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AB-2389 Local government: capital investment incentive programs: corporation tax credits: qualified wages: new advanced strategic aircraft program.(2013-2014)

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Assembly Bill No. 2389
CHAPTER 116

An act to amend Section 51298.5 of, and to amend, repeal, and add Section 51298 of, the Government Code, and to amend Sections 17059.2 and 23689 of, and to add Section 23636 to, the Revenue and Taxation Code, relating to economic development, and declaring the urgency thereof, to take effect immediately.

[ Approved by Governor  July 10, 2014. Filed with Secretary of State  July 10, 2014. ]

LEGISLATIVE COUNSEL'S DIGEST


AB 2389, Fox. Local government: capital investment incentive programs: corporation tax credits: qualified wages: new advanced strategic aircraft program.
Existing law authorizes a county, city and county, or city to establish a capital investment incentive program, pursuant to which the county, city and county, or city is authorized to pay a capital investment incentive amount, as defined, that does not exceed the amount of property tax derived from that portion of the assessed value of a qualified manufacturing facility that exceeds $150,000,000, to a proponent of a qualified manufacturing facility. A “qualified manufacturing facility” is defined to include a facility operated by a business described in specified provisions of the Standard Industrial Classification Manual. Existing law requires the Business, Transportation and Housing Agency, or its successor, to certify qualified manufacturing facilities for purposes of these provisions and to carry out various oversight duties. Existing law repeals these provisions on January 1, 2017.
This bill would, until July 1, 2015, reduce the assessed value threshold for calculating the capital investment incentive amount from $150,000,000 to $25,000,000 and would define “qualified manufacturing facility” to include, among others, facilities operated by certain businesses described in specified provisions of the North American Industry Classification System Manual. The bill would transfer the duties of the Business, Transportation and Housing Agency to the Governor’s Office of Business and Economic Development (GO-Biz). The bill would, on July 1, 2015, restore the existing provisions relating to the capital investment threshold amount and the definition of “qualified manufacturing facility,” but would maintain the transfer of duties to Go-Biz. The bill would instead repeal these provisions on January 1, 2018. The bill would also replace obsolete references in those restored provisions to the Standard Industrial Classification Manual with corresponding references to the North American Industry Classification System Manual.
The Corporation Tax Law allows various credits against the taxes imposed by that law.
This bill would, for taxable years beginning on or after January 1, 2015, and before January 1, 2030, allow, with regard to the manufacture of a new advanced strategic aircraft for the United States Air Force, a credit against the taxes imposed under that law for 171/2% of qualified wages, as defined, paid or incurred by the qualified taxpayer, as defined, to qualified full-time employees, award the credit on a first-come-first-served basis, and provide that the credit have a phased aggregate cap ranging from $25,000,000 to $31,000,000 per calendar year, as specified.
Existing law also allows a credit against the taxes imposed under both laws for each taxable year beginning on or after January 1, 2014, and before January 1, 2025, in an amount as provided in a written agreement between the Governor’s Office of Business and Economic Development and the taxpayer, agreed upon by the California Competes Tax Credit Committee, and based on specified factors, including the number of jobs the taxpayer will create or retain in the state and the amount of investment in the state by the taxpayer. Existing law limits the aggregate amount of credits allocated to taxpayers to a specified sum per fiscal year.
This bill would reduce this aggregate amount of credits that may be allocated to taxpayers per fiscal year by the phased aggregate amount allowed to taxpayers pursuant to the credit proposed by this bill with regard to the manufacture of a new advanced strategic aircraft, as described above.
This bill would declare that it is to take effect immediately as an urgency statute.
Vote: 2/3   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

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


SECTION 1.

 Section 51298 of the Government Code is amended to read:

