on 25% of qualifying investments. Status: Pending in the Assembly Committee on Jobs, Economic Development, and the Economy.
- AB 1399 (Medina and V. Manuel Pérez) New Markets Tax Credit: This bill would have established the California New Market Tax Credit to stimulate investment in small businesses located in low-income communities, mirroring the federal New Market Tax Credit. Status: Vetoed by the Governor, 2014. Governor’s veto message: "This bill creates a new markets tax credit that will cost --over time-- $200 million. I certainly endorse programs that result in private investments to help low income areas, but a bill to spend this much should be considered with other priorities during the annual budget."
- AB 2900 (JEDE) Small Business Centers Reporting: As passed by JEDE, this bill would have required a state department that awards funds to a federal small business technical assistance center to report to the Legislature in the following year. Among other data, the department would be required to report on the number of businesses assisted, industry sectors of those businesses, and the general geographic location. Amendments taken in the Senate removed the contents of the bill and added the provisions in AB 2901 with amendments. As signed, this bill expands the mandatory annual reporting of data on the California Competes Tax Credit to include the city and county of the business location, and whether the business is located in areas of high unemployment or high poverty, as specified. Status: Signed by the Governor, Chapter 582, Statues of 2016.
- AB 1715 (JEDE) Small Business New Market Tax Credit: This bill authorizes the allocation of $40 million in tax credits to financial intermediaries for the purpose of stimulating investments in small businesses located in low-income communities in California. The bill mirrors the federal New Market Tax Credit. Status: Pending in the Assembly Committee on Revenue and Taxation.
- AB 1716 (JEDE) Manufacturing and Innovation Tax Credit: This bill extends the State Sales and Use Tax Exemption and the California Competes Tax Credit for five years. Status: Pending in the Assembly Committee on Jobs, Economic Development, and the Economy.
- SB 90 (Galgiani) California Competes: Technical Changes 1 of 3: This bill makes various technical changes related to the California Competes Tax Credit Program in AB 93. Status: Signed by the Governor, Chapter 70, Statutes of 2013.
- Double Referral: The Assembly Rules Committee has referred this measure to the Assembly Committee on Revenue and Taxation (R&T) and the Assembly Committee on Jobs, Economic Development and the Economy. This measure passed on an 8 to 0 vote.
REGISTERED SUPPORT / OPPOSITION:
Support
None on File
Opposition
None on File
Analysis Prepared by: Toni Symonds / J., E.D., & E. /
Date of Hearing: March 27, 2017
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Sebastian Ridley-Thomas, Chair
ABPCA Bill Id:AB 162 (
Author:Cervantes) – As Amended Ver:February 28, 2017
Majority vote. Fiscal committee.
SUBJECT: Income taxation: credits
SUMMARY: Defines, under the California Competes Tax Credit (CCTC) Program, a “small business” as one having no more than 50 full-time employees in the current and preceding two years. Specifically, this bill:
- Defines, under the Personal Income Tax (PIT) Law and the Corporation Tax (CT) Law, a “small business” as one having 50 or fewer full-time equivalent employees, on average, in the current and two preceding tax years.
- Provides that a “small business” shall not include a sexually oriented business.
- Applies to credits allocated by the CCTC Committee for the 2018–19 fiscal year (FY) and each FY thereafter.
EXISTING LAW:
- Allows a credit against the taxes imposed under the CT Law and the PIT Law for each taxable year beginning on or after January 1, 2014, and before January 1, 2025, in an amount as provided in a written agreement between the Governor’s Office of Business and Economic Development (GO-Biz) and the taxpayer, based on certain specified factors, including the number of jobs the taxpayer will create or retain in the state and the amount of investment in the state by the taxpayer. The credit is generally referred to as the "California Competes Tax Credit."
- Authorizes GO-Biz to allocate the CCTC with respect to the FY 2013-14 and each FY thereafter, through and including FY 2017-18.
- Limits the aggregate amount of the CCTC that may be allocated to taxpayers under both the CT and PIT laws to a certain specified sum per FY.
- Authorizes the Director of Finance to increase the aggregate amount of the economic development credits that may be allocated to taxpayers each FY by $25 million per FY through the 2017-18 FY, as specified.
- Requires that 25% of the aggregate amount of the credit that may be allocated each FY be reserved for small businesses, as defined.
- Defines a “small business” as a trade or business that has aggregate gross receipts, less returns and allowances reportable to this state, of less than $2 million during the previous taxable year.
FISCAL EFFECT: The Franchise Tax Board states that there will be no impact on General Fund revenues since GO-Biz can only allocate the CCTC through FY 2017-18.
COMMENTS:
- Author’s Statement: The author has provided the following statement in support of this bill:
Small and medium sized businesses are a key component to the economic foundation to the California economy. Ensuring that small businesses have the necessary resources to be successful in leveraging state dollars is critical. However, access to capital is often a barrier in advancing business development and job creation. AB 162 would help alleviate obstacles and continue to encourage small business owners to grow and retain business in California.
