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AB-916 Income taxes: California work opportunity tax credit.(2017-2018)

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Date Published: 08/06/2018 02:00 PM
AB916:v96#DOCUMENT

Amended  IN  Senate  August 06, 2018
Amended  IN  Senate  July 05, 2018
Amended  IN  Assembly  May 02, 2017

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Assembly Bill No. 916


Introduced by Assembly Members Quirk-Silva and Arambula

February 16, 2017


An act to add and repeal Sections 17053.72 and 23672 to of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.


LEGISLATIVE COUNSEL'S DIGEST


AB 916, as amended, Quirk-Silva. Income taxes: California work opportunity tax credit.
The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws.
This bill, for each taxable year beginning on or after January 1, 2019, and before January 1, 2026, would allow a credit against the taxes imposed under both laws to a qualified employer that qualifies for the federal Work Opportunity Tax Credit in an amount equal to 40% of the qualified first-year wages paid or incurred during the taxable year to a qualified employee who is a member of a targeted group, as defined in federal tax law. employer, as defined, in an amount equal to that allowed under the federal Work Opportunity Tax Credit, as modified. The bill would prohibit the credit from exceeding $2,400 per qualified employee per taxable year. The bill would make related declarations, and would require the Employment Development Department to prepare a specified report, related to the specific goals, purposes, and objectives, performance indicators, and data collection requirements for these credits.
This bill would take effect immediately as a tax levy.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

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


SECTION 1.

 (a) It is the intent of the Legislature in enacting this act to provide for tax credits that would serve as an alternative credit that results in at least an equal amount of credit for some of the same taxpayers as under the income tax credits allowed by Sections 17053.73 and 23626 of the Revenue and Taxation Code.
(b) The purpose of the California Work Opportunity Tax Credit is to encourage qualified employers to hire employees from targeted groups of individuals who have systematically faced barriers to employment.
(c) The Legislature finds and declares that the federal Equal Employment Opportunity Commission (EEOC) has considered the questions and forms required for the federal Work Opportunity Tax Credit (WOTC) and found that the proper use of these questions and forms, which is using them solely for purposes of applying for the WOTC, does not violate federal equal employment opportunity laws. Moreover, the proper use of the WOTC benefits those that equal employment opportunity laws seek to protect. However, despite the EEOC approving the WOTC application forms, if an employer were to use the information for purposes other than to apply for the WOTC, for example, to discriminate in a hiring decision, the EEOC declared that the employer would not be protected from liability under equal employment opportunity laws. The Legislature further finds and declares that compliance with the WOTC questions and forms is necessary to ensure proper documentation and certification for employees eligible for the credit allowed by this section.

SEC. 2.

 Section 17053.72 is added to the Revenue and Taxation Code, to read:

17053.72.
 (a) For each taxable year beginning on or after January 1, 2019, and before January 1, 2026, there shall be allowed to a qualified employer as a credit against the “net tax,” as defined in Section 17039, an amount equal to 40 percent of the qualified first-year wages paid or incurred by a qualified employer to a qualified employee during the taxable year, not to exceed two thousand four hundred dollars ($2,400) per qualified employee. a California WOTC in an amount equal to an amount determined in accordance with the requirements of the federal WOTC, as applicable for federal tax purposes for the taxable year, except as otherwise provided by this section.
(b) For purposes of this section: section, the following terms have the following meanings:

(1)“Qualified employee” means an employee who is a member of a targeted group, as defined in subdivision (d) of Section 51 of the Internal Revenue Code, relating to members of targeted groups, and who has worked 500 or more hours for the qualified employer.

(1) “California WOTC” means the California Work Opportunity Tax Credit allowed by this section.
(2) “Federal WOTC” means the federal Work Opportunity Tax Credit allowed by Section 51 of the Internal Revenue Code, relating to amount of credit, as in effect on January 1, 2018.