51298.
 It is the intent of the Legislature in enacting this chapter to provide local governments with opportunities to attract large manufacturing facilities to invest in their communities and to encourage industries, such as high technology, aerospace, automotive, biotechnology, software, environmental sources, and others, to locate and invest in those facilities in California.
(a) Commencing in the 1998–99 fiscal year, the governing body of a county, city and county, or city, may, by means of an ordinance or resolution approved by a majority of its entire membership, elect to establish a capital investment incentive program. In any county, city and county, or city in which the governing body has so elected, the county, city and county, or city shall, upon the approval by a majority of the entire membership of its governing body of a written request therefor, pay a capital investment incentive amount to the proponent of a qualified manufacturing facility for up to 15 consecutive fiscal years. A request for the payment of capital investment incentive amounts shall be filed by a proponent in writing with the governing body of an electing county, city and county, or city in the time and manner specified in procedures adopted by that governing body. In the case in which the governing body of an electing county, city and county, or city approves a request for the payment of capital investment incentive amounts, both of the following conditions shall apply:
(1) The consecutive fiscal years during which a capital investment incentive amount is to be paid shall commence with the first fiscal year commencing after the date upon which the qualified manufacturing facility is certified for occupancy or, if no certification is issued, the first fiscal year commencing after the date upon which the qualified manufacturing facility commences operation.
(2) In accordance with paragraph (4) of subdivision (d), the annual payment to a proponent of each capital investment incentive amount shall be contingent upon the proponent’s payment of a community services fee.
(b) For purposes of this section:
(1) “Qualified manufacturing facility” means a proposed manufacturing facility that meets all of the following criteria:
(A) The proponent’s initial investment in that facility, in real and personal property, necessary for the full and normal operation of that facility, made pursuant to the capital investment incentive program, that comprises any portion of that facility or has its situs at that facility, exceeds one hundred fifty million dollars ($150,000,000). Compliance with this subparagraph shall be certified by the Governor’s Office of Business and Economic Development upon the director’s approval of a proponent’s application for certification of a qualified manufacturing facility. An application for certification shall be submitted by a proponent to the Governor’s Office of Business and Economic Development in writing in the time and manner as specified by the director.
(B) The facility is to be located within the jurisdiction of the electing county, city and county, or city to which the request is made for payment of capital investment incentive amounts.
(C) The facility is operated by any of the following:
(i) A business described within Code 3359 or 3364 of the 2012 North American Industry Classification System (NAICS) Manual published by the United States Office of Management and Budget.
(ii) A business engaged in the recovery of minerals from geothermal resources, including the proportional amount of a geothermal electric generating plant that is integral to the recovery process by providing electricity for it.
(iii) A business engaged in the manufacturing of parts or components related to the production of electricity using solar, wind, biomass, hydropower, or geothermal resources on or after July 1, 2010.
(D) The proponent is currently engaged in any of the following:
(i) Commercial production.
(ii) The perfection of the manufacturing process.
(iii) The perfection of a product intended to be manufactured.
(2) “Proponent” means a party or parties that meet all of the following criteria:
(A) The party is named in the application to the county, city and county, or city within which the qualified manufacturing facility would be located for a permit to construct a qualified manufacturing facility.
(B) The party will be the fee owner of the qualified manufacturing facility upon the completion of that facility. Notwithstanding the previous sentence, the party may enter into a sale-leaseback transaction and nevertheless be considered the proponent.
(C) If a proponent that is receiving capital investment incentive amounts subsequently leases the subject qualified manufacturing facility to another party, the lease may provide for the payment to that lessee of any portion of a capital investment incentive amount. Any lessee receiving any portion of a capital investment incentive amount shall also be considered a proponent for the purposes of subdivision (d).
(3) “Capital investment incentive amount” means, with respect to a qualified manufacturing facility for a relevant fiscal year, an amount up to or equal to the amount of ad valorem property tax revenue derived by the participating local agency from the taxation of that portion of the total assessed value of that real and personal property described in subparagraph (A) of paragraph (1) that is in excess of twenty-five million dollars ($25,000,000).
(4) “Manufacturing” means the activity of converting or conditioning property by changing the form, composition, quality, or character of the property for ultimate sale at retail or use in the manufacturing of a product to be ultimately sold at retail. Manufacturing includes any improvements to tangible personal property that result in a greater service life or greater functionality than that of the original property.
(c) A city or special district may, upon the approval by a majority of the entire membership of its governing body, pay to the county, city and county, or city an amount equal to the amount of ad valorem property tax revenue allocated to that city or special district, but not the actual allocation, derived from the taxation of that portion of the total assessed value of that real and personal property described in subparagraph (A) of paragraph (1) of subdivision (b) that is in excess of twenty-five million dollars ($25,000,000).
(d) A proponent whose request for the payment of capital investment incentive amounts is approved by an electing county, city and county, or city shall enter into a community services agreement with that county, city and county, or city that includes, but is not limited to, all of the following provisions:
(1) A provision requiring that a community services fee be remitted by the proponent to the county, city and county, or city, in each fiscal year, in an amount that is equal to 25 percent of the capital investment incentive amount calculated for that proponent for that fiscal year, except that in no fiscal year shall the amount of the community services fee exceed two million dollars ($2,000,000).
(2) A provision specifying the dates in each relevant fiscal year upon which payment of the community services fee is due and delinquent, and the rate of interest to be charged to a proponent for any delinquent portion of the community services fee amount.
(3) A provision specifying the procedures and rules for the determination of underpayments or overpayments of a community services fee, for the appeal of determinations of any underpayment, and for the refunding or crediting of any overpayment.
(4) A provision specifying that a proponent is ineligible to receive a capital investment incentive amount if that proponent is currently delinquent in the payment of any portion of a community services fee amount, if the qualified manufacturing facility is constructed in a manner materially different from the facility as described in building permit application materials, or if the facility is no longer operated as a qualified manufacturing facility meeting the requirements of paragraph (1) of subdivision (b). If a proponent becomes ineligible to receive a capital investment incentive amount as a result of an agreement provision included pursuant to this subparagraph, the running of the number of consecutive fiscal years specified in an agreement made pursuant to subdivision (a) is not tolled during the period in which the proponent is ineligible.
(5) A provision that sets forth a job creation plan with respect to the relevant qualified manufacturing facility. The plan shall specify the number of jobs to be created by that facility, and the types of jobs and compensation ranges to be created thereby. The plan shall also specify that for the entire term of the community services agreement, both of the following shall apply:
(A) All of the employees working at the qualified manufacturing facility shall be covered by an employer-sponsored health benefits plan, with the exception of any employee who was offered but declined coverage due to other available group coverage.
(B) The average weekly wage, exclusive of overtime, paid to all of the employees working at the qualified manufacturing facility, who are not management or supervisory employees, shall be not less than the state average weekly wage.
For the purpose of this subdivision, “state average weekly wage” means the average weekly wage paid by employers to employees covered by unemployment insurance, as reported to the Employment Development Department for the four calendar quarters ending June 30 of the preceding calendar year.
(6) (A)   In the case in which the proponent fails to operate the qualified manufacturing facility as required by the community services agreement, a provision that requires the recapture of any portion of any capital investment incentive amounts previously paid to the proponent equal to the lesser of the following:
(i) All of the capital investment incentive amounts paid to the proponent, less all of the community services fees received from the proponent, and less any capital investment incentive amounts previously recaptured.
(ii) The last capital investment incentive amount paid to the proponent, less the last community services fee received from the proponent, multiplied by 40 percent of the number of years remaining in the community services agreement, but not to exceed 10 years, and less any capital investment incentive amounts previously recaptured.
(B) If the proponent fails to operate the qualified manufacturing facility as required by the community services agreement, the county, city and county, or city may, upon a finding that good cause exists, waive any portion of the recapture of any capital investment incentive amount due under this subdivision. For the purpose of this subdivision, good cause includes, but is not limited to, the following:
(i) The proponent has sold or leased the property to a person who has entered into an agreement with the county, city and county, or city to assume all of the responsibilities of the proponent under the community services agreement.
(ii) The qualified manufacturing facility has been rendered inoperable and beyond repair as a result of an act of God, civil disorder, failure of power, riots, insurrections, war, acts of terrorism, or any other causes, whether the kind herein enumerated or otherwise, not within the control of the qualified manufacturing facility claiming good cause, which restrict or interfere with a qualified manufacturing facility’s ability to timely perform, and which by the exercise of reasonable due diligence, such party is or would have been unable to prevent or overcome.
(C) For purposes of this subdivision, failure to operate a qualified manufacturing facility as required by the community services agreement includes, but is not limited to, failure to establish the number of jobs specified in the jobs creation plan created pursuant to paragraph (5).
(e) (1)   Each county, city and county, or city that elects to establish a capital investment incentive program shall notify the Governor’s Office of Business and Economic Development of its election to do so no later than June 30th of the fiscal year in which the election was made.
(2) In addition to the information required to be reported pursuant to paragraph (1), each county, city and county, or city that has elected to establish a capital investment incentive program shall notify the Governor’s Office of Business and Economic Development each fiscal year no later than June 30th of the amount of any capital investment incentive payments made and the proponent of the qualified manufacturing facility to whom the payments were made during that fiscal year.
(3) The Governor’s Office of Business and Economic Development shall compile the information submitted by each county, city and county, and city pursuant to paragraphs (1) and (2) and submit a report to the Legislature containing this information no later than October 1, every two years commencing October 1, 2000.
(f) This section shall become inoperative on July 1, 2015.
(g) A capital investment incentive program established pursuant to this section before the effective date of the act adding this subdivision may remain in effect for the full term of that program.
(h) This section is repealed on January 1, 2016.

