Bill Text


PDF |Add To My Favorites |Track Bill | print page

SB-315 Criminal procedure: COVID-19 Alternative Adjudication Program.(2019-2020)

SHARE THIS:share this bill in Facebookshare this bill in Twitter
Date Published: 06/25/2020 09:00 PM
SB315:v95#DOCUMENT

Amended  IN  Assembly  June 25, 2020
Amended  IN  Assembly  July 09, 2019
Amended  IN  Assembly  June 25, 2019
Amended  IN  Senate  March 21, 2019

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Senate Bill
No. 315


Introduced by Senator Hertzberg
(Coauthor: Assembly Member Gabriel)

February 15, 2019


An act to amend, repeal, and add Section 12097.5 of, and to add Title 23 (commencing with Section 100600) to, the Government Code, and to amend Sections 18036 and 24916 of, and to add Sections 18190, 19183.5, and 24996 to, the Revenue and Taxation Code, and making an appropriation therefor, relating to economic development. add and repeal Section 1385.2 of the Penal Code, relating to criminal procedure.


LEGISLATIVE COUNSEL'S DIGEST


SB 315, as amended, Hertzberg. Governor’s Office of Business and Economic Development: taxation: gross income exclusions: opportunity zones. Criminal procedure: COVID-19 Alternative Adjudication Program.
Existing law authorizes a county to establish a pretrial diversion program for defendants who have been charged with a misdemeanor offense and authorizes other diversion programs.
This bill would establish the COVID-19 Alternative Adjudication Program. The bill would require a court to dismiss an accusatory pleading under the program if the defendant meets specified conditions including, among others, that 6 months have passed since the person was released from the arrest that lead to the accusatory pleading and the prosecution fails to provide clear and convincing evidence that the defendant committed a subsequent offense or that the defendant poses an unreasonable risk of danger to public safety, as defined. The bill would require a court dismissing a pleading pursuant to the program to determine whether restitution is owed to a victim as a result of an offense dismissed pursuant to the program, and would deem the arrest upon which the charges were based to have never occurred.

Existing law authorizes the Governor’s Office of Business and Economic Development to develop content on its internet website or through other mediums to be used for public dissemination, through outreach activities, in order to provide information and resources to inform the general public about place-based and other geographically targeted economic development programs, including California Promise Zones and California Opportunity Zones. Existing law requires the Governor’s Office of Business and Economic Development to convene, at least annually, representatives from various programs and agencies across the state and from various federal programs and agencies for the purpose of discussing how California can leverage Promise Zones and Opportunity Zones to meet state and local community and economic development needs.

This bill, until January 1, 2025, would eliminate the duties of the Governor’s Office of Business and Economic Development described above relating to California Promise Zones. The bill, until January 1, 2025, would require the Governor’s Office of Business and Economic Development, in cooperation with the Office of Planning and Research, to track specified information regarding California Opportunity Zone investments and to post that information on the Governor’s Office of Business and Economic Development’s internet website. The bill, to assist the Governor’s Office of Business and Economic Development in this regard, would require the manager of an Opportunity Fund to track and report specified information about the fund to the Governor’s Office of Business and Economic Development, as provided.

This bill would enact the California Opportunity Zone Authority Act, which would create within state government the California Opportunity Zone Authority Board consisting of 7 members, including the Treasurer who the bill would require to serve as chair. The bill would require the board to incorporate or form a qualified opportunity fund, as specified, known as the California Qualified Opportunity Fund, for the purpose of making allocations to cities and counties that will invest in California Opportunity Zones, as provided. The bill, subject to specified limitations, would require the board to solicit investments on or after January 1, 2020, and before January 1, 2025, of eligible capital gains for deposit in the fund, and would prohibit investments of eligible capital gains in the fund on or after January 1, 2025. The bill would require moneys in the fund to be continuously appropriated to the board, without regard to fiscal year, for purposes of administering the act, thereby making an appropriation. The bill would require the board to develop and implement investment policy and objectives for the allocation of moneys and to allocate moneys to cities and counties that apply to the board consistent with this policy and other specified criteria, as provided. The bill would also require the board to develop a risk management and oversight program to, among other things, monitor risk levels. The bill would authorize the board to employ staff and adopt regulations necessary to implement the act. The bill would provide that the board and the State of California are not be liable for investment losses of the fund.