(2)

(3) “Qualified employer” means a taxpayer that is an employer that qualifies for a federal Work Opportunity Tax Credit, pursuant to Section 51 of the Internal Revenue Code, relating to amount of credit, as certified by the Employment Development Department. that is subject to, and is required to provide, unemployment insurance to the taxpayer’s employees pursuant to the Unemployment Insurance Code.

(3)“Qualified first-year wages” means, with respect to any qualified employee, qualified wages attributable to service rendered during the one-year period beginning with the day the qualified employee begins work for the qualified employer. “Qualified first-year wages” does not include the first five thousand dollars ($5,000) of wages attributable to service rendered during that one-year period.

(4)“Qualified wages” means wages subject to withholding under Division 6 (commencing with Section 13000) of the Unemployment Insurance Code.

(c)The

(4) “Qualified individual” means any person who is covered by unemployment insurance by his or her employer pursuant to the Unemployment Insurance Code.
(c) The federal WOTC is modified as follows:
(1) Section 51(a) of the Internal Revenue Code, relating to determination of amount, is modified to limit the amount of tax credit allowed so as not to exceed two thousand four hundred dollars ($2,400) per qualified individual.
(2) Section 51(b) of the Internal Revenue Code, relating to qualified wages defined, is modified as follows:
(A) The wages are required to be attributable to an employee from a targeted group, as defined by Section 51(d) of the Internal Revenue Code, relating to members of targeted groups, and as modified by this section, who has worked not less than 500 hours for the qualified employer.
(B) The first five thousand dollars ($5,000) of wages attributable to service rendered during that one-year period are excluded from the calculation of qualified wages.
(3) Section 51(c) of the Internal Revenue Code, relating to wages defined, is modified to exclusively apply to wages subject to withholding under Division 6 (commencing with Section 13000) of the Unemployment Insurance Code.
(4) Sections 51(d)(1)(D), 51(d)(1)(F), 51(d)(3)(A)(iii), 51(d)(13)(D)(i)(II), and 51(d)(14) of the Internal Revenue Code shall not apply.
(5) Section 51(e) of the Internal Revenue Code, relating to qualified second-year wages, shall not apply.
(6) Section 51(g) of the Internal Revenue Code, relating to United States employment service to notify employers of availability of credit, is modified to substitute “Employment Development Department, in consultation with the Franchise Tax Board” in lieu of “United States Employment Service, in consultation with the Internal Revenue Service.”
(7) Section 51(h) of the Internal Revenue Code, relating to special rules for agricultural labor and railway labor, shall not apply.
(8) Section 51(i)(3) of the Internal Revenue Code, relating to individuals not meeting minimum employment periods, shall not apply.
(9) Section 51(j) of the Internal Revenue Code, relating to election to have work opportunity not apply, is modified to substitute “last date prescribed by state law” in lieu of “last date prescribed by law.”
(d) (1) Notwithstanding the federal WOTC, the qualified employer shall be allowed the credit California WOTC in the taxable year in which the employer receives the a certification from the Employment Development Department or in the taxable year in which the qualified employer paid or incurred the qualified first year wages.

(d)In

(2) Consistent with the requirements of the federal WOTC, the Employment Development Department shall issue certification of qualified individuals, subject to the modifications provided by this section.
(e) Notwithstanding the federal WOTC, in the case where the credit allowed by this section California WOTC exceeds the “net tax,” the excess may be carried over to reduce the “net tax” in the following taxable year, and succeeding nine years if necessary, until the credit California WOTC is exhausted.

(e)If Section 51 of the Internal Revenue Code, relating to amount of credit, is repealed, the Employment Development Department shall continue to issue certifications pursuant to the requirements of Section 51 of the Internal Revenue Code, relating to amount of credit, for the purposes of this section.

(f)For purposes of complying with Section 41, the Legislature finds and declares that many Californians struggle to find work due to their personal history. As such, this credit would provide businesses with credits and an incentive to hire individuals who have employment barriers in the workforce.