SEC. 2.

 Section 51298 is added to the Government Code, to read:

51298.
 It is the intent of the Legislature in enacting this chapter to provide local governments with opportunities to attract large manufacturing facilities to invest in their communities and to encourage industries, such as high technology, aerospace, automotive, biotechnology, software, environmental sources, and others, to locate and invest in those facilities in California.
(a) Commencing in the 1998–99 fiscal year, the governing body of a county, city and county, or city, may, by means of an ordinance or resolution approved by a majority of its entire membership, elect to establish a capital investment incentive program. In any county, city and county, or city in which the governing body has so elected, the county, city and county, or city shall, upon the approval by a majority of the entire membership of its governing body of a written request therefor, pay a capital investment incentive amount to the proponent of a qualified manufacturing facility for up to 15 consecutive fiscal years. A request for the payment of capital investment incentive amounts shall be filed by a proponent in writing with the governing body of an electing county, city and county, or city in the time and manner specified in procedures adopted by that governing body. In the case in which the governing body of an electing county, city and county, or city approves a request for the payment of capital investment incentive amounts, both of the following conditions shall apply:
(1) The consecutive fiscal years during which a capital investment incentive amount is to be paid shall commence with the first fiscal year commencing after the date upon which the qualified manufacturing facility is certified for occupancy or, if no certification is issued, the first fiscal year commencing after the date upon which the qualified manufacturing facility commences operation.
(2) In accordance with paragraph (4) of subdivision (d), the annual payment to a proponent of each capital investment incentive amount shall be contingent upon the proponent’s payment of a community services fee.
(b) For purposes of this section:
(1) “Qualified manufacturing facility” means a proposed manufacturing facility that meets all of the following criteria:
(A) The proponent’s initial investment in that facility, in real and personal property, necessary for the full and normal operation of that facility, made pursuant to the capital investment incentive program, that comprises any portion of that facility or has its situs at that facility, exceeds one hundred fifty million dollars ($150,000,000). Compliance with this subparagraph shall be certified by the Governor’s Office of Business and Economic Development upon the director’s approval of a proponent’s application for certification of a qualified manufacturing facility. An application for certification shall be submitted by a proponent to the Governor’s Office of Business and Economic Development in writing in the time and manner as specified by the director.
(B) The facility is to be located within the jurisdiction of the electing county, city and county, or city to which the request is made for payment of capital investment incentive amounts.
(C) The facility is operated by any of the following:
(i) A business described in Codes 3321 to 3399, inclusive, or Codes 541711 or 541712 of the 2012 North American Industry Classification System (NAICS) Manual published by the United States Office of Management and Budget.
(ii) A business engaged in the recovery of minerals from geothermal resources, including the proportional amount of a geothermal electric generating plant that is integral to the recovery process by providing electricity for it.
(iii) A business engaged in the manufacturing of parts or components related to the production of electricity using solar, wind, biomass, hydropower, or geothermal resources on or after July 1, 2010.
(D) The proponent is currently engaged in any of the following:
(i) Commercial production.
(ii) The perfection of the manufacturing process.
(iii) The perfection of a product intended to be manufactured.
(2) “Proponent” means a party or parties that meet all of the following criteria:
(A) The party is named in the application to the county, city and county, or city within which the qualified manufacturing facility would be located for a permit to construct a qualified manufacturing facility.
(B) The party will be the fee owner of the qualified manufacturing facility upon the completion of that facility. Notwithstanding the previous sentence, the party may enter into a sale-leaseback transaction and nevertheless be considered the proponent.
(C) If a proponent that is receiving capital investment incentive amounts subsequently leases the subject qualified manufacturing facility to another party, the lease may provide for the payment to that lessee of any portion of a capital investment incentive amount. Any lessee receiving any portion of a capital investment incentive amount shall also be considered a proponent for the purposes of subdivision (d).
(3) “Capital investment incentive amount” means, with respect to a qualified manufacturing facility for a relevant fiscal year, an amount up to or equal to the amount of ad valorem property tax revenue derived by the participating local agency from the taxation of that portion of the total assessed value of that real and personal property described in subparagraph (A) of paragraph (1) that is in excess of one hundred fifty million dollars ($150,000,000).
(4) “Manufacturing” means the activity of converting or conditioning property by changing the form, composition, quality, or character of the property for ultimate sale at retail or use in the manufacturing of a product to be ultimately sold at retail. Manufacturing includes any improvements to tangible personal property that result in a greater service life or greater functionality than that of the original property.
(c) A city or special district may, upon the approval by a majority of the entire membership of its governing body, pay to the county, city and county, or city an amount equal to the amount of ad valorem property tax revenue allocated to that city or special district, but not the actual allocation, derived from the taxation of that portion of the total assessed value of that real and personal property described in subparagraph (A) of paragraph (1) of subdivision (b) that is in excess of one hundred fifty million dollars ($150,000,000).
(d) A proponent whose request for the payment of capital investment incentive amounts is approved by an electing county, city and county, or city shall enter into a community services agreement with that county, city and county, or city that includes, but is not limited to, all of the following provisions:
(1) A provision requiring that a community services fee be remitted by the proponent to the county, city and county, or city, in each fiscal year, in an amount that is equal to 25 percent of the capital investment incentive amount calculated for that proponent for that fiscal year, except that in no fiscal year shall the amount of the community services fee exceed two million dollars ($2,000,000).
(2) A provision specifying the dates in each relevant fiscal year upon which payment of the community services fee is due and delinquent, and the rate of interest to be charged to a proponent for any delinquent portion of the community services fee amount.
(3) A provision specifying the procedures and rules for the determination of underpayments or overpayments of a community services fee, for the appeal of determinations of any underpayment, and for the refunding or crediting of any overpayment.
(4) A provision specifying that a proponent is ineligible to receive a capital investment incentive amount if that proponent is currently delinquent in the payment of any portion of a community services fee amount, if the qualified manufacturing facility is constructed in a manner materially different from the facility as described in building permit application materials, or if the facility is no longer operated as a qualified manufacturing facility meeting the requirements of paragraph (1) of subdivision (b). If a proponent becomes ineligible to receive a capital investment incentive amount as a result of an agreement provision included pursuant to this subparagraph, the running of the number of consecutive fiscal years specified in an agreement made pursuant to subdivision (a) is not tolled during the period in which the proponent is ineligible.
(5) A provision that sets forth a job creation plan with respect to the relevant qualified manufacturing facility. The plan shall specify the number of jobs to be created by that facility, and the types of jobs and compensation ranges to be created thereby. The plan shall also specify that for the entire term of the community services agreement, both of the following shall apply:
(A) All of the employees working at the qualified manufacturing facility shall be covered by an employer-sponsored health benefits plan, with the exception of any employee who was offered but declined coverage due to other available group coverage.
(B) The average weekly wage, exclusive of overtime, paid to all of the employees working at the qualified manufacturing facility, who are not management or supervisory employees, shall be not less than the state average weekly wage. For the purpose of this subdivision, “state average weekly wage” means the average weekly wage paid by employers to employees covered by unemployment insurance, as reported to the Employment Development Department for the four calendar quarters ending June 30 of the preceding calendar year.
(6) (A) In the case in which the proponent fails to operate the qualified manufacturing facility as required by the community services agreement, a provision that requires the recapture of any portion of any capital investment incentive amounts previously paid to the proponent equal to the lesser of the following:
(i) All of the capital investment incentive amounts paid to the proponent, less all of the community services fees received from the proponent, and less any capital investment incentive amounts previously recaptured.
(ii) The last capital investment incentive amount paid to the proponent, less the last community services fee received from the proponent, multiplied by 40 percent of the number of years remaining in the community services agreement, but not to exceed 10 years, and less any capital investment incentive amounts previously recaptured.
(B) If the proponent fails to operate the qualified manufacturing facility as required by the community services agreement, the county, city and county, or city may, upon a finding that good cause exists, waive any portion of the recapture of any capital investment incentive amount due under this subdivision. For the purpose of this subdivision, good cause includes, but is not limited to, the following:
(i) The proponent has sold or leased the property to a person who has entered into an agreement with the county, city and county, or city to assume all of the responsibilities of the proponent under the community services agreement.
(ii) The qualified manufacturing facility has been rendered inoperable and beyond repair as a result of an act of God, civil disorder, failure of power, riots, insurrections, war, acts of terrorism, or any other causes, whether the kind herein enumerated or otherwise, not within the control of the qualified manufacturing facility claiming good cause, which restrict or interfere with a qualified manufacturing facility’s ability to timely perform, and which by the exercise of reasonable due diligence, such party is or would have been unable to prevent or overcome.
(C) For purposes of this subdivision, failure to operate a qualified manufacturing facility as required by the community services agreement includes, but is not limited to, failure to establish the number of jobs specified in the jobs creation plan created pursuant to paragraph (5).
(e) (1) Each county, city and county, or city that elects to establish a capital investment incentive program shall notify the Governor’s Office of Business and Economic Development of its election to do so no later than June 30th of the fiscal year in which the election was made.
(2) In addition to the information required to be reported pursuant to paragraph (1), each county, city and county, or city that has elected to establish a capital investment incentive program shall notify the Governor’s Office of Business and Economic Development each fiscal year no later than June 30th of the amount of any capital investment incentive payments made and the proponent of the qualified manufacturing facility to whom the payments were made during that fiscal year.
(3) The Governor’s Office of Business and Economic Development shall compile the information submitted by each county, city and county, and city pursuant to paragraphs (1) and (2) and submit a report to the Legislature containing this information no later than October 1, every two years commencing October 1, 2016.
(f) This section shall become operative on July 1, 2015.

SEC. 3.

 Section 51298.5 of the Government Code is amended to read:

51298.5.
 (a) This chapter shall remain in effect only until January 1, 2018.
(b) A capital investment incentive program established pursuant to this chapter before January 1, 2018, may remain in effect for the full term of that program, regardless of the repeal of this chapter.

SEC. 4.