The Personal Income Tax Law and the Corporation Tax Law impose taxes upon taxable income, as specified. Additionally, various provisions of the Personal Income Tax Law and the Corporation Tax law conform, or conform as modified, to provisions of the Internal Revenue Code.

This bill, for taxable years beginning on or after January 1, 2020, for a qualified taxpayer, would conform the Personal Income Tax Law and the Corporation Tax Law to provisions of the Internal Revenue Code that allow for specified tax treatment for income derived from activities within a California qualified opportunity zone business property, including the deferral of recognition of a capital gain, and would provide that the provisions are limited to investments in the California Qualified Opportunity Fund. The bill would define a qualified taxpayer to mean a taxpayer that invests eligible capital gains in the California Qualified Opportunity Fund on or after January 1, 2020, and before January 1, 2025.

Vote: MAJORITY   Appropriation: YESNO   Fiscal Committee: YES   Local Program: NO  

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


SECTION 1.

 Section 1385.2 is added to the Penal Code, to read:

1385.2.
 (a) This section shall be known, and may be cited, as the COVID-19 Alternative Adjudication Program.
(b) The court shall dismiss an accusatory pleading pursuant to this section if all of the following criteria are met:
(1) The defendant is not charged with any of the following:
(A) A serious felony, as defined in subdivision (c) of Section 1192.7, or a violent felony, as defined in subdivision (c) of Section 667.5.
(B) A violation of paragraph (1) of subdivision (c) of Section 166, or of Section 273.6, where the detained person made threats to kill or harm, has engaged in violence against, or has gone to the residence or workplace of, the protected party.
(C) A violation of Section 136.1 when the punishment is imposed under subdivision (c) of Section 136.1.
(D) A violation of Section 262.
(E) A violation of paragraph (1) of subdivision (e) of Section 243 or of Section 273.5.
(F) A violation of Section 646.9.
(G) A violation of an offense listed in subdivision (c) of Section 290.
(H) A violation of Section 23152 or 23153 of the Vehicle Code.
(I) A violation of Section 29800.
(2) Six months or more have passed since the person was released from the arrest that lead to the accusatory pleading, or, if the person was not arrested, six months or more have passed since the incident that lead to the charges.
(3) The prosecution fails to provide clear and convincing evidence that the defendant committed a subsequent misdemeanor or felony while the charge has been pending.
(4) The defendant does not have a pending violation of the terms of an existing grant of probation, parole, post-release community supervision, or mandatory supervision.
(5) The defendant consents to a dismissal pursuant to this section.
(6) The prosecution fails to provide clear and convincing evidence that the defendant poses an unreasonable risk of danger to public safety, as defined in Section 1170.18.
(c) If a person would meet the conditions described in subdivision (b) except for a pending violation of the terms of an existing grant of probation, parole, post-release community supervision, or mandatory supervision, that is not the commission of a new crime, the court may dismiss the accusatory pleading pursuant to this section.
(d) A charge reduced pursuant to subdivision (b) of Section 17 may qualify for dismissal pursuant to this section if, after the charge is reduced, it meets the criteria described in subdivision (b).
(e) Upon request, the court shall conduct a hearing to determine whether restitution, as defined in subdivision (f) of Section 1202.4, is owed to any victim as a result of the alternatively adjudicated offense and, if owed, order its payment prior to dismissing the case. If restitution cannot be paid in full, the court shall order the judgment to be collected civilly. However, a defendant’s inability to pay restitution due to indigence shall not be grounds for refusing to dismiss a case pursuant to this section.
(f) (1) If a case has been dismissed pursuant to this section, the clerk of the court shall file a record with the Department of Justice indicating the disposition of the case pursuant to this section. Once the court dismisses the charges, the arrest upon which dismissal pursuant to this section was based shall be deemed never to have occurred, and the court shall order access to the record of the arrest restricted in accordance with this subdivision.
(2) Any record filed with the Department of Justice shall indicate the disposition in those cases alternatively adjudicated pursuant to this section. Upon dismissal pursuant to this section, the arrest upon which the charges were based shall be deemed to have never occurred and the court may issue an order to seal the records pertaining to the arrest pursuant to Section 851.92. The defendant may indicate in response to any question concerning their prior criminal record that they were not arrested, diverted, or alternatively adjudicated for the offense, except as specified in paragraph (3). A record pertaining to an arrest resulting in dismissal pursuant to this section shall not, without the defendant’s consent, be used in any way that could result in the denial of any employment, benefit, license, or certificate.
(3) The defendant shall be advised that, regardless of the dismissal pursuant to this section, both of the following apply:
(A) The arrest upon which the dismissal pursuant to this section was based may be disclosed by the Department of Justice to any peace officer application request and that, notwithstanding paragraphs (1) and (2), this section does not relieve the defendant of the obligation to disclose the arrest in response to any direct question contained in any questionnaire or application for a position as a peace officer, as defined in Section 830.
(B) An order to seal records pertaining to an arrest made pursuant to this section has no effect on a criminal justice agency’s ability to access and use those sealed records and information regarding sealed arrests, as described in Section 851.92.
(g) This section shall remain in effect only until January 1, 2022, and as of that date is repealed.

