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AB-38 Los Angeles Revitalization Zone: taxation: disaster relief: riots.(1991-1992)

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As Amends the Law Today

SECTION 1.
Chapter 12.95 (commencing with Section 7100) is added to Division 7 of Title 1 of the Government Code, to read:

CHAPTER 12.95. Los Angeles Revitalization Zone

7100.
The Legislature finds and declares that a large portion of the Los Angeles community suffered physical and economic devastation as a result of the civil disturbances that occurred on April 29, 1992, and the following days.
The Legislature further finds and declares that it is of vital importance to the health, safety, and welfare of the people of California that jobs be quickly developed within the affected area and that businesses be rebuilt or established within the affected area to provide employment and services to the residents.

7101.
(a) For purposes of this chapter, “zone” means the Los Angeles Revitalization Zone designated pursuant to Section 7102.
(b) “Resident” means a person residing in the Los Angeles Revitalization Zone designated pursuant to Section 7102.

7102.
(a) The Los Angeles Revitalization Zone shall be the specific geographic areas that suffered substantial property damage to businesses as a result of the civil disturbances of April 29, 1992, and the following days, in the County of Los Angeles and the affected cities within that county. The zone shall also include the supporting residential areas for the business areas. For purposes of this section, “supporting residential areas” means areas of high-density unemployment adjacent to areas of depressed economic business activity as a result of civil unrest on April 29 and 30, 1992.
(b) The County of Los Angeles and the affected cities within that county shall each prepare a map of the area within their jurisdiction that suffered substantial property damage to businesses as a result of the unrest. These maps shall also include the supporting residential areas. One or more of the following techniques shall be used by the jurisdiction in describing the areas:
(1) ZIP Codes.
(2) Census tracts and block groups.
(3) Street names in a modified metes and bounds technique.
(c) The maps shall be submitted to the Business, Transportation and Housing Agency for approval. The agency shall exclude a geographic area from the map if it finds that no substantial damage occurred in the geographic area as a result of the civil disturbances. The agency’s determination on the submitted maps shall be made on or before December 31, 1992, and shall be final.
(d) For purposes of the tax incentives added to the Personal Income Tax Law (Part 10 (commencing with Section 17001) of Division 2 of the Revenue and Taxation Code) and the Bank and Corporations Tax Law (Part 11 (commencing with Section 23001) of Division 2 of the Revenue and Taxation Code) by the act which added this chapter, the Los Angeles Revitalization Zone shall be deemed to be operative on May 1, 1992.

7103.
This chapter shall remain in effect only until January 1, 1998, and as of that date is repealed.

SEC. 2.
Section 196.1 is added to the Revenue and Taxation Code, to read:

196.1.
In the 1991–92 fiscal year or as soon as possible thereafter, the county auditor of an eligible county, proclaimed by the Governor to be in a state of disaster as a result of the riots that occurred in California during April and May 1992, shall certify to the Director of Finance an estimate of the total amount of the reduction in property tax revenues on the regular secured roll and the supplemental roll for the 1992–93 fiscal year resulting from the reassessment of eligible properties by the county assessor pursuant to Section 170, except that the amount certified shall not include any estimated property tax revenue reductions to school districts (other than basic state aid school districts), county offices of education, and community college districts. For purposes of this section, “basic state aid school district” means a school district that does not receive a state apportionment pursuant to subdivision (h) of Section 42238 of the Education Code, but receives from the state only a basic apportionment pursuant to Section 6 of Article IX of the California Constitution.

SEC. 3.
Section 196.2 is added to the Revenue and Taxation Code, to read:

196.2.
After the county auditor of an eligible county described in Section 196.1 has made the applicable certification to the Director of Finance pursuant to Section 196.1, the director shall, within 30 days and after verification of the county auditor’s estimate, certify this amount to the Controller for allocation to the county. Upon receipt of certification from the Director of Finance, the Controller shall make the appropriate allocation to the county within 10 working days thereafter.

SEC. 4.
Section 196.3 is added to the Revenue and Taxation Code, to read:

196.3.
On or before December 31, 1993, each eligible county described in Section 196.1 shall compute and remit to the Controller for deposit in the General Fund an amount equal to the amount allocated to it by the Controller pursuant to Section 196.2, less the actual amount of its property tax revenue lost on the regular secured roll and the supplemental roll for the 1992–93 fiscal year, with respect to eligible properties as a result of the reassessment of those properties pursuant to Section 170, excluding any property tax revenue lost by school districts (other than basic state aid school districts), county offices of education, and community college districts. For purposes of this section, “basic state aid school district” means any school district that does not receive a state apportionment pursuant to subdivision (h) of Section 42238 of the Education Code, but receives from the state only a basic apportionment pursuant to Section 6 of Article IX of the California Constitution. If the amount computed pursuant to this section for an eligible county is less than zero, the Controller shall allocate that amount to the county.

SEC. 5.
Section 218.1 is added to the Revenue and Taxation Code, to read:

218.1.
For purposes of Section 218, any dwelling that qualified for an exemption under that section prior to the civil disturbance that occurred in California during April and May of 1992, that was damaged or destroyed by fire in a disaster, as declared by the Governor, occurring during April and May of 1992, and that has not changed ownership since the commencement of that disaster, shall not be disqualified as a “dwelling” or denied an exemption under Section 218 solely on the basis that the dwelling was temporarily damaged or destroyed or was being reconstructed by the owner.