 Section 17059.2 of the Revenue and Taxation Code is amended to read:

17059.2.
 (a) (1) For each taxable year beginning on and after January 1, 2014, and before January 1, 2025, there shall be allowed as a credit against the “net tax,” as defined in Section 17039, an amount as determined by the committee pursuant to paragraph (2) and approved pursuant to Section 18410.2.
(2) The credit under this section shall be allocated by GO-Biz with respect to the 2013–14 fiscal year through and including the 2017–18 fiscal year. The amount of credit allocated to a taxpayer with respect to a fiscal year pursuant to this section shall be as set forth in a written agreement between GO-Biz and the taxpayer and shall be based on the following factors:
(A) The number of jobs the taxpayer will create or retain in this state.
(B) The compensation paid or proposed to be paid by the taxpayer to its employees, including wages and fringe benefits.
(C) The amount of investment in this state by the taxpayer.
(D) The extent of unemployment or poverty in the area according to the United States Census in which the taxpayer’s project or business is proposed or located.
(E) The incentives available to the taxpayer in this state, including incentives from the state, local government, and other entities.
(F) The incentives available to the taxpayer in other states.
(G) The duration of the proposed project and the duration the taxpayer commits to remain in this state.
(H) The overall economic impact in this state of the taxpayer’s project or business.
(I) The strategic importance of the taxpayer’s project or business to the state, region, or locality.
(J) The opportunity for future growth and expansion in this state by the taxpayer’s business.
(K) The extent to which the anticipated benefit to the state exceeds the projected benefit to the taxpayer from the tax credit.
(3) The written agreement entered into pursuant to paragraph (2) shall include:
(A) Terms and conditions that include the taxable year or years for which the credit allocated shall be allowed, a minimum compensation level, and a minimum job retention period.
(B) Provisions indicating whether the credit is to be allocated in full upon approval or in increments based on mutually agreed upon milestones when satisfactorily met by the taxpayer.
(C) Provisions that allow the committee to recapture the credit, in whole or in part, if the taxpayer fails to fulfill the terms and conditions of the written agreement.
(b) For purposes of this section:
(1) “Committee” means the California Competes Tax Credit Committee established pursuant to Section 18410.2.
(2) “GO-Biz” means the Governor’s Office of Business and Economic Development.
(c) For purposes of this section, GO-Biz shall do the following:
(1) Give priority to a taxpayer whose project or business is located or proposed to be located in an area of high unemployment or poverty.
(2) Negotiate with a taxpayer the terms and conditions of proposed written agreements that provide the credit allowed pursuant to this section to a taxpayer.
(3) Provide the negotiated written agreement to the committee for its approval pursuant to Section 18410.2.
(4) Inform the Franchise Tax Board of the terms and conditions of the written agreement upon approval of the written agreement by the committee.
(5) Inform the Franchise Tax Board of any recapture, in whole or in part, of a previously allocated credit upon approval of the recapture by the committee.
(6) Post on its Internet Web site all of the following:
(A) The name of each taxpayer allocated a credit pursuant to this section.
(B) The estimated amount of the investment by each taxpayer.
(C) The estimated number of jobs created or retained.
(D) The amount of the credit allocated to the taxpayer.
(E) The amount of the credit recaptured from the taxpayer, if applicable.
(d) For purposes of this section, the Franchise Tax Board shall do all of the following:
(1) (A) Except as provided in subparagraph (B), review the books and records of all taxpayers allocated a credit pursuant to this section to ensure compliance with the terms and conditions of the written agreement between the taxpayer and GO-Biz.
(B) In the case of a taxpayer that is a “small business,” as defined in Section 17053.73, review the books and records of the taxpayer allocated a credit pursuant to this section to ensure compliance with the terms and conditions of the written agreement between the taxpayer and GO-Biz when, in the sole discretion of the Franchise Tax Board, a review of those books and records is appropriate or necessary in the best interests of the state.
(2) Notwithstanding Section 19542:
(A) Notify GO-Biz of a possible breach of the written agreement by a taxpayer and provide detailed information regarding the basis for that determination.
(B) Provide information to GO-Biz with respect to whether a taxpayer is a “small business,” as defined in Section 17053.73.
(e) In the case where the credit allowed under this section exceeds the “net tax,” as defined in Section 17039, for a taxable year, the excess credit may be carried over to reduce the “net tax” in the following taxable year, and succeeding five taxable years, if necessary, until the credit has been exhausted.
(f) Any recapture, in whole or in part, of a credit approved by the committee pursuant to Section 18410.2 shall be treated as a mathematical error appearing on the return. Any amount of tax resulting from that recapture shall be assessed by the Franchise Tax Board in the same manner as provided by Section 19051. The amount of tax resulting from the recapture shall be added to the tax otherwise due by the taxpayer for the taxable year in which the committee’s recapture determination occurred.
(g) (1) The aggregate amount of credit that may be allocated in any fiscal year pursuant to this section and Section 23689 shall be an amount equal to the sum of subparagraphs (A), (B), and (C), less the amount specified in subparagraphs (D) and (E):
(A) Thirty million dollars ($30,000,000) for the 2013–14 fiscal year, one hundred fifty million dollars ($150,000,000) for the 2014–15 fiscal year, and two hundred million dollars ($200,000,000) for each fiscal year from 2015–16 to 2017–18, inclusive.
(B) The unallocated credit amount, if any, from the preceding fiscal year.
(C) The amount of any previously allocated credits that have been recaptured.
(D) The amount estimated by the Director of Finance, in consultation with the Franchise Tax Board and the State Board of Equalization, to be necessary to limit the aggregation of the estimated amount of exemptions claimed pursuant to Section 6377.1 and of the amounts estimated to be claimed pursuant to this section and Sections 17053.73, 23626, and 23689 to no more than seven hundred fifty million dollars ($750,000,000) for either the current fiscal year or the next fiscal year.
(i) The Director of Finance shall notify the Chairperson of the Joint Legislative Budget Committee of the estimated annual allocation authorized by this paragraph. Any allocation pursuant to these provisions shall be made no sooner than 30 days after written notification has been provided to the Chairperson of the Joint Legislative Budget Committee and the chairpersons of the committees of each house of the Legislature that consider appropriation, or not sooner than whatever lesser time the Chairperson of the Joint Legislative Budget Committee, or his or her designee, may determine.
(ii) In no event shall the amount estimated in this subparagraph be less than zero dollars ($0).
(E) (i) For the 2015–16 fiscal year and each fiscal year thereafter, the aggregate amount of credit that may be allocated pursuant to this section and Section 23689 shall be reduced by the amount of credit allowed to all qualified taxpayers pursuant to subparagraph (A) or subparagraph (B) of paragraph (1) of subdivision (c) of Section 23636.
(ii) If the amount available per fiscal year pursuant to this section and Section 23689 is less than the aggregate amount of credit allowed to qualified taxpayers pursuant to subparagraph (A) or subparagraph (B) of paragraph (1) of subdivision (c) of Section 23636, the aggregate amount allowed pursuant to Section 23636 shall not be reduced and, in addition to the reduction required by clause (i), the aggregate amount of credit that may be allocated pursuant to this section and Section 23689 for the next fiscal year shall be reduced by the amount of that deficit.
(iii) It is the intent of the Legislature that the reductions specified in this subparagraph of the aggregate amount of credit that may be allocated pursuant to this section and Section 23689 shall continue if the repeal dates of the credits allowed by this section and Section 23689 are removed or extended.
(2) Each fiscal year, 25 percent of the aggregate amount of the credit that may be allocated pursuant to this section and Section 23689 shall be reserved for small business, as defined in Section 17053.73 or 23626.
(3) Each fiscal year, no more than 20 percent of the aggregate amount of the credit that may be allocated pursuant to this section shall be allocated to any one taxpayer.
(h) GO-Biz may prescribe rules and regulations as necessary to carry out the purposes of this section. Any rule or regulation prescribed pursuant to this section may be by adoption of an emergency regulation in accordance with Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code.
(i) A written agreement between GO-Biz and a taxpayer with respect to the credit authorized by this section shall comply with existing law on the date the agreement is executed.
(j) (1) Upon the effective date of this section, the Department of Finance shall estimate the total dollar amount of credits that will be claimed under this section with respect to each fiscal year from the 2013–14 fiscal year to the 2024–25 fiscal year, inclusive.
(2) The Franchise Tax Board shall annually provide to the Joint Legislative Budget Committee, by no later than March 1, a report of the total dollar amount of the credits claimed under this section with respect to the relevant fiscal year. The report shall compare the total dollar amount of credits claimed under this section with respect to that fiscal year with the department’s estimate with respect to that same fiscal year. If the total dollar amount of credits claimed for the fiscal year is less than the estimate for that fiscal year, the report shall identify options for increasing annual claims of the credit so as to meet estimated amounts.
(k) This section is repealed on December 1, 2025.

