SB 661

Bill Subjects

Abstract

The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws, including, for taxable years beginning on or after January 1, 2014, and before January 1, 2021, a credit for hiring qualified full-time employees within specified economic development areas in an amount equal to 35% of the qualified wages paid to those employees multiplied by the applicable percentage for that taxable year. For the purposes of that credit, a qualified full-time employee is defined as an individual who meets certain requirements and satisfies at least one of several specified conditions, the applicable percentage is calculated, in part, by comparing the total number of full-time employees employed in this state during the taxable year to the total number of full-time employees employed in this state during the base year, as defined, and qualified wages are limited to wages that exceed 150% of minimum wage, or $10 per hour, as applicable, but do not exceed 350% of minimum wage. Under existing law, employers that provide retail trade services, or that are primarily engaged in providing food services, among others, are ineligible for that credit. This bill would extend the operation of that credit to taxable years beginning before January 1, 2031. This bill, for taxable years beginning on or after January 1, 2017, would revise the calculation of the applicable percentage used in determining the amount of the credit allowed to a small business that as of January 1, 2018, is located in a county that has an unemployment rate that is at least 150% of the statewide average or a county that has a poverty rate that is at least 125% of the statewide average by reducing the number of full-time employees considered to be employed in the state during the base year to zero. The bill would expand the definition of qualified full-time employee to include persons who meet those certain requirements and are either residents of those counties or were eligible to be recipients of the federal earned income tax credit. The bill would allow wages that do not exceed 150% of minimum wage, or $10 per hour, as applicable, to be included in qualified wages used to calculate the amount of the credit. The bill would also allow an employer that provides retail services, or that is primarily engaged in providing food services, to claim the credit. The Personal Income Tax Law and the Corporation Tax Law provide for an alternative minimum tax and provide that, except for specified credits, no credit shall reduce the regular tax, as defined, below the tentative minimum tax. This bill, for taxable years beginning on or after January 1, 2017, and before January 1, 2031, would allow the credit to reduce the regular tax below the tentative minimum tax. Existing law also allows a credit against tax under both laws for each taxable year beginning on or after January 1, 2014, and before January 1, 2025, in an amount as provided in a written agreement between the Governor's Office of Business and Economic Development and the taxpayer, agreed upon by the California Competes Tax Credit Committee, and based on specified factors, including the number of jobs the taxpayer will create or retain in the state and the amount of investment in the state by the taxpayer. Existing law limits the aggregate amount of credits allocated to taxpayers to a specified sum per fiscal year and provides that the amount available for these credits will decrease based in part, on how much credit is allowed under the hiring credit that would be modified by this bill. This bill would decrease the amount available for those credits by increasing the amount and availability of the hiring credit. This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIIIA of the California Constitution, and thus would require for passage the approval of 23 of the membership of each house of the Legislature. This bill would take effect immediately as a tax levy.