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AB-231 Economic development: economic development areas.(2011-2012)

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AB231:v95#DOCUMENT

Amended  IN  Assembly  June 07, 2011
Amended  IN  Assembly  April 15, 2011
Amended  IN  Assembly  March 24, 2011
Amended  IN  Assembly  March 22, 2011

CALIFORNIA LEGISLATURE— 2011–2012 REGULAR SESSION

Assembly Bill
No. 231


Introduced  by  Assembly Member V. Manuel Pérez, Alejo
(Coauthor(s): Assembly Member Bradford, Galgiani, Roger Hernández, Hueso, Perea, Solorio)

February 02, 2011


An act to amend Sections 7070, 7071, 7072, 7072.5, 7073.1, 7076, 7076.1, 7081, 7085, 7085.1, 7085.5, and 7114.2 of, to amend the heading of Chapter 12.8 (commencing with Section 7070) of Division 7 of Title 1 of, to add Section 7072.6 to, to repeal Sections 7073.8 and 7073.9 of, and to repeal Chapter 12.93 (commencing with Section 7097) of Division 7 of Title 1 of, the Government Code, and to amend Sections 17053.33, 17053.45, 17053.46, 17053.70, 17235, 23612.2, 17053.74, 17235, 23612.2, 23622.7, 23633, 23645, 23646, and 24384.5 of, to amend and repeal Sections 17053.34, 17053.47, 17053.74, 17276.2, 17276.5, 23622.7, 23622.8, 23634, 24416.2, and 24416.5 of, to add Sections 17053.73, 17276.11, 23622.6, and 24416.11 to, and to add and repeal Sections 17050 and 23036.3 of, the Revenue and Taxation Code, relating to economic development, to take effect immediately, tax levy.


LEGISLATIVE COUNSEL'S DIGEST


AB 231, as amended, V. Manuel Pérez. Economic development: economic development areas.
(1) The Enterprise Zone Act provides for the designation and oversight by the Department of Housing and Community Development of various types of economic development areas throughout the state, including enterprise zones, targeted tax areas, local agency military base recovery areas (LAMBRAs), and Manufacturing Enhancement Areas, collectively known as geographically targeted economic development areas, or G-TEDAs. Pursuant to these provisions, qualifying entities in those areas may receive certain tax and regulatory incentives.
This bill would rename the act as the California Economic and Community Development Zone Act.
This bill would delete the provisions governing Manufacturing Enhancement Areas and targeted tax areas, and make various revisions in the requirements for designating and administering enterprise zones and LAMBRAs, and G-TEDAs collectively.
(2) The Personal Income Tax Law and the Corporation Tax Law authorize a taxpayer to claim certain tax incentives for activities conducted in an enterprise zone or a LAMBRA, including a credit for a specified percentage of wages paid during the taxable year to a qualified employee, as defined, who is employed by the taxpayer during the taxable year in an enterprise zone or a LAMBRA.
This bill would, with respect to employees hired before January 1, 2011, increase specified requirements for an individual to be a qualified employee for purposes of the enterprise zone hiring credits, and make other specified changes relating to the requirements for a taxpayer to take advantage of the credits.
This bill would, with respect to employees hired after January 1, 2011, create a new enterprise zone and LAMBRA hiring credit, similar to revise the enterprise zone hiring credit in existing law, except, so that the credit would be available only for a qualified employee for each of the first 3 years of employment and modify the applicable percentage amounts. This bill would impose specified new requirements for a taxpayer to claim claiming this credit, including a registration requirement made under penalty of perjury. By expanding the crime of perjury, this bill would impose a state-mandated local program. This bill would also limit the carryover period to 15 years.
This bill would, for taxable years beginning on or after January 1, 2011, and before January 1, 2013, impose a specified 50% overall limitation on these credits, as provided.
(3) The Personal Income Tax Law and the Corporation Tax Law allow a credit in an amount equal to the amount of sales or use tax paid in connection with qualified property that is purchased and placed in service during the taxable year by a taxpayer engaged in a trade or business in an enterprise zone, targeted tax area, or LAMBRA, and allow unused credits to be carried over indefinitely to subsequent taxable years.
This bill would require the taxpayer to register, as specified, a business in an enterprise zone, targeted tax area, or a LAMBRA before the taxpayer can claim a credit, and would limit the carryover period to 15 years. This bill would also impose a specified 50% overall limitation on these credits as provided.
(4) The Personal Income Tax Law and the Corporation Tax Law allow deductions in the amount of net interest received by a taxpayer in payment of a debt of a person or entity engaged in a trade or business in an enterprise zone.
This bill would, for taxable years beginning on or after January 1, 2011, and before January 1, 2013, limit the amount of these deductions to 50% of the net interest received by a taxpayer in payment of debt, as specified.
(5) The Personal Income Tax Law and the Corporation Tax Law allow specified credits for hiring employees in a targeted tax area and manufacturing enhancement area.
This bill would limit the credits to qualified employees hired by a qualified taxpayer before January 1, 2011.
(6) The Personal Income Tax Law and the Corporation Tax Law allow a deduction for a net operating loss of a person or entity engaged in business in an enterprise zone or a LAMBRA, and any unused net operating losses to be a net operating loss carryover to other years, as specified.
This bill would allow a deduction for those net operating losses only for taxable years beginning before January 1, 2011, but would allow any unused net operating losses to continue to be carried to other years as provided.
(7) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
(8) This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIII A of the California Constitution, and thus would require for passage the approval of 2/3 of the membership of each house of the Legislature.
(9) This bill would take effect immediately as a tax levy.
Vote: 2/3   Appropriation: NO   Fiscal Committee: YES   Local Program: YES  

The people of the State of California do enact as follows:


SECTION 1.

 The heading of Chapter 12.8 (commencing with Section 7070) of Division 7 of Title 1 of the Government Code is amended to read:
CHAPTER  12.8. Enterprise California Economic and Community Development Zone Act

SEC. 2.

 Section 7070 of the Government Code is amended to read:

7070.
 (a) This chapter shall be known and may be cited as the Enterprise California Economic and Community Development Zone Act.
(b) Wherever the term “Enterprise Zone Act” appears in statute or regulation, it shall be construed to refer to the California Economic and Community Development Zone Act.

SEC. 3.

 Section 7071 of the Government Code is amended to read:

7071.
 The Legislature finds and declares as follows:
(a) The health, safety, and welfare of the people of California depend upon the development, stability, and expansion of private business, industry, and commerce, and there are certain areas within the state that are economically depressed due to a lack of investment in the private sector. Therefore, it is declared to be the purpose of this chapter to help stabilize local communities, alleviate poverty, and enhance the state’s economic prosperity through the implementation of public and privately funded programs and services that stimulate business and industrial growth in the depressed areas of the state by relaxing regulatory controls that impede private investment.
(b) The geographically targeted economic development area (G-TEDA) programs are based on the economic principle that targeting significant incentives to lower income communities allows these communities to more effectively compete for new businesses and retain existing businesses, which results in increased tax revenues, less reliance on social services, and lower public safety costs. Residents and businesses also directly benefit from these more sustainable economic conditions through improved neighborhoods, business expansion, and job creation.

(b)It

(c) Therefore, it is in the economic interest of the state to have one strong, combined, and business-friendly business- and community development-friendly incentive program to help attract business and industry to the state, to help retain and expand existing state business and industry, and to create increased job opportunities for all Californians.

(c)No enterprise zone shall be designated in which any boundary thereof is drawn in a manner so as to include larger stable businesses or heavily residential areas to the detriment of areas that are truly economically depressed.

(d) Nothing in this This chapter shall not be construed to infringe upon regulations relating to the civil rights, equal employment rights, equal opportunity rights, or fair housing rights of any person.

SEC. 4.

 Section 7072 of the Government Code is amended to read:

7072.
 For purposes of this chapter, the following definitions shall apply:
(a) “Department” means the Department of Housing and Community Development.
(b) “Date of original designation” means the earlier of the following:
(1) The date the eligible area receives designation as an enterprise zone by the department pursuant to this chapter.
(2) In the case of an enterprise zone deemed designated pursuant to subdivision (e) of Section 7073, the date the enterprise zone or program area received original designation by the former Trade and Commerce Agency pursuant to Chapter 12.8 (commencing with Section 7070) or Chapter 12.9 (commencing with Section 7080), as those chapters read prior to January 1, 1997.
(c) “Eligible area” means any of the following:
(1) (A) An area designated as an enterprise zone pursuant to Chapter 12.8 (commencing with Section 7070), as it read prior to January 1, 1997, or as a targeted economic development area, neighborhood development area, or program area pursuant to Chapter 12.9 (commencing with Section 7080), as it read prior to January 1, 1997.

(2)A geographic area that, based upon the determination of the department, fulfills at least one of the following criteria:

(A)The proposed geographic area meets the Urban Development Action Grant criteria of the United States Department of Housing and Urban Development.

(B)The area within the proposed eligible area has experienced plant closures within the past two years affecting more than 100 workers.

(C)The city or county has submitted material to the department for a finding that the proposed geographic area meets criteria of economic distress related to those used in determining eligibility under the Urban Development Action Grant Program and is therefore an eligible area.

(D)The area within the proposed zone has a history of gang-related activity, whether or not crimes of violence have been committed.

(3)A geographic area that meets at least two of the following criteria:

(B) A geographic area within census tracts of the proposed eligible area with a median household income for a family of four that does not exceed 80 percent of the statewide median income for the most recently available calendar year, as well as meeting at least one of the following criteria:

(A)

(i) The census tracts within the proposed eligible area have an unemployment rate not less than 3 percentage points above the statewide average for the most recent calendar year as determined by the Employment Development Department.

(B)

(ii) The county of census tracts for the proposed eligible area has are served by public schools that have more than 70 percent of the children enrolled in public school participating in the federal free lunch program.

(C)The median household income for a family of four within the census tracts of the proposed eligible area does not exceed 80 percent of the statewide median income for the most recently available calendar year.

(iii) The area within the proposed zone has experienced significant distress factors, as defined by the department, including, but not limited to, a history of significant gang-related activity, high crime rates, or a significant number of plant or business closures, or all of these.
(2) The amendments made to this subdivision during the 2011 portion of the 2011–12 Regular Session shall apply only to requests for proposals issued on or after January 1, 2011.
(d) “Enterprise zone” means any area within a city, county, or city and county that is designated as an enterprise zone by the department in accordance with Section Sections 7073 and 7073.3 that include an eligible area and a qualifying commercial or industrial area, or both, as defined by the department.
(e) “Governing body” means a county board of supervisors or a city council, as appropriate.
(f) “G-TEDA” means a geographically targeted economic development area, which is an area designated as an enterprise zone, a Manufacturing Enhancement Area, a targeted tax area, or a local agency military base recovery area.
(g) “High-technology industries” includes, but is not limited to, the computer, biological engineering, electronics, and telecommunications industries.
(h) “Resident,” unless otherwise defined, means a person whose principal place of residence is within a targeted employment area.
(i) (1) “Targeted With respect to a targeted employment area adopted or updated prior to April 1, 2011, “targeted employment area” means an area within a city, county, or city and county that is composed solely of those census tracts designated by the United States Department of Housing and Urban Development as having at least 51 percent of its residents of low- or moderate-income levels, using either the most recent United States Department of Census Bureau data available at the time of the original enterprise zone application or the most recent census data available at the time the targeted employment area is designated to determine that eligibility. The purpose of a “targeted employment area” is to encourage businesses in an enterprise zone to hire eligible residents of certain geographic areas within a city, county, or city and county. A targeted employment area may be, but is not required to be, the same as all or part of an enterprise zone. A targeted employment area’s boundaries need not be contiguous. A targeted employment area does not need to encompass each eligible census tract within a city, county, or city and county. The governing body of each city, county, or city and county that has jurisdiction of the enterprise zone shall identify those census tracts whose residents are in the most need of this employment targeting. Only those census tracts within the jurisdiction of the city, county, or city and county that has jurisdiction of the enterprise zone may be included in a targeted employment area.
(2) At least a part of each eligible census tract within a targeted employment area shall be within the territorial jurisdiction of the city, county, or city and county that has jurisdiction for an enterprise zone. If an eligible census tract encompasses the territorial jurisdiction of two or more local governmental entities, all of those entities shall be a party to the designation of a targeted employment area. However, any one or more of those entities, by resolution or ordinance, may specify that it shall not participate in the application as an applicant, but shall agree to complete all actions stated within the application that apply to its jurisdiction, if the area is designated.
(3) Each local governmental entity of each city, county, or city and county that has jurisdiction of an enterprise zone shall approve, by resolution or ordinance, the boundaries of its targeted employment area, regardless of whether a census tract within the proposed targeted employment area is outside the jurisdiction of the local governmental entity.
(4) (A) Within 180 days of updated United States census data becoming available, each local governmental entity of each city, county, or city and county that has jurisdiction of an enterprise zone shall approve, by resolution or ordinance, boundaries of its targeted employment area reflecting the new census data. If no changes are necessary to the boundaries based on the most current census data, the enterprise zone may send a letter to the department stating that a review has been undertaken by the respective local governmental entities and no boundary changes are required.
(B) A targeted employment area boundary approved prior to the 2000 United States census data becoming available that has not been reviewed and its boundaries revised to reflect the most recent census data, shall be reviewed and updated, and a new resolution or ordinance submitted by the appropriate local governmental entity to the department, by July 1, 2007. However, enterprise zones that expire on or prior to December 31, 2008, shall be exempt from the update requirement.
(5) With respect to a targeted employment area adopted or amended on or after April 1, 2011, “targeted employment area” means an area within a city, county, or city and county that is composed solely of those census block groups designated by the United States Department of Housing and Urban Development as having at least 51 percent of their residents of low-income levels, using the most recent United States Census Bureau data available at the time the targeted employment area is adopted or amended to determine its eligibility.

SEC. 5.

 Section 7072.5 of the Government Code is amended to read:

7072.5.
 (a) By April 1, 1998, a governing body that has already designated adopted a target targeted employment area may request, by a resolution of all cities or counties having jurisdiction over the enterprise zone, to redesignate readopt the targeted employment area using more current census data. A targeted employment area shall be comprised of comprise census tracts from only one decennial census.
(b) This section shall apply only to targeted employment areas adopted prior to April 1, 2011.

SEC. 6.

 Section 7072.6 is added to the Government Code, to read:

7072.6.
 (a) After receiving notification from the department of being conditionally designated as an enterprise zone, the governing body of the jurisdiction administering the enterprise zone shall adopt a resolution or ordinance adopting a targeted employment area that meets all the conditions of this section and those set forth in paragraph (2) of subdivision (i) of Section 7072, and is consistent with the purposes set forth in this section. If two or more jurisdictions are jointly administering an enterprise zone, a resolution or ordinance adopting the targeted employment area shall be adopted by each governing body.
(b) A targeted employment area serves as the residential base of potential low-income workers who are available to work in businesses located in an enterprise zone. The purpose of a targeted employment area is to help identify neighborhoods of low-income workers for the purpose of providing those workers with employment assistance, training, and job placement. Businesses located in an enterprise zone are encouraged to hire locally to help address some of the poverty and economic dislocation that led to the area’s designation as an enterprise zone.
(c) (1) A targeted employment area may be, but is not required to be, the same as all or part of an enterprise zone. A targeted employment area’s boundaries need not be contiguous. A targeted employment area does not need to encompass each eligible census tract or block group within a city, county, or city and county. The governing body of each city, county, or city and county that has jurisdiction over the zone shall identify those census block groups whose residents are in the most need of this employment targeting. Only those census block groups within the jurisdiction of the city, county, or city and county that have jurisdiction over the zone may be included in a targeted employment area.
(2) At least part of each eligible census block group within a targeted employment area shall be within the territorial jurisdiction of the city, county, or city and county that has jurisdiction over an enterprise zone. If an eligible census tract encompasses the territorial jurisdiction of two or more local governmental entities, all of those entities shall be a party to the designation of the targeted employment area. However, any one or more of those entities, by resolution or ordinance, may specify that it or they shall not participate in the application as an applicant or applicants, but shall agree to complete all actions stated within the application that apply to its or their jurisdiction, if the area is designated.
(d) (1) A targeted employment area shall be designated based on data from the most current household income data published by the United States Census Bureau at the time that the targeted employment area is designated or modified, including being updated pursuant to paragraph (2).
(2) Every targeted employment area boundary shall be reviewed and updated to the extent necessary to accommodate the new household income data provided by the United States Census Bureau in its five-year American Community Survey. Each governmental entity of each city, county, or city and county that has jurisdiction over an enterprise zone shall approve, by resolution or ordinance, the boundaries of its targeted employment area reflecting the new household data and send a copy of its resolution with the changes that are necessary to the boundaries based on the most current census data, or the governmental entity that has jurisdiction over the zone shall send a letter to the department stating that the review has been undertaken by the respective local governmental entities and no boundary changes are required.
(3) (A) A targeted employment area boundary that is not updated, or for which a letter indicating that no changes are necessary has not been received by the department within 180 days of the release of new household data, is invalidated for a period of two years, except as modified by subparagraph (C).
(B) The department shall send a notice to the Franchise Tax Board and the local enterprise zone administrator that the targeted employment area is invalid and that no additional employees will be certified based on an employee living in a targeted employment area, other than a business that has already had one or more vouchers certified by the zone pursuant to Sections 17053.74 and 23622.7 of the Revenue and Taxation Code.
(C) A business that has previously received certification of an employee is exempt from subparagraph (A). The vouchering exemption is nontransferable to any other business.
(e) This section shall apply only to targeted employment areas adopted on or after April 1, 2011.

SEC. 7.

 Section 7073.1 of the Government Code is amended to read:

7073.1.
 (a) Except as provided in subdivision (e) (f), any city, county, or city and county with an eligible area within its jurisdiction may complete a preliminary application for designation as an enterprise zone. The applying entity shall establish definitive boundaries for the proposed enterprise zone and the targeted employment area. An entity may propose zones in areas with noncontiguous boundaries, and the department may designate those areas as zones if the director determines both of the following:
(1) The noncontiguous area is needed to implement the applicant’s economic development strategy.
(2) The excluded area between the proposed zone boundaries would not, based on the proposed economic strategy, also benefit from the zone designation.
(b) If a census block group or portion of a census block group included in an enterprise zone proposed in an application submitted to the department on or after January 1, 2011, is within, or previously was within, the boundaries of a previously designated enterprise zone, then the aggregate size of the proposed enterprise zone shall not exceed the size of the previously designated enterprise zone by more than 15 percent.

(b)

(c) (1) In designating enterprise zones, the department shall select from the applications submitted those proposed enterprise zones that, upon a comparison of all of the applications submitted, indicate that they propose the most appropriate economic development strategy and implementation plan utilizing state and local programs and incentives to create jobs, attract private sector investment, and improve the economic conditions within the zone proposed. The department shall prescribe a format that promotes succinct and focused strategies and plans, and set minimum standards for the strategies and plans. For the purposes of this subdivision, important elements of a strategy or plan may include, but are not limited to, all of the following:
(A) An assessment of current financial and community development strengths, needs, and opportunities.
(B) A framework for investment of time, action, and money.
(C) Clear articulation of goals.
(D) Measurable objectives, including targets.
(E) Proposed implementation activities and tasks, including timeframes, and a framework for evaluating performance, including qualitative and quantitative benchmarks.
(F) An identification of local resources, including incentives, the jurisdiction will utilize to implement the strategy or plan and how those resources will help to leverage or maximize the benefit of state resources that become available for enterprise zone communities.
(2) For purposes of this subdivision, local incentives resources may include, but are not limited to, all of the following:
(A) The suspension or relaxation of locally originated or modified building codes, zoning laws, general development plans, or rent controls.
(B) The elimination or reduction of fees for applications, permits, and local government services.
(C) The establishment of a streamlined permit process.
(D) Elimination or reduction of construction taxes or business license taxes.
(E) The provision or expansion of infrastructure.
(F) The targeting of federal block grant moneys, including small cities, education, and health and welfare block grants.
(G) The targeting of economic development grants and loan moneys, including grant and loan moneys provided by the United States Department of Housing and Urban Development.
(H) The targeting of state and federal job disadvantaged and vocational education grant moneys, including moneys provided by the federal Workforce Investment Act of 1998 (Public Law 105-220), or its successor.
(I) The targeting of federal or state transportation grant moneys.
(J) The targeting of federal or state low-income housing and rental assistance moneys.
(K) The use of tax allocation bonds, special assessment bonds, bonds under the Mello-Roos Community Facilities Act of 1982 (Chapter 2.5 (commencing with Section 53311) of Part 1 of Division 2 of Title 5), industrial development bonds, revenue bonds, private activity bonds, housing bonds, bonds issued pursuant to the Marks-Roos Local Bond Pooling Act of 1985 (Article 4 (commencing with Section 6584) of Chapter 5), certificates of participation, hospital bonds, redevelopment bonds, school bonds, and all special provisions provided for under federal tax law for enterprise community or empowerment zone bonds.
(L) Redevelopment tax increment moneys and local financing authorities.
(M) Federal Workforce Investment Act moneys and programs funded with those moneys.
(N) Federal Community Development Block Grant Program moneys.
(O) CalWORKs funding and other related resources.
(P) Local education entities, including K–12, adult education, community colleges, and public and private universities.
(3) When designating new enterprise zones, the department shall take into consideration the location of existing zones and make every effort to locate new zones in a manner that will not adversely affect any existing zones.
(4) When reviewing and ranking new enterprise zone applications, the department shall give bonus points to applications from jurisdictions that meet minimum threshold points and at least two both of the following criteria:
(A) The percentage of households within the census tracts block groups of the proposed enterprise zone area, the income of which is below the poverty level, is at least 17.5 20 percent.
(B) The average unemployment rate for the census tracts block groups of the proposed enterprise zone area was not less than five percentage points above the statewide average for the most recent calendar year as determined by the Employment Development Department.

(C)The applicant jurisdiction has, and can document that it has, a unique distress factor affecting long-term economic development, including, but not limited to, resource depletion, plant closure, industry recession, natural disaster, or military base closure.

(5) Except as modified pursuant to paragraph (4), applications shall be ranked by the appropriateness of the economic development strategy and implementation plan, including all of the following:
(A) The extent the strategy clearly identifies the local resources, incentives, and programs that will be made available to the zone for meeting its goals and objectives.
(B) The extent the strategy provides for attracting private sector investment.
(C) The extent the strategy includes related regional and community-based partnerships for achieving the goals and objectives in the strategy.
(D) The extent the strategy fits within the jurisdiction’s overall economic development strategy, including the extent the strategy and implementation plan is appropriate for the local community.
(E) The extent the strategy addresses the hiring and retention of unemployed or underemployed residents or low-income individuals in the proposed zone and surrounding areas.
(F) The extent the strategy sets reasonable and measurable benchmarks, goals, and objectives.
(G) The extent the strategy sets forth an appropriate funding schedule for management, oversight, and program delivery within the zone relative to the benchmarks, goals, and objectives in the strategy.
(H) The extent that the economic development strategy has a comprehensive incentive package for attracting private investment to the enterprise zone.

(c)

(d) In evaluating applications for designation, the department shall ensure that applications are not disqualified solely because of technical deficiencies, and shall provide applicants with an opportunity to correct the deficiencies. Applications shall be disqualified if the deficiencies are not corrected within two weeks.

(d)

(e) Except upon dedesignation pursuant to subdivision (c) of Section 7076.1, Section 7076.2, or Section 7085.1, a designation made by the department shall be binding for a period of 15 years from the date of the original designation.
(f) The applicant shall be required to begin implementation of the enterprise zone plan contained in the final application within six months after notification of final designation, or the enterprise zone shall be dedesignated.

(e)

(g) (1) This section shall only apply only to enterprise zone applications for which the department has issued a solicitation for new enterprise zone designations on or after January 1, 2007.
(2) The amendments made to this section during the 2011 portion of the 2011–12 Regular Session shall apply only to enterprise zone applications for which the department has issued a solicitation for new enterprise zone designations on or after January 1, 2011.

SEC. 8.

 Section 7073.8 of the Government Code is repealed.
7073.8.

(a)The department shall designate up to two Manufacturing Enhancement Areas requested by the governing boards of cities each of which shall meet at least the following criteria:

(1)The unemployment rate in the county in which the applicant is located has been at least three times the state average from 1990 to 1995, inclusive.

(2)The applicant city is, or portions of the city are, designated a federal enterprise community or empowerment zone pursuant to Subchapter U (commencing with Section 1391) of Chapter 1 of Subtitle A of Title 26 of the United States Code.

(3)The applicant city is located in a Border Environment Cooperation Commission region as specified in Section 3473 of Title 19 of the United States Code.

(4)At least one of the following:

(A)The designated area has grown by less than 5 percent in population per year for each of the two years preceding the application date.

(B)The median household income for the designated area is under twenty-five thousand dollars ($25,000) per year.

(C)The designated area has a population of under 20,000 persons according to the 1990 federal census.

(D)The designated area is located in a rural community.

(5)An audit of the program shall be made pursuant to Section 7076.1 by the department with the cooperation of the local governing board. The audit shall be used to determine how effective the designation has been in attracting manufacturing facilities and creating new employment opportunities. Continuation of the designation is contingent on evidence of success of the program.

(b)For purposes of applying any provision of the Revenue and Taxation Code, any Manufacturing Enhancement Area designated pursuant to this section shall not be considered an enterprise zone designated pursuant to this chapter.

(c)The designation as a Manufacturing Enhancement Area pursuant to this section shall be binding for a period of 15 years, commencing January 1, 1998.

SEC. 9.

 Section 7073.9 of the Government Code is repealed.
7073.9.

Upon approval by the department of an application by a city, county, or city and county, a manufacturing enhancement area in Imperial County is expanded to the extent proposed, but in no event by more than a 200-acre site that is located in Imperial County and used for purposes of those lines of business described in Codes 2011 to 3999, inclusive, of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition, to include definitive boundaries that are contiguous to the manufacturing enhancement area. The department shall approve an application for expansion of the manufacturing enhancement area if it determines that the proposed additional territory meets the criteria specified in Section 7073.8 to the same extent as the existing territory of the manufacturing area and if all of the following conditions are met:

(a)The governing body of each city in which the manufacturing enhancement is located approves an ordinance or resolution approving the proposed expansion of that area.

(b)The additional territory proposed to be added to the manufacturing enhancement area is zoned for industrial or commercial use.

(c)Basic infrastructure, including, but not limited to, gas, water, electrical service, and sewer systems is available to the additional territory proposed to be added to the manufacturing enhancement area.

SEC. 10.

 Section 7076 of the Government Code is amended to read:

7076.
 (a) The department shall serve as a liaison between the state and enterprise zone residents, businesses, workers, nonprofit organizations, and local governments. State agencies and departments shall affirmatively support their statutory responsibilities under this chapter and, consistent with their statutory duties, respond to requests made by and on the behalf of an enterprise zone.
(b) (1) The department shall provide technical assistance to the enterprise zones designated pursuant to this chapter with respect to all of the following activities:
(A) Furnish limited onsite assistance to the enterprise zones when appropriate.
(B) Ensure that the locality has developed a method to make residents, businesses, and neighborhood organizations aware of the opportunities to participate in the program.
(C) Help the locality develop a marketing program for the enterprise zone.
(D) Coordinate activities of other state agencies regarding the enterprise zones.
(E) Monitor the progress of the program.
(F) Help businesses to participate in the program.
(2) Notwithstanding existing law, the provision of services in subparagraphs (A) to (F), inclusive, shall be a high priority of the department.
(3) The department may, at its discretion, undertake other activities in providing management and technical assistance for successful implementation of this chapter.

(b)The applicant shall be required to begin implementation of the enterprise zone plan contained in the final application within six months after notification of final designation or the enterprise zone shall lose its designation.

(c) The department shall assess a fee of fifteen dollars ($15) on each enterprise zone and manufacturing enhancement area for each application for issuance of a certificate pursuant to subdivision (j) of Section 17053.47 of, subdivision (c) of Section 17053.74 of, subdivision (c) of Section 23622.7 of, or subdivision (i) of Section 23622.8 of, the Revenue and Taxation Code. The department shall collect the fee for deposit into the Enterprise Zone Fund, pursuant to Section 7072.3, for the costs of administering this chapter. The enterprise zone or manufacturing enhancement area administrator shall collect this fee at the time an application is submitted for issuance of a certificate.
(d) (1) (A) The department shall establish a registration process for businesses located in a zone that includes, but is not limited to, the creation of a zone business registration form and recommended outreach methods to help inform businesses of the registration process.
(B) The department shall make the registration form available on its Internet Web site. The information sought from a business on the registration form shall include, but not be limited to, all of the following:
(i) The name and location of the business.
(ii) The type of business based on the applicable first three digits of the North American Industry Classification System.
(iii) The size of the business based on gross annual receipts for the year prior to registration.
(iv) The total number of employees of the business and the total number of employees of the business that work within the enterprise zone, for the year prior to registration.
(2) Registration shall be a precondition for claiming an enterprise zone-related tax incentive, including, but not limited to, the hiring credit, the sales and use tax credit, and the net interest deduction; however, a business shall not be required to register until six months following the department’s establishment of the registration process. Businesses shall retain a copy of the registration for use in preparation of their tax return.
(3) The registration information shall be updated at least once every five years.
(e) Certificates for hiring credits shall be processed and approved or denied based upon the regulations and administrative memoranda in effect as of the date of the application. Clarifications, interpretations, and other items contained within a memorandum shall be binding upon the department, businesses, enterprise zones, and all other applicable entities, as consistent with state and federal law, unless the memorandum is modified or repealed in writing.
(f) (1) (A) The department shall maintain, and post on its Internet Web site, a catalog of all administrative memoranda in effect that implement this chapter, including the subject matter of the memoranda and the effective dates of their publication, modification, or repeal, along with the text of the memoranda.
(B) The department shall post on its Internet Web site the publication, modification, or repeal of any of those administrative memoranda, within 10 business days of that publication, modification, or repeal.
(2) The department shall post on its Internet Web site enterprise zone and targeted employment area boundary approvals, modifications, and repeals within 10 business days of the approval, modification, or repeal becoming final.