SEC. 6.
Section 17052.15 is added to the Revenue and Taxation Code, to read:

17052.15.
(a) For taxable years beginning on or after January 1, 1992, and before January 1, 1998, there shall be allowed a credit against the “net tax” (as defined by Section 17039) an amount, not to exceed the limitation in subdivision (g), that is equal to the sales or use tax paid or incurred by the taxpayer in connection with the purchase of qualified property.
(b) For purposes of this section:
(1) “Taxpayer” means a person or entity engaged in a trade or business within the Los Angeles Revitalization Zone designated pursuant to Section 7102 of the Government Code.
(2) “Qualified property” means the purchase of both of the following:
(A) Building materials to replace or repair the taxpayer’s building and fixtures.
(B) Machinery or equipment to be used by the taxpayer exclusively in the Los Angeles Revitalization Zone.
(c) If two or more taxpayers share in the costs eligible for the credit provided by this section, each taxpayer shall be eligible to receive a tax credit with respect to his or her respective share of the costs paid or incurred.
(d) (1) In the case where a credit is allowed for qualified property under more than one section in this part, the taxpayer shall make an election, on the return filed for each year, as to which section applies to that taxpayer.
(2) Any election made under this section, and any specification contained in that election, may not be revoked except with the consent of the Franchise Tax Board.
(e) In the case where the credit allowed under this section exceeds the “net tax” for the taxable year, the excess may be carried over to reduce the “net tax” in the following year, and succeeding years if necessary, until the credit has been exhausted.
(f) Any taxpayer who elects to be subject to this section shall not be entitled to increase the basis of the property as otherwise required by Section 164(a) of the Internal Revenue Code with respect to the sales and use tax paid or incurred in connection with the purchase of qualified property.
(g) The amount of the credit provided by this section in any taxable year shall not exceed the amount of tax that would be imposed on the income attributable to business activities of the taxpayer within the Los Angeles Revitalization Zone (designated pursuant to Section 7102 of the Government Code) as if that attributable income represented all of the income of the taxpayer subject to tax under this part. The amount of that attributable income shall be determined in accordance with the provisions of Article 2 (commencing with Section 25120) of Chapter 17 of Part 11, modified as follows:
(1) For taxable years beginning on or after January 1, 1992, and before January 1, 1998, income shall be apportioned to the Los Angeles Revitalization Zone by multiplying total income from the business by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is 2.
(2) The Los Angeles Revitalization Zone shall be substituted for “this state.”
(h) If the qualified property is disposed of or no longer used by the taxpayer in the Los Angeles Revitalization Zone, at any time before the close of the second taxable year after the property is placed in service, the amount of the credit shall be added to the taxpayer’s tax liability in the taxable year of that disposition or nonuse.
(i) This section shall remain in effect only until December 1, 1998, and as of that date is repealed. However, any unused credit may continue to be carried forward, as provided in subdivision (e), until the credit has been exhausted.

SEC. 7.
Section 17053.10 is added to the Revenue and Taxation Code, to read:

17053.10.
(a) For taxable years beginning on or after January 1, 1992, and before January 1, 1998, there shall be allowed as credit against the “net tax” (as defined by Section 17039) an amount not to exceed the limitation in subdivision (g), that is equal to the sum of the following:
(1) One hundred percent of the qualified wages paid or incurred during the period from May 1, 1992, to the end of the sixth month after the designation of the Los Angeles Revitalization Zone, with respect to qualified employees that are hired during that period.
(2) Seventy-five percent of the qualified wages paid or incurred during the period from the beginning of the seventh month after designation to the end of the 12th month after designation, with respect to qualified employees that are hired during that period.
(3) Fifty percent of the qualified wages paid or incurred during the period from the beginning of the 13th month after designation to the end of the 60th month after designation, with respect to qualified employees that are hired during that period.
(b) For purposes of this section:
(1) “Qualified wages” means the wages paid or incurred by the employer for construction work in the Los Angeles Revitalization Zone, as designated pursuant to Section 7102 of the Government Code, during the taxable year with respect to qualified employees. “Qualified wages” means that portion of hourly wages that does not exceed 150 percent of the minimum wage.
(2) “Minimum wage” means the wage established by the Industrial Welfare Commission as provided for in Chapter 1 (commencing with Section 1171) of Part 4 of Division 2 of the Labor Code.
(3) “Qualified employee” means an individual to whom both of the following apply:
(A) Is a resident in the Los Angeles Revitalization Zone.
(B) Was hired by the taxpayer to perform construction work in the Los Angeles Revitalization Zone.
(4) “Los Angeles Revitalization Zone” means the area designated under Section 7102 of the Government Code.
(c) If an employer acquires the major portion of a trade or business of another employer (hereafter in this subdivision referred to as the “predecessor”) or the major portion of a separate unit of a trade or business of a predecessor, then, for the purposes of applying this section for any taxable year ending after the acquisition, the employment relationship between an employee and employer shall not be treated as terminated if the employee continues to be employed in that trade or business.
(d) The credit shall be reduced by the credits allowable under Sections 17053.7, 17053.8, and 17053.11 claimed for the same individual. The credit shall also be reduced by the credit allowed under Section 51 of the Internal Revenue Code for the same individual.
(e) Any deduction otherwise allowed under this part for the wages or salaries paid or incurred by the taxpayer upon which the credit is based shall be reduced by the amount of credit.
(f) In the case where the credit allowed under this section exceeds the “net tax” for the taxable year, the excess may be carried over to reduce the “net tax” in the following year, and succeeding years, until the credit has been exhausted.
(g) The amount of the credit allowed by this section in any taxable year shall not exceed the amount of tax that would be imposed on the income attributable to business activities of the taxpayer within the Los Angeles Revitalization Zone (as defined in Section 7102 of the Government Code) as if that attributable income represented all of the income of the taxpayer subject to tax under this part. The amount of that attributable income shall be determined in accordance with the provisions of Article 2 (commencing with Section 25120) of Chapter 17 of Part 11, modified as follows:
(1) For taxable years beginning on or after January 1, 1992, and before January 1, 1998, income shall be apportioned to the Los Angeles Revitalization Zone by multiplying total income from the business by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is 2.
(2) The Los Angeles Revitalization Zone shall be substituted for “this state.”
(h) (1) If the employment of any employee, with respect to whom qualified wages are taken into account under subdivision (a) is terminated by the taxpayer at any time during the first 270 days of that employment (whether or not consecutive) or before the close of the 270th calendar day after the day in which that employee completes 90 days of employment with the taxpayer, the tax imposed by this part for the taxable year in which that employment is terminated shall be increased by an amount (determined under those regulations) equal to the credit allowed under subdivision (a) for that taxable year and all prior taxable years attributable to qualified wages paid or incurred with respect to that employee.
(2) (A) Paragraph (1) shall not apply to any of the following:
(i) A termination of employment of an employee who voluntarily leaves the employment of the taxpayer.
(ii) A termination of employment of an individual who, before the close of the period referred to in paragraph (1), becomes disabled to perform the services of that employment, unless that disability is removed before the close of that period and the taxpayer fails to offer reemployment to that individual.
(iii) A termination of employment of an individual, if it is determined under the applicable employment compensation provisions that the termination was due to the misconduct of that individual.
(iv) A termination of employment of an individual due to a substantial reduction in the trade or business operations of the taxpayer.
(v) A termination of employment of an individual, if that individual is replaced by other qualified employees so as to create a net increase in both the number of employees and the hours of employment.
(iv) A termination of employment due to a contractual agreement.
(B) For purposes of paragraph (1), the employment relationship between the taxpayer and an employee shall not be treated as terminated by reason of a mere change in the form of conducting the trade or business of the taxpayer, if the employee continues to be employed in that trade or business and the taxpayer retains a substantial interest in that trade or business.
(i) This section shall remain in effect only until December 1, 1998, and as of that date is repealed. However, any unused credit may continue to be carried forward, as provided in subdivision (f), until the credit has been exhausted.

SEC. 8.
Section 17053.17 is added to the Revenue and Taxation Code, to read:

17053.17.
(a) For taxable years beginning on or after January 1, 1992, and before January 1, 1998, the provisions of Sections 17053.8 and 17053.11 shall also be applicable, for any period that those sections are operative, to the area designated pursuant to Section 7102 of the Government Code for the period of that designation.
(b) This section shall remain in effect only until December 1, 1998, and as of that date is repealed.

SEC. 9.
Section 17233 is added to the Revenue and Taxation Code, to read:

17233.
(a) There shall be allowed as a deduction the amount of net interest received by the taxpayer in payment of indebtedness of a person or entity engaged in trade or business located in the Los Angeles Revitalization Zone (as defined in Section 7102 of the Government Code).
(b) No deduction shall be allowed under subdivision (a) unless at the time the indebtedness is incurred each of the following requirements are met:
(1) The trade or business is located solely within the Los Angeles Revitalization Zone (as defined in Section 7102 of the Government Code).
(2) The indebtedness is incurred primarily in connection with activity within the Los Angeles Revitalization Zone.
(3) The taxpayer has no equity or other ownership interest in the debtor.
(c) This section shall remain in effect only until January 1, 1998, and as of that date is repealed.

SEC. 10.
Section 17266 is added to the Revenue and Taxation Code, to read:

17266.
(a) A taxpayer may elect to treat the cost of any Section 17266 property as an expense that is not chargeable to capital account. Any cost so treated shall be allowed as a deduction for the taxable year in which the Section 17266 property is placed in service.
(b) (1) An election made under this section for any taxable year shall meet both of the following requirements:
(A) Specify the items of Section 17266 property to which the election applies and the cost of each of those items that is to be taken into account under subdivision (a).
(B) Be made on the taxpayer’s return of the tax imposed by this part for the taxable year.
(2) Any election made under this section, and any specifications contained in that election, may not be revoked except with the consent of the Franchise Tax Board.
(c) For purposes of this section:
(1) “Section 17266 property” means any recovery property that is Section 1245 property (as defined in Section 1245(a)(3) of the Internal Revenue Code) and that is acquired by purchase for exclusive use in a trade or business conducted within the Los Angeles Revitalization Zone designated pursuant to Section 7102 of the Government Code.
(2) “Purchase” means any acquisition of property, but only if both of the following apply:
(A) The property is not acquired from a person whose relationship to the person acquiring it would result in the disallowance of losses under Section 267 or 707(b) of the Internal Revenue Code (but, in applying Sections 267(b) and 267(c) of the Internal Revenue Code for purposes of this section, Section 267(c)(4) of the Internal Revenue Code shall be treated as providing that the family of an individual shall include only his or her spouse, ancestors, and lineal descendants).
(B) The basis of the property in the hands of the person acquiring it is not determined in whole or in part by reference to the adjusted basis of the property in the hands of the person from whom acquired, or under Section 1014 of the Internal Revenue Code, relating to the basis of the property acquired from a decedent.
(d) For purposes of this section, the cost of the property does not include so much of the basis of the property as is determined by reference to the basis of other property held at any time by the person acquiring the property.
(e) This section shall not apply to estates and trusts.
(f) This section shall not apply to any property described in Section 168(f) of the Internal Revenue Code, relating to property to which Section 168 of the Internal Revenue Code does not apply.
(g) This section shall apply only to property that is used exclusively in a trade or business conducted in the Los Angeles Revitalization Zone.
(h) Any amount deducted under subdivision (a) with respect to property that ceases to be used in a trade or business within the Los Angeles Revitalization Zone at any time before the close of the second taxable year after the property was placed in service shall be included in income in the taxable year in which the property ceases to be so used.
(i) This section shall remain in effect only until January 1, 1998, and as of that date is repealed.

SEC. 11.
Section 17276.2 of the Revenue and Taxation Code is amended to read:

17276.2.
The term “qualified taxpayer” as used in Section 17276.1 means any of the following:
(a) A taxpayer engaged in the conduct of a qualified business within a program area (as defined in Section 7082 of the Government Code).
(1) A net operating loss shall not be a net operating loss carryback to any taxable year and a net operating loss for any taxable year beginning on or after the date that the taxpayer becomes a qualified business shall be a net operating loss carryover to each of the 15 taxable years following the taxable year of loss.
(2) For purposes of this subdivision:
(A) “Net operating loss” means the loss determined under Section 172 of the Internal Revenue Code, as modified by Section 17276.1, attributable to the business activities of the taxpayer within the program area (as defined in Section 7082 of the Government Code). That attributed loss shall be determined in accordance with the provisions of Article 2 (commencing with Section 25120) of Chapter 17 of Part 11, modified for purposes of this section as follows:
(i) For taxable years beginning on or after January 1, 1991, and ending on or before December 31, 1996, loss shall be apportioned to the program area by multiplying total loss from the business by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is 2.
(ii) “The program area” shall be substituted for “this state.”
(B) A net operating loss carryover shall be a deduction only with respect to income attributed to the business activities of the taxpayer within the program area (as defined in Section 7082 of the Government Code) determined in accordance with the provisions of Article 2 (commencing with Section 25120) of Chapter 17 of Part 11, modified for purposes of this section as follows:
(i) For taxable years beginning on or after January 1, 1991, and ending on or before December 31, 1996, income shall be apportioned to the program area by multiplying total income from the business by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is 2.
(ii) “The program area” shall be substituted for “this state.”
(b) A taxpayer who is engaged in the conduct of a trade or business within an enterprise zone designated pursuant to Section 7073 of the Government Code on or after that designation.
(1) A net operating loss shall not be a net operating loss carryback to any taxable year and a net operating loss for any taxable year beginning on or after the date that the area in which the taxpayer conducts a trade or business is designated an enterprise zone shall be a net operating loss carryover to each following taxable year that ends before the expiration or revocation of the designation of the enterprise zone under Section 7073 of the Government Code or to each of 15 taxable years following the taxable year of loss, if longer.
(2) For purposes of this subdivision:
(A) “Net operating loss” means the loss determined under Section 172 of the Internal Revenue Code, as modified by Section 17276.1, attributable to the business activities of the taxpayer within the enterprise zone (as defined in Section 7073 of the Government Code). The attributed loss shall be determined in accordance with the provisions of Article 2 (commencing with Section 25120) of Chapter 17 of Part 11, modified for purposes of this section as follows:
(i) For taxable years beginning on or after January 1, 1991, and ending on or before December 31, 1996, loss shall be apportioned to the enterprise zone by multiplying total loss from the business by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is 2.
(ii) “The enterprise zone” shall be substituted for “this state.”
(B) A net operating loss carryover shall be a deduction only with respect to income attributed to the business activities of the taxpayer within the enterprise zone (as defined in Section 7073 of the Government Code) determined in accordance with the provisions of Article 2 (commencing with Section 25120) of Chapter 17 of Part 11, modified for purposes of this section as follows:
(i) For taxable years beginning on or after January 1, 1991, and ending on or before December 31, 1996, income shall be apportioned to the enterprise zone by multiplying total income from the business by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is 2.
(ii) “The enterprise zone” shall be substituted for “this state.”
(c) A taxpayer engaged in the conduct of a trade or business within the Los Angeles Revitalization Zone designated pursuant to Section 7102 of the Government Code.
(1) A net operating loss shall not be a net operating loss carryback for any taxable year, and a net operating loss for any taxable year beginning on or after the date the area in which the taxpayer conducts a trade or business is designated the Los Angeles Revitalization Zone shall be a net operating loss carryover to each following taxable year that ends before the expiration or revocation of the designation of the Los Angeles Revitalization Zone under Section 7102 of the Government Code or to each of the 15 taxable years following the taxable year of loss, if longer.
(2) For the purposes of this subdivision:
(A) “Net operating loss” means the loss determined under Section 172 of the Internal Revenue Code, as modified by Section 17276.1, attributable to the business activities of the taxpayer within the Los Angeles Revitalization Zone (as defined in Section 7102 of the Government Code). The attributable loss shall be determined in accordance with the provisions of Article 2 (commencing with Section 25120) of Chapter 17 of Part 11, modified as follows:
(i) For taxable years beginning on or after January 1, 1992, and ending before January 1, 1998, loss shall be apportioned to the Los Angeles Revitalization Zone by multiplying total loss from the business by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is 2.
(ii) “The Los Angeles Revitalization Zone” shall be substituted for “this state.”
(B) A net operating loss carryover shall be a deduction only with respect to income attributed to the business activities of the taxpayer within the Los Angeles Revitalization Zone (as defined in Section 7102 of the Government Code) determined in accordance with the provisions of Article 2 (commencing with Section 25120) of Chapter 17 of Part 11, modified as follows:
(i) For taxable years beginning on or after January 1, 1992, and before January 1, 1998, income shall be apportioned to the Los Angeles Revitalization Zone by multiplying total income from the business by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is 2.
(ii) “The Los Angeles Revitalization Zone” shall be substituted for “this state.”
(3) This subdivision shall cease to be operative on January 1, 1998. However, any unused net operating loss may continue to be carried over to following years as provided in this subdivision until the net operating loss has been used.
(d) A taxpayer who qualifies as a “qualified taxpayer” shall, for the taxable year of the net operating loss and any taxable year to which that net operating loss may be carried, designate on the return filed for each year the subdivision of this section which applies to that taxpayer with respect to that net operating loss. If the taxpayer is eligible to qualify under more than one subdivision of this section, the designation is to be made after taking into account subdivision (e).
(e) If a taxpayer is eligible to qualify under more than one subdivision of this section as a “qualified taxpayer,” with respect to a net operating loss in a taxable year, the taxpayer shall designate which subdivision of this section is to apply to the taxpayer.
(f) Notwithstanding the provisions of Section 17276, the amount of the loss determined under this section shall be the only net operating loss allowed to be carried over from that taxable year and the designation under subdivision (d) shall be included in the election under Section 17276.1.

