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SB-424 Tax credits: employment: homelessness.(2021-2022)

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Date Published: 05/11/2021 09:00 PM
SB424:v97#DOCUMENT

Amended  IN  Senate  May 11, 2021
Amended  IN  Senate  April 27, 2021

CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Senate Bill
No. 424

Introduced by Senator Durazo
(Principal coauthor: Assembly Member Bloom)
(Coauthors: Senators Caballero and Dodd Caballero, Dodd, McGuire, and Wiener)

February 12, 2021

An act to add and repeal Sections 17053.80 and 23628 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.


LEGISLATIVE COUNSEL'S DIGEST


SB 424, as amended, Durazo. Tax credits: employment: homelessness.
The Personal Income Tax Law and the Corporation Tax Law authorize various credits against the tax imposed by those laws.
This bill would allow a credit under the Personal Income Tax Law and the Corporation Tax Law for each taxable year beginning on or after January 1, 2022, and before January 1, 2027, to a qualified taxpayer that employs an eligible individual during the taxable year, in an amount between $2,500 and $10,000 per eligible individual, not to exceed $30,000 per taxable year, depending on the amount of hours worked by the eligible individual. individual, and subject to specified conditions and limitations. The bill would require the qualified taxpayer to request a credit reservation from the Franchise Tax Board, as provided, to be eligible for the credit. The bill would limit the total aggregate amount of the credit that may be allowed to all qualified taxpayers under both the Personal Income Tax Law and the Corporation Tax Law to $30,000,000, plus the unallocated credit amount, if any, from the preceding calendar year. The bill would define various terms for purposes of the credit, including defining “eligible individual” as a person who is homeless. The bill would require an eligible employer to obtain an eligible employer certification from the Employment Development Department to receive the credit, and would require the Employment Development Department to issue a certification to eligible employers, as specified. The bill would require each continuum of care to issue certifications to eligible individuals that are homeless, as specified. By increasing the duties of local continuum of care, the bill would impose a state-mandated local program.
Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives that the tax expenditure will achieve, detailed performance indicators, and data collection requirements.
This bill would also include additional information required for any bill authorizing a new tax expenditure.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.
This bill would take effect immediately as a tax levy.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: YES  

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


SECTION 1.

 The Legislature finds and declares:
(a) The homeless population in the State of California has grown to exceed 130,000. Since 2011, Los Angeles’s homeless population has grown by 52 percent to over 50,000. Statewide, from 2015 to 2017, inclusive, California’s homeless population grew by 16 percent. Despite significant investment by the state and local jurisdictions, including the County of Los Angeles, additional resources are needed to combat homelessness. In the face of reports that the economy is at “full employment,” many homeless individuals experience stigma and difficulty when attempting to attain full-time, unsubsidized employment. The purpose of the California Homeless Hiring Tax Credit is to encourage qualified employers that provide family-sustaining career pathways to hire and retain employees from the homeless population who have systematically faced barriers to employment.
(b) The Legislature finds and declares that the federal Equal Employment Opportunity Commission (EEOC) has considered the questions and forms required for the related federal Work Opportunity Tax Credit (WOTC) and found that the proper use of these questions and forms, which are used solely for purposes of applying for the WOTC based on qualifying barriers to employment, does not violate federal equal employment opportunity laws. Moreover, the proper use of the WOTC benefits those that equal employment opportunity laws seek to protect. However, despite the EEOC approving the WOTC application forms, if an employer were to use the information for purposes other than to apply for the WOTC, for example, to discriminate in a hiring decision, the EEOC declared that the employer would not be protected from liability under equal employment opportunity laws. The Legislature further finds and declares that compliance with the Homeless Hiring Tax Credit questions and forms is necessary to ensure proper documentation and certification for employees eligible for the credit allowed by this measure.

SEC. 2.