SEC. 11.

 Section 7076.1 of the Government Code is amended to read:

7076.1.
 (a) The department may audit the program of any jurisdiction in any designated G-TEDA at any time during the duration of the designation, as appropriate. However, the department shall audit each G-TEDA at least once every five years from the date of designation or the operative date of this section, whichever is the latest. The matters to be examined in the course of an audit shall include an examination of the progress made by the G-TEDA toward meeting the goals, objectives, and commitments set forth in its original application and the department’s memorandum of understanding with the G-TEDA.
(b) The department shall, for each audit, determine a result of superior, pass, or fail in accordance with subdivision (c). The results of each audit shall be based upon the success of the G-TEDA in making substantial and sustained efforts since the later of its designation or last audit to meet the standards, criteria, and conditions contained in the application and the memorandum of understanding (MOU) between the department and the G-TEDA, as may be amended pursuant to the agreement of the G-TEDA and the department. In each audit, the department shall focus upon the G-TEDA’s use of the marketing plan, local incentives, financing programs, job development, and program management as described in the application and the MOU. The department shall also evaluate the vouchering plan, staffing levels, budget, and elements unique to each application.
(c) For purposes of subdivision (b), an audit determination of superior, pass, or fail shall be made in accordance with the following:
(1) A G-TEDA will be determined to be superior if each jurisdiction comprising the G-TEDA does all of the following:
(A) Meets 90 to 100 percent of its goals, objectives, and commitments as defined in its application, most recent audit, biennial report, and memorandum of understanding with the department, and as determined by the department in consultation with the G-TEDA. An equivalent or similar commitment may be substituted for an existing commitment of a G-TEDA if it is determined by the department that an original commitment was not realistically practical or is no longer relevant.
(B) Demonstrates that it has reviewed and updated its goals, objectives, and commitments as defined in its original application, most recent audit, biennial report, and memorandum of understanding with the department.
(C) Identifies to the department’s satisfaction that it has incorporated economic development commitments in addition to those commitments previously made in its application.
(2) (A) A G-TEDA will be determined to be passing if each jurisdiction comprising the area meets or exceeds 75 to 90 percent of its goals, objectives, or commitments as defined in its original application, most recent audit, biennial report, and memorandum of understanding with the department, and as determined by the department in consultation with the G-TEDA. An equivalent or similar commitment may be substituted for an existing commitment of a G-TEDA if it is determined by the department that an original commitment was not realistically practical or is no longer relevant.
(B) Any G-TEDA that is determined to be passing may appeal in writing to the department for a determination of superior. Only one appeal may be filed pursuant to this subparagraph with respect to a determination by the department, and may be filed no later than 30 days after the G-TEDA’s receipt of the determination to which the appeal pertains. The department shall respond in writing to any appeal that is properly filed pursuant to this subparagraph within 60 days of the date of that filing.
(3) (A) A G-TEDA will be determined to be failing if any jurisdiction comprising the G-TEDA fails to meet or exceed 75 percent of its goals, objectives, or commitments as defined in its original application, most recent audit, biennial report, and memorandum of understanding with the department, and as determined by the department in consultation with the G-TEDA. An equivalent or similar commitment may be substituted for an existing commitment of a G-TEDA if it is determined by the department that an original commitment was not realistically practical or is no longer relevant.
(B) Any G-TEDA that is determined to be failing shall enter into a written agreement with the department that specifies those items that the G-TEDA is required to remedy or improve. Failure of the G-TEDA and the department to negotiate and enter into a written agreement as so described within 60 days of the last day upon which the department is required to deliver a response letter pursuant to subparagraph (C) of paragraph (4) shall result in the dedesignation of the G-TEDA on January 1 immediately following the department’s written notice of dedesignation to the G-TEDA. A
(C) A written agreement entered into pursuant to this subparagraph paragraph shall be for a six-month period. If, upon the expiration of the agreement, the department determines that the G-TEDA has not met or implemented at least 75 percent of the conditions set forth in the agreement, the department shall, after immediately providing written notification to each jurisdiction comprising the G-TEDA that the G-TEDA is to be dedesignated, dedesignate. Dedesignation of the G-TEDA is effective on the first day of the month next following the date upon which the agreement expired. If, upon expiration of the agreement, the department determines that the G-TEDA has met or implemented at least 75 percent of the conditions set forth in the agreement, the department shall do either of the following:
(i) Allow the G-TEDA an additional year, or a longer period in the department’s discretion, to meet or implement those conditions in their entirety.
(ii) Pursuant to written notice provided immediately to each jurisdiction that comprises the G-TEDA that the G-TEDA is to be dedesignated, dedesignate the G-TEDA effective on January 1 immediately following the date of the department’s written notification of dedesignation to those jurisdictions.

Any

(D) Any business, located within any jurisdiction that comprises a G-TEDA that has been dedesignated, that has elected to avail itself of any state tax incentive specifically applicable to a G-TEDA for any taxable or income year beginning prior to the dedesignation of the G-TEDA may, to the extent the business is otherwise still eligible for those incentives, continue to avail itself of those incentives for a period equal to the remaining life of the G-TEDA. However, any business, located within any jurisdiction that comprises a G-TEDA that has been dedesignated, that has not availed itself of any state tax incentive in the manner described in the preceding sentence may not, after dedesignation of the G-TEDA, avail itself of any state incentive specifically applicable to a G-TEDA.
(4) (A) Notwithstanding paragraphs (1) to (3), inclusive, a G-TEDA shall be determined to be failing if any jurisdiction comprising the G-TEDA, in the determination of the director, provides funding support in at least three of the previous five years at a level that is less than 75 percent of the amount committed to in the G-TEDA’s memorandum of understanding with the department.
(B) In the event that a G-TEDA is determined to be failing pursuant to this paragraph, subparagraph (B) of paragraph (3) shall apply.
(C) Any G-TEDA that is determined to be failing pursuant to this paragraph may appeal in writing to the department. The appeal shall be filed within 30 days of the G-TEDA’s receipt of the determination to which the appeal pertains. The department shall respond in writing to any appeal that is properly filed within 60 days of the date of filing.
(d) In undertaking its audit responsibilities pursuant to this section, the department shall seek appropriate opportunities to provide technical assistance and training to help G-TEDAs address inadequacies identified through the audit of the program. Assistance may include, but is not limited to, workshops, mentoring programs, and referrals to other federal, state, and local public and private entities.

(d)

(e) (1) For purposes of this section, “dedesignation” means that a G-TEDA is no longer a G-TEDA for purposes of either Section 7073 or 7085.
(2) Upon notification by the department of the dedesignation of a G-TEDA and the end of the appeal period with respect to that dedesignation, the department shall initiate an application process for a new designation as provided in Section 7073, 7073.8, 7085, 7097, or 7114.
(f) In addition to any other oversight activities that the department determines are appropriate and necessary, the department shall review the progress reports submitted by a G-TEDA pursuant to Section 7085.1 and determine whether an audit is warranted.

SEC. 12.

 Section 7081 of the Government Code is amended to read:

7081.
 (a) Notwithstanding any other provision of state law, and to the extent permitted by federal law, the Employment Development Department and the State Department of Education shall give high priority to the training of unemployed individuals who reside in a targeted employment area or a designated enterprise zone. The
(b) When developing workforce development and training plans and strategies, including, but not limited to, federal Workforce Development Act funds, a state entity shall consider how the G-TEDA programs could be integrated so as to maximize the benefits to workers and businesses.
(c) The Employment Development Department shall, consistent with its duties to assist unemployed workers who are registered in the one-stop career centers, provide letters to unemployed prospective employees that could be used to certify their eligibility as a person participating in a program developed pursuant to the federal Workforce Investment Act of 1998 (29 U.S.C. Sec. 2081 et seq.).
(d) The department may assist localities in designating local business, labor, and education consortia to broker activities between the employment community and educational and training institutions. Any available discretionary funds may be used to assist the creation of those consortia.
(e) Local education entities that administer student work permits shall consider how enterprise zone program hiring credits could be used to benefit lower income students who apply for work permits at their offices.

SEC. 13.

 Section 7085 of the Government Code is amended to read:

7085.
 (a) Notwithstanding Section 7550.5, the department shall submit a report to the Legislature every five six years beginning January 1, 1998, that evaluates the effect of the program on retaining and increasing employment among targeted populations as described in subdivision (c),public and private investment, and incomes, and on state and local tax revenues in designated enterprise zones. The report shall include a department review of the progress and effectiveness of each enterprise zone, including, but not limited to, any efforts made regarding training and placement of unemployed individuals pursuant to Section 7081. The Employment Development Department, the State Department of Social Services, and the State Department of Education shall, for the purposes of the report, provide the department with existing data on unemployed individuals receiving training. The Franchise Tax Board shall make available to the department and the Legislature aggregate information on the dollar value of enterprise zone tax credits that are claimed each year by businesses pursuant to Section 7085.5. The Department of General Services shall provide information on the use and outcomes that the department tracks relating to the enterprise zone procurement preference.
(b) An enterprise zone governing body shall provide information at the request of the department as necessary for the department to prepare the report required pursuant to subdivision (a).
(c) Targeted populations included within the report required pursuant to subdivision (a) shall include, but not be limited to, the disabled, disabled veterans, individuals formerly on forms of federal and state assistance, individuals within the targeted employment areas, and ex-offenders.
(d) The base year for the report required pursuant to subdivision (a) shall be the calendar year commencing January 1, 2012.

SEC. 14.

 Section 7085.1 of the Government Code is amended to read:

7085.1.
 (a) The governing board of the G-TEDA shall report to the department by October 1, 2008, and by that date every other year thereafter, on the activities of the G-TEDA in the previous two fiscal years and its plans for the current and following fiscal year. The biennial report shall include at least both all of the following:
(1) The progress the G-TEDA has made during the period covered by the report relative to its goals, objectives, and commitments set forth in its original application and the department’s memorandum of understanding with the G-TEDA.
(2) Identification of the previous two years’ funding, including in-kind funding. The previous two years’ funding levels shall be compared to the funding levels identified in its original application and the department’s memorandum of understanding with the G-TEDA, and the amount identified in the previous year’s biennial report. An explanation of any meaningful discrepancies in these amounts shall be provided.
(3) Identification of the financial value of local incentives provided during the report period, and of federal and other state resources accessed to serve the residents, workers, and businesses in the G-TEDA.
(4) The following information based on the certification applications approved in the zones relating to the hiring credit:
(A) The number of jobs for which certifications have been issued.
(B) The number of new employees for which certifications have been issued.
(C) The number of employees replacing previous employees for which certification, were issued.
(D) The number of employees by qualified employee category pursuant to Sections 17053.74 and 23622.7 of the Revenue and Taxation Code.
(E) The total range and the average, median, and mean employee wage rates that were certified.
(F) The number of businesses obtaining certification for qualified employees.
(G) The industry classification, based on the North American Industry Classification System, of businesses obtaining certification of qualified employees.
(H) The distribution of employee certifications among industry sectors, based on the North American Industry Classification System.
(I) The distribution of employee certifications by the annual receipts and asset value of the business obtaining qualified employee certifications.
(J) The number of state-certified small businesses that submitted qualified employee certification applications.
(K) The number of state-certified disabled veteran owned business enterprises that submitted applications.
(b) A copy of the biennial report developed pursuant to subdivision (a) shall also be submitted to the legislative bodies of the local jurisdictions comprising the G-TEDA. The progress of the G-TEDA in meeting the goals, objectives, and commitments set forth in the original application and the memorandum of understanding with the department shall be reviewed at least biennially by these the legislative bodies, either as part of the approval of the G-TEDA’s annual work plan or separately, at the discretion of the legislative body of the local jurisdictions comprising the G-TEDA.
(c) (1) G-TEDAs designated prior to January 1, 2007, shall have until April 15, 2008, to update their benchmarks, goals, objectives, and funding levels for administering the G-TEDA program, in order to make them measurable and conducive to the successful completion of the economic development strategy. The local legislative body and the department shall approve the updated goals and objectives. The updated goals and objectives shall be included as an update to the existing memorandum of understanding between the G-TEDA and the department.
(2) G-TEDAs that fail to obtain approved updated goals and objectives by April 15, 2008, shall be dedesignated effective July 1, 2008. The Director of Housing and Community Development shall provide notice of prospective dedesignation to the local government no later than May 1, 2008. The director may authorize up to two 60-calendar-day extensions, if the local government and G-TEDA are acting in good faith and the additional time would allow them to meet the requirements of this subdivision. Businesses located within a G-TEDA that have been dedesignated shall continue to have access to tax incentives previously authorized within the G-TEDA pursuant to Section 7082.2.
(3) G-TEDAs designated prior to January 1, 2007, are not required to implement the biennial reporting requirements of subdivisions (a) and (b) until October 1, 2009.
(4) G-TEDAs that expire prior to January 1, 2010, are not required to meet the conditions of this subdivision.
(d) The department shall biennially make available to the Legislature information related to the progress that each G-TEDA is making toward implementing its goals, objectives, and commitments set forth in the original application, the department’s memorandum of understanding with the G-TEDA, and the biennial report.
(e) G-TEDAs that fail to submit a timely biennial report to the department shall be audited pursuant to Section 7076.1.

SEC. 15.

 Section 7085.5 of the Government Code is amended to read:

7085.5.
 (a) The Franchise Tax Board shall annually make available to the department and the Legislature information, by enterprise zone and by city or county, on the dollar value of the enterprise zone tax credits and other tax related incentives that are claimed each year by businesses and shall design and distribute forms and instructions that will allow the following information to be accessible:

(a)

(1) The total number of jobs for which the hiring credits are claimed.

(b)The number of new employees for which hiring credits are claimed.

(c)

(2) The number of businesses claiming each individual tax credit.

(d)

(3) The nature of the business claiming each individual tax credit.

(e)

(4) The distribution of zone tax incentives among industry groups.

(f)

(5) The distribution of zone tax incentives by the annual receipts and asset value of the business claiming each individual tax credit.
(6) The total amount of capital investments made, as well as the value of the total amount of credit claimed by businesses under the sales and use tax credit.

(g)

(7) Any other information that the Franchise Tax Board and the department deem to be important in determining the cost to, and benefit derived by, the taxpayers of the state.
(b) In developing this information, the Franchise Tax Board shall review returns from personal and corporate tax returns. The totals for each tax incentive shall, at a minimum, be reported separately.

SEC. 16.

 Chapter 12.93 (commencing with Section 7097) of Division 7 of Title 1 of the Government Code is repealed.

SEC. 17.

 Section 7114.2 of the Government Code is amended to read:

7114.2.
 (a) The department shall assess each LAMBRA a fee of fifteen dollars ($15) for each application for issuance of a certificate pursuant to subdivision (c) of Section 17053.46 of the Revenue and Taxation Code and subdivision (c) of Section 23646 of the Revenue and Taxation Code. The department shall collect the fee for deposit into the Enterprise Zone Fund, pursuant to Section 7072.3, for the costs of administering this chapter. The LAMBRA administrator shall collect this fee at the time an application is submitted for issuance of a certificate.
(b) The department shall adopt regulations governing the imposition and collection of fees pursuant to this section and the issuance of certificates pursuant to subdivision (c) of Section 17053.46 of the Revenue and Taxation Code and subdivision (c) of Section 23646 of the Revenue and Taxation Code. The regulations shall provide for a notice or invoice to fee payers as to the amount and purpose of the fee. The adoption of the regulations shall be deemed to be an emergency and necessary for the immediate preservation of the public peace, health and safety, or general welfare. Notwithstanding subdivision (e) of Section 11346.1, the regulations shall remain in effect for no more than 360 days unless the agency complies with all the provisions of Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 as required by subdivision (e) of Section 11346.1.
(c) (1) (A) The department shall establish a registration process for businesses located in a LAMBRA that includes, but is not limited to, the creation of a LAMBRA business registration form and recommended outreach methods to help inform businesses of the registration process.
(B) The department shall make the registration form available on its Internet Web site. The information sought from a business on the registration form shall include, but not be limited to, all of the following:
(i) The name and location of the business.
(ii) The type of business based on the applicable first three digits of the North American Industry Classification System.
(iii) The size of the business based on gross annual receipts for the year prior to registration.
(iv) The total number of employees of the business and the total number of employees of the business that work within the LAMBRA, for the year prior to registration.
(2) Registration shall be a precondition for claiming a LAMBRA-related tax incentive, including, but not limited to, the hiring credit, the sales and use tax credit, and the net interest deduction; however, a business shall not be required to register until six months following the department’s establishment of the registration process. Businesses shall retain a copy of the registration for use in preparation of their tax return.
(3) The registration information shall be updated at least once every five years.

SEC. 18.

 Section 17050 is added to the Revenue and Taxation Code, to read:

17050.
 (a) Notwithstanding any provision of this part or Part 10.2 (commencing with Section 18401) to the contrary, for each taxable year beginning on or after January 1, 2011, and before January 1, 2013, the total of all credits otherwise allowable under Sections 17053.33, 17053.45, 17053.46, 17053.70, and 17053.74, including the carryover of these credits, for the taxable year shall not reduce the “net tax,” as defined in Section 17039, below the applicable amount.
(b) For purposes of this section, the “applicable amount” shall be equal to 50 percent of the “net tax,” as defined in Section 17039, within the enterprise zone, targeted tax area, or LAMBRA where the credit was earned, before application of any credits.
(c) The amount of any credit otherwise allowable for the taxable year under Sections 17053.45, 17053.46, 17053.70, and 17053.74 that is not allowed due to the application of this section shall remain a credit carryover amount as otherwise allowed by this part.
(d) The carryover period for any credit that is not allowed due to the application of this section shall be increased by the number of taxable years the credit, or any portion thereof, was not allowed.
(e) This section shall not apply to a taxpayer with gross income of less than one million dollars ($1,000,000) for the taxable year.
(f) This section shall remain in effect only until December 1, 2013, and as of that date is repealed.

SEC. 19.

 Section 17053.33 of the Revenue and Taxation Code is amended to read:

17053.33.
 (a) For each taxable year beginning on or after January 1, 1998, there shall be allowed as a credit against the “net tax” (as defined in Section 17039) for the taxable year an amount equal to the sales or use tax paid or incurred during the taxable year by the qualified taxpayer in connection with the qualified taxpayer’s purchase of qualified property.
(b) For purposes of this section:
(1) “Qualified property” means property that meets all of the following requirements:
(A) Is any of the following:
(i) Machinery and machinery parts used for fabricating, processing, assembling, and manufacturing.
(ii) Machinery and machinery parts used for the production of renewable energy resources.
(iii) Machinery and machinery parts used for either of the following:
(I) Air pollution control mechanisms.
(II) Water pollution control mechanisms.
(iv) Data processing and communications equipment, such as computers, computer-automated drafting systems, copy machines, telephone systems, and faxes.
(v) Motion picture manufacturing equipment central to production and post production, such as cameras, audio recorders, and digital image and sound processing equipment.
(B) The total cost of qualified property purchased and placed in service in any taxable year that may be taken into account by any qualified taxpayer for purposes of claiming this credit shall not exceed one million dollars ($1,000,000).
(C) The qualified property is used by the qualified taxpayer exclusively in a targeted tax area.
(D) The qualified property is purchased and placed in service before the date the targeted tax area designation expires, is revoked, is no longer binding, or becomes inoperative.
(2) (A) “Qualified taxpayer” means a person or entity that meets both of the following:
(i) Is engaged in a trade or business within a targeted tax area designated pursuant to Chapter 12.93 (commencing with Section 7097) of Division 7 of Title 1 of the Government Code.
(ii) Is engaged in those lines of business described in Codes 2000 to 2099, inclusive; 2200 to 3999, inclusive; 4200 to 4299, inclusive; 4500 to 4599, inclusive; and 4700 to 5199, inclusive, of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition.
(B) In the case of any pass-through entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any credit under this section or Section 23633 shall be allowed to the pass-through entity and passed through to the partners or shareholders in accordance with applicable provisions of this part or Part 11 (commencing with Section 23001). For purposes of this subparagraph, the term “pass-through entity” means any partnership or S corporation.
(3) “Targeted tax area” means the area designated pursuant to Chapter 12.93 (commencing with Section 7097) of Division 7 of Title 1 of the Government Code.
(c) If the qualified taxpayer is allowed a credit for qualified property pursuant to this section, only one credit shall be allowed to the taxpayer under this part with respect to that qualified property.
(d) If the qualified taxpayer has purchased property upon which a use tax has been paid or incurred, the credit provided by this section shall be allowed only if qualified property of a comparable quality and price is not timely available for purchase in this state.
(e) In the case where the credit otherwise allowed under this section exceeds the “net tax” for the taxable year, that portion of the credit that exceeds the “net tax” may be carried over and added to the credit, if any, in the following year, and the succeeding 14 years if necessary, until the credit is exhausted. The credit shall be applied first to the earliest taxable years possible.
(f) Any qualified taxpayer who elects to be subject to this section shall not be entitled to increase the basis of the qualified property as otherwise required by Section 164(a) of the Internal Revenue Code with respect to sales or use tax paid or incurred in connection with the qualified taxpayer’s purchase of qualified property.
(g) (1) The amount of the credit otherwise allowed under this section and Section 17053.34, including any credit carryover from prior years, that may reduce the “net tax” for the taxable year shall not exceed the amount of tax that would be imposed on the qualified taxpayer’s business income attributable to the targeted tax area determined as if that attributable income represented all of the income of the qualified taxpayer subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer’s California source business income that is apportioned to the targeted tax area . For that purpose, the taxpayer’s business income attributable to sources in this state first shall be determined in accordance with Chapter 17 (commencing with Section 25101) of Part 11. That business income shall be further apportioned to the targeted tax area in accordance with Article 2 (commencing with Section 25120) of Chapter 17 of Part 11, modified for purposes of this section in accordance with paragraph (3).
(3) Business income shall be apportioned to the targeted tax area by multiplying the total California business income of the taxpayer by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is two. For purposes of this paragraph:
(A) The property factor is a fraction, the numerator of which is the average value of the taxpayer’s real and tangible personal property owned or rented and used in the targeted tax area during the taxable year, and the denominator of which is the average value of all the taxpayer’s real and tangible personal property owned or rented and used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is the total amount paid by the taxpayer in the targeted tax area during the taxable year for compensation, and the denominator of which is the total compensation paid by the taxpayer in this state during the taxable year.
(4) The portion of any credit remaining, if any, after application of this subdivision, shall be carried over to succeeding taxable years, as if it were an amount exceeding the “net tax” for the taxable year, as provided in subdivision (e).
(5) In the event that a credit carryover is allowable under subdivision (e) for any taxable year after the targeted tax area designation has expired, has been revoked, is no longer binding, or has become inoperative, the targeted tax area shall be deemed to remain in existence for purposes of computing the limitation specified in this subdivision.
(h) A taxpayer shall be required to register a business pursuant Chapter 12.93 (commencing with Section 7097) of Division 7 of Title 1 of the Government Code, and shall state under penalty of perjury that the taxpayer is a registered business in one or more targeted tax areas, as a condition of claiming a credit under this section.

(h)

(i) The amendments made to this section by the act adding this subdivision Chapter 323 of the Statutes of 1998 shall apply to taxable years beginning on or after January 1, 1998.
(j) The amendments made to this section by the act adding this subdivision shall apply only to taxable years beginning on or after January 1, 2011.

SEC. 20.

 Section 17053.34 of the Revenue and Taxation Code is amended to read:

17053.34.
 (a) For each taxable year beginning on or after January 1, 1998, there shall be allowed a credit against the “net tax” (as defined in Section 17039) to a qualified taxpayer who employs a qualified employee in a targeted tax area during the taxable year. The credit shall be equal to the sum of each of the following:
(1) Fifty percent of qualified wages in the first year of employment.
(2) Forty percent of qualified wages in the second year of employment.
(3) Thirty percent of qualified wages in the third year of employment.
(4) Twenty percent of qualified wages in the fourth year of employment.
(5) Ten percent of qualified wages in the fifth year of employment.
(b) For purposes of this section:
(1) “Qualified wages” means:
(A) That portion of wages paid or incurred by the qualified taxpayer during the taxable year to qualified employees that does not exceed 150 percent of the minimum wage.
(B) Wages received during the 60-month period beginning with the first day the employee commences employment with the qualified taxpayer. Reemployment in connection with any increase, including a regularly occurring seasonal increase, in the trade or business operations of the qualified taxpayer does not constitute commencement of employment for purposes of this section.
(C) Qualified wages do not include any wages paid or incurred by the qualified taxpayer on or after the targeted tax area expiration date. However, wages paid or incurred with respect to qualified employees who are employed by the qualified taxpayer within the targeted tax area within the 60-month period prior to the targeted tax area expiration date shall continue to qualify for the credit under this section after the targeted tax area expiration date, in accordance with all provisions of this section applied as if the targeted tax area designation were still in existence and binding.
(2) “Minimum wage” means the wage established by the Industrial Welfare Commission as provided for in Chapter 1 (commencing with Section 1171) of Part 4 of Division 2 of the Labor Code.
(3) “Targeted tax area expiration date” means the date the targeted tax area designation expires, is revoked, is no longer binding, or becomes inoperative.
(4) (A) “Qualified employee” means an individual who is hired by a qualified taxpayer before January 1, 2011, and who meets all of the following requirements:
(i) At least 90 percent of his or her services for the qualified taxpayer during the taxable year are directly related to the conduct of the qualified taxpayer’s trade or business located in a targeted tax area.
(ii) Performs at least 50 percent of his or her services for the qualified taxpayer during the taxable year in a targeted tax area.
(iii) Is hired by the qualified taxpayer after the date of original designation of the area in which services were performed as a targeted tax area.
(iv) Is any of the following:

(I)Immediately preceding the qualified employee’s commencement of employment with the qualified taxpayer, was a person eligible for services under the federal Job Training Partnership Act (29 U.S.C. Sec. 1501 et seq.), or its successor, who is receiving, or is eligible to receive, subsidized employment, training, or services funded by the federal Job Training Partnership Act, or its successor.

(II)Immediately preceding the qualified employee’s commencement of employment with the qualified taxpayer, was a person eligible to be a voluntary or mandatory registrant under the Greater Avenues for Independence Act of 1985 (GAIN) provided for pursuant to Article 3.2 (commencing with Section 11320) of Chapter 2 of Part 3 of Division 9 of the Welfare and Institutions Code, or its successor.

(III)

(I) Immediately preceding the qualified employee’s commencement of employment with the qualified taxpayer, was an economically disadvantaged individual 14 years of age or older.

(IV)

(II) Immediately preceding the qualified employee’s commencement of employment with the qualified taxpayer, was a dislocated worker who meets any of the following:
(aa) Has been terminated or laid off or who has received a notice of termination or layoff from employment, is eligible for or has exhausted entitlement to unemployment insurance benefits, and is unlikely to return to his or her previous industry or occupation.
(bb) Has been terminated or has received a notice of termination of employment as a result of any permanent closure or any substantial layoff at a plant, facility, or enterprise, including an individual who has not received written notification but whose employer has made a public announcement of the closure or layoff.
(cc) Is long-term unemployed and has limited opportunities for employment or reemployment in the same or a similar occupation in the area in which the individual resides, including an individual 55 years of age or older who may have substantial barriers to employment by reason of age.
(dd) Was self-employed (including farmers and ranchers) and is unemployed as a result of general economic conditions in the community in which he or she resides or because of natural disasters.
(ee) Was a civilian employee of the Department of Defense employed at a military installation being closed or realigned under the Defense Base Closure and Realignment Act of 1990.
(ff) Was an active member of the Armed Forces or National Guard as of September 30, 1990, and was either involuntarily separated or separated pursuant to a special benefits program.
(gg) Is a seasonal or migrant worker who experiences chronic seasonal unemployment and underemployment in the agriculture industry, aggravated by continual advancements in technology and mechanization.
(hh) Has been terminated or laid off, or has received a notice of termination or layoff, as a consequence of compliance with the federal Clean Air Act.

(V)

(III) Immediately preceding the qualified employee’s commencement of employment with the qualified taxpayer, was a disabled individual who is eligible for or enrolled in, or has completed a state rehabilitation plan or is.
(IV) Immediately preceding the qualified employee’s commencement of employment with the taxpayer, was a service-connected disabled veteran, veteran of the Vietnam era, or veteran who is recently separated from military service.

(VI)

(V) Immediately preceding the qualified employee’s commencement of employment with the qualified taxpayer, was an ex-offender. An individual shall be treated as convicted if he or she was placed on probation by a state court without a finding of guilty.

(VII)

(VI) Immediately preceding the qualified employee’s commencement of employment with the qualified taxpayer, was a person eligible for or a recipient of any of the following:
(aa) Federal Supplemental Security Income benefits.
(bb) Aid to Families with Dependent Children.
(cc) Food stamps.
(dd) State and local general assistance.

(VIII)

(VII) Immediately preceding the qualified employee’s commencement of employment with the qualified taxpayer, was a member of a federally recognized Indian tribe, band, or other group of Native American descent.

(IX)

(VIII) Immediately preceding the qualified employee’s commencement of employment with the qualified taxpayer, was a resident of a targeted tax area.