SEC. 5.

 Section 23636 is added to the Revenue and Taxation Code, to read:

23636.
 (a) For each taxable year beginning on or after January 1, 2015, and before January 1, 2030, a qualified taxpayer shall be allowed a credit against the “tax,” as defined in Section 23036, in an amount equal to 171/2 percent of qualified wages paid or incurred by the qualified taxpayer during the taxable year to qualified full-time employees multiplied by the annual full-time equivalent ratio.
(b) For purposes of this section:
(1) “Annual full-time equivalent” means either of the following:
(A) In the case of a qualified full-time employee paid hourly qualified wages, “annual full-time equivalent” means the total number of hours worked for the qualified taxpayer by the qualified full-time employee, not to exceed 2,000 hours per employee, divided by 2,000.
(B) In the case of a salaried qualified full-time employee, “annual full-time equivalent” means the total number of weeks worked for the qualified taxpayer by the qualified employee divided by 52.
(2) “Annual full-time equivalent ratio” means a ratio, the numerator of which is 1,100 and the denominator of which is the number of a qualified taxpayer’s qualified full-time employees computed on an annual full-time equivalent basis for the taxable year. The annual full-time equivalent ratio may not be greater than one.
(3) “Qualified full-time employee” means an individual that is employed in this state by the qualified taxpayer and satisfies both of the following:
(A) The individual’s services for the qualified taxpayer are at least 80 percent directly related to the qualified taxpayer’s subcontract to design, test, manufacture property, or otherwise support production of property for ultimate use in or as a component of a new advanced strategic aircraft for the United States Air Force.
(B) The individual is paid compensation from the qualified taxpayer that satisfies either of the following conditions:
(i) Is qualified wages paid by the qualified taxpayer for services not less than an average of 35 hours per week.
(ii) Is a salary paid by the qualified taxpayer as compensation during the taxable year for full-time employment, within the meaning of Section 515 of the Labor Code.
(4) “Qualified taxpayer” means any taxpayer that is a major first-tier subcontractor awarded a subcontract to manufacture property for ultimate use in or as a component of a new advanced strategic aircraft for the United States Air Force. For purposes of this paragraph, the term “major first-tier subcontractor” means a subcontractor that was awarded a subcontract in an amount of at least 35 percent of the amount of the initial prime contract awarded for the manufacturing of a new advanced strategic aircraft for the United States Air Force.
(5) “Qualified wages” means wages paid or incurred by the qualified taxpayer during the taxable year with respect to qualified full-time employees that are direct labor costs, within the meaning of Section 263A of the Internal Revenue Code, relating to capitalization and inclusion in inventory costs of certain expenses, allocable to property manufactured in this state by the qualified taxpayer for ultimate use in or as a component of a new advanced strategic aircraft for the United States Air Force.
(6) “New advanced strategic aircraft for the United States Air Force” means a new advanced strategic aircraft developed and produced for the United States Air Force under the New Advanced Strategic Aircraft Program.
(7) “New Advanced Strategic Aircraft Program” means the project designed to design, test, manufacture, or otherwise support production of a new advanced strategic aircraft for the United States Air Force under a contract that is expected to be awarded in the first or second calendar quarter of 2015.
(c) (1) The total aggregate amount of the credit that may be allowed to all qualified taxpayers pursuant to this section shall be as follows:
(A) In years one through five of the credit, the total aggregate amount of the credit that may be allowed to all qualified taxpayers pursuant to this section shall not exceed twenty- five million dollars ($25,000,000) per calendar year.
(B) In years 6 through 10 of the credit, the total aggregate amount of the credit that may be allowed to all qualified taxpayers pursuant to this section shall not exceed twenty-eight million dollars ($28,000,000) per calendar year.
(C) In years 11 through 15 of the credit, the total aggregate amount of the credit that may be allowed to all qualified taxpayers pursuant to this section shall not exceed thirty-one million dollars ($31,000,000) per calendar year.
(2) The Franchise Tax Board shall allocate the credit to the taxpayers on a first-come-first-served basis.
(3) The credit allowed under this section must be claimed on a timely filed original return.
(d) In the case where the credit allowed by this section exceeds the “tax,” the excess may be carried over to reduce the “tax” in the following year, and the seven succeeding years if necessary, until the credit is exhausted.
(e) A credit shall not be allowed unless the credit was reflected within the bid upon which the qualified taxpayer’s subcontract to manufacture property for ultimate use in or as a component of a New Advanced Strategic Aircraft Program is based by reducing the amount of the bid by a good faith estimate of the amount of the credit allowable under this section.
(f) All references to the credit and ultimate cost reductions incorporated into any successful bid that was awarded a subcontract and for which a qualified taxpayer is making a claim shall be made available to the Franchise Tax Board upon request.
(g) If the qualified 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.
(h) (1) The Franchise Tax Board may prescribe regulations necessary or appropriate to carry out the purposes of this section.
(2) The Franchise Tax Board may also prescribe rules, guidelines, or procedures necessary or appropriate to carry out the purposes of this section. Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code shall not apply to any rule, guideline, or procedure prescribed by the Franchise Tax Board pursuant to this section.
(i) This section shall remain in effect only until December 1, 2030, and as of that date is repealed.