SECTION 1.

The Legislature finds and declares the following:

(a)California established 879 Opportunity Zones in 2017 pursuant to the Investing in Opportunity Act (26 U.S.C. Secs. 1400Z-1 and 1400Z-2), enacted as part of the federal Tax Cuts and Jobs Act of 2017 (PL 115-97), which provides taxpayers with favorable capital gains tax treatment for investment in those zones. The aim is to provide private capital to help improve conditions in disadvantaged communities.

(b)The tax benefits associated with the Opportunity Zones policy will allow investors to leverage more capital for projects in these communities while also reducing their capital gains tax bill. Investment in Opportunity Zones has the potential to reduce economic inequality and barriers to employment facing low-income and underinvested communities.

(c)Under the federal Opportunity Zone program established by the Tax Cuts and Jobs Act of 2017, market forces tend to concentrate investment activity in a relatively small proportion of California’s 879 Opportunity Zones. This act would establish the California Opportunity Zone Authority Board, to be chaired by the State Treasurer, to administer a California Qualified Opportunity Fund to direct private investment more equitably among the state’s Opportunity Zones.

(d)The U.S. Impact Investing Alliance, the Beeck Center for Social Impact and Innovation at Georgetown University, and the Federal Reserve Bank of New York last year developed a set of Guiding Principles for Opportunity Zones to encourage Opportunity Zone investments that produce positive economic and social outcomes and minimize unintended consequences, such as gentrification and displacement of zone residents.

(e)The Guiding Principles for Opportunity Zones are as follows:

(1)Community engagement: Opportunity Funds should integrate the needs of local communities into the formation and implementation of the funds, reaching low-income and underinvested communities with attention to diversity.

(2)Equity: Opportunity Fund investments should seek to generate equitable community benefits, leverage other incentives, and aim for responsible exits.

(3)Transparency: Opportunity Funds should be transparent and accountable, with processes and practices that remain fair and clear.

(4)Measurement: Opportunity Fund investors should monitor, measure, and track progress against specific impact objectives, identifying key outcome measures and allowing for continuous improvement.

(5)Outcomes: Opportunity Fund metrics should track real change, with an understanding that both quantitative and qualitative measures are valuable indicators of progress.

(f)The Guiding Principles for Opportunity Zones, implemented through a detailed reporting framework, will help ensure that Opportunity Zone investment results in inclusive growth and shared prosperity.

SEC. 2.Section 12097.5 of the Government Code is amended to read:
12097.5.

(a)(1)The Governor’s Office of Business and Economic Development may develop content on its internet website or through other mediums to be used for public dissemination, through outreach activities, in order to provide information and resources to inform the general public about Opportunity Zones designated by the United States Treasury, pursuant to Sections 1400Z-1 and 1400Z-2 of the Internal Revenue Code.

(2)The information and resources shall include, but not be limited to, how the local jurisdictions or census tracts were created, where locals and investors may get additional information, and updates regarding federal programs as that information becomes available.

(b)The Governor’s Office of Business and Economic Development shall convene, at least annually, representatives from various programs and agencies across the state and from various federal programs and agencies for the purpose of discussing how California can leverage Opportunity Zones to meet state and local community and economic development needs. The convention topics shall include, but not be limited to, discussions on enhanced engagement opportunities and targeted outreach to assist designated areas in their efforts to access state resources and services.