(X)

(IX) Immediately preceding the qualified employee’s commencement of employment with the taxpayer, was a member of a targeted group as defined in Section 51(d) of the Internal Revenue Code, or its successor.
(B) Priority for employment shall be provided to an individual who is enrolled in a qualified program under the federal Job Training Partnership Act or the Greater Avenues for Independence Act of 1985 Workforce Investment Act or the CalWORKs program or who is eligible as a member of a targeted group under the Work Opportunity Tax Credit (Section 51 of the Internal Revenue Code), or its successor.
(5) (A) “Qualified taxpayer” means a person or entity that meets both of the following:
(i) Is engaged in a trade or business within a targeted tax area designated pursuant to Chapter 12.93 (commencing with Section 7097) of Division 7 of Title 1 of the Government Code.
(ii) Is engaged in those lines of business described in Codes 2000 to 2099, inclusive; 2200 to 3999, inclusive; 4200 to 4299, inclusive; 4500 to 4599, inclusive; and 4700 to 5199, inclusive, of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition.
(B) In the case of any passthrough entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any credit under this section or Section 23634 shall be allowed to the passthrough entity and passed through to the partners or shareholders in accordance with applicable provisions of this part or Part 11 (commencing with Section 23001). For purposes of this subdivision, the term “passthrough entity” means any partnership or S corporation.
(6) “Seasonal employment” means employment by a qualified taxpayer that has regular and predictable substantial reductions in trade or business operations.
(c) If the qualified taxpayer is allowed a credit for qualified wages pursuant to this section, only one credit shall be allowed to the taxpayer under this part with respect to those qualified wages.
(d) The qualified taxpayer shall do both of the following:
(1) Obtain from the Employment Development Department, as permitted by federal law, the local county or city Job Training Partnership Act administrative entity, the local county GAIN office federal Workforce Investment Act of 1998 administrative entity, the local county CalWORKs program office or social services agency, or the local government administering the targeted tax area, a certification that provides that a qualified employee meets the eligibility requirements specified in clause (iv) of subparagraph (A) of paragraph (4) of subdivision (b). The Employment Development Department may provide preliminary screening and referral to a certifying agency. The Department of Housing and Community Development shall develop regulations governing the issuance of certificates pursuant to subdivision (g) of Section 7097 of the Government Code, and shall develop forms for this purpose.
(2) Retain a copy of the certification and provide it upon request to the Franchise Tax Board.
(e) (1) For purposes of this section:
(A) All employees of trades or businesses, which are not incorporated, that are under common control shall be treated as employed by a single taxpayer.
(B) The credit, if any, allowable by this section with respect to each trade or business shall be determined by reference to its proportionate share of the expense of the qualified wages giving rise to the credit, and shall be allocated in that manner.
(C) Principles that apply in the case of controlled groups of corporations, as specified in subdivision (d) of Section 23634, shall apply with respect to determining employment.
(2) If an employer acquires the major portion of a trade or business of another employer (hereinafter in this paragraph referred to as the “predecessor”) or the major portion of a separate unit of a trade or business of a predecessor, then, for purposes of applying this section (other than subdivision (f)) for any calendar year ending after that acquisition, the employment relationship between a qualified employee and an employer shall not be treated as terminated if the employee continues to be employed in that trade or business.
(f) (1) (A) If the employment, other than seasonal employment, of any qualified employee, with respect to whom qualified wages are taken into account under subdivision (a) is terminated by the qualified taxpayer at any time during the first 270 days of that employment (whether or not consecutive) or before the close of the 270th calendar day after the day in which that employee completes 90 days of employment with the qualified taxpayer, the tax imposed by this part for the taxable year in which that employment is terminated shall be increased by an amount equal to the credit allowed under subdivision (a) for that taxable year and all prior taxable years attributable to qualified wages paid or incurred with respect to that employee.
(B) If the seasonal employment of any qualified employee, with respect to whom qualified wages are taken into account under subdivision (a) is not continued by the qualified taxpayer for a period of 270 days of employment during the 60-month period beginning with the day the qualified employee commences seasonal employment with the qualified taxpayer, the tax imposed by this part, for the taxable year that includes the 60th month following the month in which the qualified employee commences seasonal employment with the qualified taxpayer, shall be increased by an amount equal to the credit allowed under subdivision (a) for that taxable year and all prior taxable years attributable to qualified wages paid or incurred with respect to that qualified employee.
(2) (A) Subparagraph (A) of paragraph (1) shall not apply to any of the following:
(i) A termination of employment of a qualified employee who voluntarily leaves the employment of the qualified taxpayer.
(ii) A termination of employment of a qualified employee who, before the close of the period referred to in subparagraph (A) of paragraph (1), becomes disabled and unable to perform the services of that employment, unless that disability is removed before the close of that period and the qualified taxpayer fails to offer reemployment to that employee.
(iii) A termination of employment of a qualified employee, if it is determined that the termination was due to the misconduct (as defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the California Code of Regulations) of that employee.
(iv) A termination of employment of a qualified employee due to a substantial reduction in the trade or business operations of the qualified taxpayer.
(v) A termination of employment of a qualified employee, if that employee is replaced by other qualified employees so as to create a net increase in both the number of employees and the hours of employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of the following:
(i) A failure to continue the seasonal employment of a qualified employee who voluntarily fails to return to the seasonal employment of the qualified taxpayer.
(ii) A failure to continue the seasonal employment of a qualified employee who, before the close of the period referred to in subparagraph (B) of paragraph (1), becomes disabled and unable to perform the services of that seasonal employment, unless that disability is removed before the close of that period and the qualified taxpayer fails to offer seasonal employment to that qualified employee.
(iii) A failure to continue the seasonal employment of a qualified employee, if it is determined that the failure to continue the seasonal employment was due to the misconduct (as defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the California Code of Regulations) of that qualified employee.
(iv) A failure to continue seasonal employment of a qualified employee due to a substantial reduction in the regular seasonal trade or business operations of the qualified taxpayer.
(v) A failure to continue the seasonal employment of a qualified employee, if that qualified employee is replaced by other qualified employees so as to create a net increase in both the number of seasonal employees and the hours of seasonal employment.
(C) For purposes of paragraph (1), the employment relationship between the qualified taxpayer and a qualified employee shall not be treated as terminated by reason of a mere change in the form of conducting the trade or business of the qualified taxpayer, if the qualified employee continues to be employed in that trade or business and the qualified taxpayer retains a substantial interest in that trade or business.
(3) Any increase in tax under paragraph (1) shall not be treated as tax imposed by this part for purposes of determining the amount of any credit allowable under this part.
(g) In the case of an estate or trust, both of the following apply:
(1) The qualified wages for any taxable year shall be apportioned between the estate or trust and the beneficiaries on the basis of the income of the estate or trust allocable to each.
(2) Any beneficiary to whom any qualified wages have been apportioned under paragraph (1) shall be treated, for purposes of this part, as the employer with respect to those wages.
(h) For purposes of this section, “targeted tax area” means an area designated pursuant to Chapter 12.93 (commencing with Section 7097) of Division 7 of Title 1 of the Government Code.
(i) In the case where the credit otherwise allowed under this section exceeds the “net tax” for the taxable year, that portion of the credit that exceeds the “net tax” may be carried over and added to the credit, if any, in succeeding taxable years, until the credit is exhausted. The credit shall be applied first to the earliest taxable years possible.
(j) (1) The amount of the credit otherwise allowed under this section and Section 17053.33, including any credit carryover from prior years, that may reduce the “net tax” for the taxable year shall not exceed the amount of tax that would be imposed on the qualified taxpayer’s business income attributable to the targeted tax area determined as if that attributable income represented all of the income of the qualified taxpayer subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer’s California source business income that is apportioned to the targeted tax area. For that purpose, the taxpayer’s business income attributable to sources in this state first shall be determined in accordance with Chapter 17 (commencing with Section 25101) of Part 11. That business income shall be further apportioned to the targeted tax area in accordance with Article 2 (commencing with Section 25120) of Chapter 17 of Part 11, modified for purposes of this section in accordance with paragraph (3).
(3) Business income shall be apportioned to the targeted tax area by multiplying the total California business income of the taxpayer by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is two. For purposes of this paragraph:
(A) The property factor is a fraction, the numerator of which is the average value of the taxpayer’s real and tangible personal property owned or rented and used in the targeted tax area during the taxable year, and the denominator of which is the average value of all the taxpayer’s real and tangible personal property owned or rented and used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is the total amount paid by the taxpayer in the targeted tax area during the taxable year for compensation, and the denominator of which is the total compensation paid by the taxpayer in this state during the taxable year.
(4) The portion of any credit remaining, if any, after application of this subdivision, shall be carried over to succeeding taxable years, as if it were an amount exceeding the “net tax” for the taxable year, as provided in subdivision (h).
(5) In the event that a credit carryover is allowable under subdivision (h) for any taxable year after the targeted tax area expiration date, the targeted tax area shall be deemed to remain in existence for purposes of computing the limitation specified in this subdivision.
(k) This section shall remain in effect only until January 1, 2017, and as of that date is repealed.

SEC. 21.

 Section 17053.45 of the Revenue and Taxation Code is amended to read:

17053.45.
 (a) For each taxable year beginning on or after January 1, 1995, there shall be allowed as a credit against the “net tax” (as defined by Section 17039) an amount equal to the sales or use tax paid or incurred by the taxpayer in connection with the purchase of qualified property to the extent that the qualified property does not exceed a value of one million dollars ($1,000,000).
(b) For purposes of this section:
(1) “LAMBRA” means a local agency military base recovery area designated in accordance with Section 7114 of the Government Code.
(2) “Taxpayer” means a taxpayer that conducts a trade or business within a LAMBRA and, for the first two taxable years, has a net increase in jobs (defined as 2,000 paid hours per employee per year) of one or more employees in the LAMBRA.
(A) The net increase in the number of jobs shall be determined by subtracting the total number of full-time employees (defined as 2,000 paid hours per employee per year) the taxpayer employed in this state in the taxable year prior to commencing business operations in the LAMBRA from the total number of full-time employees the taxpayer employed in this state during the second taxable year after commencing business operations in the LAMBRA. For taxpayers who commence doing business in this state with their LAMBRA business operation, the number of employees for the taxable year prior to commencing business operations in the LAMBRA shall be zero. If the taxpayer has a net increase in jobs in the state, the credit shall be allowed only if one or more full-time employees is employed within the LAMBRA.
(B) The total number of employees employed in the LAMBRA shall equal the sum of both of the following:
(i) The total number of hours worked in the LAMBRA for the taxpayer by employees (not to exceed 2,000 hours per employee) who are paid an hourly wage divided by 2,000.
(ii) The total number of months worked in the LAMBRA for the taxpayer by employees who are salaried employees divided by 12.
(C) In the case of a taxpayer who first commences doing business in the LAMBRA during the taxable year, for purposes of clauses (i) and (ii), respectively, of subparagraph (B), the divisors “2,000” and “12” shall be multiplied by a fraction, the numerator of which is the number of months of the taxable year that the taxpayer was doing business in the LAMBRA and the denominator of which is 12.
(3) “Qualified property” means property that is each of the following:
(A) Purchased by the taxpayer for exclusive use in a trade or business conducted within a LAMBRA.
(B) Purchased before the date the LAMBRA designation expires, is no longer binding, or becomes inoperative.
(C) Any of the following:
(i) High technology equipment, including, but not limited to, computers and electronic processing equipment.
(ii) Aircraft maintenance equipment, including, but not limited to, engine stands, hydraulic mules, power carts, test equipment, handtools, aircraft start carts, and tugs.
(iii) Aircraft components, including, but not limited to, engines, fuel control units, hydraulic pumps, avionics, starts, wheels, and tires.
(iv) Section 1245 property, as defined in Section 1245(a)(3) of the Internal Revenue Code.
(c) The credit provided under subdivision (a) shall be allowed only for qualified property manufactured in California unless qualified property of a comparable quality and price is not available for timely purchase and delivery from a California manufacturer.
(d) In the case where the credit otherwise allowed under this section exceeds the “net tax” for the taxable year, that portion of the credit which exceeds the “net tax” may be carried over and added to the credit, if any, in the following year, and the succeeding 14 years if necessary, until the credit is exhausted. The credit shall be applied first to the earliest taxable years possible.
(e) Any taxpayer who elects to be subject to this section shall not be entitled to increase the basis of the property as otherwise required by Section 164(a) of the Internal Revenue Code with respect to sales or use tax paid or incurred in connection with the purchase of qualified property.
(f) (1) The amount of credit otherwise allowed under this section and Section 17053.46, including any credit carryover from prior years, that may reduce the “net tax” for the taxable year shall not exceed the amount of tax that would be imposed on the taxpayer’s business income attributed to a LAMBRA determined as if that attributable income represented all the income of the taxpayer subject to tax under this part.
(2) Attributable income is that portion of the taxpayer’s California source business income that is apportioned to the LAMBRA. For that purpose, the taxpayer’s business income that is attributable to sources in this state shall first be determined in accordance with Chapter 17 (commencing with Section 25101) of Part 11. That business income shall be further apportioned to the LAMBRA in accordance with Article 2 (commencing with Section 25120) of Chapter 17 of Part 11, as modified for purposes of this section in accordance with paragraph (3).
(3) Income shall be apportioned to a LAMBRA by multiplying the total California business income of the taxpayer by a fraction, the numerator of which is the property factor, plus the payroll factor, and the denominator of which is two. For purposes of this paragraph:
(A) The property factor is a fraction, the numerator of which is the average value of the taxpayer’s real and tangible personal property owned or rented and used in the LAMBRA during the taxable year, and the denominator of which is the average value of all the taxpayer’s real and tangible personal property owned or rented and used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is the total amount paid by the taxpayer in the LAMBRA during the taxable year for compensation, and the denominator of which is the total compensation paid by the taxpayer in this state during the taxable year.
(4) The portion of any credit remaining, if any, after application of this subdivision, shall be carried over to succeeding taxable years, as if it were an amount exceeding the “net tax” for the taxable year, as provided in subdivision (d).
(g) (1) If the qualified property is disposed of or no longer used by the taxpayer in the LAMBRA, at any time before the close of the second taxable year after the property is placed in service, the amount of the credit previously claimed, with respect to that property, shall be added to the taxpayer’s tax liability in the taxable year of that disposition or nonuse.
(2) At the close of the second taxable year, if the taxpayer has not increased the number of its employees as determined by paragraph (2) of subdivision (b), then the amount of the credit previously claimed shall be added to the taxpayer’s net tax for the taxpayer’s second taxable year.
(h) If the taxpayer is allowed a credit for qualified property pursuant to this section, only one credit shall be allowed to the taxpayer under this part with respect to that qualified property.
(i) A taxpayer shall be required to register a business pursuant to the Local Agency Military Base Recovery Area Act (Chapter 12.97 (commencing with Section 7105) of Division 7 of Title 1 of the Government Code), and shall state under penalty of perjury that the taxpayer is a registered business in one or more LAMBRAs, as a condition of claiming a credit under this section.

(i)

(j) The amendments made to this section by the act adding this subdivision shall apply to taxable years beginning on or after January 1, 1998.
(k) The amendments made to this section by the act adding this subdivision shall apply only to taxable years beginning on or after January 1, 2011.

SEC. 22.

 Section 17053.46 of the Revenue and Taxation Code is amended to read:

17053.46.
 (a) For each taxable year beginning on or after January 1, 1995, there shall be allowed as a credit against the “net tax” (as defined in Section 17039) to a qualified taxpayer for hiring a qualified disadvantaged individual or a qualified displaced employee during the taxable year for employment in the LAMBRA. The credit shall be equal to the sum of each of the following:
(1) Fifty Thirty percent of the qualified wages in the first year of employment.
(2) Forty percent of the qualified wages in the second year of employment.
(3) Thirty Fifty percent of the qualified wages in the third year of employment.

(4)Twenty percent of the qualified wages in the fourth year of employment.

(5)Ten percent of the qualified wages in the fifth year of employment.

(b) For purposes of this section:
(1) “Qualified wages” means:
(A) That (i) Except as modified by clause (ii), that portion of wages paid or incurred by the employer during the taxable year to qualified disadvantaged individuals or qualified displaced employees that does not exceed 150 180 percent of the minimum wage.
(ii) For qualified employees who are employed by the taxpayer who undertake manufacturing activities described in Codes 311 to 339, inclusive, of the North American Industry Classification System published by the United States Office of Management and Budget, 2007 edition, “qualified wages” means that portion of hourly wages that does not exceed 202 percent of the minimum wage.
(B) The total amount of qualified wages which may be taken into account for purposes of claiming the credit allowed under this section shall not exceed two million dollars ($2,000,000) per taxable year.
(C) Wages received during the 60-month 36-month period beginning with the first day the individual commences employment with the taxpayer. Reemployment in connection with any increase, including a regularly occurring seasonal increase, in the trade or business operations of the qualified taxpayer does not constitute commencement of employment for purposes of this section.
(D) Qualified wages do not include any wages paid or incurred by the qualified taxpayer on or after the LAMBRA expiration date. However, wages paid or incurred with respect to qualified disadvantaged individuals or qualified displaced employees who are employed by the qualified taxpayer within the LAMBRA within the 60-month 36-month period prior to the LAMBRA expiration date shall continue to qualify for the credit under this section after the LAMBRA expiration date, in accordance with all provisions of this section applied as if the LAMBRA designation were still in existence and binding.
(2) “Minimum wage” means the wage established by the Industrial Welfare Commission as provided for in Chapter 1 (commencing with Section 1171) of Part 4 of Division 2 of the Labor Code.
(3) “LAMBRA” means a local agency military base recovery area designated in accordance with Section 7114 of the Government Code.
(4) “Qualified disadvantaged individual” means an individual who satisfies all of the following requirements:
(A) (i) At least 90 percent of whose services for the taxpayer during the taxable year are directly related to the conduct of the taxpayer’s trade or business located in a LAMBRA.
(ii) Who performs at least 50 percent of his or her services for the taxpayer during the taxable year in the LAMBRA.
(B) Who is hired by the employer after the designation of the area as a LAMBRA in which the individual’s services were primarily performed.
(C) Who is any of the following immediately preceding the individual’s commencement of employment with the taxpayer:

(i)An individual who has been determined eligible for services under the federal Job Training Partnership Act (29 U.S.C. Sec. 1501 et seq.).

(ii)Any voluntary or mandatory registrant under the Greater Avenues for Independence Act of 1985 as provided pursuant to Article 3.2 (commencing with Section 11320) of Chapter 2 of Part 3 of Division 9 of the Welfare and Institutions Code.

(iii)

(i) An economically disadvantaged individual age 16 years or older.

(iv)

(ii) A dislocated worker who meets any of the following conditions:
(I) Has been terminated or laid off or who has received a notice of termination or layoff from employment, is eligible for or has exhausted entitlement to unemployment insurance benefits, and is unlikely to return to his or her previous industry or occupation.
(II) Has been terminated or has received a notice of termination of employment as a result of any permanent closure or any substantial layoff at a plant, facility, or enterprise, including an individual who has not received written notification but whose employer has made a public announcement of the closure or layoff.
(III) Is long-term unemployed and has limited opportunities for employment or reemployment in the same or a similar occupation in the area in which the individual resides, including an individual 55 years of age or older who may have substantial barriers to employment by reason of age.
(IV) Was self-employed (including farmers and ranchers) and is unemployed as a result of general economic conditions in the community in which he or she resides or because of natural disasters.
(V) Was a civilian employee of the Department of Defense employed at a military installation being closed or realigned under the Defense Base Closure and Realignment Act of 1990.
(VI) Was an active member of the Armed Forces or National Guard as of September 30, 1990, and was either involuntarily separated or separated pursuant to a special benefits program.
(VII) Experiences chronic seasonal unemployment and underemployment in the agriculture industry, aggravated by continual advancements in technology and mechanization.
(VIII) Has been terminated or laid off or has received a notice of termination or layoff as a consequence of compliance with the federal Clean Air Act.

(v)

(iii) An individual who is enrolled in or has completed a state rehabilitation plan or is a service-connected disabled veteran, veteran of the Vietnam era, or veteran who is recently separated from military service.

(vi)

(iv) An ex-offender. An individual shall be treated as convicted if he or she was placed on probation by a state court without a finding of guilty.

(vii)

(v) A recipient of:
(I) Federal Supplemental Security Income benefits.
(II) Aid to Families with Dependent Children.
(III) Food stamps.
(IV) State and local general assistance.

(viii)

(vi) Is a member of a federally recognized Indian tribe, band, or other group of Native American descent.
(5) “Qualified taxpayer” means a taxpayer or partnership that conducts a trade or business within a LAMBRA and, for the first two taxable years, has a net increase in jobs (defined as 2,000 paid hours per employee per year) of one or more employees in the LAMBRA.
(A) The net increase in the number of jobs shall be determined by subtracting the total number of full-time employees (defined as 2,000 paid hours per employee per year) the taxpayer employed in this state in the taxable year prior to commencing business operations in the LAMBRA from the total number of full-time employees the taxpayer employed in this state during the second taxable year after commencing business operations in the LAMBRA. For taxpayers who commence doing business in this state with their LAMBRA business operation, the number of employees for the taxable year prior to commencing business operations in the LAMBRA shall be zero. If the taxpayer has a net increase in jobs in the state, the credit shall be allowed only if one or more full-time employees is employed within the LAMBRA.
(B) The total number of employees employed in the LAMBRA shall equal the sum of both of the following:
(i) The total number of hours worked in the LAMBRA for the taxpayer by employees (not to exceed 2,000 hours per employee) who are paid an hourly wage divided by 2,000.
(ii) The total number of months worked in the LAMBRA for the taxpayer by employees who are salaried employees divided by 12.
(C) In the case of a taxpayer who first commences doing business in the LAMBRA during the taxable year, for purposes of clauses (i) and (ii), respectively, of subparagraph (B), the divisors “2,000” and “12” shall be multiplied by a fraction, the numerator of which is the number of months of the taxable year that the taxpayer was doing business in the LAMBRA and the denominator of which is 12.
(6) “Qualified displaced employee” means an individual who satisfies all of the following requirements:
(A) Any civilian or military employee of a base or former base who has been displaced as a result of a federal base closure act.
(B) (i) At least 90 percent of whose services for the taxpayer during the taxable year are directly related to the conduct of the taxpayer’s trade or business located in a LAMBRA.
(ii) Who performs at least 50 percent of his or her services for the taxpayer during the taxable year in a LAMBRA.
(C) Who is hired by the employer after the designation of the area in which services were performed as a LAMBRA.
(7) “Seasonal employment” means employment by a qualified taxpayer that has regular and predictable substantial reductions in trade or business operations.
(8) “LAMBRA expiration date” means the date the LAMBRA designation expires, is no longer binding, or becomes inoperative.
(c) For qualified disadvantaged individuals or qualified displaced employees hired on or after January 1, 2001, the taxpayer shall do both of the following:
(1) Obtain Apply for certification, within 36 months of an employee being hired, from the Employment Development Department, as permitted by federal law, the local county or city Job Training Partnership Act administrative entity, the local county GAIN office federal Workforce Investment Act of 1998 administrative entity, the local county CalWORKs program office or social services agency, or the local government administering the LAMBRA, a certification that provides that a qualified disadvantaged individual or qualified displaced employee meets the eligibility requirements specified in subparagraph (C) of paragraph (4) of subdivision (b) or subparagraph (A) of paragraph (6) of subdivision (b). The Employment Development Department may provide preliminary screening and referral to a certifying agency. The Department of Housing and Community Development shall develop regulations governing the issuance of certificates pursuant to Section 7114.2 of the Government Code and shall develop forms for this purpose.
(2) Retain a copy of the certification and provide it upon request to the Franchise Tax Board.
(d) (1) For purposes of this section, both of the following apply:
(A) All employees of trades or businesses that are under common control shall be treated as employed by a single employer.
(B) The credit (if any) allowable by this section with respect to each trade or business shall be determined by reference to its proportionate share of the qualified wages giving rise to the credit.
The regulations prescribed under this paragraph shall be based on principles similar to the principles that apply in the case of controlled groups of corporations as specified in subdivision (e) of Section 23622.
(2) (A) If an employer acquires the major portion of a trade or business of another employer (hereinafter in this paragraph referred to as the “predecessor”) or the major portion of a separate unit of a trade or business of a predecessor, then, for purposes of applying this section (other than subdivision (d)) for any calendar year ending after that acquisition, the employment relationship between an employee and an employer shall not be treated as terminated if the employee continues to be employed in that trade or business.
(B) If a taxpayer relocated to a LAMBRA from within the state, the taxpayer shall be allowed a credit only for that number of employees that exceeds the number of employees at the previous location. The number of employees at the previous location and the type of jobs undertaken shall be established by the Employment Development Department. Exceptions to this subparagraph shall be limited to the following:
(i) Employees who undertake core work activities or activities that are the primary job duties of the employee that are significantly different from those activities at the previous location, as determined by the Employment Development Department.
(ii) Taxpayers that receive a bona fide offer to relocate to another state.
(iii) Taxpayers who relocate as a result of a natural disaster, civic unrest, or eminent domain proceeding.
(iv) Taxpayers who relocate within the same local government jurisdiction.
(e) (1) (A) If the employment, other than seasonal employment, of any employee, with respect to whom qualified wages are taken into account under subdivision (a) is terminated by the taxpayer at any time during the first 270 300 days of that employment (whether or not consecutive) or before the close of the 270th 300th calendar day after the day in which that employee completes 90 days of employment with the taxpayer, the tax imposed by this part for the taxable year in which that employment is terminated shall be increased by an amount (determined under those regulations) equal to the credit allowed under subdivision (a) for that taxable year and all prior taxable years attributable to qualified wages paid or incurred with respect to that employee.
(B) If the seasonal employment of any qualified disadvantaged individual, with respect to whom qualified wages are taken into account under subdivision (a) is not continued by the qualified taxpayer for a period of 270 300 days of employment during the 60-month 36-month period beginning with the day the qualified disadvantaged individual commences seasonal employment with the qualified taxpayer, the tax imposed by this part, for the taxable year that includes the 60th 36th month following the month in which the qualified disadvantaged individual commences seasonal employment with the qualified taxpayer, shall be increased by an amount equal to the credit allowed under subdivision (a) for that taxable year and all prior taxable years attributable to qualified wages paid or incurred with respect to that qualified disadvantaged individual.
(2) (A) Subparagraph (A) of paragraph (1) shall not apply to any of the following:
(i) A termination of employment of an employee who voluntarily leaves the employment of the taxpayer.
(ii) A termination of employment of an individual who, before the close of the period referred to in subparagraph (A) of paragraph (1), becomes disabled to perform the services of that employment, unless that disability is removed before the close of that period and the taxpayer fails to offer reemployment to that individual.
(iii) A termination of employment of an individual, if it is determined that the termination was due to the misconduct (as defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the California Code of Regulations) of that individual.
(iv) A termination of employment of an individual due to a substantial reduction in the trade or business operations of the taxpayer.
(v) A termination of employment of an individual, if that individual is replaced by other qualified employees so as to create a net increase in both the number of employees and the hours of employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of the following:
(i) A failure to continue the seasonal employment of a qualified disadvantaged individual who voluntarily fails to return to the seasonal employment of the qualified taxpayer.
(ii) A failure to continue the seasonal employment of a qualified disadvantaged individual who, before the close of the period referred to in subparagraph (B) of paragraph (1), becomes disabled and unable to perform the services of that seasonal employment, unless that disability is removed before the close of that period and the qualified taxpayer fails to offer seasonal employment to that individual.
(iii) A failure to continue the seasonal employment of a qualified disadvantaged individual, if it is determined that the failure to continue the seasonal employment was due to the misconduct (as defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the California Code of Regulations) of that qualified disadvantaged individual.
(iv) A failure to continue seasonal employment of a qualified disadvantaged individual due to a substantial reduction in the regular seasonal trade or business operations of the qualified taxpayer.
(v) A failure to continue the seasonal employment of a qualified disadvantaged individual, if that individual is replaced by other qualified displaced employees so as to create a net increase in both the number of seasonal employees and the hours of seasonal employment.
(C) For purposes of paragraph (1), the employment relationship between the taxpayer and an employee shall not be treated as terminated by reason of a mere change in the form of conducting the trade or business of the taxpayer, if the employee continues to be employed in that trade or business and the taxpayer retains a substantial interest in that trade or business.
(3) Any increase in tax under paragraph (1) shall not be treated as tax imposed by this part for purposes of determining the amount of any credit allowable under this part.
(4) At the close of the second taxable year, if the taxpayer has not increased the number of its employees as determined by paragraph (5) of subdivision (b), then the amount of the credit previously claimed shall be added to the taxpayer’s net tax for the taxpayer’s second taxable year.
(f) In the case of an estate or trust, both of the following apply:
(1) The qualified wages for any taxable year shall be apportioned between the estate or trust and the beneficiaries on the basis of the income of the estate or trust allocable to each.
(2) Any beneficiary to whom any qualified wages have been apportioned under paragraph (1) shall be treated (for purposes of this part) as the employer with respect to those wages.
(g) The credit shall be reduced by the credit allowed under Section 17053.7. The credit shall also be reduced by the federal credit allowed under Section 51 of the Internal Revenue Code.
In addition, any deduction otherwise allowed under this part for the wages or salaries paid or incurred by the taxpayer upon which the credit is based shall be reduced by the amount of the credit, prior to any reduction required by subdivision (h) or (i).
(h) In the case where the credit otherwise allowed under this section exceeds the “net tax” for the taxable year, that portion of the credit that exceeds the “net tax” may be carried over and added to the credit, if any, in the following year, and the succeeding 14 years if necessary, until the credit is exhausted. The credit shall be applied first to the earliest taxable years possible.
(i) (1) The amount of credit otherwise allowed under this section and Section 17053.45, including prior year credit carryovers, that may reduce the “net tax” for the taxable year shall not exceed the amount of tax that would be imposed on the taxpayer’s business income attributed to a LAMBRA determined as if that attributed income represented all of the net income of the taxpayer subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer’s California source business income that is apportioned to the LAMBRA. For that purpose, the taxpayer’s business income that is attributable to sources in this state first shall be determined in accordance with Chapter 17 (commencing with Section 25101) of Part 11. That business income shall be further apportioned to the LAMBRA in accordance with Article 2 (commencing with Section 25120) of Chapter 17 of Part 11, modified for purposes of this section in accordance with paragraph (3).
(3) Income shall be apportioned to a LAMBRA by multiplying the total California business income of the taxpayer by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is two. For purposes of this paragraph:
(A) The property factor is a fraction, the numerator of which is the average value of the taxpayer’s real and tangible personal property owned or rented and used in the LAMBRA during the taxable year, and the denominator of which is the average value of all the taxpayer’s real and tangible personal property owned or rented and used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is the total amount paid by the taxpayer in the LAMBRA during the taxable year for compensation, and the denominator of which is the total compensation paid by the taxpayer in this state during the taxable year.
(4) The portion of any credit remaining, if any, after application of this subdivision, shall be carried over to succeeding taxable years, as if it were an amount exceeding the “net tax” for the taxable year, as provided in subdivision (h).
(j) If the taxpayer is allowed a credit pursuant to this section for qualified wages paid or incurred, only one credit shall be allowed to the taxpayer under this part with respect to any wage consisting in whole or in part of those qualified wages.
(k) A credit shall not be allowed under this section to a taxpayer that has been notified by the Director of Industrial Relations of a final determination, based on the taxpayer’s history of significant employment violations, that the taxpayer is considered by the Department of Industrial Relations as a serious, repeated, and willful violator of state employment laws, including, but not limited to, demonstrating a failure to successfully abate these violations.
(l) A taxpayer shall be required to register a business pursuant to the Local Agency Military Base Recovery Area Act (Chapter 12.97 (commencing with Section 7105) of Division 7 of Title 1 of the Government Code), and shall state under penalty of perjury that the taxpayer is a registered business in one or more LAMBRAs, as a condition of claiming a credit under this section.
(m) The changes made to this section by the act adding this subdivision shall apply only to qualified disadvantaged individuals hired by a qualified taxpayer on or after January 1, 2011.