 Section 17053.80 is added to the Revenue and Taxation Code, to read:

17053.80.
 (a) (1) For each taxable year beginning on or after January 1, 2022, and before January 1, 2027, there shall be allowed to a qualified taxpayer that employs an eligible individual a credit against the “net tax,” as defined in Section 17039, an amount as determined pursuant to paragraph (2), not to exceed thirty thousand dollars ($30,000) per taxable year.
(2) A qualified taxpayer shall be allowed the credit pursuant to this section in the following amounts per taxable year:
(A) Two thousand five hundred dollars ($2,500), for each eligible individual that works at least 500 hours hours, but fewer than 1,000 hours, for the eligible employer during the taxable year in which the credit is claimed.
(B) Five thousand dollars ($5,000), for each eligible individual that works at least 1,000 hours hours, but fewer than 1,500 hours, for the eligible employer during the taxable year in which the credit is claimed.
(C) Seven thousand five hundred dollars ($7,500), for each eligible individual that works at least 1,500 hours hours, but fewer than 2,000 hours, for the eligible employer during the taxable year in which the credit is claimed.
(D) Ten thousand dollars ($10,000), for each eligible individual that works at least 2,000 hours for the eligible employer during the taxable year in which the credit is claimed.
(b) For purposes of this section:
(1) “Continuum of care” has the same meaning as in Section 578.3 of Title 24 of the Code of Federal Regulations.
(2) “Eligible employer” means a taxpayer that is either of the following:
(A) An employer that meets both of the following requirements:
(i) Pays wages subject to withholding under Division 6 (commencing with Section 13000) of the Unemployment Insurance Code.
(ii) Pays family-supporting wages at or exceeding the jurisdiction’s prevailing wage, as determined by the Employment Development Department.
(B) An employer that meets the requirements of subparagraph (A) and is certified as a “high-road” employer by the Labor and Workforce Development Agency.
(3) “Eligible individual” means a person who is homeless on the date of the hire or anytime during the 60-day period immediately before the hire, or someone who is receiving supportive services from a homeless services provider as designated by a local continuum of care or coordinated entry system.
(4) “ ‘High-road’ employer” means an employer that pays family-supporting wages at or exceeding the jurisdiction’s prevailing wage, competes based on the quality of their services and products, and engages workers and their representatives in the project of building skills and competitiveness in an effort to advance the workers’ career objectives.
(5) “Person who is homeless” means the same as “homeless” as defined in Section 578.3 of Title 24 of the Code of Federal Regulations.
(6) “Qualified taxpayer” means an eligible employer that pays wages subject to withholding under Division 6 (commencing with Section 13000) of the Unemployment Insurance Code to an eligible individual.
(c) (1) A credit shall not be allowed under this section unless the eligible employer submits to the Franchise Tax Board, upon request, an eligible employer certification issued pursuant to paragraph (2) and submits an eligible individual certification issued pursuant to paragraph (3) for each eligible individual employed.
(2) (A) An employer shall submit a request for an eligible employer certification to the Employment Development Department.
(B) The Employment Development Department shall issue an eligible employer certification to an employer that qualifies as an eligible employer under paragraph (2) of subdivision (b).
(C) An eligible employer certification issued pursuant to this subdivision shall expire two years after issuance.
(3) (A) A continuum of care, in coordination with the Employment Development Department, shall issue certifications to eligible individuals who meet the definition of “person who is homeless.”
(B) A certification issued pursuant to this paragraph shall expire one year after issuance.
(d) (1) The total aggregate amount of the credit that may be allowed per calendar year to all qualified taxpayers pursuant to this section and Section 23628 shall not exceed thirty million dollars ($30,000,000), plus the unallocated credit amount, if any, from the preceding calendar year.
(2) A qualified taxpayer shall claim the credit on a timely filed original return of the qualified taxpayer and only with respect to an eligible individual for whom the qualified taxpayer has received a credit reservation.
(3) (A) To be eligible for the credit allowed by this section, a qualified taxpayer shall, upon hiring an eligible individual, request a credit reservation from the Franchise Tax Board within 30 days of complying with the Employment Development Department’s new hire reporting requirements as provided in Section 1088.5 of the Unemployment Insurance Code, in the form and manner prescribed by the Franchise Tax Board.
(B) To obtain a credit reservation with respect to an eligible individual, the qualified taxpayer shall provide necessary information, as determined by the Franchise Tax Board, including the name, social security number, how many hours the eligible individual is expected to work for that year, and the start date of employment.
(4) The Franchise Tax Board shall do both of the following:
(A) Approve a tentative credit reservation with respect to an eligible individual hired during a taxable year.
(B) Subject to the annual cap established as provided in paragraph (1), allocate an aggregate amount of credits under this section and Section 23628, and allocate any carryover of unallocated credits from prior years.
(e) In the case where the credit allowed by this section exceeds the “net tax,” the excess may be carried over to reduce the “net tax” in the following taxable year, and succeeding two years if necessary, until the credit is exhausted.
(f) If the credit allowed by this section is claimed by the qualified taxpayer, a deduction otherwise allowed under this part for any amount of wages paid or incurred by the qualified taxpayer as a trade or business expense to an eligible individual shall be reduced by the amount of the credit allowed by this section.