(f) Any deduction otherwise allowed under this part for the qualified wages paid or incurred by the taxpayer upon which the California WOTC is based shall be reduced by the amount of the California WOTC allowed by this section.
(g) (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 tax year from 2018–19 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, in accordance with Section 9795 of the Government Code, that includes all of the following:
(A) 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.
(B) The number of tax returns claiming the credit.
(C) The number of qualified individuals represented on tax returns claiming the credit.
(h) (1) This section shall remain in effect only until December 1, 2026, and as of that date is repealed.
(2) Notwithstanding paragraph (1), this section shall continue to be operative for taxable years beginning on or after January 1, 2018, but only with respect to qualified individuals who commenced employment with a qualified taxpayer in a taxable year beginning before January 1, 2026.

SEC. 3.

 Section 23672 is added to the Revenue and Taxation Code, to read:

23672.
 (a) For each taxable year beginning on or after January 1, 2019, and before January 1, 2026, there shall be allowed to a qualified employer as a credit against the “tax,” as defined in Section 23036, an amount equal to 40 percent of the qualified first-year wages paid or incurred by a qualified employer to a qualified employee during the taxable year, not to exceed two thousand four hundred dollars ($2,400) per qualified employee. a California WOTC in an amount equal to an amount determined in accordance with the requirements of the federal WOTC, as applicable for federal tax purposes for the taxable year, except as otherwise provided by this section.
(b) For purposes of this section: section, the following terms have the following meanings:

(1)“Qualified employee” means an employee who is a member of a targeted group, as defined in subdivision (d) of Section 51 of the Internal Revenue Code, relating to members of targeted groups, and who has worked 500 or more hours for the qualified employer.

(1) “California WOTC” means the California Work Opportunity Tax Credit allowed by this section.
(2) “Federal WOTC” means the federal Work Opportunity Tax Credit allowed by Section 51 of the Internal Revenue Code, relating to amount of credit, as in effect on January 1, 2018.

(2)

(3) “Qualified employer” means a taxpayer that is an employer that qualifies for a federal Work Opportunity Tax Credit, pursuant to Section 51 of the Internal Revenue Code, relating to amount of credit, as certified by the Employment Development Department. is subject to, and is required to provide, unemployment insurance to the taxpayer’s employees pursuant to the Unemployment Insurance Code.

(3)“Qualified first-year wages” means, with respect to any qualified employee, qualified wages attributable to service rendered during the one-year period beginning with the day the qualified employee begins work for the qualified employer. “Qualified first-year wages” does not include the first five thousand dollars ($5,000) of wages attributable to service rendered during that one-year period.

(4)“Qualified wages” means wages subject to withholding under Division 6 (commencing with Section 13000) of the Unemployment Insurance Code.

