Bill Text: CA SB974 | 2009-2010 | Regular Session | Amended

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Bill Title: Income and corporations tax: hiring and career credits.

Spectrum: Partisan Bill (Democrat 4-0)

Status: (Engrossed - Dead) 2010-06-29 - Set, first hearing. Hearing canceled at the request of author. [SB974 Detail]

Download: California-2009-SB974-Amended.html

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BILL NUMBER: SB 974	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  JUNE 15, 2010
	AMENDED IN SENATE  MAY 19, 2010
	AMENDED IN SENATE  MAY 3, 2010
	AMENDED IN SENATE  APRIL 5, 2010

INTRODUCED BY   Senator Steinberg
   (Coauthors: Senators  Hancock   Alquist,
  Hancock,  and Romero)

                        FEBRUARY 8, 2010

   An act to add Part 38 (commencing with Section 64200) to Division
4 of Title 2 of the Education Code, and to amend Sections 17053.74
and 23622.7 of, and to add Sections 17057.6 and 23610.6 to, the
Revenue and Taxation Code, relating to taxation, to take effect
immediately, tax levy.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 974, as amended, Steinberg. Income and corporations tax: hiring
and career credits.
   (1) The Personal Income Tax Law and The Corporation Tax Law
authorize various credits against the taxes imposed by those laws.
   This bill, in accordance with legislative findings contained in
this bill and for calendar years beginning on or after January 1,
2011, would, for a business entity, as described, that provides
career technical education, authorize a credit against those taxes,
subject to specified limitations, in an amount equal to that 
reserved and  allocated by the  State Department of
Education   Superintendent of Public Instruction  .

   This bill would impose specified duties on the  State
Department of Education   Superintendent of Public
Instruction  , the Franchise Tax Board, and the State Board of
Equalization  ,  in administering the credits.
   (2) The Personal Income Tax Law and the Corporation Tax Law
authorize various credits against the taxes imposed by those laws,
including a hiring credit for qualified taxpayers who hire qualified
employees, as defined, within enterprise zones, subject to specific
criteria. Qualified employees includes, for purposes of the credit,
an ex-offender, as defined. Existing law requires a taxpayer to
obtain, from specified agencies, a certification providing that a
qualified employee meets the requirements of the credit.
   This bill would, for taxable years beginning on or after January
1, 2011, revise the definition of "qualified employee" for this
purpose, by providing that an ex-offender includes an individual who
has been convicted of a felony or a misdemeanor offense punishable by
incarceration, or a person charged with a felony or misdemeanor
punishable by incarceration but placed on probation without a finding
of guilt, with specified exclusions. This bill would also, for
taxable years beginning on or after January 1, 2011, revise the
definition of "qualified employee" by removing, as an element of
eligibility as a qualified employee, residency in a targeted
employment or targeted tax area. Additionally, this bill would
require taxpayers to apply for, and obtain, the certification of a
qualified employee within 42 days of the date of hire of the
qualified employee. This bill would also make technical,
nonsubstantive changes to remove obsolete references in the credit
provisions.
   This bill would take effect immediately as a tax levy.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Part 38 (commencing with Section 64200) is added to
Division 4 of Title 2 of the Education Code, to read:

      PART 38.  Career Pathways Investment Credit


   64200.  (a)  The Legislature finds and declares the following:
   (1) The deep economic recession that has gripped California
requires a timely response and strategic investments to educate and
prepare the workforce that will help fuel the next stage of the state'
s economic growth.
   (2) The swift recovery of the California economy faces an obstacle
in the high numbers of young people dropping out of the state's
middle and high schools. Longitudinal data show that fewer than 70
percent of 9th graders in California graduate from high school in
four years. According to the  State Department of Education
  Superintendent of Public Instruction  , some
85,000 middle and high school pupils are abandoning secondary schools
annually.
   (3) If the dropout crisis is left unchecked, demographic trends
suggest that the rate of future dropouts will increase. The Public
Policy Institute of California predicts there will be twice as many
high school dropouts in California in 2025 as there will be jobs to
support them.
   (4) According to a 2007 study by the California Dropout Research
Project, each cohort of dropouts costs California more than $46
billion in total economic losses over the lifetimes of those
dropouts.
   (5) The fastest growing occupations in the coming years are
expected to be those that require scientific, technical, engineering,
or math (STEM) skills, such as jobs in biotechnology, digital media
arts, green technology, or computer-related and health-related
fields.
   (6) A 2006 poll of at-risk California 9th and 10th graders by
Peter D. Hart Research Associates found that 6 in 10 pupils were not
motivated to succeed in school. Of those pupils, more than 90 percent
said they would be more engaged in their education if classes helped
them acquire skills and knowledge relevant to future careers.
   (7) Comprehensive programs that link challenging academics with
demanding career and technical education create engaging pathways to
further education, advanced training, and productive jobs in high
opportunity careers. They keep students on track to a diploma,
postsecondary credentials, and lasting career success.
   (8) New research from the Public Policy Institute of California
suggests that the state's enterprise zone tax credit program has not
significantly increased job creation or the employment of
hard-to-hire individuals, as was intended.
   (9) Two aspects of the enterprise zone program that have produced
an especially poor return on investment, Targeted Employment Areas
(TEA) and retroactive vouchering, should be phased out in favor of
fiscal incentives that enhance workforce development for the jobs of
the future and that have a beneficial impact on high school
graduation rates.
   (b) It is the intent of the Legislature to do the following:
   (1) Evaluate the state's tax expenditure investments as rigorously
as it evaluates the state's spending programs.
   (2) Establish fiscal incentives, such as tax credits, that
encourage California businesses and industry to enter into
partnerships with schools that strengthen middle and high school
education statewide. These partnerships will connect pupils and
teachers to real-world experience that provides sustained exposure to
applied academics, skill development, work-related education, and
potential future employers. This experience will keep students
engaged and on track to graduation, further education, and productive
careers.
   (c) As used in this section, "tax expenditure" means a credit,
deduction, exclusion, exemption, or any other tax benefit as may be
provided for by state law.
   64201.  For purposes of this part:
   (a) "Applicant" means a business entity that enters into a
contract or memorandum of understanding with a local educational
agency to provide career technical education that connects pupils to
real-world experience and provides sustained exposure to applied
academics, skill development, work-related education, and potential
future employment  , and that applies to the Superintendent of
Public Instruction for the Career Pathways Investment Credit  .
   (b) "Authentic application" means an activity in the context of a
middle or high school course that requires pupils to work actively
with academic and technical concepts, facts, and skills in a
realistic, work-like setting that emulates the problems encountered
by professionals and the practices they use to address them. These
applications typically require pupils to examine a task from a
variety of perspectives, to draw upon multiple resources, to
collaborate with others, and to accomplish tasks and projects by
working in teams rather than individually. 
   (c) "Budget" means an estimate of all qualified expenditures to be
paid or incurred in providing the career pathways program over the
period for which the applicant is applying for the career pathways
investment credit.  
   (c) 
    (d)  "Career pathways investment credit ceiling" means
the aggregate amount of credit that may be annually allocated by the
department pursuant to Sections 17057.6 and 23610.6 of the Revenue
and Taxation Code. 
   (d) "Department" means the State Department of Education.