SEC. 12.
Section 23612.6 is added to the Revenue and Taxation Code, to read:

23612.6.
(a) For income years beginning on or after January 1, 1992, and before January 1, 1998, there shall be allowed a credit against the “tax” (as defined by Section 23036) for the income year an amount, not to exceed the limitation of subdivision (g), but other otherwise equal to the sales or use tax paid or incurred by the taxpayer in connection with the purchase of qualified property.
(b) For purposes of this section:
(1) “Taxpayer” means a bank or corporation engaged in a trade or business within the Los Angeles Revitalization Zone designated pursuant to Section 7102 of the Government Code.
(2) “Qualified property” means the purchase of both of the following:
(A) Building materials to replace or repair the taxpayer’s building and fixtures.
(B) Machinery or equipment to be used by the taxpayer exclusively in the Los Angeles Revitalization Zone.
(c) If two or more taxpayers share in the costs eligible for the credit provided by this section, each taxpayer shall be eligible to receive a tax credit with respect to its respective share of the costs paid or incurred.
(d) (1) In the case where a credit is allowed for qualified property under more than one section in this part, the taxpayer shall make an election, on the return filed for each year, as to which section applies to that taxpayer.
(2) Any election made under this section, and any specification contained in that election, may not be revoked except with the consent of the Franchise Tax Board.
(e) In the case where the credit allowed under this section exceeds the “tax,” the excess may be carried over to reduce the “tax” in the following year, and succeeding years if necessary, until the credit has been exhausted.
(f) Any taxpayer who elects to be subject to this section shall not be entitled to increase the basis of the property as otherwise required by Section 164(a) of the Internal Revenue Code with respect to the sales and use tax paid or incurred in connection with the purchase of qualified property.
(g) The amount of the credit provided by this section in any taxable year shall not exceed the amount of tax which would be imposed on the income attributable to business activities of the taxpayer within the Los Angeles Revitalization Zone (designated pursuant to Section 7102 of the Government Code) as if that attributable income represented all of the income of the taxpayer subject to tax under this part. The amount of that attributable income shall be determined in accordance with the provisions of Article 2 (commencing with Section 25120) of Chapter 17, modified as follows:
(1) For income years beginning on or after January 1, 1992, and before January 1, 1998, income shall be apportioned to the Los Angeles Revitalization Zone by multiplying total income from the business by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is 2.
(2) The Los Angeles Revitalization Zone shall be substituted for “this state.”
(h) If the qualified property is disposed of or no longer used by the taxpayer in the Los Angeles Revitalization Zone, at any time before the close of the second income year after the property is placed in service, the amount of the credit shall be added to the taxpayer’s tax liability in the income year of that disposition or nonuse.
(i) This section shall remain in effect only until December 1, 1998, and as of that date is repealed. However, any unused credit may continue to be carried forward, as provided in subdivision (e), until the credit has been exhausted.