SEC. 23.

 Section 17053.47 of the Revenue and Taxation Code is amended to read:

17053.47.
 (a) For each taxable year beginning on or after January 1, 1998, there shall be allowed a credit against the “net tax” (as defined in Section 17039) to a qualified taxpayer for hiring a qualified disadvantaged individual during the taxable year for employment in the manufacturing enhancement area. The credit shall be equal to the sum of each of the following:
(1) Fifty percent of the qualified wages in the first year of employment.
(2) Forty percent of the qualified wages in the second year of employment.
(3) Thirty percent of the qualified wages in the third year of employment.
(4) Twenty percent of the qualified wages in the fourth year of employment.
(5) Ten percent of the qualified wages in the fifth year of employment.
(b) For purposes of this section:
(1) “Qualified wages” means:
(A) That portion of wages paid or incurred by the qualified taxpayer during the taxable year to qualified disadvantaged individuals that does not exceed 150 percent of the minimum wage.
(B) The total amount of qualified wages which may be taken into account for purposes of claiming the credit allowed under this section shall not exceed two million dollars ($2,000,000) per taxable year.
(C) Wages received during the 60-month period beginning with the first day the qualified disadvantaged individual commences employment with the qualified taxpayer. Reemployment in connection with any increase, including a regularly occurring seasonal increase, in the trade or business operations of the taxpayer does not constitute commencement of employment for purposes of this section.
(D) Qualified wages do not include any wages paid or incurred by the qualified taxpayer on or after the manufacturing enhancement area expiration date. However, wages paid or incurred with respect to qualified employees who are employed by the qualified taxpayer within the manufacturing enhancement area within the 60-month period prior to the manufacturing enhancement area expiration date shall continue to qualify for the credit under this section after the manufacturing enhancement area expiration date, in accordance with all provisions of this section applied as if the manufacturing enhancement area designation were still in existence and binding.
(2) “Minimum wage” means the wage established by the Industrial Welfare Commission as provided for in Chapter 1 (commencing with Section 1171) of Part 4 of Division 2 of the Labor Code.
(3) “Manufacturing enhancement area” means an area designated pursuant to Section 7073.8 of the Government Code according to the procedures of Chapter 12.8 (commencing with Section 7070) of Division 7 of Title 1 of the Government Code.
(4) “Manufacturing enhancement area expiration date” means the date the manufacturing enhancement area designation expires, is no longer binding, or becomes inoperative.
(5) “Qualified disadvantaged individual” means an individual who was hired by a qualified taxpayer before January 1, 2011, and who satisfies all of the following requirements:
(A) (i) At least 90 percent of whose services for the qualified taxpayer during the taxable year are directly related to the conduct of the qualified taxpayer’s trade or business located in a manufacturing enhancement area.
(ii) Who performs at least 50 percent of his or her services for the qualified taxpayer during the taxable year in the manufacturing enhancement area.
(B) Who is hired by the qualified taxpayer after the designation of the area as a manufacturing enhancement area in which the individual’s services were primarily performed.
(C) Who is any of the following, immediately preceding the individual’s commencement of employment with the qualified taxpayer:, was certified as eligible by the Employment Development Department under the federal Targeted Jobs Tax Credit Program, or its successor, whether or not this program is in effect.

(i)An individual who has been determined eligible for services under the federal Job Training Partnership Act (29 U.S.C. Sec. 1501 et seq.), or its successor.

(ii)Any voluntary or mandatory registrant under the Greater Avenues for Independence Act of 1985, or its successor, as provided pursuant to Article 3.2 (commencing with Section 11320) of Chapter 2 of Part 3 of Division 9 of the Welfare and Institutions Code.

(iii)Any individual who has been certified eligible by the Employment Development Department under the federal Targeted Jobs Tax Credit Program, or its successor, whether or not this program is in effect.

(6) “Qualified taxpayer” means any taxpayer engaged in a trade or business within a manufacturing enhancement area designated pursuant to Section 7073.8 of the Government Code and who meets all of the following requirements:
(A) Is engaged in those lines of business described in Codes 0211 to 0291, inclusive, Code 0723, or in Codes 2011 to 3999, inclusive, of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition.
(B) At least 50 percent of the qualified taxpayer’s workforce hired after the designation of the manufacturing enhancement area is composed of individuals who, at the time of hire, are residents of the county in which the manufacturing enhancement area is located.
(C) Of this percentage of local hires, at least 30 percent shall be qualified disadvantaged individuals.
(7) “Seasonal employment” means employment by a qualified taxpayer that has regular and predictable substantial reductions in trade or business operations.
(c) (1) For purposes of this section, all of the following apply:
(A) All employees of trades or businesses that are under common control shall be treated as employed by a single qualified taxpayer.
(B) The credit (if any) allowable by this section with respect to each trade or business shall be determined by reference to its proportionate share of the expense of the qualified wages giving rise to the credit and shall be allocated in that manner.
(C) Principles that apply in the case of controlled groups of corporations, as specified in subdivision (d) of Section 23622.7, shall apply with respect to determining employment.
(2) If a qualified taxpayer acquires the major portion of a trade or business of another employer (hereinafter in this paragraph referred to as the “predecessor”) or the major portion of a separate unit of a trade or business of a predecessor, then, for purposes of applying this section (other than subdivision (d)) for any calendar year ending after that acquisition, the employment relationship between a qualified disadvantaged individual and a qualified taxpayer shall not be treated as terminated if the qualified disadvantaged individual continues to be employed in that trade or business.
(d) (1) (A) If the employment, other than seasonal employment, of any qualified disadvantaged individual, with respect to whom qualified wages are taken into account under subdivision (b) is terminated by the qualified taxpayer at any time during the first 270 days of that employment (whether or not consecutive) or before the close of the 270th calendar day after the day in which that qualified disadvantaged individual completes 90 days of employment with the qualified taxpayer, the tax imposed by this part for the taxable year in which that employment is terminated shall be increased by an amount equal to the credit allowed under subdivision (a) for that taxable year and all prior taxable years attributable to qualified wages paid or incurred with respect to that qualified disadvantaged individual.
(B) If the seasonal employment of any qualified disadvantaged individual, with respect to whom qualified wages are taken into account under subdivision (a) is not continued by the qualified taxpayer for a period of 270 days of employment during the 60-month period beginning with the day the qualified disadvantaged individual commences seasonal employment with the qualified taxpayer, the tax imposed by this part, for the taxable year that includes the 60th month following the month in which the qualified disadvantaged individual commences seasonal employment with the qualified taxpayer, shall be increased by an amount equal to the credit allowed under subdivision (a) for that taxable year and all prior taxable years attributable to qualified wages paid or incurred with respect to that qualified disadvantaged individual.
(2) (A) Subparagraph (A) of paragraph (1) does not apply to any of the following:
(i) A termination of employment of a qualified disadvantaged individual who voluntarily leaves the employment of the qualified taxpayer.
(ii) A termination of employment of a qualified disadvantaged individual who, before the close of the period referred to in subparagraph (A) of paragraph (1), becomes disabled to perform the services of that employment, unless that disability is removed before the close of that period and the taxpayer fails to offer reemployment to that individual.
(iii) A termination of employment of a qualified disadvantaged individual, if it is determined that the termination was due to the misconduct (as defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the California Code of Regulations) of that individual.
(iv) A termination of employment of a qualified disadvantaged individual due to a substantial reduction in the trade or business operations of the qualified taxpayer.
(v) A termination of employment of a qualified disadvantaged individual, if that individual is replaced by other qualified disadvantaged individuals so as to create a net increase in both the number of employees and the hours of employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of the following:
(i) A failure to continue the seasonal employment of a qualified disadvantaged individual who voluntarily fails to return to the seasonal employment of the qualified taxpayer.
(ii) A failure to continue the seasonal employment of a qualified disadvantaged individual who, before the close of the period referred to in subparagraph (B) of paragraph (1), becomes disabled and unable to perform the services of that seasonal employment, unless that disability is removed before the close of that period and the qualified taxpayer fails to offer seasonal employment to that qualified disadvantaged individual.
(iii) A failure to continue the seasonal employment of a qualified disadvantaged individual, if it is determined that the failure to continue the seasonal employment was due to the misconduct (as defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the California Code of Regulations) of that qualified disadvantaged individual.
(iv) A failure to continue seasonal employment of a qualified disadvantaged individual due to a substantial reduction in the regular seasonal trade or business operations of the qualified taxpayer.
(v) A failure to continue the seasonal employment of a qualified disadvantaged individual, if that qualified disadvantaged individual is replaced by other qualified disadvantaged individuals so as to create a net increase in both the number of seasonal employees and the hours of seasonal employment.
(C) For purposes of paragraph (1), the employment relationship between the qualified taxpayer and a qualified disadvantaged individual shall not be treated as terminated by reason of a mere change in the form of conducting the trade or business of the qualified taxpayer, if the qualified disadvantaged individual continues to be employed in that trade or business and the qualified taxpayer retains a substantial interest in that trade or business.
(3) Any increase in tax under paragraph (1) shall not be treated as tax imposed by this part for purposes of determining the amount of any credit allowable under this part.
(e) In the case of an estate or trust, both of the following apply:
(1) The qualified wages for any taxable year shall be apportioned between the estate or trust and the beneficiaries on the basis of the income of the estate or trust allocable to each.
(2) Any beneficiary to whom any qualified wages have been apportioned under paragraph (1) shall be treated (for purposes of this part) as the employer with respect to those wages.
(f) The credit shall be reduced by the credit allowed under Section 17053.7. The credit shall also be reduced by the federal credit allowed under Section 51 of the Internal Revenue Code.
In addition, any deduction otherwise allowed under this part for the wages or salaries paid or incurred by the qualified taxpayer upon which the credit is based shall be reduced by the amount of the credit, prior to any reduction required by subdivision (g) or (h).
(g) In the case where the credit otherwise allowed under this section exceeds the “net tax” for the taxable year, that portion of the credit that exceeds the “net tax” may be carried over and added to the credit, if any, in succeeding years, until the credit is exhausted. The credit shall be applied first to the earliest taxable years possible.
(h) (1) The amount of credit otherwise allowed under this section, including prior year credit carryovers, that may reduce the “net tax” for the taxable year shall not exceed the amount of tax that would be imposed on the qualified taxpayer’s business income attributed to a manufacturing enhancement area determined as if that attributed income represented all of the net income of the qualified taxpayer subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer’s California source business income that is apportioned to the manufacturing enhancement area. For that purpose, the taxpayer’s business income that is attributable to sources in this state first shall be determined in accordance with Chapter 17 (commencing with Section 25101) of Part 11. That business income shall be further apportioned to the manufacturing enhancement area in accordance with Article 2 (commencing with Section 25120) of Chapter 17 of Part 11, modified for purposes of this section in accordance with paragraph (3).
(3) Income shall be apportioned to a manufacturing enhancement area by multiplying the total California business income of the taxpayer by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is two. For purposes of this paragraph:
(A) The property factor is a fraction, the numerator of which is the average value of the taxpayer’s real and tangible personal property owned or rented and used in the manufacturing enhancement area during the taxable year, and the denominator of which is the average value of all the taxpayer’s real and tangible personal property owned or rented and used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is the total amount paid by the taxpayer in the manufacturing enhancement area during the taxable year for compensation, and the denominator of which is the total compensation paid by the taxpayer in this state during the taxable year.
(4) The portion of any credit remaining, if any, after application of this subdivision, shall be carried over to succeeding taxable years, as if it were an amount exceeding the “net tax” for the taxable year, as provided in subdivision (g).
(i) If the taxpayer is allowed a credit pursuant to this section for qualified wages paid or incurred, only one credit shall be allowed to the taxpayer under this part with respect to any wage consisting in whole or in part of those qualified wages.
(j) The qualified taxpayer shall do both of the following:
(1) Obtain from the Employment Development Department, as permitted by federal law, the local county or city Job Training Partnership Act administrative entity, the local county GAIN office federal Workforce Investment Act of 1998 administrative entity, local county CalWORKs program office or social services agency, or the local government administering the manufacturing enhancement area, a certification that provides that a qualified disadvantaged individual meets the eligibility requirements specified in paragraph (5) of subdivision (b). The Employment Development Department may provide preliminary screening and referral to a certifying agency. The Department of Housing and Community Development shall develop regulations governing the issuance of certificates pursuant to subdivision (d) of Section 7086 of the Government Code and shall develop forms for this purpose.
(2) Retain a copy of the certification and provide it upon request to the Franchise Tax Board.
(k) This section shall remain in effect only until January 1, 2017, and as of that date is repealed.

SEC. 24.

 Section 17053.70 of the Revenue and Taxation Code is amended to read:

17053.70.
 (a) There shall be allowed as a credit against the “net tax” (as defined in Section 17039) for the taxable year an amount equal to the sales or use tax paid or incurred during the taxable year by the taxpayer in connection with the taxpayer’s purchase of qualified property.
(b) For purposes of this section:
(1) “Taxpayer” means a person or entity engaged in a trade or business within an enterprise zone.
(2) “Qualified property” means:
(A) Any of the following:
(i) Machinery and machinery parts used for fabricating, processing, assembling, and manufacturing.
(ii) Machinery and machinery parts used for the production of renewable energy resources.
(iii) Machinery and machinery parts used for either of the following:
(I) Air pollution control mechanisms.
(II) Water pollution control mechanisms.
(iv) Data processing and communications equipment, including, but not limited, to computers, computer-automated drafting systems, copy machines, telephone systems, and faxes.
(v) Motion picture manufacturing equipment central to production and postproduction, including, but not limited to, cameras, audio recorders, and digital image and sound processing equipment.
(B) The total cost of qualified property purchased and placed in service in any taxable year that may be taken into account by any taxpayer for purposes of claiming this credit shall not exceed one million dollars ($1,000,000).
(C) The qualified property is used by the taxpayer exclusively in an enterprise zone.
(D) The qualified property is purchased and placed in service before the date the enterprise zone designation expires, is no longer binding, or becomes inoperative.
(3) “Enterprise zone” means the area designated as an enterprise zone pursuant to Chapter 12.8 (commencing with Section 7070) of Division 7 of Title 1 of the Government Code.
(c) If the taxpayer has purchased property upon which a use tax has been paid or incurred, the credit provided by this section shall be allowed only if qualified property of a comparable quality and price is not timely available for purchase in this state.
(d) In the case where the credit otherwise allowed under this section exceeds the “net tax” for the taxable year, that portion of the credit that exceeds the “net tax” may be carried over and added to the credit, if any, in the following year, and the succeeding 14 taxable years if necessary, until the credit is exhausted. The credit shall be applied first to the earliest taxable years possible.
(e) Any taxpayer who elects to be subject to this section shall not be entitled to increase the basis of the qualified property as otherwise required by Section 164(a) of the Internal Revenue Code with respect to sales or use tax paid or incurred in connection with the taxpayer’s purchase of qualified property.
(f) (1) The amount of the credit otherwise allowed under this section and Section 17053.74, including any credit carryover from prior years, that may reduce the “net tax” for the taxable year shall not exceed the amount of tax that would be imposed on the taxpayer’s business income attributable to the enterprise zone determined as if that attributable income represented all of the income of the taxpayer subject to tax under this part.
(2)  Attributable income shall be that portion of the taxpayer’s California source business income that is apportioned to the enterprise zone. For that purpose, the taxpayer’s business income attributable to sources in this state first shall be determined in accordance with Chapter 17 (commencing with Section 25101) of Part 11. That business income shall be further apportioned to the enterprise zone in accordance with Article 2 (commencing with Section 25120) of Chapter 17 of Part 11, modified for purposes of this section in accordance with paragraph (3).
(3) Business income shall be apportioned to the enterprise zone by multiplying the total California business income of the taxpayer by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is two. For purposes of this paragraph:
(A) The property factor is a fraction, the numerator of which is the average value of the taxpayer’s real and tangible personal property owned or rented and used in the enterprise zone during the taxable year, and the denominator of which is the average value of all the taxpayer’s real and tangible personal property owned or rented and used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is the total amount paid by the taxpayer in the enterprise zone during the taxable year for compensation, and the denominator of which is the total compensation paid by the taxpayer in this state during the taxable year.
(4) The portion of any credit remaining, if any, after application of this subdivision, shall be carried over to succeeding taxable years, as if it were an amount exceeding the “net tax” for the taxable year, as provided in subdivision (d).
(g) A taxpayer shall be required to register a business pursuant to the Enterprise Zone Act (Chapter 12.8 (commencing with Section 7070) of Division 7 of Title 1 of the Government Code), and shall state under penalty of perjury that the taxpayer is a registered business in one or more enterprise zones, as a condition of claiming a credit under this section.

(g)

(h) The amendments made to this section by the act adding this subdivision shall apply to taxable years beginning on or after January 1, 1998.
(i) The amendments made to this section by the act adding this subdivision shall apply only to taxable years beginning on or after January 1, 2011.

SEC. 25.

 Section 17053.74 of the Revenue and Taxation Code is amended to read:

17053.74.
 (a) (1) There shall be allowed a credit against the “net tax” (as defined in Section 17039) to a taxpayer who employs a qualified employee in an enterprise zone during the taxable year. The For qualified employees hired by a taxpayer before January 1, 2011, the credit shall be equal to the sum of each of the following:

(1)

(A) Fifty percent of qualified wages in the first year of employment.

(2)

(B) Forty percent of qualified wages in the second year of employment.

(3)

(C) Thirty percent of qualified wages in the third year of employment.

(4)

(D) Twenty percent of qualified wages in the fourth year of employment.

(5)

(E) Ten percent of qualified wages in the fifth year of employment.
(2) For qualified employees hired by a taxpayer on or after January 1, 2011, the credit shall be equal to the sum of each of the following:
(A) Thirty percent of qualified wages in the first year of employment.
(B) Forty percent of qualified wages in the second year of employment.
(C) Fifty percent of qualified wages in the third year of employment.
(b) For purposes of this section:
(1) “Qualified (A) For qualified employees hired by a taxpayer before January 1, 2011, “qualified wagesmeans:

(A)(i)

(i) Except as provided in clause (ii) subclause (II), that portion of wages paid or incurred by the taxpayer during the taxable year to qualified employees that does not exceed 150 percent of the minimum wage.

(ii)

(II) For up to 1,350 qualified employees who are employed by the taxpayer in the Long Beach Enterprise Zone in aircraft manufacturing activities described in Codes 3721 to 3728, inclusive, and Code 3812 of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition, “qualified wages” means that portion of hourly wages that does not exceed 202 percent of the minimum wage.

(B)

(ii) Wages received during the 60-month period beginning with the first day the employee commences employment with the taxpayer. Reemployment in connection with any increase, including a regularly occurring seasonal increase, in the trade or business operations of the taxpayer does not constitute commencement of employment for purposes of this section.

(C)

(iii) Qualified wages do not include any wages paid or incurred by the taxpayer on or after the zone expiration date. However, wages paid or incurred with respect to qualified employees who are employed by the taxpayer within the enterprise zone within the 60-month period prior to the zone expiration date shall continue to qualify for the credit under this section after the zone expiration date, in accordance with all provisions of this section applied as if the enterprise zone designation were still in existence and binding.
(B) For qualified employees hired on or after January 1, 2011, “qualified wages” means:
(i) (I) Except as provided in subclause (II), that portion of wages paid or incurred by the taxpayer during the taxable year to qualified employees that does not exceed 180 percent of the minimum wage.
(II) Qualified employees who are employed by a taxpayer who undertake manufacturing activities described in Codes 311 to 339, inclusive, of the North American Industry Classification System published by the United States Office of Management and Budget, 2007 edition, “qualified wages” means that portion of hourly wages that does not exceed 202 percent of the minimum wage.
(ii) Wages received during the 36-month period beginning with the first day the employee commences employment with the taxpayer. Reemployment in connection with any increase, including a regularly occurring seasonal increase, in the trade or business operations of the taxpayer does not constitute commencement of employment for purposes of this section.
(iii) Qualified wages shall not include any wages paid or incurred by the taxpayer on or after the zone expiration date. However, wages paid or incurred with respect to qualified employees who are employed by the taxpayer within the enterprise zone within the 36-month period prior to the zone expiration date shall continue to qualify for the credit under this section after the zone expiration date, in accordance with all provisions of this section applied as if the enterprise zone designation were still in existence and binding.
(2) “Minimum wage” means the wage established by the Industrial Welfare Commission as provided for in Chapter 1 (commencing with Section 1171) of Part 4 of Division 2 of the Labor Code.
(3) “Zone expiration date” means the date the enterprise zone designation expires, is no longer binding, or becomes inoperative.
(4) (A) “Qualified employee” means an individual who meets all of the following requirements:
(i) At least 90 percent of whose services for the taxpayer during the taxable year are directly related to the conduct of the taxpayer’s trade or business located in an enterprise zone.
(ii) Performs at least 50 percent of his or her services for the taxpayer during the taxable year in an enterprise zone.
(iii) Is hired by the taxpayer after the date of original designation of the area in which services were performed as an enterprise zone.
(iv) Is any of the following:

(I)Immediately preceding the qualified employee’s commencement of employment with the taxpayer, was a person eligible for services under the federal Job Training Partnership Act (29 U.S.C. Sec. 1501 et seq.), or its successor, who is receiving, or is eligible to receive, subsidized employment, training, or services funded by the federal Job Training Partnership Act, or its successor.

(II)Immediately preceding the qualified employee’s commencement of employment with the taxpayer, was a person eligible to be a voluntary or mandatory registrant under the Greater Avenues for Independence Act of 1985 (GAIN) provided for pursuant to Article 3.2 (commencing with Section 11320) of Chapter 2 of Part 3 of Division 9 of the Welfare and Institutions Code, or its successor.

(III)

(I) Immediately preceding the qualified employee’s commencement of employment with the taxpayer, was an economically disadvantaged individual 14 years of age or older.

(IV)

(II) Immediately preceding the qualified employee’s commencement of employment with the taxpayer, was a dislocated worker who meets any of the following:
(aa) Has been terminated or laid off or who has received a notice of termination or layoff from employment, is eligible for or has exhausted entitlement to unemployment insurance benefits, and is unlikely to return to his or her previous industry or occupation.
(bb) Has been terminated or has received a notice of termination of employment as a result of any permanent closure or any substantial layoff at a plant, facility, or enterprise, including an individual who has not received written notification but whose employer has made a public announcement of the closure or layoff.
(cc) Is long-term unemployed and has limited opportunities for employment or reemployment in the same or a similar occupation in the area in which the individual resides, including an individual 55 years of age or older who may have substantial barriers to employment by reason of age.
(dd) Was self-employed (including farmers and ranchers) and is unemployed as a result of general economic conditions in the community in which he or she resides or because of natural disasters.
(ee) Was a civilian employee of the Department of Defense employed at a military installation being closed or realigned under the Defense Base Closure and Realignment Act of 1990.
(ff) Was an active member of the armed forces or National Guard as of September 30, 1990, and was either involuntarily separated or separated pursuant to a special benefits program.
(gg) Is a seasonal or migrant worker who experiences chronic seasonal unemployment and underemployment in the agriculture industry, aggravated by continual advancements in technology and mechanization.
(hh) Has been terminated or laid off, or has received a notice of termination or layoff, as a consequence of compliance with the federal Clean Air Act.

(V)

(III) Immediately preceding the qualified employee’s commencement of employment with the taxpayer, was a disabled individual who is eligible for or enrolled in, or has completed a state rehabilitation plan or is.
(IV) Immediately preceding the qualified employee’s commencement of employment with the taxpayer, was a service-connected disabled veteran, veteran of the Vietnam era, or veteran who is recently separated from military service.

(VI)

(V) Immediately preceding the qualified employee’s commencement of employment with the taxpayer, was an ex-offender. An individual shall be treated as convicted if he or she was placed on probation by a state court without a finding of guilt.

(VII)

(VI) Immediately preceding the qualified employee’s commencement of employment with the taxpayer, was a person eligible for or a recipient of any of the following:
(aa) Federal Supplemental Security Income benefits.
(bb) Aid to Families with Dependent Children Temporary Assistance for Needy Families.
(cc) Medi-Cal or Healthy Families.

(cc)

(dd) Food stamps.

(dd)

(ee) State and local general assistance.
(ff) Intensive services, including employment training services, funded through the federal Workforce Investment Act (Public Law 105-220).
(gg) Voluntary or mandatory services under the California Work Opportunity and Responsibility to Kids (CalWORKs) program (Chapter 2 (commencing with Section 11200) of Part 3 of Division 9 of the Welfare and Institutions Code).
(hh) Federal Work Opportunity Tax Credit (Section 51 of the Internal Revenue Code).

(VIII)

(VII) Immediately preceding the qualified employee’s commencement of employment with the taxpayer, was a member of a federally recognized Indian tribe, band, or other group of Native American descent.

(IX)

(VIII) Immediately preceding the qualified employee’s commencement of employment with the taxpayer, was a resident of a targeted employment area, as defined in Section 7072 of the Government Code. For individuals hired on or after January 1, 2011, the employee also is receiving a wage that does not exceed the median income for a family of four within the census block groups of the enterprise zone, as defined by the United States Census Bureau.

(X)

(IX) An employee who qualified the taxpayer for the enterprise zone hiring credit under former Section 17053.8 or the program area hiring credit under former Section 17053.11.

(XI)Immediately preceding the qualified employee’s commencement of employment with the taxpayer, was a member of a targeted group, as defined in Section 51(d) of the Internal Revenue Code, or its successor.

(B) Priority for employment shall be provided to an individual who is enrolled in a qualified program under the federal Job Training Partnership Act or the Greater Avenues for Independence Act of 1985 Workforce Investment Act or the CalWORKs program or who is eligible as a member of a targeted group under the Work Opportunity Tax Credit (Section 51 of the Internal Revenue Code), or its successor.
(5) “Taxpayer” means a person or entity engaged in a trade or business within an enterprise zone designated pursuant to Chapter 12.8 (commencing with Section 7070) of the Government Code.
(6) “Seasonal employment” means employment by a taxpayer that has regular and predictable substantial reductions in trade or business operations.
(c) The (1) For qualified employees who are hired by the taxpayer before January 1, 2011, the taxpayer shall do both of the following:

(1)

(A) Obtain from the Employment Development Department, as permitted by federal law, the local county or city Job Training Partnership Act administrative entity, the local county GAIN federal Workforce Investment Act administrative entity, the local county CalWORKs program office or social services agency, or the local government administering the enterprise zone, a certification which provides that a qualified employee meets the eligibility requirements specified in clause (iv) of subparagraph (A) of paragraph (4) of subdivision (b). The Employment Development Department may provide preliminary screening and referral to a certifying agency. The Employment Development Department shall develop a form for this purpose businesses located in an enterprise zone as of the department’s implementation of the intensive services activities funded through the federal Workforce Investment Act. The Department of Housing and Community Development shall develop regulations governing the issuance of certificates by local governments pursuant to subdivision (a) of Section 7086 of the Government Code.