   (e) "Middle school or high school programs that create career
pathways" means programs that support the following:
   (1) High school pathways programs delivered through high schools,
regional occupation centers or programs, California Partnership
Academies and other career academies, alternative education programs,
including continuation schools and programs administered by county
offices of education, or adult education programs, that integrate
academic and technical learning to prepare pupils for both
postsecondary education and careers in high-growth or high-need
sectors of the economy. These programs include core academic courses
emphasizing authentic applications, sequences or clusters of three or
more courses that align with the State Board of Education approved
career technical education standards and frameworks that also
integrate key academic concepts and skills, work-based learning
opportunities, additional services like counseling or supplementary
instruction in reading, writing, and mathematics. These programs
shall also:
   (A) Focus on occupations requiring comprehensive skills in leading
to high entry-level wages or the possibility of significant wage
increases after a demonstrated amount of time at the position.
   (B) Provide prerequisite courses that are needed to enter
apprenticeships, or postsecondary vocation certificate or degree
programs. Where possible, sequenced courses shall be articulated
with, or linked to, postsecondary certificate and degree programs in
the region.
   (C) Offer as many courses as possible that have been approved by
the University of California as courses meeting the "A-G" admissions
requirements.
   (2) Curriculum and professional development.
   (3) Middle school career exploration activities.
   (4) Externship opportunities that expose middle school and high
school teachers to the skills and competencies that pupils need for
successful employment in high-growth sectors of the California
economy.
   (5) Active engagement by business and industry in pathway design
and implementation, work-based learning, assessment of student work,
and other aspects of effective preparation for success in further
postsecondary education and careers. 
   (f) "Qualified expenditures" includes the following:  
   (1) Equipment and instructional materials.  
   (2) Employees to provide instruction, in partnership with
credentialed teachers employed by the school district, at the
schoolsite.  
   (3) Paid jobs or internships.  
   (4) Teacher externships.  
   (5) Contributions to programs administered by postsecondary
institutions that provide support to middle or high school programs
that create career pathways. This support may include, but shall not
be limited to, teacher training, curriculum development, and other
forms of technical assistance.  
   (g) "Superintendent" means the Superintendent of Public
Instruction. 
   64202.  For calendar years beginning on or after January 1, 2011,
the  department   Superintendent  shall
 determine   reserve  and allocate the
career pathways investment credit ceiling.  The department
may reserve a portion of anticipated career pathways investment
credit ceiling for subsequent calendar years.  For purposes
of this section, the  department  
Superintendent  shall do all of the following:
   (a) Allocate the career pathways investment credit ceiling on a
regular basis consisting of two or more periods in a calendar year in
which applications may be filed and considered.  The
Superintendent may reserve credits for up to 5 calendar years for
each application he or she approves. The amount of credit reserved in
any calendar year shall be applied against the career pathways
program. The amount of career pathway credit reserved in each
calendar year shall equal the amounts specified in subdivision (d) of
Section 17057.6 of   the Revenue and Taxation Code, 
 as added by this act. 
   (b) (1) Establish a procedure for applicants to file with the
 department   Superintendent  a written
application for the  allocation   reservation
 of the tax  credit,   credit and 
establish application filing  deadlines, the maximum amount
of career pathways investment credit ceiling that the department may
allocate for that period, and the approximate date on which the
allocations are made.   deadlines. 
   (2) The  department   Superintendent 
may contract with other entities to aid in the processing and review
of applications.
   (c) (1) Give priority in allocating tax credits to the following:
   (A) Applicants that have entered into a contract or memorandum of
understanding with local educational agencies in communities that
have an unemployment rate higher than the statewide unemployment
rate, as determined by the United States Census, and a high school
graduation rate lower than the statewide high school graduation rate,
as determined by the  department  
Superintendent  using the California Longitudinal Pupil
Achievement Data System.
   (B) Applicants that have entered into a contract or memorandum of
understanding with local educational agencies with proportions of
private funding support that exceed the one-to-one match requirement
described in paragraph (1) of subdivision (e).
   (C) Applicants that have entered into a contract or memorandum of
understanding with local educational agencies that are articulated
with postsecondary certificate and degree programs in their region.

   (D) Applicants that are not seeking tax credits for existing
activities. However, priority shall be given to applicants that seek
to expand or augment existing investments in career pathway programs.