- Committee Staff Comments:
- Too Soon? GO-Biz has provided the following statement with respect to any changes made to the CCTC, the New Employment Credit, and the Partial Sales and Use Tax Exemption:
Due to the uncertainty of potential federal policy changes and any corresponding impacts to the economy, as well as potential future state budget constraints, the Administration is not pursuing modifications to the California Competes Tax Credit, the New Employment Tax Credit, or the Partial Sales and Use Tax Exemption at this time. These incentives will continue to be available under current law for FY 17/18, and in the case of the New Employment Tax Credit and the Partial Sales and Use Tax Exemption, for the next several years.
In light of the position taken by the GO-Biz, the changes outlined in this bill may be premature.
- Allocation of Credits: The CCTC is an income tax credit available to businesses who want to come, stay, or grow in California. Tax credit agreements are negotiated between GO-Biz and the taxpayer, and approved by the CCTC Committee, consisting of the State Treasurer, the Director of the Department of Finance, the Director of GO-Biz, and one appointee each by the Speaker of the Assembly and Senate Committee on Rules. Allocations are based on certain specified factors, but mainly focus on the amount of investment, the impact of a project, and the number of jobs the taxpayer will create or retain in California. The CCTC program is open to taxpayers of all sizes but creates preferential treatment for those that are “small businesses”, defined as those making less than $2 million in revenue per year. In fact, the CCTC Committee is required to allocate at least 25% of the aggregate amount of credits available in each FY to small businesses. Small businesses then compete against each other, and applications are ranked according to the investments that show the greatest amount of return for California. The CCTC Committee, however, has recently been unable to fully allocate that 25% set aside for small businesses. Despite not being able to meet the allocation threshold, any unallocated tax credits will be reallocated and used in subsequent years.
- Defining “Small Business”: There are various ways of defining a “small business”. The U.S. Small Business Administration (SBA) provides a long list of definitions that vary by industry and use a wide range of factors such as revenues, number of employees, or assets. It is, therefore, not unusual to have a small business definition that uses the number of employees as a standard. However, defining a “small business” as an entity with less than 50 employees may include some very profitable companies. For example, Headset.com, an audio company, has annual revenue of $26 million but only 44 employees, and Cue Ball Group, a financial firm, has $200 million in annual revenue and only 12 employees.
- Will this bill help more small businesses obtain a tax credit? As noted above, the CCTC Committee has recently been unable to fully allocate the 25% of tax credits set aside for small businesses. The 2015-16 FY was the first year that the CCTC Committee failed to allocate at least 90% of the funds set aside for small businesses. Out of the $50,225,000 that was made available to small businesses, the CCTC Committee only allocated $30,468,163, or about 60.6% of available funds. Modifying the definition of a “small business” to include businesses with 50 or fewer full time employees has the potential of dramatically increasing the number of businesses that qualify for preferential treatment, and would likely make it easier for the CCTC Committee to allocate the full 25%. Larger companies, on average, tend to receive larger allocations of credits. Therefore, modifying the definition in the manner proposed by this bill could unintentionally allow a very large “small business” to receive a disproportionate share of the 25% set aside for small businesses. Alternatively, instead of allowing very large companies to compete for funds specifically set aside for “small businesses,” the author may consider making it easier for small businesses, as currently defined, to obtain a CCTC.
REGISTERED SUPPORT / OPPOSITION:
Support
None on file
Opposition
None on file
Analysis Prepared by: Carlos Anguiano / REV. & TAX. / (916) 319-2098
Date of Hearing: March 13, 2017
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Sebastian Ridley-Thomas, Chair
ABPCA Bill Id:AB 162 (
Author:Cervantes) – As Amended Ver:February 28, 2017
Majority vote. Fiscal committee.
SUBJECT: Income taxation: credits
SUMMARY: Defines, under the California Competes Tax Credit (CCTC) Program, a “small business” as one having no more than 50 full-time employees in the current and preceding two years. Specifically, this bill:
- Defines, under the Personal Income Tax (PIT) Law and the Corporation Tax (CT) Law, a “small business” as one having 50 or fewer full-time equivalent employees, on average, in the current and two preceding tax years.
- Provides that a “small business” shall not include a sexually oriented business.
- Applies to credits allocated by the CCTC Committee for the 2018–19 fiscal year (FY) and each FY thereafter.
EXISTING LAW:
- Allows a credit against the taxes imposed under the CT Law and the PIT Law for each taxable year beginning on or after January 1, 2014, and before January 1, 2025, in an amount as provided in a written agreement between the Governor’s Office of Business and Economic Development (GO-Biz) and the taxpayer, based on certain specified factors, including the number of jobs the taxpayer will create or retain in the state and the amount of investment in the state by the taxpayer. The credit is generally referred to as the "California Competes Tax Credit."
- Authorizes GO-Biz to allocate the CCTC with respect to the FY 2013-14 and each FY thereafter, through and including FY 2017-18.