SEC. 13.
Section 23623.5 is added to the Revenue and Taxation Code, to read:

23623.5.
(a) For income years beginning on or after January 1, 1992, and before January 1, 1998, the provisions of Sections 23622 and 23623 shall also be applicable, for any period that those sections are operative, to the area designated pursuant to Section 7102 of the Government Code for the period of that designation.
(b) This section shall remain in effect only until December 1, 1998, and as of that date is repealed.

SEC. 14.
Section 23625 is added to the Revenue and Taxation Code, to read:

23625.
(a) For income years beginning on or after January 1, 1992, and before January 1, 1998, there shall be allowed as credit against the “tax” (as defined by Section 23036) an amount, not to exceed the limitation in subdivision (g), that is equal to the sum of the following:
(1) One hundred percent of the qualified wages paid or incurred during the period from May 1, 1992, to the end of the sixth month after the designation of the Los Angeles Revitalization Zone with respect to qualified employees that are hired during that period.
(2) Seventy-five percent of the qualified wages paid or incurred during the period from the beginning of the seventh month after designation to the end of the 12th month after designation with respect to qualified employees that are hired during that period.
(3) Fifty percent of the qualified wages paid or incurred during the period from the beginning of the 13th month after designation to the end of the 60th month after designation with respect to qualified employees that are hired during that period.
(b) For purposes of this section:
(1) “Qualified wages” means the wages paid or incurred by the employer for construction work in the Los Angeles Revitalization Zone, as designated pursuant to Section 7102 of the Government Code, during the income year with respect to qualified employees. “Qualified wages” means that portion of hourly wages which does not exceed 150 percent of the minimum wage.
(2) “Minimum wage” means the wage established by the Industrial Welfare Commission as provided for in Chapter 1 (commencing with Section 1171) of Part 4 of Division 2 of the Labor Code.
(3) “Qualified employee” means an individual to whom both of the following apply:
(A) Is a resident in the Los Angeles Revitalization Zone.
(B) Was hired by the taxpayer to perform construction work in the Los Angeles Revitalization Zone.
(4) “Los Angeles Revitalization Zone” means the area designated under Section 7102 of the Government Code.
(c) If an employer acquires the major portion of a trade or business of another employer (hereafter in this subdivision referred to as the “predecessor”) or the major portion of a separate unit of a trade or business of a predecessor, then, for the purposes of applying this section for any income year ending after the acquisition, the employment relationship between an employee and employer shall not be treated as terminated if the employee continues to be employed in that trade or business.
(d) The credit shall be reduced by the credits allowable under Sections 23621 to 23623, inclusive, claimed for the same individual. The credit shall also be reduced by the credit allowed under Section 51 of the Internal Revenue Code for the same individual.
(e) Any deduction otherwise allowed under this part for the wages or salaries paid or incurred by the taxpayer upon which the credit is based shall be reduced by the amount of credit.
(f) In the case where the credit allowed under this section exceeds the “tax” for the income year, the excess may be carried over to reduce the “tax” in the following year, and succeeding years, until the credit has been exhausted.
(g) The amount of the credit allowed by this section in any taxable year shall not exceed the amount of tax that would be imposed on the income attributable to business activities of the taxpayer within the Los Angeles Revitalization Zone (as defined in Section 7102 of the Government Code) as if that attributable income represented all of the income of the taxpayer subject to tax under this part. The amount of that attributable income shall be determined in accordance with the provisions of Article 2 (commencing with Section 25120) of Chapter 17, modified as follows:
(1) For taxable years beginning on or after January 1, 1992, and before January 1, 1998, income shall be apportioned to the Los Angeles Revitalization Zone by multiplying total income from the business by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is 2.
(2) The Los Angeles Revitalization Zone shall be substituted for “this state.”
(h) (1) If the employment of any employee, with respect to whom qualified wages are taken into account under subdivision (a) is terminated by the taxpayer at any time during the first 270 days of that employment (whether or not consecutive) or before the close of the 270th calendar day after the day in which that employee completes 90 days of employment with the taxpayer, the tax imposed by this part for the taxable year in which that employment is terminated shall be increased by an amount (determined under those regulations) equal to the credit allowed under subdivision (a) for that taxable year and all prior taxable years attributable to qualified wages paid or incurred with respect to that employee.
(2) (A) Paragraph (1) shall not apply to any of the following:
(i) A termination of employment of an employee who voluntarily leaves the employment of the taxpayer.
(ii) A termination of employment of an individual who, before the close of the period referred to in paragraph (1), becomes disabled to perform the services of that employment, unless that disability is removed before the close of that period and the taxpayer fails to offer reemployment to that individual.
(iii) A termination of employment of an individual, if it is determined under the applicable employment compensation provisions that the termination was due to the misconduct of that individual.
(iv) A termination of employment of an individual due to a substantial reduction in the trade or business operations of the taxpayer.
(v) A termination of employment of an individual, if that individual is replaced by other qualified employees so as to create a net increase in both the number of employees and the hours of employment.
(iv) A termination of employment due to a contractual agreement.
(B) For purposes of paragraph (1), the employment relationship between the taxpayer and an employee shall not be treated as terminated by reason of a mere change in the form of conducting the trade or business of the taxpayer, if the employee continues to be employed in that trade or business and the taxpayer retains a substantial interest in that trade or business.
(i) This section shall remain in effect only until December 1, 1998, and as of that date is repealed. However, any unused credit may continue to be carried forward, as provided in subdivision (f), until the credit has been exhausted.