(c)(1)The Governor’s Office of Business and Economic Development shall, in cooperation with the Office of Planning and Research, track information regarding California Opportunity Zone investments. To assist the Governor’s Office of Business and Economic Development in this regard, the manager of an Opportunity Fund shall track and provide all of the following information about the fund:

(A)Within 60 days of the incorporation or formation of a fund, the manager shall submit the following information electronically to the Governor’s Office of Business and Economic Development:

(i)The following information about the fund:

(I)The name.

(II)The federal and state employer identification number.

(III)The type of entity.

(IV)If the fund is a corporation, the date incorporated and the state of incorporation.

(V)If the fund is a partnership, the date of formation and the state of formation.

(VI)The structure of the fund as a single or multiasset fund.

(VII)The size of the fund, including total assets and eligible deferred gain assets.

(VIII)The target investment size.

(IX)The responsible party or point of contact.

(ii)A copy of the offering document, if applicable.

(iii)If the offering document is not submitted or does not contain the information described in this clause, the manager shall submit the following information about the fund to the Governor’s Office of Business and Economic Development:

(I)The mission statement or impact objective.

(II)The investment focus, such as housing, green, office, or operating business.

(III)The geographic focus, including, but not limited to, state, ZIP Code, and urban or rural focus.

(IV)A sustainability narrative.

(V)A community engagement narrative.

(B)(i)On June 30, 2020, and on June 30 each year thereafter, the manager shall submit the following information electronically to the Governor’s Office of Business and Economic Development:

(I)The following information about the fund:

(ia)The size of the fund, including total assets and eligible deferred gain assets.

(ib)The federal and state employer identification number of any business owned in a California Opportunity Zone by the fund.

(ic)The total amount invested by census tract.

(id)The types of investors, such as corporate, partnership, or individual filers.

(ie)The taxpaying residence of investors, aggregated by state and percentage of fund assets.

(II)The following information on investment activity of the fund:

(ia)The amount, date, and source of the investment.

(ib)The location of the investment by census tract.

(ic)The types of investments, such as real estate or business.

(III)The following information about business investments, if applicable:

(ia)The types of businesses.

(ib)The North American Industry Classification System (NAICS) Code of any operating business.

(ic)The number of full-time employees employed by the business at the time of investment.

(id)The percentage of permanent, full-time employees employed by the business who reside within the California Opportunity Zone.

(IV)The following information about real estate investments, if applicable:

(ia)The types of properties, such as single-family, multifamily, or commercial properties.

(ib)The square footage of developed real estate.

(ic)The number of housing units developed and the percentage of units in the development that are affordable.

(id)The net new number of affordable housing units developed.

(ie)The number of affordable housing units demolished or vacated.

(if)The number of projects certified as Leadership in Energy and Environmental Design (LEED), if applicable.

(ig)The use of other public financing programs or incentives, as applicable.

(V)Any other economic indicator the Governor’s Office of Business and Economic Development and the Office of Planning Research deem appropriate.

(ii)The manager shall include in the first report submitted pursuant to clause (i) information that dates back to the incorporation or formation of the fund. The manager shall include in each report submitted after the first report information for the relevant reporting period.

(2)The Governor’s Office of Business and Economic Development shall post information gathered pursuant to this subdivision on its internet website.

(d)As used in this section, “California Opportunity Zone” means a census tract in this state that has been designated by the United States Treasury as an Opportunity Zone, pursuant to Sections 1400Z-1 and 1400Z-2 of the Internal Revenue Code.

(e)This section shall remain in effect only until January 1, 2025, and as of that date is repealed.

SEC. 3.Section 12097.5 is added to the Government Code, to read:
12097.5.

(a)(1)The Governor’s Office of Business and Economic Development may develop content on its internet website or through other mediums to be used for public dissemination, through outreach activities, in order to provide information and resources to inform the general public about place-based and other geographically targeted economic development programs, including, but not limited to, federal Promise Zones within California that are designated by the United States Department of Housing and Urban Development; and Opportunity Zones designated by the United States Treasury, pursuant to Sections 1400Z-1 and 1400Z-2 of the Internal Revenue Code.