(2)

(B) Retain a copy of the certification and provide it upon request to the Franchise Tax Board.
(2) For qualified employees who are hired on or after January 1, 2011, the taxpayer shall do both of the following:
(A) Apply for certification, within 36 months of an employee being hired, from the Employment Development Department, as permitted by federal law, the local county or city federal Workforce Investment Act administrative entity, the local county CalWORKs program office or social services agency, or the local government administering the enterprise zone, a certification which provides that a qualified employee meets the eligibility requirements specified in clause (iv) of subparagraph (A) of paragraph (4) of subdivision (b). The Employment Development Department may provide preliminary screening and referral to businesses located in an enterprise zone as of the department’s implementation of the intensive services activities funded through the federal Workforce Investment Act. The Department of Housing and Community Development shall develop regulations governing the issuance of certificates by local governments pursuant to subdivision (a) of Section 7086 of the Government Code.
(B) Retain a copy of the certification and provide it upon request to the Franchise Tax Board.
(d) (1) For purposes of this section:
(A) All employees of trades or businesses, which are not incorporated, that are under common control shall be treated as employed by a single taxpayer.
(B) The credit, if any, allowable by this section with respect to each trade or business shall be determined by reference to its proportionate share of the expense of the qualified wages giving rise to the credit, and shall be allocated in that manner.
(C) Principles that apply in the case of controlled groups of corporations, as specified in subdivision (d) of Section 23622.7, shall apply with respect to determining employment.
(2) (A) If an employer acquires the major portion of a trade or business of another employer (hereinafter in this paragraph referred to as the “predecessor”) or the major portion of a separate unit of a trade or business of a predecessor, then, for purposes of applying this section (other than subdivision (e) or (f)) for any calendar year ending after that acquisition, the employment relationship between a qualified employee and an employer shall not be treated as terminated if the employee continues to be employed in that trade or business.
(B) For taxable years beginning on or after January 1, 2011, if a taxpayer relocated to an enterprise zone from within the state, the taxpayer shall be allowed a credit only for that number of employees that exceeds the number of employees at the previous location. The number of employees at the previous location and the type of jobs undertaken shall be established by the Employment Development Department. Exceptions to this subparagraph shall be limited to the following:
(i) Employees who undertake core work activities or activities that are the primary job duties of the employee that are significantly different from those activities at the previous location, as determined by the Employment Development Department.
(ii) Taxpayers that receive a bona fide offer to relocate to another state.
(iii) Taxpayers who relocate as a result of a natural disaster, civic unrest, or eminent domain proceeding.
(iv) Taxpayers who relocated within the same local government jurisdiction.
(e) (1) (A) If For qualified employees who were hired before January 1, 2011, if the employment, other than seasonal employment, of any qualified employee, with respect to whom qualified wages are taken into account under paragraph (1) of subdivision (a) is terminated by the taxpayer at any time during the first 270 days of that employment (whether or not consecutive) or before the close of the 270th calendar day after the day in which that employee completes 90 days of employment with the taxpayer, the tax imposed by this part for the taxable year in which that employment is terminated shall be increased by an amount equal to the credit allowed under paragraph (1) of subdivision (a) for that taxable year and all prior taxable years attributable to qualified wages paid or incurred with respect to that employee.
(B) If the seasonal employment of any qualified employee, with respect to whom qualified wages are taken into account under paragraph (1) of subdivision (a) is not continued by the taxpayer for a period of 270 days of employment during the 60-month period beginning with the day the qualified employee commences seasonal employment with the taxpayer, the tax imposed by this part, for the taxable year that includes the 60th month following the month in which the qualified employee commences seasonal employment with the taxpayer, shall be increased by an amount equal to the credit allowed under paragraph (1) of subdivision (a) for that taxable year and all prior taxable years attributable to qualified wages paid or incurred with respect to that qualified employee.
(2) (A) Subparagraph (A) of paragraph (1) shall not apply to any of the following:
(i) A termination of employment of a qualified employee who voluntarily leaves the employment of the taxpayer.
(ii) A termination of employment of a qualified employee who, before the close of the period referred to in paragraph (1), becomes disabled and unable to perform the services of that employment, unless that disability is removed before the close of that period and the taxpayer fails to offer reemployment to that employee.
(iii) A termination of employment of a qualified employee, if it is determined that the termination was due to the misconduct (as defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the California Code of Regulations) of that employee.
(iv) A termination of employment of a qualified employee due to a substantial reduction in the trade or business operations of the taxpayer.
(v) A termination of employment of a qualified employee, if that employee is replaced by other qualified employees so as to create a net increase in both the number of employees and the hours of employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of the following:
(i) A failure to continue the seasonal employment of a qualified employee who voluntarily fails to return to the seasonal employment of the taxpayer.
(ii) A failure to continue the seasonal employment of a qualified employee who, before the close of the period referred to in subparagraph (B) of paragraph (1), becomes disabled and unable to perform the services of that seasonal employment, unless that disability is removed before the close of that period and the taxpayer fails to offer seasonal employment to that qualified employee.
(iii) A failure to continue the seasonal employment of a qualified employee, if it is determined that the failure to continue the seasonal employment was due to the misconduct (as defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the California Code of Regulations) of that qualified employee.
(iv) A failure to continue seasonal employment of a qualified employee due to a substantial reduction in the regular seasonal trade or business operations of the taxpayer.
(v) A failure to continue the seasonal employment of a qualified employee, if that qualified employee is replaced by other qualified employees so as to create a net increase in both the number of seasonal employees and the hours of seasonal employment.
(C) For purposes of paragraph (1), the employment relationship between the taxpayer and a qualified employee shall not be treated as terminated by reason of a mere change in the form of conducting the trade or business of the taxpayer, if the qualified employee continues to be employed in that trade or business and the taxpayer retains a substantial interest in that trade or business.
(3) Any increase in tax under paragraph (1) shall not be treated as tax imposed by this part for purposes of determining the amount of any credit allowable under this part.
(f) (1) (A) For qualified employees who are hired on or after January 1, 2011, if the employment, other than seasonal employment, of any qualified employee, with respect to whom qualified wages are taken into account under paragraph (2) of subdivision (a), is terminated by the taxpayer at any time during the first 300 days of that employment (whether or not consecutive) or before the close of the 300th calendar day after the day in which that employee completes 90 days of employment with the taxpayer, the tax imposed by this part for the taxable year in which that employment is terminated shall be increased by an amount equal to the credit allowed under paragraph (2) of subdivision (a) for that taxable year and all prior taxable years attributable to qualified wages paid or incurred with respect to that employee.
(B) If the seasonal employment of any qualified employee, with respect to whom qualified wages are taken into account under paragraph (2) of subdivision (a) is not continued by the taxpayer for a period of 300 days of employment during the 36-month period beginning with the day the qualified employee commences seasonal employment with the taxpayer, the tax imposed by this part, for the taxable year that includes the 36th month following the month in which the qualified employee commences seasonal employment with the taxpayer, shall be increased by an amount equal to the credit allowed under paragraph (2) of subdivision (a) for that taxable year and all prior taxable years attributable to qualified wages paid or incurred with respect to that qualified employee.
(2) (A) Subparagraph (A) of paragraph (1) shall not apply to any of the following:
(i) A termination of employment of a qualified employee who voluntarily leaves the employment of the taxpayer.
(ii) A termination of employment of a qualified employee who, before the close of the period referred to in paragraph (1), becomes disabled and unable to perform the services of that employment, unless that disability is removed before the close of that period and the taxpayer fails to offer reemployment to that employee.
(iii) A termination of employment of a qualified employee, if it is determined that the termination was due to the misconduct (as defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the California Code of Regulations) of that employee.
(iv) A termination of employment of a qualified employee due to a substantial reduction in the trade or business operations of the taxpayer.
(v) A termination of employment of a qualified employee, if that employee is replaced by other qualified employees so as to create a net increase in both the number of employees and the hours of employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of the following:
(i) A failure to continue the seasonal employment of a qualified employee who voluntarily fails to return to the seasonal employment of the taxpayer.
(ii) A failure to continue the seasonal employment of a qualified employee who, before the close of the period referred to in subparagraph (B) of paragraph (1), becomes disabled and unable to perform the services of that seasonal employment, unless that disability is removed before the close of that period and the taxpayer fails to offer seasonal employment to that qualified employee.
(iii) A failure to continue the seasonal employment of a qualified employee, if it is determined that the failure to continue the seasonal employment was due to the misconduct (as defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the California Code of Regulations) of that qualified employee.
(iv) A failure to continue seasonal employment of a qualified employee due to a substantial reduction in the regular seasonal trade or business operations of the taxpayer.
(v) A failure to continue the seasonal employment of a qualified employee, if that qualified employee is replaced by other qualified employees so as to create a net increase in both the number of seasonal employees and the hours of seasonal employment.
(C) For purposes of paragraph (1), the employment relationship between the taxpayer and a qualified employee shall not be treated as terminated by reason of a mere change in the form of conducting the trade or business of the taxpayer, if the qualified employee continues to be employed in that trade or business and the taxpayer retains a substantial interest in that trade or business.
(3) Any increase in tax under paragraph (1) shall not be treated as tax imposed by this part for purposes of determining the amount of any credit allowable under this part.

(f)

(g) In the case of an estate or trust, both of the following apply:
(1) The qualified wages for any taxable year shall be apportioned between the estate or trust and the beneficiaries on the basis of the income of the estate or trust allocable to each.
(2) Any beneficiary to whom any qualified wages have been apportioned under paragraph (1) shall be treated, for purposes of this part, as the employer with respect to those wages.

(g)

(h) For purposes of this section, “enterprise zone” means an area designated as an enterprise zone pursuant to Chapter 12.8 (commencing with Section 7070) of Division 7 of Title 1 of the Government Code.

(h)

(i) The credit allowable under this section shall be reduced by the credit allowed under Sections 17053.10, 17053.17, and 17053.46 claimed for the same employee. The credit shall also be reduced by the federal credit allowed under Section 51 of the Internal Revenue Code.
In addition, any deduction otherwise allowed under this part for the wages or salaries paid or incurred by the taxpayer upon which the credit is based shall be reduced by the amount of the credit, prior to any reduction required by subdivision (i) or (j) or (k).

(i)

(j) (1) In the case where the credit otherwise allowed under this section exceeds the “net tax” for the taxable year, that portion of the credit that exceeds the “net tax” may be carried over and added to the credit, if any, in succeeding taxable years, until the credit is exhausted. The credit shall be applied first to the earliest taxable years possible.
(2) Notwithstanding paragraph (1), for taxable years beginning on or after January 1, 2011, in the case where the credit otherwise allowed under this section exceeds the “net tax” for the taxable year, that portion of the credit that exceeds the “net tax” may be carried over and added to the credit, if any, in the following year, and the succeeding 14 years if necessary, until the credit is exhausted. The credit shall be applied first to the earliest taxable years possible.

(j)

(k) (1) The amount of the credit otherwise allowed under this section and Section 17053.70, including any credit carryover from prior years, that may reduce the “net tax” for the taxable year shall not exceed the amount of tax which would be imposed on the taxpayer’s business income attributable to the enterprise zone determined as if that attributable income represented all of the income of the taxpayer subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer’s California source business income that is apportioned to the enterprise zone. For that purpose, the taxpayer’s business income attributable to sources in this state first shall be determined in accordance with Chapter 17 (commencing with Section 25101) of Part 11. That business income shall be further apportioned to the enterprise zone in accordance with Article 2 (commencing with Section 25120) of Chapter 17 of Part 11, modified for purposes of this section in accordance with paragraph (3).
(3) Business income shall be apportioned to the enterprise zone by multiplying the total California business income of the taxpayer by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is two. For purposes of this paragraph:
(A) The property factor is a fraction, the numerator of which is the average value of the taxpayer’s real and tangible personal property owned or rented and used in the enterprise zone during the taxable year, and the denominator of which is the average value of all the taxpayer’s real and tangible personal property owned or rented and used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is the total amount paid by the taxpayer in the enterprise zone during the taxable year for compensation, and the denominator of which is the total compensation paid by the taxpayer in this state during the taxable year.
(4) The portion of any credit remaining, if any, after application of this subdivision, shall be carried over to succeeding taxable years, as if it were an amount exceeding the “net tax” for the taxable year, as provided in subdivision (i) (j).

(k)

(l) The changes made to this section by the act adding this subdivision shall apply to taxable years beginning on or after January 1, 1997.
(m) For taxable years beginning on or after January 1, 2011, a credit shall not be allowed under this section for a taxpayer that has been notified by the Director of Industrial Relations of a final determination, based on the taxpayer’s history of significant employment violations, that the taxpayer is considered by the Department of Industrial Relations as a serious, repeated, and willful violator of state employment laws, including, but not limited to, demonstrating a failure to successfully abate these violations.
(n) For taxable years beginning on or after January 1, 2011, a taxpayer shall be required to register a business pursuant to the Enterprise Zone Act (Chapter 12.8 (commencing with Section 7070) of Division 7 of Title 1 of the Government Code), and shall state under penalty or perjury that the taxpayer is a registered business in one or more enterprise zones, as a condition of claiming a credit under this section.

SEC. 26.

 Section 17235 of the Revenue and Taxation Code is amended to read:

17235.
 (a) There (1) For taxable years beginning on or after January 1, 2011, and before January 1, 2013, there shall be allowed as a deduction in an amount equal to 50 percent of the amount of net interest received by the taxpayer in payment on indebtedness of a person or entity engaged in the conduct of a trade or business located in an enterprise zone.
(2) For taxable years beginning on or after January 1, 2013, there shall be allowed as a deduction the amount of net interest received by the taxpayer in payment on indebtedness of a person or entity engaged in the conduct of a trade or business located in an enterprise zone.
(b) No A deduction shall be allowed under this section unless only if at the time the indebtedness is incurred each of the following requirements are met:
(1) The trade or business is located solely within an enterprise zone.
(2) The indebtedness is incurred solely in connection with activity within the enterprise zone.
(3) The taxpayer has no equity or other ownership interest in the debtor.
(c) “Enterprise zone” means an area designated as an enterprise zone pursuant to Chapter 12.8 (commencing with Section 7070) of Division 7 of Title 1 of the Government Code.
(d) For taxable years beginning on or after January 1, 2011, a taxpayer shall be required to register a business pursuant to the Enterprise Zone Act (Chapter 12.8 (commencing with Section 7070) of Division 7 of Title 1 of the Government Code), and shall state under penalty of perjury that the taxpayer is a registered business in one or more enterprise zones, as a condition of claiming a deduction under this section.
(e) The changes made to this section by the act adding this subdivision shall apply only to taxable years beginning on or after January 1, 2011.

SEC. 27.

 Section 17276.2 of the Revenue and Taxation Code is amended to read:

17276.2.
 (a) The term “qualified taxpayer” as used in Section 17276.1 includes a person or entity engaged in the conduct of a trade or business within an enterprise zone designated pursuant to Chapter 12.8 (commencing with Section 7070) of Division 7 of Title 1 of the Government Code. For purposes of this subdivision, all of the following shall apply:
(1) A net operating loss shall not be a net operating loss carryback to any taxable year and a net operating loss for any taxable year beginning on or after the date that the area in which the taxpayer conducts a trade or business is designated as an enterprise zone shall be a net operating loss carryover to each of the 15 taxable years following the taxable year of loss.
(2) For purposes of this subdivision:
(A) “Net operating loss” means the loss determined under Section 172 of the Internal Revenue Code, as modified by Section 17276.1, attributable to the taxpayer’s business activities within the enterprise zone (as defined in Chapter 12.8 (commencing with Section 7070) of Division 7 of Title 1 of the Government Code) prior to the enterprise zone expiration date. That attributable loss shall be determined in accordance with Chapter 17 (commencing with Section 25101) of Part 11, modified for purposes of this subdivision, as follows:
(i) Loss shall be apportioned to the enterprise zone by multiplying total loss from the business by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is two.
(ii)“The enterprise zone” shall be substituted for “this state.”
(B) A net operating loss carryover shall be a deduction only with respect to the taxpayer’s business income attributable to the enterprise zone as defined in Chapter 12.8 (commencing with Section 7070) of Division 7 of Title 1 of the Government Code.
(C) Attributable income is that portion of the taxpayer’s California source business income that is apportioned to the enterprise zone. For that purpose, the taxpayer’s business income attributable to sources in this state first shall be determined in accordance with Chapter 17 (commencing with Section 25101) of Part 11. That business income shall be further apportioned to the enterprise zone in accordance with Article 2 (commencing with Section 25120) of Chapter 17 of Part 11, modified for purposes of this subdivision as follows:
(i) Business income shall be apportioned to the enterprise zone by multiplying the total California business income of the taxpayer by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is two. For purposes of this clause:
(I) The property factor is a fraction, the numerator of which is the average value of the taxpayer’s real and tangible personal property owned or rented and used in the enterprise zone during the taxable year, and the denominator of which is the average value of all the taxpayer’s real and tangible personal property owned or rented and used in this state during the taxable year.
(II) The payroll factor is a fraction, the numerator of which is the total amount paid by the taxpayer in the enterprise zone during the taxable year for compensation, and the denominator of which is the total compensation paid by the taxpayer in this state during the taxable year.
(ii) If a loss carryover is allowable pursuant to this section for any taxable year after the enterprise zone designation has expired, the enterprise zone shall be deemed to remain in existence for purposes of computing the limitation set forth in subparagraph (B) and allowing a net operating loss deduction.
(D) “Enterprise zone expiration date” means the date the enterprise zone designation expires, is no longer binding, or becomes inoperative.
(3) The changes made to this subdivision by the act adding this paragraph shall apply to taxable years beginning on or after January 1, 1998.
(b) A taxpayer who qualifies as a “qualified taxpayer” under one or more sections shall, for the taxable year of the net operating loss and any taxable year to which that net operating loss may be carried, designate on the original return filed for each year the section which applies to that taxpayer with respect to that net operating loss. If the taxpayer is eligible to qualify under more than one section, the designation is to be made after taking into account subdivision (c).
(c) If a taxpayer is eligible to qualify under this section and either Section 17276.4, 17276.5, or 17276.6 as a “qualified taxpayer,” with respect to a net operating loss in a taxable year, the taxpayer shall designate which section is to apply to the taxpayer.
(d) Notwithstanding Section 17276, the amount of the loss determined under this section or Section 17276.4, 17276.5, or 17276.6 shall be the only net operating loss allowed to be carried over from that taxable year and the designation under subdivision (b) shall be included in the election under Section 17276.1.
(e) This section shall remain in effect only until January 1, 2011, and as of that date is repealed.

SEC. 28.

 Section 17276.5 of the Revenue and Taxation Code is amended to read:

17276.5.
 (a) For each taxable year beginning on or after January 1, 1995, the term “qualified taxpayer” as used in Section 17276.1 includes a taxpayer engaged in the conduct of a trade or business within a LAMBRA. For purposes of this subdivision, all of the following shall apply:
(1) A net operating loss shall not be a net operating loss carryback for any taxable year, and a net operating loss for any taxable year beginning on or after the date the area in which the taxpayer conducts a trade or business is designated a LAMBRA shall be a net operating loss carryover to each following taxable year that ends before the LAMBRA expiration date or to each of the 15 taxable years following the taxable year of loss, if longer.
(2) “LAMBRA” means a local agency military base recovery area designated in accordance with Section 7114 of the Government Code.
(3) “Taxpayer” means a person or entity that conducts a trade or business within a LAMBRA and, for the first two taxable years, has a net increase in jobs (defined as 2,000 paid hours per employee per year) of one or more employees in the LAMBRA and this state. For purposes of this paragraph:
(A) The net increase in the number of jobs shall be determined by subtracting the total number of full-time employees (defined as 2,000 paid hours per employee per year) the taxpayer employed in this state in the taxable year prior to commencing business operations in the LAMBRA from the total number of full-time employees the taxpayer employed in this state during the second taxable year after commencing business operations in the LAMBRA. For taxpayers who commence doing business in this state with their LAMBRA business operation, the number of employees for the taxable year prior to commencing business operations in the LAMBRA shall be zero. The deduction shall be allowed only if the taxpayer has a net increase in jobs in the state, and if one or more full-time employees is employed within the LAMBRA.
(B) The total number of employees employed in the LAMBRA shall equal the sum of both of the following:
(i) The total number of hours worked in the LAMBRA for the taxpayer by employees (not to exceed 2,000 hours per employee) who are paid an hourly wage divided by 2,000.
(ii) The total number of months worked in the LAMBRA for the taxpayer by employees who are salaried employees divided by 12.
(C) In the case of a taxpayer who first commences doing business in the LAMBRA during the taxable year, for purposes of clauses (i) and (ii), respectively, of subparagraph (B), the divisors “2,000” and “12” shall be multiplied by a fraction, the numerator of which is the number of months of the taxable year that the taxpayer was doing business in the LAMBRA and the denominator of which is 12.
(4) “Net operating loss” means the loss determined under Section 172 of the Internal Revenue Code, as modified by Section 17276.1, attributable to the taxpayer’s business activities within a LAMBRA prior to the LAMBRA expiration date. The attributable loss shall be determined in accordance with Chapter 17 (commencing with Section 25101) of Part 11, modified for purposes of this section as follows:
(A) Loss shall be apportioned to a LAMBRA by multiplying total loss from the business by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is 2.
(B) “The LAMBRA” shall be substituted for “this state.”
(5) A net operating loss carryover shall be a deduction only with respect to the taxpayer’s business income attributable to a LAMBRA.
(6) Attributable income is that portion of the taxpayer’s California source business income that is apportioned to the LAMBRA. For that purpose, the taxpayer’s business income attributable to sources in this state first shall be determined in accordance with Chapter 17 (commencing with Section 25101) of Part 11. That business income shall be further apportioned to the LAMBRA in accordance with Article 2 (commencing with Section 25120) of Chapter 17 of Part 11, modified for purposes of this subdivision as follows:
(A) Business income shall be apportioned to a LAMBRA by multiplying total California business income of the taxpayer by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is two. For purposes of this clause:
(i) The property factor is a fraction, the numerator of which is the average value of the taxpayer’s real and tangible personal property owned or rented and used in the LAMBRA during the taxable year, and the denominator of which is the average value of all the taxpayer’s real and tangible personal property owned or rented and used in this state during the taxable year.
(ii) The payroll factor is a fraction, the numerator of which is the total amount paid by the taxpayer in the LAMBRA during the taxable year for compensation, and the denominator of which is the total compensation paid by the taxpayer in this state during the taxable year.
(B) If a loss carryover is allowable pursuant to this section for any taxable year after the LAMBRA designation has expired, the LAMBRA shall be deemed to remain in existence for purposes of computing the limitation specified in paragraph (5) and allowing a net operating loss deduction.
(7) “LAMBRA expiration date” means the date the LAMBRA designation expires, is no longer binding, or becomes inoperative pursuant to Section 7110 of the Government Code.
(b) A taxpayer who qualifies as a “qualified taxpayer” under one or more sections shall, for the taxable year of the net operating loss and any taxable year to which that net operating loss may be carried, designate on the original return filed for each year the section that applies to that taxpayer with respect to that net operating loss. If the taxpayer is eligible to qualify under more than one section, the designation is to be made after taking into account subdivision (c).
(c) If a taxpayer is eligible to qualify under this section and either Section 17276.2, 17276.4, or 17276.6 as a “qualified taxpayer,” with respect to a net operating loss in a taxable year, the taxpayer shall designate which section is to apply to the taxpayer.
(d) Notwithstanding Section 17276, the amount of the loss determined under this section or Section 17276.2, 17276.4, or 17276.6 shall be the only net operating loss allowed to be carried over from that taxable year and the designation under subdivision (b) shall be included in the election under Section 17276.1.
(e) This section shall apply to taxable years beginning on or after January 1, 1998.
(f) This section shall remain in effect only until January 1, 2011, and as of that date is repealed.

SEC. 29.

 Section 17276.11 is added to the Revenue and Taxation Code, to read:

Notwithstanding the repeal of Sections 17276.2 and 17276.5 by the act adding this section, any remaining carryover of a net operating loss allowed by Section 17276.2 or 17276.5 shall continue to be allowed as a net operating loss carryover to subsequent taxable years as provided by those sections as they read immediately prior to being repealed.

SEC. 30.

 Section 23036.3 is added to the Revenue and Taxation Code, to read:

23036.3.
 (a) Notwithstanding any provision of this part or Part 10.2 (commencing with Section 18401) to the contrary, for each taxable year beginning on or after January 1, 2011, and before January 1, 2013, the total of all credits otherwise allowable under Sections 23612.2, 23622.7, 23633, 23645, and 23646, including the carryover of these credits, for the taxable year shall not reduce the “tax,” as defined in Section 23036, below the applicable amount.
(b) For purposes of this section, the “applicable amount” shall be equal to 50 percent of the “tax,” as defined in Section 23036, within the enterprise zone, targeted tax area, or LAMBRA, where the credit was earned, before application of any credits.
(c) The amount of any credit otherwise allowable for the taxable year under Sections 23612.2, 23622.7, 23645, and 23646 that is not allowed due to the application of this section shall remain a credit carryover amount as otherwise allowed by this part.
(d) The carryover period for any credit that is not allowed due to the application of this section shall be increased by the number of taxable years the credit, or any portion thereof, was not allowed.
(e) This section shall not apply to a taxpayer with gross income of less than one million dollars ($1,000,000) for the taxable year.
(f) This section shall remain in effect only until December 1, 2013, and as of that date is repealed.

SEC. 31.

 Section 23612.2 of the Revenue and Taxation Code is amended to read:

23612.2.
 (a) There shall be allowed as a credit against the “tax” (as defined by Section 23036) for the taxable year an amount equal to the sales or use tax paid or incurred during the taxable year by the taxpayer in connection with the taxpayer’s purchase of qualified property.
(b) For purposes of this section:
(1) “Taxpayer” means a corporation engaged in a trade or business within an enterprise zone.
(2) “Qualified property” means:
(A) Any of the following:
(i) Machinery and machinery parts used for fabricating, processing, assembling, and manufacturing.
(ii) Machinery and machinery parts used for the production of renewable energy resources.
(iii) Machinery and machinery parts used for either of the following:
(I) Air pollution control mechanisms.
(II) Water pollution control mechanisms.
(iv) Data-processing and communications equipment, including, but not limited to, computers, computer-automated drafting systems, copy machines, telephone systems, and faxes.
(v) Motion picture manufacturing equipment central to production and postproduction, including, but not limited to, cameras, audio recorders, and digital image and sound processing equipment.
(B) The total cost of qualified property purchased and placed in service in any taxable year that may be taken into account by any taxpayer for purposes of claiming this credit shall not exceed twenty million dollars ($20,000,000).
(C) The qualified property is used by the taxpayer exclusively in an enterprise zone.
(D) The qualified property is purchased and placed in service before the date the enterprise zone designation expires, is no longer binding, or becomes inoperative.
(3) “Enterprise zone” means the area designated as an enterprise zone pursuant to Chapter 12.8 (commencing with Section 7070) of Division 7 of Title 1 of the Government Code.
(c) If the taxpayer has purchased property upon which a use tax has been paid or incurred, the credit provided by this section shall be allowed only if qualified property of a comparable quality and price is not timely available for purchase in this state.
(d) In the case where the credit otherwise allowed under this section exceeds the “tax” for the taxable year, that portion of the credit which exceeds the “tax” may be carried over and added to the credit, if any, in the following year, and the succeeding 14 years if necessary, until the credit is exhausted. The credit shall be applied first to the earliest taxable years possible.
(e) Any taxpayer who elects to be subject to this section shall not be entitled to increase the basis of the qualified property as otherwise required by Section 164(a) of the Internal Revenue Code with respect to sales or use tax paid or incurred in connection with the taxpayer’s purchase of qualified property.
(f) (1) The amount of credit otherwise allowed under this section and Section 23622.7, including any credit carryover from prior years, that may reduce the “tax” for the taxable year shall not exceed the amount of tax which would be imposed on the taxpayer’s business income attributable to the enterprise zone determined as if that attributable income represented all of the income of the taxpayer subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer’s California source business income that is apportioned to the enterprise zone. For that purpose, the taxpayer’s business income attributable to sources in this state first shall be determined in accordance with Chapter 17 (commencing with Section 25101). That business income shall be further apportioned to the enterprise zone in accordance with Article 2 (commencing with Section 25120) of Chapter 17, modified for purposes of this section in accordance with paragraph (3).
(3) Business income shall be apportioned to the enterprise zone by multiplying the total California business income of the taxpayer by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is two. For purposes of this paragraph:
(A) The property factor is a fraction, the numerator of which is the average value of the taxpayer’s real and tangible personal property owned or rented and used in the enterprise zone during the taxable year, and the denominator of which is the average value of all the taxpayer’s real and tangible personal property owned or rented and used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is the total amount paid by the taxpayer in the enterprise zone during the taxable year for compensation, and the denominator of which is the total compensation paid by the taxpayer in this state during the taxable year.
(4) The portion of any credit remaining, if any, after application of this subdivision, shall be carried over to succeeding taxable years, as if it were an amount exceeding the “tax” for the taxable year, as provided in subdivision (d).
(g) A taxpayer shall be required to register a business pursuant to the Enterprise Zone Act (Chapter 12.8 (commencing with Section 7070) of Division 7 of Title 1 of the Government Code), and shall state under penalty of perjury that the taxpayer is a registered business in one or more enterprise zones, as a condition of claiming a credit under this section.

(g)

(h) The amendments made to this section by the act adding this subdivision shall apply to taxable years beginning on or after January 1, 1998.
(i) The amendments made to this section by the act adding this subdivision shall apply only to taxable years beginning on or after January 1, 2011.

SEC. 32.

 Section 23622.7 of the Revenue and Taxation Code is amended to read:

23622.7.
 (a) (1) There shall be allowed a credit against the “tax” (as defined by Section 23036) to a taxpayer who employs a qualified employee in an enterprise zone during the taxable year. The For qualified employees who were hired by a taxpayer before January 1, 2011, the credit shall be equal to the sum of each of the following:

(1)

(A) Fifty percent of qualified wages in the first year of employment.

(2)

(B) Forty percent of qualified wages in the second year of employment.

(3)

(C) Thirty percent of qualified wages in the third year of employment.

(4)

(D) Twenty percent of qualified wages in the fourth year of employment.

(5)

(E) Ten percent of qualified wages in the fifth year of employment.
(2) For qualified employees who are hired on or after January 1, 2011, the credit shall be equal to the sum of each of the following:
(A) Thirty percent of qualified wages in the first year of employment.
(B) Forty percent of qualified wages in the second year of employment.
(C) Fifty percent of qualified wages in the third year of employment.
(b) For purposes of this section:
(1) “Qualified (A) For qualified employees who were hired by a taxpayer before January 1, 2011, “qualified wages” means:

(A)(i)

(i) (I) Except as provided in clause (ii) subclause (II), that portion of wages paid or incurred by the taxpayer during the taxable year to qualified employees that does not exceed 150 percent of the minimum wage.

(ii)

(II) For up to 1,350 qualified employees who are employed by the taxpayer in the Long Beach Enterprise Zone in aircraft manufacturing activities described in Codes 3721 to 3728, inclusive, and Code 3812 of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition, “qualified wages” means that portion of hourly wages that does not exceed 202 percent of the minimum wage.