SEC. 15.
Section 24356.4 is added to the Revenue and Taxation Code, to read:

24356.4.
(a) A taxpayer may elect to treat the cost of any Section 24356.4 property as an expense that is not chargeable to capital account. Any cost so treated shall be allowed as a deduction for the income year in which the Section 24356.4 property is placed in service.
(b) (1) An election made under this section for any income year shall meet both of the following requirements:
(A) Specify the items of Section 24356.4 property to which the election applies and the cost of each of those items that is to be taken into account under subdivision (a).
(B) Be made on the taxpayer’s return of the tax imposed by this part for the income year.
(2) Any election made under this section, and any specifications contained in that election, may not be revoked except with the consent of the Franchise Tax Board.
(c) For purposes of this section:
(1) “Section 24356.4 property” means any recovery property that is Section 1245 property (as defined in Section 1245(a)(3) of the Internal Revenue Code) and that is acquired by purchase for exclusive use in a trade or business conducted within the Los Angeles Revitalization Zone designated pursuant to Section 7102 of the Government Code.
(2) “Purchase” means any acquisition of property, but only if all of the following apply:
(A) The property is not acquired from a person whose relationship to the person acquiring it would result in the disallowance of losses under Section 267 or 707(b) of the Internal Revenue Code (but, in applying Sections 267(b) and 267(c) of the Internal Revenue Code, Section 267(c)(4) of the Internal Revenue Code shall be treated as providing that the family of an individual shall include only his or her spouse, ancestors, and lineal descendants).
(B) The property is not acquired by one member of an affiliated group from another member of the same affiliated group.
(C) The basis of the property in the hands of the person acquiring it is not determined in whole or in part by reference to the adjusted basis of the property in the hands of the person from whom acquired.
(d) This section shall not apply to any property described in Section 168(f) of the Internal Revenue Code, relating to property to which Section 168 of the Internal Revenue Code does not apply.
(e) This section shall apply only to property that is used exclusively in a trade or business conducted in the Los Angeles Revitalization Zone.
(f) Any amount deducted under subdivision (a) with respect to property that ceases to be used in a trade or business within the Los Angeles Revitalization Zone at any time before the close of the second income year after the property was placed in service shall be included in income in the income year in which property ceases to be so used.
(g) This section shall remain in effect only until January 1, 1998, and as of that date is repealed.

SEC. 16.
Section 24385 is added to the Revenue and Taxation Code, to read:

24385.
(a) There shall be allowed as a deduction the amount of net interest received by the taxpayer in payment of indebtedness of a person or entity engaged in trade or business located in the Los Angeles Revitalization Zone (as defined in Section 7102 of the Government Code).
(b) No deduction shall be allowed under subdivision (a) unless at the time the indebtedness is incurred each of the following requirements are met:
(1) The trade or business is located solely within the Los Angeles Revitalization Zone (as defined in Section 7102 of the Government Code).
(2) The indebtedness is incurred primarily in connection with activity within the Los Angeles Revitalization Zone.
(3) The taxpayer has no equity or other ownership interest in the debtor.
(c) This section shall remain in effect only until January 1, 1998, and as of that date is repealed.

SEC. 17.
Section 24416.2 of the Revenue and Taxation Code is amended to read:

24416.2.
The term “qualified taxpayer” as used in Section 24416.1 means any of the following:
(a) A taxpayer engaged in the conduct of a qualified business within a program area (as defined in Section 7082 of the Government Code).
(1) A net operating loss shall not be a net operating loss carryback for any income year and a net operating loss for any income year beginning on or after the date that the taxpayer becomes a qualified business shall be a net operating loss carryover to each of the 15 income years following the income year of loss.
(2) For purposes of this subdivision:
(A) “Net operating loss” means the loss determined under Section 172 of the Internal Revenue Code, as modified by Section 24416.1, attributable to the business activities of the taxpayer within the program area (as defined in Section 7082 of the Government Code). That attributed loss shall be determined in accordance with the provisions of Article 2 (commencing with Section 25120) of Chapter 17, modified for purposes of this section as follows:
(i) For income years beginning on or after January 1, 1991, and ending on or before December 31, 1996, loss shall be apportioned to the program area by multiplying total loss from the business by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is two.
(ii) “The program area” shall be substituted for “this state.”
(B) A net operating loss carryover shall be a deduction only with respect to income attributed to the business activities of the taxpayer within the program area (as defined in Section 7082 of the Government Code) determined in accordance with the provisions of Article 2 (commencing with Section 25120) of Chapter 17, modified for purposes of this section as follows:
(i) For income years beginning on or after January 1, 1991, and ending on or before December 31, 1996, income shall be apportioned to the program area by multiplying total income from the business by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is two.
(ii) “The program area” shall be substituted for “this state.”
(b) A taxpayer who is engaged in the conduct of a trade or business within an enterprise zone designated pursuant to Section 7073 of the Government Code on or after that designation.
(1) (A) A net operating loss shall not be a net operating loss carryback to any income year and, except as provided in subparagraph (B), a net operating loss for any income year beginning on or after the date that the area in which the taxpayer conducts a trade or business is designated an enterprise zone shall be a net operating loss carryover to each following income year that ends before the expiration or revocation of the designation of the enterprise zone under Section 7073 of the Government Code or to each of 15 income years following the income year of loss, if longer.
(B) In the case of a financial institution to which Section 585, 586, or 593 of the Internal Revenue Code applies, a net operating loss for any income year beginning on or after January 1, 1984, shall be a net operating loss carryover to each of the five income years following the income year of the loss. Subdivision (b) of Section 24416.1 shall not apply.
(2) For purposes of this subdivision:
(A) “Net operating loss” means the loss determined under Section 172 of the Internal Revenue Code, as modified by Section 24416.1, attributable to the business activities of the taxpayer within the enterprise zone (as defined in Section 7073 of the Government Code). The attributed loss shall be determined in accordance with the provisions of Article 2 (commencing with Section 25120) of Chapter 17, modified for purposes of this section as follows:
(i) For income years beginning on or after January 1, 1991, and ending on or before December 31, 1996, loss shall be apportioned to the enterprise zone by multiplying total loss from the business by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is 2.
(ii) “The enterprise zone” shall be substituted for “this state.”
(B) A net operating loss carryover shall be a deduction only with respect to income attributed to the business activities of the taxpayer within the enterprise zone (as defined in Section 7073 of the Government Code) determined in accordance with the provisions of Article 2 (commencing with Section 25120) of Chapter 17, modified for purposes of this section as follows:
(i) For income years beginning on or after January 1, 1991, and ending on or before December 31, 1996, income shall be apportioned to the enterprise zone by multiplying total income from the business by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is 2.
(ii) “The enterprise zone” shall be substituted for “this state.”
(c) A taxpayer engaged in the conduct of a trade or business within the Los Angeles Revitalization Zone designated pursuant to Section 7102 of the Government Code.
(1) (A) A net operating loss shall not be a net operating loss carryback for any income year and, except as provided in subparagraph (B), a net operating loss for any income year beginning on or after the date the area in which the taxpayer conducts a trade or business is designated the Los Angeles Revitalization Zone shall be a net operating loss carryover to each following income year that ends before the expiration or revocation of the designation of the Los Angeles Revitalization Zone under Section 7102 of the Government Code or to each of the 15 income years following the income year of loss, if longer.
(B) In the case of a financial institution to which Section 585, 586, or 593 of the Internal Revenue Code applies, a net operating loss for any income year beginning on or after January 1, 1984, shall be a net operating loss carryover to each of the five years following the income year of the loss. Subdivision (b) of Section 24416.1 shall not apply.
(2) For the purposes of this subdivision:
(A) “Net operating loss” means the loss determined under Section 172 of the Internal Revenue Code, as modified by Section 24416.1, attributable to the business activities of the taxpayer within the Los Angeles Revitalization Zone (as defined in Section 7102 of the Government Code). The attributable loss shall be determined in accordance with the provisions of Article 2 (commencing with Section 25120), modified as follows:
(i) The loss shall be apportioned to the Los Angeles Revitalization Zone by multiplying the loss from the business by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is 2.
(ii) “The Los Angeles Revitalization Zone” shall be substituted for this state.
(B) A net operating loss carryover shall be a deduction only with respect to income attributable to the business activities of the taxpayer within the Los Angeles Revitalization Zone (as defined in Section 7102 of the Government Code) determined in accordance with the provisions of Article 2 (commencing with Section 25120) of Chapter 17 of Part 11, modified as follows:
(i) For taxable years beginning on or after January 1, 1992, and before January 1, 1998, income shall be apportioned to the los Angeles Revitalization Zone by multiplying total income from the business by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is 2.
(ii) “The Los Angeles Revitalization Zone” shall be substituted for “this state.”
(3) This subdivision shall cease to be operative on January 1, 1998. However, any unused net operating loss may continue to be carried over to following years as provided in this subdivision until the net operating loss has been used.
(d) A taxpayer who qualifies as a “qualified taxpayer” shall, for the income year of the net operating loss and any income year to which that net operating loss may be carried, designate on the return filed for each year the subdivision of this section which applies to that taxpayer with respect to that net operating loss. If the taxpayer is eligible to qualify under more than one subdivision of this section, the designation is to be made after taking into account subdivision (e).
(e) If a taxpayer is eligible to qualify under more than one subdivision of this section as a “qualified taxpayer,” with respect to a net operating loss in an income year, the taxpayer shall designate which subdivision of this section is to apply to the taxpayer.
(f) Notwithstanding the provisions of Section 24416, the amount of the loss determined under Section 24416.1 shall be the only net operating loss allowed to be carried over from that income year and the designation under subdivision (d) shall be included in the election under Section 24416.1.

SEC. 18.
The Legislature finds and declares that a general statute, within the meaning of Section 16 of Article IV of the California Constitution, cannot be made applicable to the unique problems within the County of Los Angeles that this act is intended to remedy, and that, therefore, this special statute is necessary.

SEC. 19.
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 expeditiously provide essential assistance to ensure recovery from the extensive damage to lives and property inflicted by the riots that occurred in California during April and May 1992, it is necessary that this act take effect immediately.