(f)

(g) The Franchise Tax Board may prescribe rules, guidelines, or procedures necessary or appropriate to carry out the purposes of this section, including any guidelines regarding the allocation of the credit allowed under this section. Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code shall not apply to any rule, guideline, or procedure prescribed by the Franchise Tax Board pursuant to this section.

(g)

(h) This section shall remain in effect only until December 1, 2027, and as of that date is repealed.

SEC. 3.

 Section 23628 is added to the Revenue and Taxation Code, to read:

23628.
 (a) (1) For each taxable year beginning on or after January 1, 2022, and before January 1, 2027, there shall be allowed to a qualified taxpayer that employs an eligible individual a credit against the “tax,” as defined in Section 23036, an amount as determined pursuant to paragraph (2), not to exceed thirty thousand dollars ($30,000) per taxable year.
(2) A qualified taxpayer shall be allowed the credit pursuant to this section in the following amounts per taxable year:
(A) Two thousand five hundred dollars ($2,500), for each eligible individual that works at least 500 hours hours, but fewer than 1,000 hours, for the eligible employer during the taxable year in which the credit is claimed.
(B) Five thousand dollars ($5,000), for each eligible individual that works at least 1,000 hours hours, but fewer than 1,500 hours, for the eligible employer during the taxable year in which the credit is claimed.
(C) Seven thousand five hundred dollars ($7,500), for each eligible individual that works at least 1,500 hours hours, but fewer than 2,000 hours, for the eligible employer during the taxable year in which the credit is claimed.
(D) Ten thousand dollars ($10,000), for each eligible individual that works at least 2,000 hours for the eligible employer during the taxable year in which the credit is claimed.
(b) For purposes of this section:
(1) “Continuum of care” has the same meaning as in Section 578.3 of Title 24 of the Code of Federal Regulations.
(2) “Eligible employer” means a taxpayer that is either of the following:
(A) An employer that meets both of the following requirements:
(i) Pays wages subject to withholding under Division 6 (commencing with Section 13000) of the Unemployment Insurance Code.
(ii) Pays family-supporting wages at or exceeding the jurisdiction’s prevailing wage, as determined by the Employment Development Department.
(B) An employer that meets the requirements of subparagraph (A) and is certified as a “high-road” employer by the Labor and Workforce Development Agency.
(3) “Eligible individual” means a person who is homeless on the date of the hire or anytime during the 60-day period immediately before the hire, or someone who is receiving supportive services from a homeless services provider as designated by a local continuum of care or coordinated entry system.
(4) “ ‘High-road’ employer” means an employer that pays family-supporting wages at or exceeding the jurisdiction’s prevailing wage, competes based on the quality of their services and products, and engages workers and their representatives in the project of building skills and competitiveness in an effort to advance the workers’ career objectives.
(5) “Person who is homeless” means the same as “homeless” as defined in Section 578.3 of Title 24 of the Code of Federal Regulations.
(6) “Qualified taxpayer” means an eligible employer that pays wages subject to withholding under Division 6 (commencing with Section 13000) of the Unemployment Insurance Code to an eligible individual.
(c) (1) A credit shall not be allowed under this section unless the eligible employer submits to the Franchise Tax Board, upon request, an eligible employer certification issued pursuant to paragraph (2) and submits an eligible individual certification issued pursuant to paragraph (3) for each eligible individual employed.
(2) (A) An employer shall submit a request for an eligible employer certification to the Employment Development Department.
(B) The Employment Development Department shall issue an eligible employer certification to an employer that qualifies as an eligible employer under paragraph (2) of subdivision (b).
(C) An eligible employer certification issued pursuant to this subdivision shall expire two years after issuance.
(3) (A) A continuum of care, in coordination with the Employment Development Department, shall issue certifications to eligible individuals who meet the definition of “person who is homeless.”
(B) A certification issued pursuant to this paragraph shall expire one year after issuance.
(d) (1) The total aggregate amount of the credit that may be allowed per calendar year to all qualified taxpayers pursuant to this section and Section 17053.80 shall not exceed thirty million dollars ($30,000,000), plus the unallocated credit amount, if any, from the preceding calendar year.
(2) A qualified taxpayer shall claim the credit on a timely filed original return of the qualified taxpayer and only with respect to an eligible individual for whom the qualified taxpayer has received a credit reservation.
(3) (A) To be eligible for the credit allowed by this section, a qualified taxpayer shall, upon hiring an eligible individual, request a credit reservation from the Franchise Tax Board within 30 days of complying with the Employment Development Department’s new hire reporting requirements as provided in Section 1088.5 of the Unemployment Insurance Code, in the form and manner prescribed by the Franchise Tax Board.
(B) To obtain a credit reservation with respect to an eligible individual, the qualified taxpayer shall provide necessary information, as determined by the Franchise Tax Board, including the name, social security number, how many hours the employee is expected to work for that year, and the start date of employment.
(4) The Franchise Tax Board shall do both of the following:
(A) Approve a tentative credit reservation with respect to an eligible individual hired during a taxable year.
(B) Subject to the annual cap established as provided in paragraph (1), allocate an aggregate amount of credits under this section and Section 17053.80, and allocate any carryover of unallocated credits from prior years.
(e) In the case where the credit allowed by this section exceeds the “tax,” the excess may be carried over to reduce the “tax” in the following taxable year, and succeeding two years if necessary, until the credit is exhausted.
(f) If the credit allowed by this section is claimed by the qualified taxpayer, a deduction otherwise allowed under this part for any amount of wages paid or incurred by the qualified taxpayer as a trade or business expense to an eligible individual shall be reduced by the amount of the credit allowed by this section.