(2)The information and resources shall include, but not be limited to, how the local jurisdictions or census tracts were created, where locals and investors may get additional information, and updates regarding federal programs as that information becomes available.

(b)The Governor’s Office of Business and Economic Development shall convene, at least annually, representatives from various programs and agencies across the state and from various federal programs and agencies for the purpose of discussing how California can leverage Promise Zones and Opportunity Zones to meet state and local community and economic development needs. The convention topics shall include, but not be limited to, discussions on enhanced engagement opportunities and targeted outreach to assist designated areas in their efforts to access state resources and services.

(c)As used in this section:

(1)“California Opportunity Zone” means a census tract in this state that has been designated by the United States Treasury as an Opportunity Zone, pursuant to Sections 1400Z-1 and 1400Z-2 of the Internal Revenue Code.

(2)“California Promise Zone” means a community in this state that has been designated by the United States Department of Housing and Urban Development as a Promise Zone.

(d)This section shall become operative on January 1, 2025.

SEC. 4.Title 23 (commencing with Section 100600) is added to the Government Code, to read:
23.The California Opportunity Zone Authority Act
100600.

This title shall be known, and may be cited, as the California Opportunity Zone Authority Act.

100601.

For purposes of this title, the following shall apply:

(a)“California Opportunity Zone” has the same meaning as defined in subdivision (d) of Section 12097.5.

(b)“Board” means the California Opportunity Zone Authority Board.

(c)“Fund” means the California Qualified Opportunity Fund.

100602.

(a)(1)There is hereby created within state government the California Opportunity Zone Authority Board, which shall consist of seven members, with the Treasurer serving as chair, as follows:

(A)The Treasurer.

(B)The Director of Finance, or the director’s designee.

(C)The Controller.

(D)The Director of the Governor’s Office of Business and Economic Development.

(E)An individual with financial market expertise appointed by the Senate Committee on Rules.

(F)An employee representative appointed by the Speaker of the Assembly.

(G)A public member with economic development expertise appointed by the Governor.

(2)Members of the board appointed by the Governor, the Senate Committee on Rules, and the Speaker of the Assembly shall serve at the pleasure of the appointing authority.

(b)All members of the board shall serve without compensation. Members of the board shall be reimbursed for necessary travel expenses incurred in connection with their board duties.

(c)A board member and staff of the board shall not do any of the following:

(1)Directly or indirectly have any interest in the making of any investment or in the gains or profits accruing from any investment made.

(2)Borrow any moneys from the fund, or use those moneys in any manner, for themselves or as an agent or partner of others.

(3)Become an endorser, surety, or obligor on investments by the board.

(d)The board and staff shall discharge their duties with respect to the fund as follows:

(1)For the exclusive purposes of providing benefits to the fund and defraying reasonable expenses of administering the fund.

(2)By investing with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with those matters would use in the conduct of an enterprise of a like character and with like aims.

(e)The board shall do all of the following:

(1)(A)(i)Incorporate or form a qualified opportunity fund known as the California Qualified Opportunity Fund for the purpose of making allocations to cities and counties that will invest in California Opportunity Zones as provided by this title. The fund shall comply with the requirements of Subchapter Z of Chapter 1 of Subtitle A of the Internal Revenue Code.

(ii)(I)On or after January 1, 2020, and before January 1, 2025, solicit investments of eligible capital gains for deposit in the fund. The amount of investments of eligible capital gains that the board may accept for deposit in the fund each year shall be specified in a bill providing for appropriations related to the Budget Act.

(II)Investments of eligible capital gains shall not be made to the fund on or after January 1, 2025.

(iii)Administer the fund.

(B)Notwithstanding Section 13340, moneys in the fund shall be continuously appropriated, without regard to fiscal year, to the board for purposes of administering this title, including for purposes of reimbursing the board for its cost of administering this title.

(2)Develop and implement investment policy and objectives for the allocation of moneys pursuant to paragraph (3) that shall satisfy the following:

(A)Give priority to investments in California Opportunity Zones that are not receiving investment capital from private investors.

(B)Give priority to investments that include responsible exit plans and include provisions for the retention of a public sector ownership interest in the property.

(C)Give priority to investments in operating businesses that offer employee stock ownership plans.

(D)Diversify risk through multiasset pools and financial products such as equity loss reserves and loan guarantees for small business startups.