- Limits the aggregate amount of the CCTC that may be allocated to taxpayers under both the CT and PIT laws to a certain specified sum per FY.
- Authorizes the Director of Finance to increase the aggregate amount of the economic development credits that may be allocated to taxpayers each FY by $25 million per FY through the 2017-18 FY, as specified.
- Requires that 25% of the aggregate amount of the credit that may be allocated each FY be reserved for small businesses, as defined.
- Defines a “small business” as a trade or business that has aggregate gross receipts, less returns and allowances reportable to this state, of less than $2 million during the previous taxable year.
FISCAL EFFECT: The Franchise Tax Board states that there will be no impact on General Fund revenues since GO-Biz can only allocate the CCTC through FY 2017-18.
COMMENTS:
- Author’s Statement: The author has provided the following statement in support of this bill:
Small and medium sized businesses are a key component to the economic foundation to the California economy. Ensuring that small businesses have the necessary resources to be successful in leveraging state dollars is critical. However, access to capital is often a barrier in advancing business development and job creation. AB 162 would help alleviate obstacles and continue to encourage small business owners to grow and retain business in California.
- Committee Staff Comments:
- Too Soon? GO-Biz has provided the following statement with respect to any changes made to the CCTC, the New Employment Credit, and the Partial Sales and Use Tax Exemption:
Due to the uncertainty of potential federal policy changes and any corresponding impacts to the economy, as well as potential future state budget constraints, the Administration is not pursuing modifications to the California Competes Tax Credit, the New Employment Tax Credit, or the Partial Sales and Use Tax Exemption at this time. These incentives will continue to be available under current law for FY 17/18, and in the case of the New Employment Tax Credit and the Partial Sales and Use Tax Exemption, for the next several years.
In light of the position taken by the GO-Biz, the changes outlined in this bill may be premature.
- Allocation of Credits: The CCTC is an income tax credit available to businesses who want to come, stay, or grow in California. Tax credit agreements are negotiated between GO-Biz and the taxpayer, and approved by the CCTC Committee, consisting of the State Treasurer, the Director of the Department of Finance, the Director of GO-Biz, and one appointee each by the Speaker of the Assembly and Senate Committee on Rules. Allocations are based on certain specified factors, but mainly focus on the amount of investment, the impact of a project, and the number of jobs the taxpayer will create or retain in California. The CCTC program is open to taxpayers of all sizes but creates preferential treatment for those that are “small businesses”, defined as those making less than $2 million in revenue per year. In fact, the CCTC Committee is required to allocate at least 25% of the aggregate amount of credits available in each FY to small businesses. Small businesses then compete against each other, and applications are ranked according to the investments that show the greatest amount of return for California. The CCTC Committee, however, has recently been unable to fully allocate that 25% set aside for small businesses. Despite not being able to meet the allocation threshold, any unallocated tax credits will be reallocated and used in subsequent years.
- Defining “Small Business”: There are various ways of defining a “small business”. The U.S. Small Business Administration (SBA) provides a long list of definitions that vary by industry and use a wide range of factors such as revenues, number of employees, or assets. It is, therefore, not unusual to have a small business definition that uses the number of employees as a standard. However, defining a “small business” as an entity with less than 50 employees may include some very profitable companies. For example, Headset.com, an audio company, has annual revenue of $26 million but only 44 employees, and Cue Ball Group, a financial firm, has $200 million in annual revenue and only 12 employees.
- Will this bill help more small businesses obtain a tax credit? As noted above, the CCTC Committee has recently been unable to fully allocate the 25% of tax credits set aside for small businesses. The 2015-16 FY was the first year that the CCTC Committee failed to allocate at least 90% of the funds set aside for small businesses. Out of the $50,225,000 that was made available to small businesses, the CCTC Committee only allocated $30,468,163, or about 60.6% of available funds. Modifying the definition of a “small business” to include businesses with 50 or fewer full time employees has the potential of dramatically increasing the number of businesses that qualify for preferential treatment, and would likely make it easier for the CCTC Committee to allocate the full 25%. Larger companies, on average, tend to receive larger allocations of credits. Therefore, modifying the definition in the manner proposed by this bill could unintentionally allow a very large “small business” to receive a disproportionate share of the 25% set aside for small businesses. Alternatively, instead of allowing very large companies to compete for funds specifically set aside for “small businesses,” the author may consider making it easier for small businesses, as currently defined, to obtain a CCTC.
REGISTERED SUPPORT / OPPOSITION:
Support
None on file
Opposition
None on file
Analysis Prepared by: Carlos Anguiano / REV. & TAX. / (916) 319-2098
Discussed in Hearing
5MIN
Senate Standing Committee on Transportation and Housing
2MIN
Assembly Floor
1H
Assembly Standing Committee on Appropriations
3MIN
Assembly Standing Committee on Jobs, Economic Development, and the Economy
6MIN