   (2) To the maximum extent practicable, subject to paragraph (1),
give priority in allocating career pathways investment credits to
applicants serving socioeconomically diverse student populations and
on a geographically equitable basis.
   (3) The  department   Superintendent 
shall not give priority to any applicant by virtue of the date of
submission of its application, except to allocate credits where two
or more applicants have the same rating.
   (d) Only  allocate   reserve  the career
pathways investment credit ceiling to an applicant that agrees to
enter into an enforceable contract or memorandum of understanding
with the department to comply with the requirements of this part,
Sections 17057.6 and 23610.6 of the Revenue and Taxation Code, any
applicable state laws, and any additional requirements the department
deems necessary or appropriate to serve the purposes of this part.
The contract or memorandum of understanding shall also provide for
legal action to obtain specified performance or monetary damages for
breach of contract and shall require regular programmatic audits.
   (e) Adopt  allocation   reserve 
criteria that awards credits to applicants that demonstrate that
either the applicant or the local educational agency meets the
following criteria: 
   (1) At least a one-to-one match of private to public investment in
middle school and high school programs that create career pathways
or similar programs.  
   (2) 
    (1)  The effectiveness of the career pathway program
toward preparing students for productive, high-wage employment in
growing or high-need sectors of the California economy. Effectiveness
criteria shall include:
   (A) Pathway completion rates.
   (B) High school graduation rates.
   (C) Percentages of students attaining an industry certification.
   (D) Percentages of students transitioning successfully to
postsecondary education.
   (E) Employment and earnings after high school. 
   (3) 
    (2)  The level of the applicant's investment in,
oversight of, and ability to leverage and sustain current career
pathways programs and current career technical education programs.
   (f) Develop and provide forms for the purposes of informing
potential applicants of the purposes of this part.
   (g) (1) Certify to each applicant the amount of the career
pathways credit ceiling  allocated   reserved
 to it for the calendar year.  The amount of the credit
reserved for a calendar year shall not exceed 50 percent of the
qualified expenditures estimated by the applicant for the calendar
year. The department may allocate the career pathways tax credit to
the applicant after it audits and verifies that the amount of
qualified expenditures the applicant actually incurs in the
performance of the career pathways program is accurate.  The
certificate shall include the amount of the credit allocation that
may be distributed and applied by the applicant against tax
liability.
   (2) The  department   Superintendent 
shall provide a copy of the certification to the applicant. 
   (3) The Superintendent shall report to the Franchise Tax Board,
once each year, the identity of the qualified taxpayers for whom the
career pathways credits are reserved or allocated each year. 
   (h) The  department   Superintendent 
may, in  its   his or her  discretion,
consult with the Treasurer and the California Tax Credit Allocation
Committee regarding the allocation of tax credits. If a request for
consultation is made, the Treasurer and the California Tax Credit
Allocation Committee shall aid the  department  
Superintendent  .
   (i) Establish audit requirements. The  department
  Superintendent  may share information established
during an audit with the Franchise Tax Board.
   64203.  For calendar years beginning on or after January 1, 2011,
the  department   Superintendent  shall
develop and provide forms for use by applicants and adopt uniform
procedures for submission and review of applications. The application
shall include, but not be limited to, the following:
   (a) A copy of the contract or memorandum of understanding between
the applicant and the local educational agency that includes, but is
not limited to, the following:
   (1) A clear and comprehensive plan for each middle school or high
school program that creates career pathways. 
   (2) A description of the nature and value of the applicant's
support for career exploration activities, curriculum and
professional development programs, and middle school or high school
programs that create career pathways that integrate academic and
technical learning to prepare pupils for both college and careers.
The support may include any of the following:  
   (A) Equipment or instructional materials.  
   (B) Employees to provide instruction, in partnership with
credentialed teachers employed by the school district, at the
schoolsite.  
   (C) Opportunities for pupils to be mentored by, or to shadow,
employees at a partnering private entity.  
   (D) Paid or unpaid internships.  
   (E) Paid jobs.  
   (F) Teacher externships.  
   (G) Contributions to programs administered by postsecondary
institutions that provide support to middle or high school programs
that create career pathways. This support may include, but shall not
be limited to, teacher training, curriculum development, and other
forms of technical assistance.  
   (2) The budget for the career pathways investment program over the
period for which the applicant is applying for the career pathways
investment credit. 
   (b) Details about the strength and relevance of the education plan
to the needs of industry for qualified technical employees
applicable to the economic development needs of the region in which
the local education agency and partnering private entity are located.