(B)

(ii) Wages received during the 60-month period beginning with the first day the employee commences employment with the taxpayer. Reemployment in connection with any increase, including a regularly occurring seasonal increase, in the trade or business operations of the taxpayer does not constitute commencement of employment for purposes of this section.

(C)

(iii) Qualified wages do not include any wages paid or incurred by the taxpayer on or after the zone expiration date. However, wages paid or incurred with respect to qualified employees who are employed by the taxpayer within the enterprise zone within the 60-month period prior to the zone expiration date shall continue to qualify for the credit under this section after the zone expiration date, in accordance with all provisions of this section applied as if the enterprise zone designation were still in existence and binding.
(B) For qualified employees who are hired on or after January 1, 2011, “qualified wages” means:
(i) (I) Except as provided in subclause (II), that portion of wages paid or incurred by the taxpayer during the taxable year to qualified employees that does not exceed 180 percent of the minimum wage.
(II) Qualified employees who are employed by a taxpayer who undertake manufacturing activities described in Codes 311 to 339, inclusive, of the North American Industry Classification System published by the United States Office of Management and Budget, 2007 edition, “qualified wages” means that portion of hourly wages that does not exceed 202 percent of the minimum wage.
(ii) Wages received during the 36-month period beginning with the first day the employee commences employment with the taxpayer. Reemployment in connection with any increase, including a regularly occurring seasonal increase, in the trade or business operations of the taxpayer does not constitute commencement of employment for purposes of this section.
(iii) Qualified wages shall not include any wages paid or incurred by the taxpayer on or after the zone expiration date. However, wages paid or incurred with respect to qualified employees who are employed by the taxpayer within the enterprise zone within the 36-month period prior to the zone expiration date shall continue to qualify for the credit under this section after the zone expiration date, in accordance with all provisions of this section applied as if the enterprise zone designation were still in existence and binding.
(2) “Minimum wage” means the wage established by the Industrial Welfare Commission as provided for in Chapter 1 (commencing with Section 1171) of Part 4 of Division 2 of the Labor Code.
(3) “Zone expiration date” means the date the enterprise zone designation expires, is no longer binding, or becomes inoperative.
(4) (A) “Qualified employee” means an individual who meets all of the following requirements:
(i) At least 90 percent of whose services for the taxpayer during the taxable year are directly related to the conduct of the taxpayer’s trade or business located in an enterprise zone.
(ii) Performs at least 50 percent of his or her services for the taxpayer during the taxable year in an enterprise zone.
(iii) Is hired by the taxpayer after the date of original designation of the area in which services were performed as an enterprise zone.
(iv) Is any of the following:

(I)Immediately preceding the qualified employee’s commencement of employment with the taxpayer, was a person eligible for services under the federal Job Training Partnership Act (29 U.S.C. Sec. 1501 et seq.), or its successor, who is receiving, or is eligible to receive, subsidized employment, training, or services funded by the federal Job Training Partnership Act, or its successor.

(II)Immediately preceding the qualified employee’s commencement of employment with the taxpayer, was a person eligible to be a voluntary or mandatory registrant under the Greater Avenues for Independence Act of 1985 (GAIN) provided for pursuant to Article 3.2 (commencing with Section 11320) of Chapter 2 of Part 3 of Division 9 of the Welfare and Institutions Code, or its successor.

(III)

(I) Immediately preceding the qualified employee’s commencement of employment with the taxpayer, was an economically disadvantaged individual 14 years of age or older.

(IV)

(II) Immediately preceding the qualified employee’s commencement of employment with the taxpayer, was a dislocated worker who meets any of the following:
(aa) Has been terminated or laid off or who has received a notice of termination or layoff from employment, is eligible for or has exhausted entitlement to unemployment insurance benefits, and is unlikely to return to his or her previous industry or occupation.
(bb) Has been terminated or has received a notice of termination of employment as a result of any permanent closure or any substantial layoff at a plant, facility, or enterprise, including an individual who has not received written notification but whose employer has made a public announcement of the closure or layoff.
(cc) Is long-term unemployed and has limited opportunities for employment or reemployment in the same or a similar occupation in the area in which the individual resides, including an individual 55 years of age or older who may have substantial barriers to employment by reason of age.
(dd) Was self-employed (including farmers and ranchers) and is unemployed as a result of general economic conditions in the community in which he or she resides or because of natural disasters.
(ee) Was a civilian employee of the Department of Defense employed at a military installation being closed or realigned under the Defense Base Closure and Realignment Act of 1990.
(ff) Was an active member of the armed forces or National Guard as of September 30, 1990, and was either involuntarily separated or separated pursuant to a special benefits program.
(gg) Is a seasonal or migrant worker who experiences chronic seasonal unemployment and underemployment in the agriculture industry, aggravated by continual advancements in technology and mechanization.
(hh) Has been terminated or laid off, or has received a notice of termination or layoff, as a consequence of compliance with the federal Clean Air Act.

(V)

(III) Immediately preceding the qualified employee’s commencement of employment with the taxpayer, was a disabled individual who is eligible for or enrolled in, or has completed a state rehabilitation plan or is.
(IV) Immediately preceding the qualified employee’s commencement of employment with the taxpayer, was a service-connected disabled veteran, veteran of the Vietnam era, or veteran who is recently separated from military service.

(VI)

(V) Immediately preceding the qualified employee’s commencement of employment with the taxpayer, was an ex-offender. An individual shall be treated as convicted if he or she was placed on probation by a state court without a finding of guilt.

(VII)

(VI) Immediately preceding the qualified employee’s commencement of employment with the taxpayer, was a person eligible for or a recipient of any of the following:
(aa) Federal Supplemental Security Income benefits.
(bb) Aid to Families with Dependent Children Temporary Assistance for Needy Families.
(cc) Medi-Cal or Healthy Families.

(cc)

(dd) Food stamps.

(dd)

(ee) State and local general assistance.
(ff) Intensive services, including employment training services, funded through the federal Workforce Investment Act (Public Law 105-220).
(gg) Voluntary or mandatory services under the California Work Opportunity and Responsibility to Kids (CalWORKs) program (Chapter 2 (commencing with Section 11200) of Part 3 of Division 9 of the Welfare and Institutions Code).
(hh) Federal Work Opportunity Tax Credit (Section 51 of the Internal Revenue Code).

(VIII)

(VII) Immediately preceding the qualified employee’s commencement of employment with the taxpayer, was a member of a federally recognized Indian tribe, band, or other group of Native American descent.

(IX)

(VIII) Immediately preceding the qualified employee’s commencement of employment with the taxpayer, was a resident of a targeted employment area (as defined in Section 7072 of the Government Code). For individuals hired on or after January 1, 2011, the employee is also receiving a wage that does not exceed the median income for a family of four within the census block groups of the enterprise zone, as defined by the United States Census Bureau.

(X)

(IX) An employee who qualified the taxpayer for the enterprise zone hiring credit under former Section 23622 or the program area hiring credit under former Section 23623.

(XI)Immediately preceding the qualified employee’s commencement of employment with the taxpayer, was a member of a targeted group, as defined in Section 51(d) of the Internal Revenue Code, or its successor.

(B) Priority for employment shall be provided to an individual who is enrolled in a qualified program under the federal Job Training Partnership Act or the Greater Avenues for Independence Act of 1985 Workforce Investment Act or the CalWORKs program or who is eligible as a member of a targeted group under the Work Opportunity Tax Credit (Section 51 of the Internal Revenue Code), or its successor.
(5) “Taxpayer” means a corporation engaged in a trade or business within an enterprise zone designated pursuant to Chapter 12.8 (commencing with Section 7070) of Division 7 of Title 1 of the Government Code.
(6) “Seasonal employment” means employment by a taxpayer that has regular and predictable substantial reductions in trade or business operations.
(c) The (1) For qualified employees who were hired before January 1, 2011, the taxpayer shall do both of the following:

(1)

(A) Obtain from the Employment Development Department, as permitted by federal law, the local county or city Job Training Partnership Act administrative entity, the local county GAIN federal Workforce Investment Act administrative entity, the local county CalWORKs program office or social services agency, or the local government administering the enterprise zone, a certification that provides that a qualified employee meets the eligibility requirements specified in clause (iv) of subparagraph (A) of paragraph (4) of subdivision (b). The Employment Development Department may provide preliminary screening and referral to a certifying agency. The Employment Development Department shall develop a form for this purpose businesses located in a zone as part of the department’s implementation of the intensive services activities funded through the federal Workforce Investment Act. The Department of Housing and Community Development shall develop regulations governing the issuance of certificates by local governments pursuant to subdivision (a) of Section 7086 of the Government Code.

(2)

(B) Retain a copy of the certification and provide it upon request to the Franchise Tax Board.
(2) For qualified employees who are hired on or after January 1, 2011, the taxpayer shall do both of the following:
(A) Apply for certification, within 36 months of an employee being hired, from the Employment Development Department, as permitted by federal law, the local county or city federal Workforce Investment Act administrative entity, the local county CalWORKs program office or social services agency, or the local government administering the enterprise zone, a certification that provides that a qualified employee meets the eligibility requirements specified in clause (iv) of subparagraph (A) of paragraph (4) of subdivision (b). The Employment Development Department may provide preliminary screening and referral to businesses located in an enterprise zone as part of the department’s implementation of the intensive services activities funded through the federal Workforce Investment Act. The Department of Housing and Community Development shall develop regulations governing the issuance of certificates by local governments pursuant to subdivision (a) of Section 7086 of the Government Code.
(B) Retain a copy of the certification and provide it upon request to the Franchise Tax Board.
(d) (1) For purposes of this section:
(A) All employees of all corporations which are members of the same controlled group of corporations shall be treated as employed by a single taxpayer.
(B) The credit, if any, allowable by this section to each member shall be determined by reference to its proportionate share of the expense of the qualified wages giving rise to the credit, and shall be allocated in that manner.
(C) For purposes of this subdivision, “controlled group of corporations” means “controlled group of corporations” as defined in Section 1563(a) of the Internal Revenue Code, except that:
(i) “More than 50 percent” shall be substituted for “at least 80 percent” each place it appears in Section 1563(a)(1) of the Internal Revenue Code.
(ii) The determination shall be made without regard to subsections (a)(4) and (e)(3)(C) of Section 1563 of the Internal Revenue Code.
(2) (A) If an employer acquires the major portion of a trade or business of another employer (hereinafter in this paragraph referred to as the “predecessor”) or the major portion of a separate unit of a trade or business of a predecessor, then, for purposes of applying this section (other than subdivision (e) or (f)) for any calendar year ending after that acquisition, the employment relationship between a qualified employee and an employer shall not be treated as terminated if the employee continues to be employed in that trade or business.
(B) For taxable years beginning on or after January 1, 2011, if a taxpayer relocated to an enterprise zone from within the state, the taxpayer shall be allowed a credit only for that number of employees that exceeds the number of employees at the previous location. The number of employees at the previous location and the type of jobs undertaken shall be established by the Employment Development Department. Exceptions to this subparagraph shall be limited to the following:
(i) Employees who undertake core work activities or activities that are the primary job duties of the employee that are significantly different from those activities at the previous location, as determined by the Employment Development Department.
(ii) Taxpayers that receive a bona fide offer to relocate to another state.
(iii) Taxpayers who relocate as a result of a natural disaster, civic unrest, or eminent domain proceeding.
(iv) Taxpayers who relocate within the same local government jurisdiction.
(e) (1) (A) If the employment, other than seasonal employment, of any qualified employee with respect to whom qualified wages are taken into account under paragraph (1) of subdivision (a) is terminated by the taxpayer at any time during the first 270 days of that employment, whether or not consecutive, or before the close of the 270th calendar day after the day in which that employee completes 90 days of employment with the taxpayer, the tax imposed by this part for the taxable year in which that employment is terminated shall be increased by an amount equal to the credit allowed under paragraph (1) of subdivision (a) for that taxable year and all prior taxable years attributable to qualified wages paid or incurred with respect to that employee.
(B) If the seasonal employment of any qualified employee, with respect to whom qualified wages are taken into account under paragraph (1) of subdivision (a) is not continued by the taxpayer for a period of 270 days of employment during the 60-month period beginning with the day the qualified employee commences seasonal employment with the taxpayer, the tax imposed by this part, for the taxable year that includes the 60th month following the month in which the qualified employee commences seasonal employment with the taxpayer, shall be increased by an amount equal to the credit allowed under paragraph (1) of subdivision (a) for that taxable year and all prior taxable years attributable to qualified wages paid or incurred with respect to that qualified employee.
(2) (A) Subparagraph (A) of paragraph (1) shall not apply to any of the following:
(i) A termination of employment of a qualified employee who voluntarily leaves the employment of the taxpayer.
(ii) A termination of employment of a qualified employee who, before the close of the period referred to in subparagraph (A) of paragraph (1), becomes disabled and unable to perform the services of that employment, unless that disability is removed before the close of that period and the taxpayer fails to offer reemployment to that employee.
(iii) A termination of employment of a qualified employee, if it is determined that the termination was due to the misconduct (as defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the California Code of Regulations) of that employee.
(iv) A termination of employment of a qualified employee due to a substantial reduction in the trade or business operations of the taxpayer.
(v) A termination of employment of a qualified employee, if that employee is replaced by other qualified employees so as to create a net increase in both the number of employees and the hours of employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of the following:
(i) A failure to continue the seasonal employment of a qualified employee who voluntarily fails to return to the seasonal employment of the taxpayer.
(ii) A failure to continue the seasonal employment of a qualified employee who, before the close of the period referred to in subparagraph (B) of paragraph (1), becomes disabled and unable to perform the services of that seasonal employment, unless that disability is removed before the close of that period and the taxpayer fails to offer seasonal employment to that qualified employee.
(iii) A failure to continue the seasonal employment of a qualified employee, if it is determined that the failure to continue the seasonal employment was due to the misconduct (as defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the California Code of Regulations) of that qualified employee.
(iv) A failure to continue seasonal employment of a qualified employee due to a substantial reduction in the regular seasonal trade or business operations of the taxpayer.
(v) A failure to continue the seasonal employment of a qualified employee, if that qualified employee is replaced by other qualified employees so as to create a net increase in both the number of seasonal employees and the hours of seasonal employment.
(C) For purposes of paragraph (1), the employment relationship between the taxpayer and a qualified employee shall not be treated as terminated by either of the following:
(i) By a transaction to which Section 381(a) of the Internal Revenue Code applies, if the qualified employee continues to be employed by the acquiring corporation.
(ii) By reason of a mere change in the form of conducting the trade or business of the taxpayer, if the qualified employee continues to be employed in that trade or business and the taxpayer retains a substantial interest in that trade or business.
(3) Any increase in tax under paragraph (1) shall not be treated as tax imposed by this part for purposes of determining the amount of any credit allowable under this part.
(f) (1) (A) For qualified employees who are hired on or after January 1, 2011, if the employment, other than seasonal employment, of any qualified employee with respect to whom qualified wages are taken into account under paragraph (2) of subdivision (a), is terminated by the taxpayer at any time during the first 300 days of that employment, whether or not consecutive, or before the close of the 300th calendar day after the day in which that employee completes 90 days of employment with the taxpayer, the tax imposed by this part for the taxable year in which that employment is terminated shall be increased by an amount equal to the credit allowed under paragraph (2) of subdivision (a) for that taxable year and all prior taxable years attributable to qualified wages paid or incurred with respect to that employee.
(B) If the seasonal employment of any qualified employee, with respect to whom qualified wages are taken into account under paragraph (2) of subdivision (a) is not continued by the taxpayer for a period of 300 days of employment during the 36-month period beginning with the day the qualified employee commences seasonal employment with the taxpayer, the tax imposed by this part, for the taxable year that includes the 36th month following the month in which the qualified employee commences seasonal employment with the taxpayer, shall be increased by an amount equal to the credit allowed under paragraph (2) of subdivision (a) for that taxable year and all prior taxable years attributable to qualified wages paid or incurred with respect to that qualified employee.
(2) (A) Subparagraph (A) of paragraph (1) shall not apply to any of the following:
(i) A termination of employment of a qualified employee who voluntarily leaves the employment of the taxpayer.
(ii) A termination of employment of a qualified employee who, before the close of the period referred to in subparagraph (A) of paragraph (1), becomes disabled and unable to perform the services of that employment, unless that disability is removed before the close of that period and the taxpayer fails to offer reemployment to that employee.
(iii) A termination of employment of a qualified employee, if it is determined that the termination was due to the misconduct (as defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the California Code of Regulations) of that employee.
(iv) A termination of employment of a qualified employee due to a substantial reduction in the trade or business operations of the taxpayer.
(v) A termination of employment of a qualified employee, if that employee is replaced by other qualified employees so as to create a net increase in both the number of employees and the hours of employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of the following:
(i) A failure to continue the seasonal employment of a qualified employee who voluntarily fails to return to the seasonal employment of the taxpayer.
(ii) A failure to continue the seasonal employment of a qualified employee who, before the close of the period referred to in subparagraph (B) of paragraph (1), becomes disabled and unable to perform the services of that seasonal employment, unless that disability is removed before the close of that period and the taxpayer fails to offer seasonal employment to that qualified employee.
(iii) A failure to continue the seasonal employment of a qualified employee, if it is determined that the failure to continue the seasonal employment was due to the misconduct (as defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the California Code of Regulations) of that qualified employee.
(iv) A failure to continue seasonal employment of a qualified employee due to a substantial reduction in the regular seasonal trade or business operations of the taxpayer.
(v) A failure to continue the seasonal employment of a qualified employee, if that qualified employee is replaced by other qualified employees so as to create a net increase in both the number of seasonal employees and the hours of seasonal employment.
(C) For purposes of paragraph (1), the employment relationship between the taxpayer and a qualified employee shall not be treated as terminated by either of the following:
(i) By a transaction to which Section 381(a) of the Internal Revenue Code applies, if the qualified employee continues to be employed by the acquiring corporation.
(ii) By reason of a mere change in the form of conducting the trade or business of the taxpayer, if the qualified employee continues to be employed in that trade or business and the taxpayer retains a substantial interest in that trade or business.
(3) Any increase in tax under paragraph (1) shall not be treated as tax imposed by this part for purposes of determining the amount of any credit allowable under this part.

(f)

(g) Rules similar to the rules provided in Section 46(e) and (h) of the Internal Revenue Code shall apply to both of the following:
(1) An organization to which Section 593 of the Internal Revenue Code applies.
(2) A regulated investment company or a real estate investment trust subject to taxation under this part.

(g)

(h) For purposes of this section, “enterprise zone” means an area designated as an enterprise zone pursuant to Chapter 12.8 (commencing with Section 7070) of Division 7 of Title 1 of the Government Code.

(h)

(i) The credit allowable under this section shall be reduced by the credit allowed under Sections 23623.5, 23625, and 23646 claimed for the same employee. The credit shall also be reduced by the federal credit allowed under Section 51 of the Internal Revenue Code.
In addition, any deduction otherwise allowed under this part for the wages or salaries paid or incurred by the taxpayer upon which the credit is based shall be reduced by the amount of the credit, prior to any reduction required by subdivision (i) or (j) or (k).

(i)

(j) (1) In the case where the credit otherwise allowed under this section exceeds the “tax” for the taxable year, that portion of the credit that exceeds the “tax” may be carried over and added to the credit, if any, in succeeding taxable years, until the credit is exhausted. The credit shall be applied first to the earliest taxable years possible.
(2) Notwithstanding paragraph (1), for taxable years beginning on or after January 1, 2011, in the case where the credit otherwise allowed under this section exceeds the “tax” for the taxable year, that portion of the credit that exceeds the “tax” may be carried over and added to the credit, if any, in the following year, and the succeeding 14 years if necessary, until the credit is exhausted. The credit shall be applied first to the earliest taxable years possible.

(j)

(k) (1) The amount of the credit otherwise allowed under this section and Section 23612.2, including any credit carryover from prior years, that may reduce the “tax” for the taxable year shall not exceed the amount of tax which would be imposed on the taxpayer’s business income attributable to the enterprise zone determined as if that attributable income represented all of the income of the taxpayer subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer’s California source business income that is apportioned to the enterprise zone. For that purpose, the taxpayer’s business attributable to sources in this state first shall be determined in accordance with Chapter 17 (commencing with Section 25101). That business income shall be further apportioned to the enterprise zone in accordance with Article 2 (commencing with Section 25120) of Chapter 17, modified for purposes of this section in accordance with paragraph (3).
(3) Business income shall be apportioned to the enterprise zone by multiplying the total California business income of the taxpayer by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is two. For purposes of this paragraph:
(A) The property factor is a fraction, the numerator of which is the average value of the taxpayer’s real and tangible personal property owned or rented and used in the enterprise zone during the income year, and the denominator of which is the average value of all the taxpayer’s real and tangible personal property owned or rented and used in this state during the income year.
(B) The payroll factor is a fraction, the numerator of which is the total amount paid by the taxpayer in the enterprise zone during the income year for compensation, and the denominator of which is the total compensation paid by the taxpayer in this state during the income year.
(4) The portion of any credit remaining, if any, after application of this subdivision, shall be carried over to succeeding taxable years, as if it were an amount exceeding the “tax” for the taxable year, as provided in subdivision (i) (j).

(k)

(l) The changes made to this section by the act adding this subdivision shall apply to taxable years on or after January 1, 1997.
(m) For taxable years beginning on or after January 1, 2011, a credit shall not be allowed under this section for a taxpayer that has been notified by the Director of Industrial Relations of a final determination, based on the taxpayer’s history of significant employment violations, that the taxpayer is considered by the Department of Industrial Relations as a serious, repeated, and willful violator of state employment laws, including, but not limited to, demonstrating a failure to successfully abate these violations.
(n) For taxable years beginning on or after January 1, 2011, a taxpayer shall be required to register a business pursuant to the Enterprise Zone Act (Chapter 12.8 (commencing with Section 7070) of Division 7 of Title 1 of the Government Code), and shall state under penalty of perjury that the taxpayer is a registered business in one or more enterprise zones, as a condition of claiming a credit under this section.

SEC. 33.

 Section 23622.8 of the Revenue and Taxation Code is amended to read:

23622.8.
 (a) For each taxable year beginning on or after January 1, 1998, there shall be allowed a credit against the “tax” (as defined in Section 23036) to a qualified taxpayer for hiring a qualified disadvantaged individual during the taxable year for employment in the manufacturing enhancement area. The credit shall be equal to the sum of each of the following:
(1) Fifty percent of the qualified wages in the first year of employment.
(2) Forty percent of the qualified wages in the second year of employment.
(3) Thirty percent of the qualified wages in the third year of employment.
(4) Twenty percent of the qualified wages in the fourth year of employment.
(5) Ten percent of the qualified wages in the fifth year of employment.
(b) For purposes of this section:
(1) “Qualified wages” means:
(A) That portion of wages paid or incurred by the qualified taxpayer during the taxable year to qualified disadvantaged individuals that does not exceed 150 percent of the minimum wage.
(B) The total amount of qualified wages which may be taken into account for purposes of claiming the credit allowed under this section shall not exceed two million dollars ($2,000,000) per taxable year.
(C) Wages received during the 60-month period beginning with the first day the qualified disadvantaged individual commences employment with the qualified taxpayer. Reemployment in connection with any increase, including a regularly occurring seasonal increase, in the trade or business operations of the qualified taxpayer does not constitute commencement of employment for purposes of this section.
(D) Qualified wages do not include any wages paid or incurred by the qualified taxpayer on or after the manufacturing enhancement area expiration date. However, wages paid or incurred with respect to qualified employees who are employed by the qualified taxpayer within the manufacturing enhancement area within the 60-month period prior to the manufacturing enhancement area expiration date shall continue to qualify for the credit under this section after the manufacturing enhancement area expiration date, in accordance with all provisions of this section applied as if the manufacturing enhancement area designation were still in existence and binding.
(2) “Minimum wage” means the wage established by the Industrial Welfare Commission as provided for in Chapter 1 (commencing with Section 1171) of Part 4 of Division 2 of the Labor Code.
(3) “Manufacturing enhancement area” means an area designated pursuant to Section 7073.8 of the Government Code according to the procedures of Chapter 12.8 (commencing with Section 7070) of Division 7 of Title 1 of the Government Code.
(4) “Manufacturing enhancement area expiration date” means the date the manufacturing enhancement area designation expires, is no longer binding, or becomes inoperative.
(5) “Qualified disadvantaged individual” means an individual who was hired by a qualified taxpayer before January 1, 2011, and who satisfies all of the following requirements:
(A) (i) At least 90 percent of whose services for the qualified taxpayer during the taxable year are directly related to the conduct of the qualified taxpayer’s trade or business located in a manufacturing enhancement area.
(ii) Who performs at least 50 percent of his or her services for the qualified taxpayer during the taxable year in the manufacturing enhancement area.
(B) Who is hired by the qualified taxpayer after the designation of the area as a manufacturing enhancement area in which the individual’s services were primarily performed.
(C) Who is any of the following, immediately preceding the individual’s commencement of employment with the qualified taxpayer:, was certified as eligible by the Employment Development Department under the federal Targeted Jobs Tax Credit Program, or its successor, whether or not this program is in effect.

(i)An individual who has been determined eligible for services under the federal Job Training Partnership Act (29 U.S.C. Sec. 1501 et seq.) or its successor.

(ii)Any voluntary or mandatory registrant under the Greater Avenues for Independence Act of 1985, or its successor, as provided pursuant to Article 3.2 (commencing with Section 11320) of Chapter 2 of Part 3 of Division 9 of the Welfare and Institutions Code.

(iii)Any individual who has been certified eligible by the Employment Development Department under the federal Targeted Jobs Tax Credit Program, or its successor, whether or not this program is in effect.

(6) “Qualified taxpayer” means any corporation engaged in a trade or business within a manufacturing enhancement area designated pursuant to Section 7073.8 of the Government Code and that meets all of the following requirements:
(A) Is engaged in those lines of business described in Codes 0211 to 0291, inclusive, Code 0723, or in Codes 2011 to 3999, inclusive, of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition.
(B) At least 50 percent of the qualified taxpayer’s workforce hired after the designation of the manufacturing enhancement area is composed of individuals who, at the time of hire, are residents of the county in which the manufacturing enhancement area is located.
(C) Of this percentage of local hires, at least 30 percent shall be qualified disadvantaged individuals.
(7) “Seasonal employment” means employment by a qualified taxpayer that has regular and predictable substantial reductions in trade or business operations.
(c) (1) For purposes of this section, all of the following apply:
(A) All employees of all corporations that are members of the same controlled group of corporations shall be treated as employed by a single qualified taxpayer.
(B) The credit (if any) allowable by this section with respect to each member shall be determined by reference to its proportionate share of the expenses of the qualified wages giving rise to the credit and shall be allocated in that manner.
(C) Principles that apply in the case of controlled groups of corporations, as specified in subdivision (d) of Section 23622.7, shall apply with respect to determining employment.
(2) If a qualified taxpayer acquires the major portion of a trade or business of another employer (hereinafter in this paragraph referred to as the “predecessor”) or the major portion of a separate unit of a trade or business of a predecessor, then, for purposes of applying this section (other than subdivision (d)) for any calendar year ending after that acquisition, the employment relationship between a qualified disadvantaged individual and a qualified taxpayer shall not be treated as terminated if the qualified disadvantaged individual continues to be employed in that trade or business.
(d) (1) (A) If the employment, other than seasonal employment, of any qualified disadvantaged individual, with respect to whom qualified wages are taken into account under subdivision (b) is terminated by the qualified taxpayer at any time during the first 270 days of that employment (whether or not consecutive) or before the close of the 270th calendar day after the day in which that qualified disadvantaged individual completes 90 days of employment with the qualified taxpayer, the tax imposed by this part for the taxable year in which that employment is terminated shall be increased by an amount equal to the credit allowed under subdivision (a) for that taxable year and all prior taxable years attributable to qualified wages paid or incurred with respect to that qualified disadvantaged individual.
(B) If the seasonal employment of any qualified disadvantaged individual, with respect to whom qualified wages are taken into account under subdivision (a) is not continued by the qualified taxpayer for a period of 270 days of employment during the 60-month period beginning with the day the qualified disadvantaged individual commences seasonal employment with the qualified taxpayer, the tax imposed by this part, for the income year that includes the 60th month following the month in which the qualified disadvantaged individual commences seasonal employment with the qualified taxpayer, shall be increased by an amount equal to the credit allowed under subdivision (a) for that taxable year and all prior taxable years attributable to qualified wages paid or incurred with respect to that qualified disadvantaged individual.
(2) (A) Subparagraph (A) of paragraph (1) does not apply to any of the following:
(i) A termination of employment of a qualified disadvantaged individual who voluntarily leaves the employment of the qualified taxpayer.
(ii) A termination of employment of a qualified disadvantaged individual who, before the close of the period referred to in subparagraph (A) of paragraph (1), becomes disabled to perform the services of that employment, unless that disability is removed before the close of that period and the qualified taxpayer fails to offer reemployment to that individual.
(iii) A termination of employment of a qualified disadvantaged individual, if it is determined that the termination was due to the misconduct (as defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the California Code of Regulations) of that individual.
(iv) A termination of employment of a qualified disadvantaged individual due to a substantial reduction in the trade or business operations of the qualified taxpayer.
(v) A termination of employment of a qualified disadvantaged individual, if that individual is replaced by other qualified disadvantaged individuals so as to create a net increase in both the number of employees and the hours of employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of the following:
(i) A failure to continue the seasonal employment of a qualified disadvantaged individual who voluntarily fails to return to the seasonal employment of the qualified taxpayer.
(ii) A failure to continue the seasonal employment of a qualified disadvantaged individual who, before the close of the period referred to in subparagraph (B) of paragraph (1), becomes disabled and unable to perform the services of that seasonal employment, unless that disability is removed before the close of that period and the qualified taxpayer fails to offer seasonal employment to that qualified disadvantaged individual.
(iii) A failure to continue the seasonal employment of a qualified disadvantaged individual, if it is determined that the failure to continue the seasonal employment was due to the misconduct (as defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the California Code of Regulations) of that qualified disadvantaged individual.
(iv) A failure to continue seasonal employment of a qualified disadvantaged individual due to a substantial reduction in the regular seasonal trade or business operations of the qualified taxpayer.
(v) A failure to continue the seasonal employment of a qualified disadvantaged individual, if that qualified disadvantaged individual is replaced by other qualified disadvantaged individuals so as to create a net increase in both the number of seasonal employees and the hours of seasonal employment.
(C) For purposes of paragraph (1), the employment relationship between the qualified taxpayer and a qualified disadvantaged individual shall not be treated as terminated by either of the following:
(i) By a transaction to which Section 381(a) of the Internal Revenue Code applies, if the qualified disadvantaged individual continues to be employed by the acquiring corporation.
(ii) By reason of a mere change in the form of conducting the trade or business of the qualified taxpayer, if the qualified disadvantaged individual continues to be employed in that trade or business and the qualified taxpayer retains a substantial interest in that trade or business.
(3) Any increase in tax under paragraph (1) shall not be treated as tax imposed by this part for purposes of determining the amount of any credit allowable under this part.
(e) The credit shall be reduced by the credit allowed under Section 23621. The credit shall also be reduced by the federal credit allowed under Section 51 of the Internal Revenue Code.
In addition, any deduction otherwise allowed under this part for the wages or salaries paid or incurred by the qualified taxpayer upon which the credit is based shall be reduced by the amount of the credit, prior to any reduction required by subdivision (f) or (g).
(f) In the case where the credit otherwise allowed under this section exceeds the “tax” for the taxable year, that portion of the credit that exceeds the “tax” may be carried over and added to the credit, if any, in succeeding years, until the credit is exhausted. The credit shall be applied first to the earliest taxable years possible.
(g) (1) The amount of credit otherwise allowed under this section, including prior year credit carryovers, that may reduce the “tax” for the taxable year shall not exceed the amount of tax that would be imposed on the qualified taxpayer’s business income attributed to a manufacturing enhancement area determined as if that attributed income represented all of the net income of the qualified taxpayer subject to tax under this part.
(2) Attributable income is that portion of the taxpayer’s California source business income that is apportioned to the manufacturing enhancement area. For that purpose, the taxpayer’s business income attributable to sources in this state first shall be determined in accordance with Chapter 17 (commencing with Section 25101). That business income shall be further apportioned to the manufacturing enhancement area in accordance with Article 2 (commencing with Section 25120) of Chapter 17, modified for purposes of this section in accordance with paragraph (3).
(3) Income shall be apportioned to a manufacturing enhancement area by multiplying the total California business income of the taxpayer by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is two. For the purposes of this paragraph:
(A) The property factor is a fraction, the numerator of which is the average value of the taxpayer’s real and tangible personal property owned or rented and used in the manufacturing enhancement area during the taxable year, and the denominator of which is the average value of all the taxpayer’s real and tangible personal property owned or rented and used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is the total amount paid by the taxpayer in the manufacturing enhancement area during the taxable year for compensation, and the denominator of which is the total compensation paid by the taxpayer in this state during the taxable year.
(4) The portion of any credit remaining, if any, after application of this subdivision, shall be carried over to succeeding taxable years, as if it were an amount exceeding the “tax” for the taxable year, as provided in subdivision (g).
(h) If the taxpayer is allowed a credit pursuant to this section for qualified wages paid or incurred, only one credit shall be allowed to the taxpayer under this part with respect to any wage consisting in whole or in part of those qualified wages.
(i) The qualified taxpayer shall do both of the following:
(1) Obtain from the Employment Development Department, as permitted by federal law, the local county or city Job Training Partnership Act administrative entity, the local county GAIN office federal Workforce Investment Act of 1998 administrative entity, the local county CalWORKs program office or social services agency, or the local government administering the manufacturing enhancement area, a certification that provides that a qualified disadvantaged individual meets the eligibility requirements specified in paragraph (5) of subdivision (b). The Employment Development Department may provide preliminary screening and referral to a certifying agency. The Department of Housing and Community Development shall develop regulations governing the issuance of certificates pursuant to subdivision (d) of Section 7086 of the Government Code and shall develop forms for this purpose.
(2) Retain a copy of the certification and provide it upon request to the Franchise Tax Board.
(j) This section shall remain in effect only until January 1, 2017, and as of that date is repealed.