(c)The

(4) “Qualified individual” means any person who is covered by unemployment insurance by his or her employer pursuant to the Unemployment Insurance Code.
(c) The federal WOTC is modified as follows:
(1) Section 51(a) of the Internal Revenue Code, relating to determination of amount, is modified to limit the amount of tax credit allowed so as not to exceed two thousand four hundred dollars ($2,400) per qualified individual.
(2) Section 51(b) of the Internal Revenue Code, relating to qualified wages defined, is modified as follows:
(A) The wages are required to be attributable to an employee from a targeted group, as defined by Section 51(d) of the Internal Revenue Code, relating to members of targeted groups, and as modified by this section, who has worked not less than 500 hours for the qualified employer.
(B) The first five thousand dollars ($5,000) of wages attributable to service rendered during that one-year period are excluded from the calculation of qualified wages.
(3) Section 51(c) of the Internal Revenue Code, relating to wages defined, is modified to exclusively apply to wages subject to withholding under Division 6 (commencing with Section 13000) of the Unemployment Insurance Code.
(4) Sections 51(d)(1)(D), 51(d)(1)(F), 51(d)(3)(A)(iii), 51(d)(13)(D)(i)(II), and 51(d)(14) of the Internal Revenue Code shall not apply.
(5) Section 51(e) of the Internal Revenue Code, relating to qualified second-year wages, shall not apply.
(6) Section 51(g) of the Internal Revenue Code, relating to United States employment service to notify employers of availability of credit, is modified to substitute “Employment Development Department, in consultation with the Franchise Tax Board” in lieu of “United States Employment Service, in consultation with the Internal Revenue Service.”
(7) Section 51(h) of the Internal Revenue Code, relating to special rules for agricultural labor and railway labor, shall not apply.
(8) Section 51(i)(3) of the Internal Revenue Code, relating to individuals not meeting minimum employment periods, shall not apply.
(9) Section 51(j) of the Internal Revenue Code, relating to election to have work opportunity not apply, is modified to substitute “last date prescribed by state law” in lieu of “last date prescribed by law.”
(d) (1)  Notwithstanding the federal WOTC, the qualified employer shall be allowed the credit California WOTC in the taxable year in which the employer receives the a certification from the Employment Development Department or in the taxable year in which the qualified employer paid or incurred the qualified first year wages.
(2) Consistent with the requirements of the federal WOTC, the Employment Development Department shall issue certification of qualified individuals, subject to the modifications provided by this section.

(d)In

(e) Notwithstanding the federal WOTC, in the case where the credit allowed by this section California WOTC exceeds the “tax,” the excess may be carried over to reduce the “tax” in the following taxable year, and succeeding nine years if necessary, until the credit California WOTC is exhausted.

(e)If Section 51 of the Internal Revenue Code, relating to amount of credit, is repealed, the Employment Development Department shall continue to issue certifications pursuant to the requirements of Section 51 of the Internal Revenue Code, relating to amount of credit, for the purposes of this section.

(f)For purposes of complying with Section 41, the Legislature finds and declares that many Californians struggle to find work due to their personal history. As such, this credit would provide businesses with credits and an incentive to hire individuals who have employment barriers in the workforce.

(f) Any deduction otherwise allowed under this part for the qualified wages paid or incurred by the taxpayer upon which the California WOTC is based shall be reduced by the amount of the California WOTC allowed by this section.
(g) (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 tax year from 2018–19 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, in accordance with Section 9795 of the Government Code, that includes all of the following:
(A) 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.
(B) The number of tax returns claiming the credit.
(C) The number of qualified individuals represented on tax returns claiming the credit.
(h) (1) This section shall remain in effect only until December 1, 2026, and as of that date is repealed.
(2) Notwithstanding paragraph (1), this section shall continue to be operative for taxable years beginning on or after January 1, 2018, but only with respect to qualified individuals who commenced employment with a qualified taxpayer in a taxable year beginning before January 1, 2026.

SEC. 4.

 (a) In accordance with Section 41 of the Revenue and Taxation Code, the purpose of the California Work Opportunity Credit, as added to the Revenue and Taxation Code by Sections 17053.72 and 23672 of this bill, is to encourage employers to hire individuals from targeted groups which have been found to face systemic barriers to employment. To measure whether the credit achieves its intended purpose the Employment Development Department shall annually prepare a written report on the following:
(1) The number of employers, based on employer IDs, who filed for certification.
(2) The number and percentage of employees for which certification was granted.
(3) The distribution of newly hired employees over the eight eligible targeted groups.
(4) The distribution of employers based on industry sectors.
(5) The distribution of employees based on industry sectors.
(b) On or before October 1, 2019, and annually thereafter while Sections 17053.72 and 23672 of the Revenue and Taxation Code are in effect, the Employment Development Department shall post on its Internet Web site the written report required by subdivision (a). A letter indicating that the report is posted shall be delivered to the Assembly and Senate Desks within four calendar days of the report being posted on the website of the Employment Development Department. The Assembly and Senate Desks shall distribute the notice, as the respective Desk deems appropriate.

SEC. 4.SEC. 5.

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