(E)Encourage investment in operating businesses by evaluating project proposals for eligibility for state grants and loans for workforce and business development and other forms of state financial assistance.

(3)(A)Establish procedures for the allocation of moneys from the fund to cities and counties for the purpose of investing in a California Opportunity Zone within the city or county that applies for the moneys.

(B)A city or county shall apply to the board, in the form and manner as provided by the board. The application shall include a description of project proposals.

(C)The board shall evaluate applications and allocate moneys from the fund to cities and counties consistent with the investment policy and objectives developed and implemented pursuant to paragraph (2). The board shall also consider the following:

(i)An evaluation of financial returns, the social impact, and environmental sustainability of the project proposal.

(ii)Whether the proposed project has obtained the necessary land use entitlements.

(4)Develop a risk management and oversight program that includes an effective risk management system to monitor the risk levels of the fund investment portfolio and ensure that the risks taken are prudent and properly managed. The program shall be managed to provide an integrated process for overall risk management on both a consolidated and disaggregated basis, and to monitor investment returns and risk to determine if the risks taken are adequately compensated compared to applicable performance benchmarks and standards.

(5)Develop criteria for evaluating the community impact of exit plans under which investors may divest from a California Opportunity Zone after 10 years.

(f)The board may do any of the following:

(1)Employ any staff necessary to administer this title.

(2)Approve and utilize an investment management entity or entities, the costs of which shall be paid out of moneys held in the fund and shall not be attributed to the administrative costs of the board.

(3)Adopt regulations that it deems necessary to implement this title.

(g)The board and the State of California shall not be liable for investment losses of the fund.

SEC. 5.Section 18036 of the Revenue and Taxation Code is amended to read:
18036.

(a)In addition to the adjustments to basis provided by Section 1016(a) of the Internal Revenue Code, a proper adjustment shall also be made for amounts allowed as deductions as deferred expenses under subdivision (b) of former Section 17689 or former Section 17689.5 (relating to certain exploration expenditures) and resulting in a reduction of the taxpayer’s taxes under this part, but not less than the amounts allowable under those sections for the taxable year and prior years. A proper adjustment shall also be made for amounts deducted under Section 17252.5, 17265, or 17266.

(b)Notwithstanding the provisions of Sections 164(a) and 1016(a) of the Internal Revenue Code, no adjustment to basis shall be made for any of the following:

(1)Abandonment fees paid in respect of property on which the open-space easement is terminated under Section 51061 or 51093 of the Government Code.

(2)Tax recoupment fees paid under Section 51142 of the Government Code.

(3)Sales or use tax which is paid or incurred by the taxpayer in connection with the acquisition of property for which a tax credit is claimed pursuant to Section 17052.13.

(c)The provisions of Section 1016(c) of the Internal Revenue Code, relating to increase in basis of property on which additional estate tax is imposed, shall be applicable.

(d)The amendments made to Section 1016 of the Internal Revenue Code by Section 1913(a) of Public Law 102-486, relating to deduction for clean-fuel vehicles and certain refueling property, shall apply to property placed in service after June 30, 1993, without respect to taxable year.

(e)(1)For taxable years beginning on or after January 1, 2020, for a qualified taxpayer, the amendments made by Section 13823(b) of the Tax Cuts and Jobs Act (Public Law 115-97) to Section 1016(a) of the Internal Revenue Code, relating to adjustments to basis, shall apply, except as otherwise provided.

(2)For purposes of this subdivision, “qualified taxpayer” means a taxpayer that invests eligible capital gains in the California Qualified Opportunity Fund, created pursuant to Section 100602 of the Government Code, on or after January 1, 2020, and before January 1, 2025.

SEC. 6.Section 18190 is added to the Revenue and Taxation Code, to read:
18190.

(a)For taxable years beginning on or after January 1, 2020, for a qualified taxpayer, the amendments made by Section 13823(a) of the Tax Cuts and Jobs Act (Public Law 115-97) to add Subchapter Z to Chapter 1 of Subtitle A of the Internal Revenue Code, relating to opportunity zones, shall apply, except as otherwise provided.

(b)For purposes of this section:

(1)“California qualified opportunity zone” means a qualified opportunity zone under Section 1400Z-1 of the Internal Revenue Code, relating to designation, which is located within the State of California.