   (c) Projections of program participant enrollment.
   (d) The method by which accountability for program participant
enrollments and outcomes will be maintained. Outcomes shall include
the criteria listed in paragraph (2) of subdivision (e) of Section
64202.
   (e) Any other information deemed relevant by the 
department   Superintendent  .
   64204.  (a) The  department   Superintendent
 may charge a fee for the submission of applications for
allocations of the current calendar year's career pathways investment
credit ceiling, reservation of the following year's career pathways
investment credit ceiling, and for monitoring the compliance of
applicants receiving a credit under this part. If the 
department   Superintendent  chooses to impose a
fee, it shall establish and charge fees in an amount which it
determines are reasonably sufficient to cover the costs of the
department, the State Board of Equalization, and the Franchise Tax
Board in carrying out the administrative responsibilities required by
this part.
   (b) Fees collected pursuant to this subdivision shall be deposited
in the Career Pathways Investment Credit Fee Account, which is
hereby created in the State Treasury, and shall be available, upon
appropriation by the Legislature to cover the administrative costs of
the  department   Superintendent  , the
State Board of Equalization, and the Franchise Tax Board in
administering this part.
   (c) Until the time sufficient fee revenue is received by the
department to fully cover the administrative costs of administering
this part, the  department   Superintendent
 may borrow moneys as may be required for the purposes of
meeting necessary administrative expenses of the  department
  Superintendent  in administering this part. Any
loan made to the  department   Superintendent
 pursuant to this section shall be repayable solely from the
moneys appropriated to the  department  
Superintendent  and shall not constitute a general obligation
for which the faith and credit of the state are pledged.
   64205.  The  department   Superintendent
 may prescribe rules and regulations to carry out the purposes
of this part, including any rules and regulations necessary to
establish procedures, processes, requirements, and rules identified
or required to implement this part, including any rules and
regulations necessary to establish a fee schedule necessary to offset
the costs of administering this part.
  SEC. 2.  Section 17053.74 of the Revenue and Taxation Code is
amended to read:
   17053.74.  (a) There shall be allowed a credit against the "net
tax" (as defined in Section 17039) to a taxpayer who employs a
qualified employee in an enterprise zone during the taxable year. The
credit shall be equal to the sum of each of the following:
   (1) Fifty percent of qualified wages in the first year of
employment.
   (2) Forty percent of qualified wages in the second year of
employment.
   (3) Thirty percent of qualified wages in the third year of
employment.
   (4) Twenty percent of qualified wages in the fourth year of
employment.
   (5) Ten percent of qualified wages in the fifth year of
employment.
   (b) For purposes of this section:
   (1) "Qualified wages" means:
   (A) (i) Except as provided in clause (ii), that portion of wages
paid or incurred by the taxpayer during the taxable year to qualified
employees that does not exceed 150 percent of the minimum wage.
   (ii) For up to 1,350 qualified employees who are employed by the
taxpayer in the Long Beach Enterprise Zone in aircraft manufacturing
activities described in Codes 3721 to 3728, inclusive, and Code 3812
of the Standard Industrial Classification (SIC) Manual published by
the United States Office of Management and Budget, 1987 edition,
"qualified wages" means that portion of hourly wages that does not
exceed 202 percent of the minimum wage.
   (B) Wages received during the 60-month period beginning with the
first day the employee commences employment with the taxpayer.
Reemployment in connection with any increase, including a regularly
occurring seasonal increase, in the trade or business operations of
the taxpayer does not constitute commencement of employment for
purposes of this section.
   (C) Qualified wages do not include any wages paid or incurred by
the taxpayer on or after the zone expiration date. However, wages
paid or incurred with respect to qualified employees who are employed
by the taxpayer within the enterprise zone within the 60-month
period prior to the zone expiration date shall continue to qualify
for the credit under this section after the zone expiration date, in
accordance with all provisions of this section applied as if the
enterprise zone designation were still in existence and binding.
   (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) "Zone expiration date" means the date the enterprise zone
designation expires, is no longer binding, or becomes inoperative.
   (4) (A) "Qualified employee" means an individual who meets all of
the following requirements:
   (i) At least 90 percent of whose services for the taxpayer during
the taxable year are directly related to the conduct of the taxpayer'
s trade or business located in an enterprise zone.
   (ii) Performs at least 50 percent of his or her services for the
taxpayer during the taxable year in an enterprise zone.
   (iii) Is hired by the taxpayer after the date of original
designation of the area in which services were performed as an
enterprise zone.
   (iv) Is any of the following:
   (I) Immediately preceding the qualified employee's commencement of
employment with the taxpayer, was a person eligible for services
under the federal Job Training Partnership Act (29 U.S.C. Sec. 1501
et seq.), or its successor, who is receiving, or is eligible to
receive, subsidized employment, training, or services funded by the
federal Job Training Partnership Act, or its successor.
   (II) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a person eligible to be a
voluntary or mandatory registrant under the Greater Avenues for
Independence Act of 1985 (GAIN) provided for pursuant to Article 3.2
(commencing with Section 11320) of Chapter 2 of Part 3 of Division 9
of the Welfare and Institutions Code, or its successor.
   (III) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was an economically disadvantaged
individual 14 years of age or older.
   (IV) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a dislocated worker who meets
any of the following:
   (ia) Has been terminated or laid off or who has received a notice
of termination or layoff from employment, is eligible for or has
exhausted entitlement to unemployment insurance benefits, and is
unlikely to return to his or her previous industry or occupation.
   (ib) Has been terminated or has received a notice of termination
of employment as a result of any permanent closure or any substantial
layoff at a plant, facility, or enterprise, including an individual
who has not received written notification but whose employer has made
a public announcement of the closure or layoff.
   (ic) Is long-term unemployed and has limited opportunities for
employment or reemployment in the same or a similar occupation in the
area in which the individual resides, including an individual 55
years of age or older who may have substantial barriers to employment
by reason of age.
   (id) Was self-employed (including farmers and ranchers) and is
unemployed as a result of general economic conditions in the
community in which he or she resides or because of natural disasters.