SEC. 34.

 Section 23633 of the Revenue and Taxation Code is amended to read:

23633.
 (a) For each taxable year beginning on or after January 1, 1998, there shall be allowed as a credit against the “tax” (as defined by Section 23036) for the taxable year an amount equal to the sales or use tax paid or incurred during the taxable year by the qualified taxpayer in connection with the qualified taxpayer’s purchase of qualified property.
(b) For purposes of this section:
(1) “Qualified property” means property that meets all of the following requirements:
(A) Is any of the following:
(i) Machinery and machinery parts used for fabricating, processing, assembling, and manufacturing.
(ii) Machinery and machinery parts used for the production of renewable energy resources.
(iii) Machinery and machinery parts used for either of the following:
(I) Air pollution control mechanisms.
(II) Water pollution control mechanisms.
(iv) Data-processing and communications equipment, such as computers, computer-automated drafting systems, copy machines, telephone systems, and faxes.
(v) Motion picture manufacturing equipment central to production and post production, such as cameras, audio recorders, and digital image and sound processing equipment.
(B) The total cost of qualified property purchased and placed in service in any taxable year that may be taken into account by any qualified taxpayer for purposes of claiming this credit shall not exceed twenty million dollars ($20,000,000).
(C) The qualified property is used by the qualified taxpayer exclusively in a targeted tax area.
(D) The qualified property is purchased and placed in service before the date the targeted tax area designation expires, is revoked, is no longer binding, or becomes inoperative.
(2) (A) “Qualified taxpayer” means a corporation that meets both of the following:
(i) Is engaged in a trade or business within a targeted tax area designated pursuant to Chapter 12.93 (commencing with Section 7097) of Division 7 of Title 1 of the Government Code.
(ii) Is engaged in those lines of business described in Codes 2000 to 2099, inclusive; 2200 to 3999, inclusive; 4200 to 4299, inclusive; 4500 to 4599, inclusive; and 4700 to 5199, inclusive, of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition.
(B) In the case of any pass-through entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any credit under this section or Section 17053.33 shall be allowed to the pass-through entity and passed through to the partners or shareholders in accordance with applicable provisions of this part or Part 10 (commencing with Section 17001). For purposes of this subparagraph, the term “pass-through entity” means any partnership or S corporation.
(3) “Targeted tax area” means the area designated pursuant to Chapter 12.93 (commencing with Section 7097) of Division 7 of Title 1 of the Government Code.
(c) If the qualified taxpayer is allowed a credit for qualified property pursuant to this section, only one credit shall be allowed to the taxpayer under this part with respect to that qualified property.
(d) If the qualified taxpayer has purchased property upon which a use tax has been paid or incurred, the credit provided by this section shall be allowed only if qualified property of a comparable quality and price is not timely available for purchase in this state.
(e) In the case where the credit otherwise allowed under this section exceeds the “tax” for the taxable year, that portion of the credit that exceeds the “tax” may be carried over and added to the credit, if any, in the following year, and the succeeding 14 years if necessary, until the credit is exhausted. The credit shall be applied first to the earliest taxable years possible.
(f) Any qualified taxpayer who elects to be subject to this section shall not be entitled to increase the basis of the qualified property as otherwise required by Section 164(a) of the Internal Revenue Code with respect to sales or use tax paid or incurred in connection with the qualified taxpayer’s purchase of qualified property.
(g) (1) The amount of credit otherwise allowed under this section and Section 23634, including any credit carryover from prior years, that may reduce the “tax” for the taxable year shall not exceed the amount of tax that would be imposed on the qualified taxpayer’s business income attributable to the targeted tax area determined as if that attributable income represented all of the income of the qualified taxpayer subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer’s California source business income that is apportioned to the targeted tax area. For that purpose, the taxpayer’s business income attributable to sources in this state first shall be determined in accordance with Chapter 17 (commencing with Section 25101). That business income shall be further apportioned to the targeted tax area in accordance with Article 2 (commencing with Section 25120) of Chapter 17, modified for purposes of this section in accordance with paragraph (3).
(3) Business income shall be apportioned to the targeted tax area by multiplying the total California business income of the taxpayer by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is two. For purposes of this paragraph:
(A) The property factor is a fraction, the numerator of which is the average value of the taxpayer’s real and tangible personal property owned or rented and used in the targeted tax area during the taxable year and the denominator of which is the average value of all the taxpayer’s real and tangible personal property owned or rented and used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is the total amount paid by the taxpayer in the targeted tax area during the taxable year for compensation, and the denominator of which is the total compensation paid by the taxpayer in this state during the taxable year.
(4) The portion of any credit remaining, if any, after application of this subdivision, shall be carried over to succeeding taxable years, as if it were an amount exceeding the “tax” for the taxable year, as provided in subdivision (e).
(5) In the event that a credit carryover is allowable under subdivision (e) for any taxable year after the targeted tax area designation has expired, has been revoked, is no longer binding, or has become inoperative, the targeted tax area shall be deemed to remain in existence for purposes of computing the limitation specified in this subdivision.
(h) A taxpayer shall be required to register a business pursuant Chapter 12.93 (commencing with Section 7097) of Division 7 of Title 1 of the Government Code, and shall state under penalty of perjury that the taxpayer is a registered business in one or more targeted tax areas, as a condition of claiming a credit under this section.

(h)

(i) The changes made to this section by the act adding this subdivision shall apply to taxable years beginning on or after January 1, 1998.
(j) The changes made to this section by the act adding this subdivision shall apply to taxable years beginning on or after January 1, 2011.

SEC. 35.

 Section 23634 of the Revenue and Taxation Code is amended to read:

23634.
 (a) For each taxable year beginning on or after January 1, 1998, there shall be allowed a credit against the “tax” (as defined by Section 23036) to a qualified taxpayer who employs a qualified employee in a targeted tax area during the taxable year. The credit shall be equal to the sum of each of the following:
(1) Fifty percent of qualified wages in the first year of employment.
(2) Forty percent of qualified wages in the second year of employment.
(3) Thirty percent of qualified wages in the third year of employment.
(4) Twenty percent of qualified wages in the fourth year of employment.
(5) Ten percent of qualified wages in the fifth year of employment.
(b) For purposes of this section:
(1) “Qualified wages” means:
(A) That portion of wages paid or incurred by the qualified taxpayer during the taxable year to qualified employees that does not exceed 150 percent of the minimum wage.
(B) Wages received during the 60-month period beginning with the first day the employee commences employment with the qualified taxpayer. Reemployment in connection with any increase, including a regularly occurring seasonal increase, in the trade or business operations of the qualified taxpayer does not constitute commencement of employment for purposes of this section.
(C) Qualified wages do not include any wages paid or incurred by the qualified taxpayer on or after the targeted tax area expiration date. However, wages paid or incurred with respect to qualified employees who are employed by the qualified taxpayer within the targeted tax area within the 60-month period prior to the targeted tax area expiration date shall continue to qualify for the credit under this section after the targeted tax area expiration date, in accordance with all provisions of this section applied as if the targeted tax area designation were still in existence and binding.
(2) “Minimum wage” means the wage established by the Industrial Welfare Commission as provided for in Chapter 1 (commencing with Section 1171) of Part 4 of Division 2 of the Labor Code.
(3) “Targeted tax area expiration date” means the date the targeted tax area designation expires, is revoked, is no longer binding, or becomes inoperative.
(4) (A) “Qualified employee” means an individual who was hired by a qualified taxpayer before January 1, 2011, and who meets all of the following requirements:
(i) At least 90 percent of his or her services for the qualified taxpayer during the taxable year are directly related to the conduct of the qualified taxpayer’s trade or business located in a targeted tax area.
(ii) Performs at least 50 percent of his or her services for the qualified taxpayer during the taxable year in a targeted tax area.
(iii) Is hired by the qualified taxpayer after the date of original designation of the area in which services were performed as a targeted tax area.
(iv) Is any of the following:

(I)Immediately preceding the qualified employee’s commencement of employment with the qualified taxpayer, was a person eligible for services under the federal Job Training Partnership Act (29 U.S.C. Sec. 1501 et seq.), or its successor, who is receiving, or is eligible to receive, subsidized employment, training, or services funded by the federal Job Training Partnership Act, or its successor.

(II)Immediately preceding the qualified employee’s commencement of employment with the qualified taxpayer, was a person eligible to be a voluntary or mandatory registrant under the Greater Avenues for Independence Act of 1985 (GAIN) provided for pursuant to Article 3.2 (commencing with Section 11320) of Chapter 2 of Part 3 of Division 9 of the Welfare and Institutions Code, or its successor.

(III)

(I) Immediately preceding the qualified employee’s commencement of employment with the qualified taxpayer, was an economically disadvantaged individual 14 years of age or older.

(IV)

(II) Immediately preceding the qualified employee’s commencement of employment with the qualified taxpayer, was a dislocated worker who meets any of the following:
(aa) Has been terminated or laid off or who has received a notice of termination or layoff from employment, is eligible for or has exhausted entitlement to unemployment insurance benefits, and is unlikely to return to his or her previous industry or occupation.
(bb) Has been terminated or has received a notice of termination of employment as a result of any permanent closure or any substantial layoff at a plant, facility, or enterprise, including an individual who has not received written notification but whose employer has made a public announcement of the closure or layoff.
(cc) Is long-term unemployed and has limited opportunities for employment or reemployment in the same or a similar occupation in the area in which the individual resides, including an individual 55 years of age or older who may have substantial barriers to employment by reason of age.
(dd) Was self-employed (including farmers and ranchers) and is unemployed as a result of general economic conditions in the community in which he or she resides or because of natural disasters.
(ee) Was a civilian employee of the Department of Defense employed at a military installation being closed or realigned under the Defense Base Closure and Realignment Act of 1990.
(ff) Was an active member of the Armed Forces or National Guard as of September 30, 1990, and was either involuntarily separated or separated pursuant to a special benefits program.
(gg) Is a seasonal or migrant worker who experiences chronic seasonal unemployment and underemployment in the agriculture industry, aggravated by continual advancements in technology and mechanization.
(hh) Has been terminated or laid off, or has received a notice of termination or layoff, as a consequence of compliance with the federal Clean Air Act.

(V)

(III) Immediately preceding the qualified employee’s commencement of employment with the qualified taxpayer, was a disabled individual who is eligible for or enrolled in, or has completed a state rehabilitation plan or is.
(IV) Immediately preceding the qualified employee’s commencement of employment with taxpayer, was a service-connected disabled veteran, veteran of the Vietnam era, or veteran who is recently separated from military service.

(VI)

(V) Immediately preceding the qualified employee’s commencement of employment with the qualified taxpayer, was an ex-offender. An individual shall be treated as convicted if he or she was placed on probation by a state court without a finding of guilt.

(VII)

(VI) Immediately preceding the qualified employee’s commencement of employment with the qualified taxpayer, was a person eligible for or a recipient of any of the following:
(aa) Federal Supplemental Security Income benefits.
(bb) Aid to Families with Dependent Children.
(cc) Food stamps.
(dd) State and local general assistance.

(VIII)

(VII) Immediately preceding the qualified employee’s commencement of employment with the qualified taxpayer, was a member of a federally recognized Indian tribe, band, or other group of Native American descent.

(IX)

(VIII) Immediately preceding the qualified employee’s commencement of employment with the qualified taxpayer, was a resident of a targeted tax area.

(X)

(IX) Immediately preceding the qualified employee’s commencement of employment with the taxpayer, was a member of a targeted group, as defined in Section 51(d) of the Internal Revenue Code, or its successor.
(B) Priority for employment shall be provided to an individual who is enrolled in a qualified program under the federal Job Training Partnership Act or the Greater Avenues for Independence Act of 1985 Workforce Investment Act or the CalWORKs program or who is eligible as a member of a targeted group under the Work Opportunity Tax Credit (Section 51 of the Internal Revenue Code), or its successor.
(5) (A) “Qualified taxpayer” means a person or entity that meets both of the following:
(i) Is engaged in a trade or business within a targeted tax area designated pursuant to Chapter 12.93 (commencing with Section 7097) of Division 7 of Title 1 of the Government Code.
(ii) Is engaged in those lines of business described in Codes 2000 to 2099, inclusive; 2200 to 3999, inclusive; 4200 to 4299, inclusive; 4500 to 4599, inclusive; and 4700 to 5199, inclusive, of the Standard Industrial Classification (SIC) Manual published by the United States Office of Management and Budget, 1987 edition.
(B) In the case of any passthrough entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any credit under this section or Section 17053.34 shall be allowed to the passthrough entity and passed through to the partners or shareholders in accordance with applicable provisions of this part or Part 10 (commencing with Section 17001). For purposes of this subparagraph, the term “passthrough entity” means any partnership or S corporation.
(6) “Seasonal employment” means employment by a qualified taxpayer that has regular and predictable substantial reductions in trade or business operations.
(c) If the qualified taxpayer is allowed a credit for qualified wages pursuant to this section, only one credit shall be allowed to the taxpayer under this part with respect to those qualified wages.
(d) The qualified taxpayer shall do both of the following:
(1) Obtain from the Employment Development Department, as permitted by federal law, the local county or city Job Training Partnership Act administrative entity, the local county GAIN office federal Workforce Investment of 1998 administrative entity, the local county CalWORKs program office or social services agency, or the local government administering the targeted tax area, a certification that provides that a qualified employee meets the eligibility requirements specified in clause (iv) of subparagraph (A) of paragraph (4) of subdivision (b). The Employment Development Department may provide preliminary screening and referral to a certifying agency. The Department of Housing and Community Development shall develop regulations for the issuance of certificates pursuant to subdivision (g) of Section 7097 of the Government Code, and shall develop forms for this purpose.
(2) Retain a copy of the certification and provide it upon request to the Franchise Tax Board.
(e) (1) For purposes of this section:
(A) All employees of all corporations that are members of the same controlled group of corporations shall be treated as employed by a single taxpayer.
(B) The credit, if any, allowable by this section to each member shall be determined by reference to its proportionate share of the expense of the qualified wages giving rise to the credit, and shall be allocated in that manner.
(C) For purposes of this subdivision, “controlled group of corporations” means “controlled group of corporations” as defined in Section 1563(a) of the Internal Revenue Code, except that:
(i) “More than 50 percent” shall be substituted for “at least 80 percent” each place it appears in Section 1563(a)(1) of the Internal Revenue Code.
(ii) The determination shall be made without regard to subsections (a)(4) and (e)(3)(C) of Section 1563 of the Internal Revenue Code.
(2) If an employer acquires the major portion of a trade or business of another employer (hereinafter in this paragraph referred to as the “predecessor”) or the major portion of a separate unit of a trade or business of a predecessor, then, for purposes of applying this section (other than subdivision (f)) for any calendar year ending after that acquisition, the employment relationship between a qualified employee and an employer shall not be treated as terminated if the employee continues to be employed in that trade or business.
(f) (1) (A) If the employment, other than seasonal employment, of any qualified employee with respect to whom qualified wages are taken into account under subdivision (a) is terminated by the qualified taxpayer at any time during the first 270 days of that employment (whether or not consecutive) or before the close of the 270th calendar day after the day in which that employee completes 90 days of employment with the qualified taxpayer, the tax imposed by this part for the taxable year in which that employment is terminated shall be increased by an amount equal to the credit allowed under subdivision (a) for that taxable year and all prior taxable years attributable to qualified wages paid or incurred with respect to that employee.
(B) If the seasonal employment of any qualified employee, with respect to whom qualified wages are taken into account under subdivision (a) is not continued by the qualified taxpayer for a period of 270 days of employment during the 60-month period beginning with the day the qualified employee commences seasonal employment with the qualified taxpayer, the tax imposed by this part, for the taxable year that includes the 60th month following the month in which the qualified employee commences seasonal employment with the qualified taxpayer, shall be increased by an amount equal to the credit allowed under subdivision (a) for that taxable year and all prior taxable years attributable to qualified wages paid or incurred with respect to that qualified employee.
(2) (A) Subparagraph (A) of paragraph (1) shall not apply to any of the following:
(i) A termination of employment of a qualified employee who voluntarily leaves the employment of the qualified taxpayer.
(ii) A termination of employment of a qualified employee who, before the close of the period referred to in subparagraph (A) of paragraph (1), becomes disabled and unable to perform the services of that employment, unless that disability is removed before the close of that period and the qualified taxpayer fails to offer reemployment to that employee.
(iii) A termination of employment of a qualified employee, if it is determined that the termination was due to the misconduct (as defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the California Code of Regulations) of that employee.
(iv) A termination of employment of a qualified employee due to a substantial reduction in the trade or business operations of the taxpayer.
(v) A termination of employment of a qualified employee, if that employee is replaced by other qualified employees so as to create a net increase in both the number of employees and the hours of employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of the following:
(i) A failure to continue the seasonal employment of a qualified employee who voluntarily fails to return to the seasonal employment of the qualified taxpayer.
(ii) A failure to continue the seasonal employment of a qualified employee who, before the close of the period referred to in subparagraph (B) of paragraph (1), becomes disabled and unable to perform the services of that seasonal employment, unless that disability is removed before the close of that period and the qualified taxpayer fails to offer seasonal employment to that qualified employee.
(iii) A failure to continue the seasonal employment of a qualified employee, if it is determined that the failure to continue the seasonal employment was due to the misconduct (as defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the California Code of Regulations) of that qualified employee.
(iv) A failure to continue seasonal employment of a qualified employee due to a substantial reduction in the regular seasonal trade or business operations of the qualified taxpayer.
(v) A failure to continue the seasonal employment of a qualified employee, if that qualified employee is replaced by other qualified employees so as to create a net increase in both the number of seasonal employees and the hours of seasonal employment.
(C) For purposes of paragraph (1), the employment relationship between the qualified taxpayer and a qualified employee shall not be treated as terminated by either of the following:
(i) By a transaction to which Section 381(a) of the Internal Revenue Code applies, if the qualified employee continues to be employed by the acquiring corporation.
(ii) By reason of a mere change in the form of conducting the trade or business of the qualified taxpayer, if the qualified employee continues to be employed in that trade or business and the qualified taxpayer retains a substantial interest in that trade or business.
(3) Any increase in tax under paragraph (1) shall not be treated as tax imposed by this part for purposes of determining the amount of any credit allowable under this part.
(g) Rules similar to the rules provided in Sections 46(e) and (h) of the Internal Revenue Code shall apply to both of the following:
(1) An organization to which Section 593 of the Internal Revenue Code applies.
(2) A regulated investment company or a real estate investment trust subject to taxation under this part.
(h) For purposes of this section, “targeted tax area” means an area designated pursuant to Chapter 12.93 (commencing with Section 7097) of Division 7 of Title 1 of the Government Code.
(i) In the case where the credit otherwise allowed under this section exceeds the “tax” for the taxable year, that portion of the credit that exceeds the “tax” may be carried over and added to the credit, if any, in succeeding taxable years, until the credit is exhausted. The credit shall be applied first to the earliest taxable years possible.
(j) (1) The amount of the credit otherwise allowed under this section and Section 23633, including any credit carryover from prior years, that may reduce the “tax” for the taxable year shall not exceed the amount of tax that would be imposed on the qualified taxpayer’s business income attributable to the targeted tax area determined as if that attributable income represented all of the income of the qualified taxpayer subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer’s California source business income that is apportioned to the targeted tax area. For that purpose, the taxpayer’s business income attributable to sources in this state first shall be determined in accordance with Chapter 17 (commencing with Section 25101). That business income shall be further apportioned to the targeted tax area in accordance with Article 2 (commencing with Section 25120) of Chapter 17, modified for purposes of this section in accordance with paragraph (3).
(3) Business income shall be apportioned to the targeted tax area by multiplying the total California business income of the taxpayer by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is two. For purposes of this paragraph:
(A) The property factor is a fraction, the numerator of which is the average value of the taxpayer’s real and tangible personal property owned or rented and used in the targeted tax area during the taxable year, and the denominator of which is the average value of all the taxpayer’s real and tangible personal property owned or rented and used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is the total amount paid by the taxpayer in the targeted tax area during the taxable year for compensation, and the denominator of which is the total compensation paid by the taxpayer in this state during the taxable year.
(4) The portion of any credit remaining, if any, after application of this subdivision, shall be carried over to succeeding taxable years, as if it were an amount exceeding the “tax” for the taxable year, as provided in subdivision (h).
(5) In the event that a credit carryover is allowable under subdivision (h) for any taxable year after the targeted tax area designation has expired or been revoked, the targeted tax area shall be deemed to remain in existence for purposes of computing the limitation specified in this subdivision.
(k) This section shall remain in effect only until January 1, 2017, and as of that date is repealed.

SEC. 36.

 Section 23645 of the Revenue and Taxation Code is amended to read:

23645.
 (a) For each taxable year beginning on or after January 1, 1995, there shall be allowed as a credit against the “tax” (as defined by Section 23036) for the taxable year an amount equal to the sales or use tax paid or incurred by the taxpayer in connection with the purchase of qualified property to the extent that the qualified property does not exceed a value of twenty million dollars ($20,000,000).
(b) For purposes of this section:
(1) “LAMBRA” means a local agency military base recovery area designated in accordance with Section 7114 of the Government Code.
(2) “Taxpayer” means a corporation that conducts a trade or business within a LAMBRA and, for the first two taxable years, has a net increase in jobs (defined as 2,000 paid hours per employee per year) of one or more employees in the LAMBRA.
(A) The net increase in the number of jobs shall be determined by subtracting the total number of full-time employees (defined as 2,000 paid hours per employee per year) the taxpayer employed in this state in the taxable year prior to commencing business operations in the LAMBRA from the total number of full-time employees the taxpayer employed in this state during the second taxable year after commencing business operations in the LAMBRA. For taxpayers who commence doing business in this state with their LAMBRA business operation, the number of employees for the taxable year prior to commencing business operations in the LAMBRA shall be zero. If the taxpayer has a net increase in jobs in the state, the credit shall be allowed only if one or more full-time employees is employed within the LAMBRA.
(B) The total number of employees employed in the LAMBRA shall equal the sum of both of the following:
(i) The total number of hours worked in the LAMBRA for the taxpayer by employees (not to exceed 2,000 hours per employee) who are paid an hourly wage divided by 2,000.
(ii) The total number of months worked in the LAMBRA for the taxpayer by employees that are salaried employees divided by 12.
(C) In the case of a taxpayer who first commences doing business in the LAMBRA during the taxable year, for purposes of clauses (i) and (ii), respectively, of subparagraph (B) the divisors “2,000” and “12” shall be multiplied by a fraction, the numerator of which is the number of months of the taxable year that the taxpayer was doing business in the LAMBRA and the denominator of which is 12.
(3) “Qualified property” means property that is each of the following:
(A) Purchased by the taxpayer for exclusive use in a trade or business conducted within a LAMBRA.
(B) Purchased before the date the LAMBRA designation expires, is no longer binding, or becomes inoperative.
(C) Any of the following:
(i) High technology equipment, including, but not limited to, computers and electronic processing equipment.
(ii) Aircraft maintenance equipment, including, but not limited to, engine stands, hydraulic mules, power carts, test equipment, handtools, aircraft start carts, and tugs.
(iii) Aircraft components, including, but not limited to, engines, fuel control units, hydraulic pumps, avionics, starts, wheels, and tires.
(iv) Section 1245 property, as defined in Section 1245(a)(3) of the Internal Revenue Code.
(c) The credit provided under subdivision (a) shall only be allowed for qualified property manufactured in California unless qualified property of a comparable quality and price is not available for timely purchase and delivery from a California manufacturer.
(d) In the case where the credit otherwise allowed under this section exceeds the “tax” for the taxable year, that portion of the credit which exceeds the “tax” may be carried over and added to the credit, if any, in the following year, and the succeeding 14 years if necessary, until the credit is exhausted. The credit shall be applied first to the earliest taxable years possible.
(e) Any taxpayer who elects to be subject to this section shall not be entitled to increase the basis of the property as otherwise required by Section 164(a) of the Internal Revenue Code with respect to sales or use tax paid or incurred in connection with the purchase of qualified property.
(f) (1) The amount of the credit otherwise allowed under this section and Section 23646, including any credit carryovers from prior years, that may reduce the “tax” for the taxable year shall not exceed the amount of tax that would be imposed on the taxpayer’s business income attributed to a LAMBRA determined as if that attributable income represented all the income of the taxpayer subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer’s California source business income that is apportioned to the LAMBRA. For that purpose, the taxpayer’s business income that is attributable to sources in this state shall first be determined in accordance with Chapter 17 (commencing with Section 25101). That business income shall be further apportioned to the LAMBRA in accordance with Article 2 (commencing with Section 25120) of Chapter 17, modified for purposes of this section in accordance with paragraph (3).
(3) Income shall be apportioned to a LAMBRA by multiplying the total California business income of the taxpayer by a fraction, the numerator of which is the property factor, plus the payroll factor, and the denominator of which is two. For purposes of this paragraph:
(A) The property factor is a fraction, the numerator of which is the average value of the taxpayer’s real and tangible personal property owned or rented and used in the LAMBRA during the taxable year, and the denominator of which is the average value of all the taxpayer’s real and tangible personal property owned or rented and used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is the total amount paid by the taxpayer in the LAMBRA during the taxable year for compensation, and the denominator of which is the total compensation paid by the taxpayer in this state during the taxable year.
(4) The portion of any credit remaining, if any, after application of this subdivision, shall be carried over to succeeding taxable years, as if it were an amount exceeding the “tax” for the taxable year, as provided in subdivision (d).
(g) (1) If the qualified property is disposed of or no longer used by the taxpayer in the LAMBRA, at any time before the close of the second taxable year after the property is placed in service, the amount of the credit previously claimed, with respect to that property, shall be added to the taxpayer’s tax liability in the taxable year of that disposition or nonuse.
(2) At the close of the second taxable year, if the taxpayer has not increased the number of its employees as determined by paragraph (2) of subdivision (b), then the amount of the credit previously claimed shall be added to the taxpayer’s tax for the taxpayer’s second taxable year.
(h) If the taxpayer is allowed a credit for qualified property pursuant to this section, only one credit shall be allowed to the taxpayer under this part with respect to that qualified property.
(i) A taxpayer shall be required to register a business pursuant to the Local Agency Military Base Recovery Area Act (Chapter 12.97 (commencing with Section 7105) of Division 7 of Title 1 of the Government Code), and shall state under penalty of perjury that the taxpayer is a registered business in one or more LAMBRAs, as a condition of claiming a credit under this section.