(f)

(g) The Franchise Tax Board may prescribe rules, guidelines, or procedures necessary or appropriate to carry out the purposes of this section, including any guidelines regarding the allocation of the credit allowed under this section. Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code shall not apply to any rule, guideline, or procedure prescribed by the Franchise Tax Board pursuant to this section.

(g)

(h) This section shall remain in effect only until December 1, 2027, and as of that date is repealed.

SEC. 4.

 For purposes of complying with Section 41 of the Revenue and Taxation Code, with respect to Sections 17053.80 and 23628 of the Revenue and Taxation Code as added by this act, hereafter the “credit,” the Legislature finds and declares the following:
(a) The goal of the credit is to encourage employers to hire and retain individuals from the homeless population which has been found to face systemic barriers to employment.
(b) (1) The effectiveness of the credit shall be measured by an annual written report created by the Labor and Workforce Development Agency that contains all of the following information:
(A) The number of employers, based on employer identification numbers, who applied for certification.
(B) The number and percentage of employees that applied for and received certification.
(C) The distribution of employers based on industry sectors.
(D) The distribution of employees based on industry sectors.
(E) The wages of workers hired as a result of the credit.
(2) (A) On or before October 1, 2022, and annually thereafter while the credit is in effect, the Employment Development Department shall post on its internet website the written report required by subdivision (b).
(B) A letter indicating that the report is posted on the Employment Development Department internet website shall be delivered to the Chief Clerk of the Assembly and the Secretary of the Senate within four calendar days of the report being posted. The Chief Clerk of the Assembly and the Secretary of the Senate shall distribute the notice, as they deem appropriate.

SEC. 5.

 If the Commission on State Mandates determines that this act contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code.

SEC. 6.

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