   (ie) Was a civilian employee of the Department of Defense employed
at a military installation being closed or realigned under the
Defense Base Closure and Realignment Act of 1990.
   (if) Was an active member of the Armed Forces or National Guard as
of September 30, 1990, and was either involuntarily separated or
separated pursuant to a special benefits program.
   (ig) Is a seasonal or migrant worker who experiences chronic
seasonal unemployment and underemployment in the agriculture
industry, aggravated by continual advancements in technology and
mechanization.
   (ih) Has been terminated or laid off, or has received a notice of
termination or layoff, as a consequence of compliance with the Clean
Air Act.
   (V) Immediately preceding the qualified employee's commencement of
employment with the taxpayer, was a disabled individual who is
eligible for or enrolled in, or has completed a state rehabilitation
plan or is a service-connected disabled veteran, veteran of the
Vietnam era, or veteran who is recently separated from military
service.
   (VI) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was an ex-offender. An ex-offender
means an individual who has been convicted of a felony or a
misdemeanor offense punishable by incarceration or a person charged
with a felony offense or a misdemeanor offense punishable by
incarceration but placed on probation by a state court without a
finding of guilt. Ex-offender shall not include an individual whose
record has been expunged.
       (VII) Immediately preceding the qualified employee's
commencement of employment with the taxpayer, was a person eligible
for or a recipient of any of the following:
   (ia) Federal Supplemental Security Income benefits.
   (ib) Temporary Assistance for Needy Families.
   (ic) Food stamps.
   (id) State and local general assistance.
   (VIII) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a member of a federally
recognized Indian tribe, band, or other group of Native American
descent.
   (IX) An employee who qualified the taxpayer for the enterprise
zone hiring credit under former Section 17053.8 or the program area
hiring credit under former Section 17053.11.
   (X) Immediately preceding the qualified employee's commencement of
employment with the taxpayer, was a member of a targeted group, as
defined in Section 51(d) of the Internal Revenue Code, or its
successor.
   (B) Priority for employment shall be provided to an individual who
is enrolled in a qualified program under the federal Workforce
Investment Act or the California Work Opportunity and Responsibility
to Kids Act (CalWORKs) or who is eligible as a member of a targeted
group under the Work Opportunity Tax Credit (Section 51 of the
Internal Revenue Code), or its successor.
   (5) "Taxpayer" means a person or entity engaged in a trade or
business within an enterprise zone designated pursuant to Chapter
12.8 (commencing with Section 7070) of the Government Code.
   (6) "Seasonal employment" means employment by a taxpayer that has
regular and predictable substantial reductions in trade or business
operations.
   (c) The taxpayer shall do both of the following:
   (1) (A) Obtain, within 42 days from the commencement date of
employment, from the Employment Development Department, as permitted
by federal law, the local county or city Workforce Investment Act
administrative entity, the local county CalWORKs office or social
services agency, or the local government administering the enterprise
zone, a certification which provides that a qualified employee meets
the eligibility requirements specified in clause (iv) of
subparagraph (A) of paragraph (4) of subdivision (b). The Employment
Development Department may provide preliminary screening and referral
to a certifying agency. The Employment Development Department shall
develop a form for this purpose. The Department of Housing and
Community Development shall develop regulations governing the
issuance of certificates by local governments pursuant to subdivision
(a) of Section 7086 of the Government Code.
   (B) Applications for certification shall be submitted to the
certifying agency within 28 days of the commencement date of
employment for the employee. The certifying agency shall not provide
a certification for any employee whose employment commenced more than
28 days before the taxpayer requests a certification.
   (2) Retain a copy of the certification and provide it upon request
to the Franchise Tax Board.
   (d) (1) For purposes of this section:
   (A) All employees of trades or businesses, which are not
incorporated, that are under common control shall be treated as
employed by a single taxpayer.
   (B) The credit, if any, allowable by this section with respect to
each trade or business shall be determined by reference to its
proportionate share of the expense of the qualified wages giving rise
to the credit, and shall be allocated in that manner.