(i)

(j) The amendments made to this section by the act adding this subdivision shall apply to taxable years beginning on or after January 1, 1998.
(k) The amendments made to this section by the act adding this subdivision shall apply only to taxable years beginning on or after January 1, 2011.

SEC. 37.

 Section 23646 of the Revenue and Taxation Code is amended to read:

23646.
 (a) For each taxable year beginning on or after January 1, 1995, there shall be allowed as a credit against the “tax” (as defined in Section 23036) to a qualified taxpayer for hiring a qualified disadvantaged individual or a qualified displaced employee during the taxable year for employment in the LAMBRA. The credit shall be equal to the sum of each of the following:
(1) Fifty Thirty percent of the qualified wages in the first year of employment.
(2) Forty percent of the qualified wages in the second year of employment.
(3) Thirty Fifty percent of the qualified wages in the third year of employment.

(4)Twenty percent of the qualified wages in the fourth year of employment.

(5)Ten percent of the qualified wages in the fifth year of employment.

(b) For purposes of this section:
(1) “Qualified wages” means:
(A) (i) That portion of wages paid or incurred by the employer during the taxable year to qualified disadvantaged individuals or qualified displaced employees that does not exceed 150 180 percent of the minimum wage.
(ii) For qualified employees who are employed by the taxpayer who undertake manufacturing activities described in Codes 311 to 339, inclusive, of the North American Industry Classification System published by the United States Office of Management and Budget, 2007 edition, “qualified wages” means that portion of hourly wages that does not exceed 202 percent of the minimum wage.
(B) The total amount of qualified wages which may be taken into account for purposes of claiming the credit allowed under this section shall not exceed two million dollars ($2,000,000) per taxable year.
(C) Wages received during the 60-month 36-month period beginning with the first day the individual commences employment with the taxpayer. Reemployment in connection with any increase, including a regularly occurring seasonal increase, in the trade or business operation of the qualified taxpayer does not constitute commencement of employment for purposes of this section.
(D) Qualified wages do not include any wages paid or incurred by the qualified taxpayer on or after the LAMBRA expiration date. However, wages paid or incurred with respect to qualified disadvantaged individuals or qualified displaced employees who are employed by the qualified taxpayer within the LAMBRA within the 60-month 36-month period prior to the LAMBRA expiration date shall continue to qualify for the credit under this section after the LAMBRA expiration date, in accordance with all provisions of this section applied as if the LAMBRA designation were still in existence and binding.
(2) “Minimum wage” means the wage established by the Industrial Welfare Commission as provided for in Chapter 1 (commencing with Section 1171) of Part 4 of Division 2 of the Labor Code.
(3) “LAMBRA” means a local agency military base recovery area designated in accordance with the provisions of Section 7114 of the Government Code.
(4) “Qualified disadvantaged individual” means an individual who satisfies all of the following requirements:
(A) (i) At least 90 percent of whose services for the taxpayer during the taxable year are directly related to the conduct of the taxpayer’s trade or business located in a LAMBRA.
(ii) Who performs at least 50 percent of his or her services for the taxpayer during the taxable year in the LAMBRA.
(B) Who is hired by the employer after the designation of the area as a LAMBRA in which the individual’s services were primarily performed.
(C) Who is any of the following immediately preceding the individual’s commencement of employment with the taxpayer:

(i)An individual who has been determined eligible for services under the federal Job Training Partnership Act (29 U.S.C. Sec. 1501 et seq.), or its successor.

(ii)Any voluntary or mandatory registrant under the Greater Avenues for Independence Act of 1985 provided for pursuant to Article 3.2 (commencing with Section 11320) of Chapter 2 of Part 3 of Division 9 of the Welfare and Institutions Code.

(iii)

(i) An economically disadvantaged individual age 16 years or older.

(iv)

(ii) A dislocated worker who meets any of the following conditions:
(I) Has been terminated or laid off or who has received a notice of termination or layoff from employment, is eligible for or has exhausted entitlement to unemployment insurance benefits, and is unlikely to return to his or her previous industry or occupation.
(II) Has been terminated or has received a notice of termination of employment as a result of any permanent closure or any substantial layoff at a plant, facility, or enterprise, including an individual who has not received written notification but whose employer has made a public announcement of the closure or layoff.
(III) Is long-term unemployed and has limited opportunities for employment or reemployment in the same or a similar occupation in the area in which the individual resides, including an individual 55 years of age or older who may have substantial barriers to employment by reason of age.
(IV) Was self-employed (including farmers and ranchers) and is unemployed as a result of general economic conditions in the community in which he or she resides or because of natural disasters.
(V) Was a civilian employee of the Department of Defense employed at a military installation being closed or realigned under the Defense Base Closure and Realignment Act of 1990.
(VI) Was an active member of the Armed Forces or National Guard as of September 30, 1990, and was either involuntarily separated or separated pursuant to a special benefits program.
(VII) Experiences chronic seasonal unemployment and underemployment in the agriculture industry, aggravated by continual advancements in technology and mechanization.
(VIII) Has been terminated or laid off or has received a notice of termination or layoff as a consequence of compliance with the federal Clean Air Act.

(v)

(iii) An individual who is enrolled in or has completed a state rehabilitation plan or is a service-connected disabled veteran, veteran of the Vietnam era, or veteran who is recently separated from military service.

(vi)

(iv) An ex-offender. An individual shall be treated as convicted if he or she was placed on probation by a state court without a finding of guilty.

(vii)

(v) A recipient of:
(I) Federal Supplemental Security Income benefits.
(II) Aid to Families with Dependent Children.
(III) Food stamps.
(IV) State and local general assistance.

(viii)

(vi) Is a member of a federally recognized Indian tribe, band, or other group of Native American descent.
(5) “Qualified taxpayer” means a corporation that conducts a trade or business within a LAMBRA and, for the first two taxable years, has a net increase in jobs (defined as 2,000 paid hours per employee per year) of one or more employees as determined below in the LAMBRA.
(A) The net increase in the number of jobs shall be determined by subtracting the total number of full-time employees (defined as 2,000 paid hours per employee per year) the taxpayer employed in this state in the taxable year prior to commencing business operations in the LAMBRA from the total number of full-time employees the taxpayer employed in this state during the second taxable year after commencing business operations in the LAMBRA. For taxpayers who commence doing business in this state with their LAMBRA business operation, the number of employees for the taxable year prior to commencing business operations in the LAMBRA shall be zero. If the taxpayer has a net increase in jobs in the state, the credit shall be allowed only if one or more full-time employees is employed within the LAMBRA.
(B) The total number of employees employed in the LAMBRA shall equal the sum of both of the following:
(i) The total number of hours worked in the LAMBRA for the taxpayer by employees (not to exceed 2,000 hours per employee) who are paid an hourly wage divided by 2,000.
(ii) The total number of months worked in the LAMBRA for the taxpayer by employees who are salaried employees divided by 12.
(C) In the case of a qualified taxpayer that first commences doing business in the LAMBRA during the taxable year, for purposes of clauses (i) and (ii), respectively, of subparagraph (B) the divisors “2,000” and “12” shall be multiplied by a fraction, the numerator of which is the number of months of the taxable year that the taxpayer was doing business in the LAMBRA and the denominator of which is 12.
(6) “Qualified displaced employee” means an individual who satisfies all of the following requirements:
(A) Any civilian or military employee of a base or former base that has been displaced as a result of a federal base closure act.
(B) (i) At least 90 percent of whose services for the taxpayer during the taxable year are directly related to the conduct of the taxpayer’s trade or business located in a LAMBRA.
(ii) Who performs at least 50 percent of his or her services for the taxpayer during the taxable year in a LAMBRA.
(C) Who is hired by the employer after the designation of the area in which services were performed as a LAMBRA.
(7) “Seasonal employment” means employment by a qualified taxpayer that has regular and predictable substantial reductions in trade or business operations.
(8) “LAMBRA expiration date” means the date the LAMBRA designation expires, is no longer binding, or becomes inoperative.
(c) For qualified disadvantaged individuals or qualified displaced employees hired on or after January 1, 2001, the taxpayer shall do both of the following:
(1) Obtain Apply for certification, within 36 months of an employee being hired, from the Employment Development Department, as permitted by federal law, the administrative entity of the local county or city for the federal Job Training Partnership Act, or its successor, the local county GAIN office Workforce Investment Act of 1998 administrative entity, the local county CalWORKs program office or social services agency, or the local government administering the LAMBRA, a certification that provides that a qualified disadvantaged individual or qualified displaced employee meets the eligibility requirements specified in subparagraph (C) of paragraph (4) of subdivision (b) or subparagraph (A) of paragraph (6) of subdivision (b). The Employment Development Department may provide preliminary screening and referral to a certifying agency. The Department of Housing and Community Development shall develop regulations governing the issuance of certificates pursuant to Section 7114.2 of the Government Code and shall develop forms for this purpose.
(2) Retain a copy of the certification and provide it upon request to the Franchise Tax Board.
(d) (1) For purposes of this section, both of the following apply:
(A) All employees of all corporations that are members of the same controlled group of corporations shall be treated as employed by a single employer.
(B) The credit (if any) allowable by this section to each member shall be determined by reference to its proportionate share of the qualified wages giving rise to the credit.
(2) For purposes of this subdivision, “controlled group of corporations” has the meaning given to that term by Section 1563(a) of the Internal Revenue Code, except that both of the following apply:
(A) “More than 50 percent” shall be substituted for “at least 80 percent” each place it appears in Section 1563(a)(1) of the Internal Revenue Code.
(B) The determination shall be made without regard to Section 1563(a)(4) and Section 1563(e)(3)(C) of the Internal Revenue Code.
(3) (A) If an employer acquires the major portion of a trade or business of another employer (hereinafter in this paragraph referred to as the “predecessor”) or the major portion of a separate unit of a trade or business of a predecessor, then, for purposes of applying this section (other than subdivision (e)) for any calendar year ending after that acquisition, the employment relationship between an employee and an employer shall not be treated as terminated if the employee continues to be employed in that trade or business.
(B) If a taxpayer relocated to a LAMBRA from within the state, the taxpayer shall be allowed a credit only for that number of employees that exceeds the number of employees at the previous location. The number of employees at the previous location and the type of jobs undertaken shall be established by the Employment Development Department. Exceptions to this subparagraph shall be limited to the following:
(i) Employees who undertake core work activities or activities that are the primary job duties of the employee that are significantly different from those activities at the previous location, as determined by the Employment Development Department.
(ii) Taxpayers that receive a bona fide offer to relocate to another state.
(iii) Taxpayers who relocate as a result of a natural disaster, civic unrest, or eminent domain proceeding.
(iv) Taxpayers who relocate within the same local government jurisdiction.
(e) (1) (A) If the employment of any employee, other than seasonal employment, with respect to whom qualified wages are taken into account under subdivision (a) is terminated by the taxpayer at any time during the first 270 300 days of that employment (whether or not consecutive) or before the close of the 270th 300th calendar day after the day in which that employee completes 90 days of employment with the taxpayer, the tax imposed by this part for the taxable year in which that employment is terminated shall be increased by an amount equal to the credit allowed under subdivision (a) for that taxable year and all prior income years attributable to qualified wages paid or incurred with respect to that employee.
(B) If the seasonal employment of any qualified disadvantaged individual, with respect to whom qualified wages are taken into account under subdivision (a) is not continued by the qualified taxpayer for a period of 270 300 days of employment during the 60 36-month period beginning with the day the qualified disadvantaged individual commences seasonal employment with the qualified taxpayer, the tax imposed by this part, for the taxable year that includes the 60th 36th month following the month in which the qualified disadvantaged individual commences seasonal employment with the qualified taxpayer, shall be increased by an amount equal to the credit allowed under subdivision (a) for that taxable year and all prior taxable years attributable to qualified wages paid or incurred with respect to that qualified disadvantaged individual.
(2) (A) Subparagraph (A) of paragraph (1) shall not apply to any of the following:
(i) A termination of employment of an employee who voluntarily leaves the employment of the taxpayer.
(ii) A termination of employment of an individual who, before the close of the period referred to in paragraph (1), becomes disabled to perform the services of that employment, unless that disability is removed before the close of that period and the taxpayer fails to offer reemployment to that individual.
(iii) A termination of employment of an individual, if it is determined that the termination was due to the misconduct (as defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the California Code of Regulations) of that individual.
(iv) A termination of employment of an individual due to a substantial reduction in the trade or business operations of the taxpayer.
(v) A termination of employment of an individual, if that individual is replaced by other qualified employees so as to create a net increase in both the number of employees and the hours of employment.
(B) Subparagraph (B) of paragraph (1) shall not apply to any of the following:
(i) A failure to continue the seasonal employment of a qualified disadvantaged individual who voluntarily fails to return to the seasonal employment of the qualified taxpayer.
(ii) A failure to continue the seasonal employment of a qualified disadvantaged individual who, before the close of the period referred to in subparagraph (B) of paragraph (1), becomes disabled and unable to perform the services of that seasonal employment, unless that disability is removed before the close of that period and the qualified taxpayer fails to offer seasonal employment to that qualified disadvantaged individual.
(iii) A failure to continue the seasonal employment of a qualified disadvantaged individual, if it is determined that the failure to continue the seasonal employment was due to the misconduct (as defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the California Code of Regulations) of that individual.
(iv) A failure to continue seasonal employment of a qualified disadvantaged individual due to a substantial reduction in the regular seasonal trade or business operations of the qualified taxpayer.
(v) A failure to continue the seasonal employment of a qualified disadvantaged individual, if that individual is replaced by other qualified disadvantaged individuals so as to create a net increase in both the number of seasonal employees and the hours of seasonal employment.
(C) For purposes of paragraph (1), the employment relationship between the taxpayer and an employee shall not be treated as terminated by either of the following:
(i) A transaction to which Section 381(a) of the Internal Revenue Code applies, if the employee continues to be employed by the acquiring corporation.
(ii) A mere change in the form of conducting the trade or business of the taxpayer, if the employee continues to be employed in that trade or business and the taxpayer retains a substantial interest in that trade or business.
(3) Any increase in tax under paragraph (1) shall not be treated as tax imposed by this part for purposes of determining the amount of any credit allowable under this part.
(4) At the close of the second taxable year, if the taxpayer has not increased the number of its employees as determined by paragraph (5) of subdivision (b), then the amount of the credit previously claimed shall be added to the taxpayer’s tax for the taxpayer’s second taxable year.
(f) In the case of an organization to which Section 593 of the Internal Revenue Code applies, and a regulated investment company or a real estate investment trust subject to taxation under this part, rules similar to the rules provided in Section 46(e) and Section 46(h) of the Internal Revenue Code shall apply.
(g) The credit shall be reduced by the credit allowed under Section 23621. The credit shall also be reduced by the federal credit allowed under Section 51 of the Internal Revenue Code.
In addition, any deduction otherwise allowed under this part for the wages or salaries paid or incurred by the taxpayer upon which the credit is based shall be reduced by the amount of the credit, prior to any reduction required by subdivision (h) or (i).
(h) In the case where the credit otherwise allowed under this section exceeds the “tax” for the taxable year, that portion of the credit that exceeds the “tax” may be carried over and added to the credit, if any, in the following year, and the succeeding 14 years if necessary, until the credit is exhausted. The credit shall be applied first to the earliest taxable years possible.
(i) (1) The amount of credit otherwise allowed under this section and Section 23645, including any prior year carryovers, that may reduce the “tax” for the taxable year shall not exceed the amount of tax that would be imposed on the taxpayer’s business income attributed to a LAMBRA determined as if that attributed income represented all of the income of the taxpayer subject to tax under this part.
(2) Attributable income shall be that portion of the taxpayer’s California source business income that is apportioned to the LAMBRA. For that purpose, the taxpayer’s business income that is attributable to sources in this state first shall be determined in accordance with Chapter 17 (commencing with Section 25101). That business income shall be further apportioned to the LAMBRA in accordance with Article 2 (commencing with Section 25120) of Chapter 17, modified for purposes of this section in accordance with paragraph (3).
(3) Income shall be apportioned to a LAMBRA by multiplying the total California business income of the taxpayer by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is two. For purposes of this paragraph:
(A) The property factor is a fraction, the numerator of which is the average value of the taxpayer’s real and tangible personal property owned or rented and used in the LAMBRA during the taxable year, and the denominator of which is the average value of all the taxpayer’s real and tangible personal property owned or rented and used in this state during the taxable year.
(B) The payroll factor is a fraction, the numerator of which is the total amount paid by the taxpayer in the LAMBRA during the taxable year for compensation, and the denominator of which is the total compensation paid by the taxpayer in this state during the taxable year.
(4) The portion of any credit remaining, if any, after application of this subdivision, shall be carried over to succeeding taxable years, as if it were an amount exceeding the “tax” for the taxable year, as provided in subdivision (h).
(j) If the taxpayer is allowed a credit pursuant to this section for qualified wages paid or incurred, only one credit shall be allowed to the taxpayer under this part with respect to any wage consisting in whole or in part of those qualified wages.
(k) A credit shall not be allowed under this section to a taxpayer that has been notified by the Director of Industrial Relations of a final determination, based on the taxpayer’s history of significant employment violations, that the taxpayer is considered by the Department of Industrial Relations as a serious, repeated, and willful violator of state employment laws, including, but not limited to, demonstrating a failure to successfully abate these violations.
(l) A taxpayer shall be required to register a business pursuant to the Local Agency Military Base Recovery Area Act (Chapter 12.97 (commencing with Section 7105) of Division 7 of Title 1 of the Government Code), and shall state under penalty of perjury that the taxpayer is a registered business in one or more LAMBRAs, as a condition of claiming a credit under this section.
(m) The changes made to this section by the act adding this subdivision shall apply only to qualified disadvantaged individuals hired by a qualified taxpayer on or after January 1, 2011.

SEC. 38.

 Section 24384.5 of the Revenue and Taxation Code is amended to read:

24384.5.
 (a) There (1) For taxable years beginning on or after January 1, 2011, and before January 1, 2013, there shall be allowed as a deduction in an amount equal to 50 percent of the amount of net interest received by the taxpayer in payment on indebtedness of a person or entity engaged in the conduct of a trade or business located in an enterprise zone.
(2) For taxable years beginning on or after January 1, 2013, there shall be allowed as a deduction the amount of net interest received by the taxpayer in payment of indebtedness of a person or entity engaged in a trade or business located in an enterprise zone.
(b) No A deduction shall be allowed under this section unless only if at the time the indebtedness is incurred each of the following requirements are met:
(1) The trade or business is located solely within an enterprise zone.
(2) The indebtedness is incurred solely in connection with activity within the enterprise zone.
(3) The taxpayer has no equity or other ownership interest in the debtor.
(c) “Enterprise zone” means an area designated as an enterprise zone pursuant to Chapter 12.8 (commencing with Section 7070) of Division 7 of Title 1 of the Government Code.
(d) For taxable years beginning on or after January 1, 2011, a taxpayer shall be required to register a business pursuant to the Enterprise Zone Act (Chapter 12.8 (commencing with Section 7070) of Division 7 of Title 1 of the Government Code), and shall state under penalty of perjury that the taxpayer has a registered business in one or more enterprise zones, as a condition of claiming a deduction under this section.
(e) The changes made to this section by the act adding this subdivision shall apply only to taxable years beginning on or after January 1, 2011.

SEC. 39.

 Section 24416.2 of the Revenue and Taxation Code is amended to read:

24416.2.
 (a) The term “qualified taxpayer” as used in Section 24416.1 includes a corporation engaged in the conduct of a trade or business within an enterprise zone designated pursuant to Chapter 12.8 (commencing with Section 7070) of Division 7 of Title 1 of the Government Code. For purposes of this subdivision, all of the following shall apply:
(1) A net operating loss shall not be a net operating loss carryback for any taxable year and a net operating loss for any taxable year beginning on or after the date that the area in which the taxpayer conducts a trade or business is designated as an enterprise zone shall be a net operating loss carryover to each of the 15 taxable years following the taxable year of loss.
(2) For purposes of this subdivision:
(A) “Net operating loss” means the loss determined under Section 172 of the Internal Revenue Code, as modified by Section 24416.1, attributable to the taxpayer’s business activities within the enterprise zone (as defined in Chapter 12.8 (commencing with Section 7070) of Division 7 of Title 1 of the Government Code) prior to the enterprise zone expiration date. That attributable loss shall be determined in accordance with Chapter 17 (commencing with Section 25101), modified for purposes of this subdivision as follows:
(i) Loss shall be apportioned to the enterprise zone by multiplying total loss from the business by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is two.
(ii) “The enterprise zone” shall be substituted for “this state.”
(B) A net operating loss carryover shall be a deduction only with respect to the taxpayer’s business income attributable to the enterprise zone as defined in Chapter 12.8 (commencing with Section 7070) of Division 7 of Title 1 of the Government Code.
(C) Attributable income is that portion of the taxpayer’s California source business income that is apportioned to the enterprise zone. For that purpose, the taxpayer’s business income attributable to sources in this state first shall be determined in accordance with Chapter 17 (commencing with Section 25101). That business income shall be further apportioned to the enterprise zone in accordance with Article 2 (commencing with Section 25120) of Chapter 17, modified for purposes of this subdivision as follows:
(i) Business income shall be apportioned to the enterprise zone by multiplying the total California business income of the taxpayer by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is two. For purposes of this clause:
(I) The property factor is a fraction, the numerator of which is the average value of the taxpayer’s real and tangible personal property owned or rented and used in the enterprise zone during the taxable year, and the denominator of which is the average value of all the taxpayer’s real and tangible personal property owned or rented and used in this state during the taxable year.
(II) The payroll factor is a fraction, the numerator of which is the total amount paid by the taxpayer in the enterprise zone during the taxable year for compensation, and the denominator of which is the total compensation paid by the taxpayer in this state during the taxable year.
(ii) If a loss carryover is allowable pursuant to this section for any taxable year after the enterprise zone designation has expired, the enterprise zone shall be deemed to remain in existence for purposes of computing the limitation set forth in subparagraph (B) and allowing a net operating loss deduction.
(D) “Enterprise zone expiration date” means the date the enterprise zone designation expires, is no longer binding, or becomes inoperative.
(3) The changes made to this subdivision by the act adding this paragraph shall apply to taxable years beginning on or after January 1, 1998.
(b) A taxpayer who qualifies as a “qualified taxpayer” under one or more sections shall, for the taxable year of the net operating loss and any taxable year to which that net operating loss may be carried, designate on the original return filed for each year the section which applies to that taxpayer with respect to that net operating loss. If the taxpayer is eligible to qualify under more than one section, the designation is to be made after taking into account subdivision (c).
(c) If a taxpayer is eligible to qualify under this section and either Section 24416.4, 24416.5, or 24416.6 as a “qualified taxpayer,” with respect to a net operating loss in a taxable year, the taxpayer shall designate which section is to apply to the taxpayer.
(d) Notwithstanding Section 24416, the amount of the loss determined under this section, or Section 24416.4, 24416.5, or 24416.6 shall be the only net operating loss allowed to be carried over from that taxable year and the designation under subdivision (b) shall be included in the election under Section 24416.1.
(e) This section shall remain in effect only until January 1, 2011, and as of that date is repealed.

SEC. 40.

 Section 24416.5 of the Revenue and Taxation Code is amended to read:

24416.5.
 (a) For each taxable year beginning on or after January 1, 1995, the term “qualified taxpayer” as used in Section 24416.1 includes a taxpayer engaged in the conduct of a trade or business within a LAMBRA. For purposes of this subdivision, all of the following shall apply:
(1) A net operating loss shall not be a net operating loss carryback for any taxable year and, except as provided in subparagraph (B), a net operating loss for any taxable year beginning on or after the date the area in which the taxpayer conducts a trade or business is designated a LAMBRA shall be a net operating loss carryover to each following taxable year that ends before the LAMBRA expiration date or to each of the 15 taxable years following the taxable year of loss, if longer.
(2) In the case of a financial institution to which Section 585, 586, or 593 of the Internal Revenue Code applies, a net operating loss for any taxable year beginning on or after January 1, 1984, shall be a net operating loss carryover to each of the five years following the taxable year of the loss. Subdivision (b) of Section 24416.1 shall not apply.
(3) “LAMBRA” means a local agency military base recovery area designated in accordance with Section 7114 of the Government Code.
(4) “Taxpayer” means a bank or corporation that conducts a trade or business within a LAMBRA and, for the first two taxable years, has a net increase in jobs (defined as 2,000 paid hours per employee per year) of one or more employees in the LAMBRA and this state. For purposes of this paragraph, all of the following shall apply:
(A) The net increase in the number of jobs shall be determined by subtracting the total number of full-time employees (defined as 2,000 paid hours per employee per year) the taxpayer employed in this state in the taxable year prior to commencing business operations in the LAMBRA from the total number of full-time employees the taxpayer employed in this state during the second taxable year after commencing business operations in the LAMBRA. For taxpayers who commence doing business in this state with their LAMBRA business operation, the number of employees for the taxable year prior to commencing business operations in the LAMBRA shall be zero. The deduction shall be allowed only if the taxpayer has a net increase in jobs in the state, and if one or more full-time employees are employed within the LAMBRA.
(B) The total number of employees employed in the LAMBRA shall equal the sum of both of the following:
(i) The total number of hours worked in the LAMBRA for the taxpayer by employees (not to exceed 2,000 hours per employee) who are paid an hourly wage divided by 2,000.
(ii) The total number of months worked in the LAMBRA for the taxpayer by employees who are salaried employees divided by 12.
(C) In the case of a taxpayer that first commences doing business in the LAMBRA during the taxable year, for purposes of clauses (i) and (ii), respectively, of subparagraph (B) the divisors “2,000” and “12” shall be multiplied by a fraction, the numerator of which is the number of months of the taxable year that the taxpayer was doing business in the LAMBRA and the denominator of which is 12.
(5) “Net operating loss” means the loss determined under Section 172 of the Internal Revenue Code, as modified by Section 24416.1, attributable to the taxpayer’s business activities within a LAMBRA prior to the LAMBRA expiration date. The attributable loss shall be determined in accordance with Chapter 17 (commencing with Section 25101), modified for purposes of this section as follows:
(A) Loss shall be apportioned to a LAMBRA by multiplying total loss from the business by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is 2.
(B) “The LAMBRA” shall be substituted for “this state.”
(6) A net operating loss carryover shall be a deduction only with respect to the taxpayer’s business income attributable to a LAMBRA.
(7) Attributable income is that portion of the taxpayer’s California source business income that is apportioned to the LAMBRA. For that purpose, the taxpayer’s business income attributable to sources in this state first shall be determined in accordance with Chapter 17 (commencing with Section 25101). That business income shall be further apportioned to the LAMBRA in accordance with Article 2 (commencing with Section 25120) of Chapter 17, modified as follows:
(A) Business income shall be apportioned to a LAMBRA by multiplying total California business income of the taxpayer by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is two. For purposes of this clause:
(i) The property factor is a fraction, the numerator of which is the average value of the taxpayer’s real and tangible personal property owned or rented and used in the LAMBRA during the taxable year, and the denominator of which is the average value of all the taxpayer’s real and tangible personal property owned or rented and used in this state during the taxable year.
(ii) The payroll factor is a fraction, the numerator of which is the total amount paid by the taxpayer in the LAMBRA during the taxable year for compensation, and the denominator of which is the total compensation paid by the taxpayer in this state during the taxable year.
(B) If a loss carryover is allowable pursuant to this section for any taxable year after the LAMBRA designation has expired, the LAMBRA shall be deemed to remain in existence for purposes of computing the limitation specified in subparagraph (D) and allowing a net operating loss deduction.
(8) “LAMBRA expiration date” means the date the LAMBRA designation expires, is no longer binding, or becomes inoperative pursuant to Section 7110 of the Government Code.
(b) A taxpayer who qualifies as a “qualified taxpayer” under one or more sections shall, for the taxable year of the net operating loss and any taxable year to which that net operating loss may be carried, designate on the original return filed for each year the section that applies to that taxpayer with respect to that net operating loss. If the taxpayer is eligible to qualify under more than one section, the designation is to be made after taking into account subdivision (c).
(c) If a taxpayer is eligible to qualify under this section and either Section 24416.2, 24416.4, or 24416.6 as a “qualified taxpayer,” with respect to a net operating loss in a taxable year, the taxpayer shall designate which section is to apply to the taxpayer.
(d) Notwithstanding Section 24416, the amount of the loss determined under this section or Section 24416.2, 24416.4, or 24416.6 shall be the only net operating loss allowed to be carried over from that taxable year and the designation under subdivision (b) shall be included in the election under Section 24416.1.
(e) This section shall apply to taxable years beginning on and after January 1, 1998.
(f) This section shall remain in effect only until January 1, 2011, and as of that date is repealed.

SEC. 41.

 Section 24416.11 is added to the Revenue and Taxation Code, to read:

24416.11.
 Notwithstanding the repeal of Sections 24416.2 and 24416.5 by the act adding this section, any remaining carryover of a net operating loss allowed by Section 24416.2 or 24416.5, shall continue to be allowed as a net operating loss carryover to subsequent taxable years as provided by those sections as they read immediately prior to being repealed.

SEC. 42.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.

SEC. 43.

 This act provides for a tax levy within the meaning of Article IV of the Constitution and shall go into immediate effect.