(2)“California qualified opportunity zone business property” means property that is qualified opportunity zone business property under Section 1400Z-2(d)(2)(D) of the Internal Revenue Code that is located in a California qualified opportunity zone.

(3)“California Qualified Opportunity Fund” means the fund created pursuant to Section 100602 of the Government Code.

(4)“Qualified taxpayer” means a taxpayer that invests eligible capital gains in the California Qualified Opportunity Fund on or after January 1, 2020, and before January 1, 2025.

(c)(1)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 standard, criterion, procedure, determination, rule, notice, or guideline established or issued by the Franchise Tax Board pursuant to this section.

(2)The Franchise Tax Board may prescribe regulations as necessary or appropriate to implement the purposes of this section, including regulations to properly determine the direct or indirect investment by the California Qualified Opportunity Fund in a California qualified opportunity zone business property.

SEC. 7.Section 19183.5 is added to the Revenue and Taxation Code, to read:
19183.5.

(a)For taxable years beginning on or after January 1, 2020, for a qualified taxpayer:

(1)Section 1400Z-2(f)(1) of the Internal Revenue Code, relating to in general, is modified by substituting “(d)(1)” in place of “(c)(1).”

(2)Section 1400Z-2(f)(1)(A)(i) of the Internal Revenue Code is modified by substituting the phrase “90 percent of its aggregate assets located in California” in lieu of “90 percent of its aggregate assets.”

(3)Section 1400Z-2(f)(1)(A)(ii) of the Internal Revenue Code is modified by substituting the phrase “the aggregate amount of California qualified opportunity zone business property” in lieu of “the aggregate amount of qualified opportunity zone property.”

(b)For purposes of this section, “qualified taxpayer” means a taxpayer that invests eligible capital gains in the California Qualified Opportunity Fund, created pursuant to Section 100602 of the Government Code, on or after January 1, 2020, and before January 1, 2025.

SEC. 8.Section 24916 of the Revenue and Taxation Code is amended to read:
24916.

Proper adjustment with regard to the property shall in all cases be made as follows:

(a)For expenditures, receipts, losses, or other items properly chargeable to capital account. However, no adjustment shall be made for any of the following:

(1)Sales or use tax paid or incurred in connection with the acquisition of property for which a tax credit is claimed pursuant to Section 23612.2.

(2)Taxes or other carrying charges described in Section 24426, or for expenditures described in Sections 24364 and 24369 for which deductions have been taken in determining net income for the taxable year or any prior taxable year.

(b)For exhaustion, wear and tear, obsolescence, amortization, and depletion:

(1)In the case of corporations subject to the tax imposed by Chapter 2 (commencing with Section 23101), to the extent sustained prior to January 1, 1928, and to the extent allowed (but not less than the amount allowable) under this part, except that no deduction shall be made for amounts in excess of the amount which would have been allowable had depreciation not been computed on the basis of January 1, 1928, value and amounts in excess of the adjustments required by Section 113(b)(1)(B) of the Federal Revenue Act of 1938 for depletion prior to January 1, 1932.

(2)In the case of a taxpayer subject to the tax imposed by Chapter 3 (commencing with Section 23501), to the extent sustained prior to January 1, 1937, and for periods thereafter to the extent allowed (but not less than the amount allowable) under the provisions of this part.

(3)If a taxpayer has not claimed an amortization deduction for an emergency facility, the adjustment under paragraph (1) shall be made only to the extent ordinarily provided under Sections 24349 and 24372.

(c)In the case of stock (to the extent not provided for in the foregoing subdivisions) for the amount of distributions previously made which, under the law applicable to the year in which the distribution was made, either were tax free or were applicable in reduction of basis (not including distributions made by a corporation, which was classified as a personal service corporation under the provisions of the Federal Revenue Act of 1918 or 1921, out of its earnings or profits which were taxable in accordance with the provisions of Section 218 of the Federal Revenue Act of 1918 or 1921).

(d)(1)In the case of corporations subject to the tax imposed by Chapter 2 (commencing with Section 23101), in the case of any bond, as defined in Section 24363, to the extent of the deductions allowable pursuant to Section 24360 with respect thereto.