SEC. 6.

 Section 23689 of the Revenue and Taxation Code is amended to read:

23689.
 (a) (1) For each taxable year beginning on and after January 1, 2014, and before January 1, 2025, there shall be allowed as a credit against the “tax,” as defined in Section 23036, an amount as determined by the committee pursuant to paragraph (2) and approved pursuant to Section 18410.2.
(2) The credit under this section shall be allocated by GO-Biz with respect to the 2013–14 fiscal year through and including the 2017–18 fiscal year. The amount of credit allocated to a taxpayer with respect to a fiscal year pursuant to this section shall be as set forth in a written agreement between GO-Biz and the taxpayer and shall be based on the following factors:
(A) The number of jobs the taxpayer will create or retain in this state.
(B) The compensation paid or proposed to be paid by the taxpayer to its employees, including wages and fringe benefits.
(C) The amount of investment in this state by the taxpayer.
(D) The extent of unemployment or poverty in the area according to the United States Census in which the taxpayer’s project or business is proposed or located.
(E) The incentives available to the taxpayer in the state, including incentives from the state, local government and other entities.
(F) The incentives available to the taxpayer in other states.
(G) The duration of the proposed project and the duration the taxpayer commits to remain in this state.
(H) The overall economic impact in this state of the taxpayer’s project or business.
(I) The strategic importance of the taxpayer’s project or business to the state, region, or locality.
(J) The opportunity for future growth and expansion in this state by the taxpayer’s business.
(K) The extent to which the anticipated benefit to the state exceeds the projected benefit to the taxpayer from the tax credit.
(3) The written agreement entered into pursuant to paragraph (2) shall include:
(A) Terms and conditions that include the taxable year or years for which the credit allocated shall be allowed, a minimum compensation level, and a minimum job retention period.
(B) Provisions indicating whether the credit is to be allocated in full upon approval or in increments based on mutually agreed upon milestones when satisfactorily met by the taxpayer.
(C) Provisions that allow the committee to recapture the credit, in whole or in part, if the taxpayer fails to fulfill the terms and conditions of the written agreement.
(b) For purposes of this section:
(1) “Committee” means the California Competes Tax Credit Committee established pursuant to Section 18410.2.
(2) “GO-Biz” means the Governor’s Office of Business and Economic Development.
(c) For purposes of this section, GO-Biz shall do the following:
(1) Give priority to a taxpayer whose project or business is located or proposed to be located in an area of high unemployment or poverty.
(2) Negotiate with a taxpayer the terms and conditions of proposed written agreements that provide the credit allowed pursuant to this section to a taxpayer.
(3) Provide the negotiated written agreement to the committee for its approval pursuant to Section 18410.2.
(4) Inform the Franchise Tax Board of the terms and conditions of the written agreement upon approval of the written agreement by the committee.
(5) Inform the Franchise Tax Board of any recapture, in whole or in part, of a previously allocated credit upon approval of the recapture by the committee.
(6) Post on its Internet Web site all of the following:
(A) The name of each taxpayer allocated a credit pursuant to this section.
(B) The estimated amount of the investment by each taxpayer.
(C) The estimated number of jobs created or retained.
(D) The amount of the credit allocated to the taxpayer.
(E) The amount of the credit recaptured from the taxpayer, if applicable.
(d) For purposes of this section, the Franchise Tax Board shall do all of the following:
(1) (A) Except as provided in subparagraph (B), review the books and records of all taxpayers allocated a credit pursuant to this section to ensure compliance with the terms and conditions of the written agreement between the taxpayer and GO-Biz.
(B) In the case of a taxpayer that is a “small business,” as defined in Section 23626, review the books and records of the taxpayer allocated a credit pursuant to this section to ensure compliance with the terms and conditions of the written agreement between the taxpayers and GO-Biz when, in the sole discretion of the Franchise Tax Board, a review of those books and records is appropriate or necessary in the best interests of the state.
(2) Notwithstanding Section 19542:
(A) Notify GO-Biz of a possible breach of the written agreement by a taxpayer and provide detailed information regarding the basis for that determination.
(B) Provide information to GO-Biz with respect to whether a taxpayer is a “small business,” as defined in Section 23626.
(e) In the case where the credit allowed under this section exceeds the “tax,” as defined in Section 23036, for a taxable year, the excess credit may be carried over to reduce the “tax” in the following taxable year, and succeeding five taxable years, if necessary, until the credit has been exhausted.
(f) Any recapture, in whole or in part, of a credit approved by the committee pursuant to Section 18410.2 shall be treated as a mathematical error appearing on the return. Any amount of tax resulting from that recapture shall be assessed by the Franchise Tax Board in the same manner as provided by Section 19051. The amount of tax resulting from the recapture shall be added to the tax otherwise due by the taxpayer for the taxable year in which the committee’s recapture determination occurred.
(g) (1) The aggregate amount of credit that may be allocated in any fiscal year pursuant to this section and Section 17059.2 shall be an amount equal to the sum of subparagraphs (A), (B), and (C), less the amount specified in subparagraphs (D) and (E):
(A) Thirty million dollars ($30,000,000) for the 2013–14 fiscal year, one hundred fifty million dollars ($150,000,000) for the 2014–15 fiscal year, and two hundred million dollars ($200,000,000) for each fiscal year from 2015–16 to 2017–18, inclusive.
(B) The unallocated credit amount, if any, from the preceding fiscal year.
(C) The amount of any previously allocated credits that have been recaptured.
(D) The amount estimated by the Director of Finance, in consultation with the Franchise Tax Board and the State Board of Equalization, to be necessary to limit the aggregation of the estimated amount of exemptions claimed pursuant to Section 6377.1 and of the amounts estimated to be claimed pursuant to this section and Sections 17053.73, 17059.2, and 23626 to no more than seven hundred fifty million dollars ($750,000,000) for either the current fiscal year or the next fiscal year.
(i) The Director of Finance shall notify the Chairperson of the Joint Legislative Budget Committee of the estimated annual allocation authorized by this paragraph. Any allocation pursuant to these provisions shall be made no sooner than 30 days after written notification has been provided to the Chairperson of the Joint Legislative Budget Committee and the chairpersons of the committees of each house of the Legislature that consider appropriation, or not sooner than whatever lesser time the Chairperson of the Joint Legislative Budget Committee, or his or her designee, may determine.
(ii) In no event shall the amount estimated in this subparagraph be less than zero dollars ($0).
(E) (i) For the 2015–16 fiscal year and each fiscal year thereafter, the aggregate amount of credit that may be allocated pursuant to this section and Section 17059.2 shall be reduced by the amount of credit allowed to all qualified taxpayers pursuant to subparagraph (A) or subparagraph (B) of paragraph (1) of subdivision (c) of Section 23636.
(ii) If the amount available per fiscal year pursuant to this section and Section 17059.2 is less than the aggregate amount allowed to qualified taxpayers pursuant to subparagraph (A) or subparagraph (B) of paragraph (1) of subdivision (c) of Section 23636, the aggregate amount allowed pursuant to Section 23636 shall not be reduced and, in addition to the reduction required by clause (i), the aggregate amount available pursuant to this section and Section 17059.2 for the next fiscal year shall be reduced by the amount of that deficit.
(iii) It is the intent of the Legislature that the reductions specified in this subparagraph of the aggregate amount of credit that may be allocated pursuant to this section and Section 17059.2 shall continue if the repeal dates of the credits allowed by this section and Section 17059.2 are removed or extended.
(2) Each fiscal year, 25 percent of the aggregate amount of the credit that may be allocated pursuant to this section and Section 17059.2 shall be reserved for “small business,” as defined in Section 17053.73 or 23626.
(3) Each fiscal year, no more than 20 percent of the aggregate amount of the credit that shall be allocated pursuant to this section may be allocated to any one taxpayer.
(h) GO-Biz may prescribe rules and regulations as necessary to carry out the purposes of this section. Any rule or regulation prescribed pursuant to this section may be by adoption of an emergency regulation in accordance with Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code.
(i) (1) A written agreement between GO-Biz and a taxpayer with respect to the credit authorized by this section shall not restrict, broaden, or otherwise alter the ability of the taxpayer to assign that credit or any portion thereof in accordance with Section 23663.
(2) A written agreement between GO-Biz and a taxpayer with respect to the credit authorized by this section must comply with existing law on the date the agreement is executed.
(j) (1) Upon the effective date of this section, the Department of Finance shall estimate the total dollar amount of credits that will be claimed under this section with respect to each fiscal year from the 2013–14 fiscal year to the 2024–25 fiscal year, inclusive.
(2) The Franchise Tax Board shall annually provide to the Joint Legislative Budget Committee, by no later than March 1, a report of the total dollar amount of the credits claimed under this section with respect to the relevant fiscal year. The report shall compare the total dollar amount of credits claimed under this section with respect to that fiscal year with the department’s estimate with respect to that same fiscal year. If the total dollar amount of credits claimed for the fiscal year is less than the estimate for that fiscal year, the report shall identify options for increasing annual claims of the credit so as to meet estimated amounts.
(k) This section is repealed on December 1, 2025.

SEC. 7.

  This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are:
In order to promote economic development in California related to the manufacture of property to be used for new advanced strategic aircraft for the United States Air Force and to authorize a local government to pay a related capital investment amount pursuant to a reduced threshold amount as soon as possible, it is necessary that this act take effect immediately.