(2)In the case of taxpayers subject to the tax imposed by Chapter 3 (commencing with Section 23501), in the case of any bond, as defined in Section 24363, the interest on which is wholly exempt from the tax imposed by this part, to the extent of the amortizable bond premium disallowable as a deduction pursuant to subdivision (b) of Section 24360, and in the case of any other bond, as defined in Section 24363, to the extent of the deductions allowable pursuant to subdivision (a) of Section 24360 (or the amount applied to reduce interest payments under paragraph (2) of subdivision (a) of Section 24363.5) with respect thereto.

(3)In the case of property pledged to the Commodity Credit Corporation, to the extent of the amount received as a loan from the Commodity Credit Corporation and treated by the taxpayer as income for the year in which received pursuant to Section 24273, and to the extent of any deficiency on that loan with respect to which the taxpayer has been relieved from liability.

(e)For amounts allowed as deductions as deferred expenses under Section 616(b) of the Internal Revenue Code, relating to certain expenditures in the development of mines, and resulting in a reduction of the taxpayer’s tax, but not less than the amounts allowable under that section for the taxable year and prior years.

(f)For amounts allowable as deductions as deferred expenses under Section 617(a) of the Internal Revenue Code, relating to certain exploration expenditures, and resulting in a reduction of the taxpayer’s tax, but not less than the amounts allowable under that section for the taxable year and prior years.

(g)For amounts allowed as deductions as deferred expenses under subdivision (a) of Section 24366, relating to research and experimental expenditures, and resulting in a reduction of the corporation’s taxes under this part, but not less than the amounts allowable under that section for the taxable year and prior years.

(h)For amounts allowed as deductions under Sections 24356.2, 24356.3, and 24356.4.

(i)(1)To the extent provided in Section 179A(e)(6)(A) of the Internal Revenue Code, relating to basis reduction for clean-fuel vehicles and certain refueling property.

(2)This subdivision shall apply to property placed in service after June 30, 1993, without regard to taxable year.

(j)(1)For taxable years beginning on or after January 1, 2020, for a qualified taxpayer, the amendments made by Section 13823(b) of the Tax Cuts and Jobs Act (Public Law 115-97) to Section 1016(a) of the Internal Revenue Code, relating to adjustments to basis, shall apply, except as otherwise provided.

(2)For purposes of this subdivision, “qualified taxpayer” means a taxpayer that invests eligible capital gains in the California Qualified Opportunity Fund, created pursuant to Section 100602 of the Government Code, on or after January 1, 2020, and before January 1, 2025.

(k)In the case of property the acquisition of which resulted under Section 1044 of the Internal Revenue Code, relating to rollover of publicly traded securities gain into specialized small business investment companies, in the nonrecognition of any part of the gain realized on the sale of other property, to the extent provided in Section 1044(d) of the Internal Revenue Code, relating to basis adjustments.

SEC. 9.Section 24996 is added to the Revenue and Taxation Code, to read:
24996.

(a)For taxable years beginning on or after January 1, 2020, for a qualified taxpayer, the amendments made by Section 13823(a) of the Tax Cuts and Jobs Act (Public Law 115-97) to add Subchapter Z to Chapter 1 of Subtitle A of the Internal Revenue Code, relating to opportunity zones, shall apply, except as otherwise provided.

(b)For purposes of this section:

(1)“California qualified opportunity zone” means a qualified opportunity zone under Section 1400Z-1 of the Internal Revenue Code, relating to designation, which is located within the State of California.

(2)“California qualified opportunity zone business property” means property that is qualified opportunity zone business property under Section 1400Z-2(d)(2)(D) of the Internal Revenue Code that is located in a California qualified opportunity zone.

(3)“California Qualified Opportunity Fund” means the fund created pursuant to Section 100602 of the Government Code.

(4)“Qualified taxpayer” means a taxpayer that invests eligible capital gains in the California Qualified Opportunity Fund on or after January 1, 2020, and before January 1, 2025.

(c)(1)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 standard, criterion, procedure, determination, rule, notice, or guideline established or issued by the Franchise Tax Board pursuant to this section.

(2)The Franchise Tax Board may prescribe regulations as necessary or appropriate to implement the purposes of this section, including regulations to properly determine the direct or indirect investment by the California Qualified Opportunity Fund in a California qualified opportunity zone business property.