   (C) Principles that apply in the case of controlled groups of
corporations, as specified in subdivision (d) of Section 23622.7,
shall apply with respect to determining employment.
   (2) If an employer acquires the major portion of a trade or
business of another employer (hereafter in this paragraph referred to
as the "predecessor") or the major portion of a separate unit of a
trade or business of a predecessor, then, for purposes of applying
this section (other than subdivision (e)) for any calendar year
ending after that acquisition, the employment relationship between a
qualified employee and an employer shall not be treated as terminated
if the employee continues to be employed in that trade or business.
   (e) (1) (A) If the employment, other than seasonal employment, of
any qualified 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 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.
   (B) If the seasonal employment of any qualified employee, with
respect to whom qualified wages are taken into account under
subdivision (a) is not continued by the taxpayer for a period of 270
days of employment during the 60-month period beginning with the day
the qualified employee commences seasonal employment with the
taxpayer, the tax imposed by this part, for the taxable year that
includes the 60th month following the month in which the qualified
employee commences seasonal employment with the taxpayer, shall be
increased by an amount 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 qualified
employee.
   (2) (A) Subparagraph (A) of paragraph (1) shall not apply to any
of the following:
   (i) A termination of employment of a qualified employee who
voluntarily leaves the employment of the taxpayer.
   (ii) A termination of employment of a qualified employee who,
before the close of the period referred to in paragraph (1), becomes
disabled and unable 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 employee.
   (iii) A termination of employment of a qualified employee, if it
is determined that the termination was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that employee.
   (iv) A termination of employment of a qualified employee due to a
substantial reduction in the trade or business operations of the
taxpayer.
   (v) A termination of employment of a qualified employee, if that
employee is replaced by other qualified employees so as to create a
net increase in both the number of employees and the hours of
employment.
   (B) Subparagraph (B) of paragraph (1) shall not apply to any of
the following:
   (i) A failure to continue the seasonal employment of a qualified
employee who voluntarily fails to return to the seasonal employment
of the taxpayer.
   (ii) A failure to continue the seasonal employment of a qualified
employee who, before the close of the period referred to in
subparagraph (B) of paragraph (1), becomes disabled and unable to
perform the services of that seasonal employment, unless that
disability is removed before the close of that period and the
taxpayer fails to offer seasonal employment to that qualified
employee.
   (iii) A failure to continue the seasonal employment of a qualified
employee, if it is determined that the failure to continue the
seasonal employment was due to the misconduct (as defined in Sections
1256-30 to 1256-43, inclusive, of Title 22 of the California Code of
Regulations) of that qualified employee.
   (iv) A failure to continue seasonal employment of a qualified
employee due to a substantial reduction in the regular seasonal trade
or business operations of the taxpayer.
   (v) A failure to continue the seasonal employment of a qualified
employee, if that qualified employee is replaced by other qualified
employees so as to create a net increase in both the number of
seasonal employees and the hours of seasonal employment.
   (C) For purposes of paragraph (1), the employment relationship
between the taxpayer and a qualified 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 qualified employee
continues to be employed in that trade or business and the taxpayer
retains a substantial interest in that trade or business.
   (3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
   (f) In the case of an estate or trust, both of the following
apply:
   (1) The qualified wages for any taxable year shall be apportioned
between the estate or trust and the beneficiaries on the basis of the
income of the estate or trust allocable to each.
   (2) Any beneficiary to whom any qualified wages have been
apportioned under paragraph (1) shall be treated, for purposes of
this part, as the employer with respect to those wages.
   (g) For purposes of this section, "enterprise zone" means an area
designated as an enterprise zone pursuant to Chapter 12.8 (commencing
with Section 7070) of Division 7 of Title 1 of the Government Code.
   (h) The credit allowable under this section shall be reduced by
the credit allowed under Sections 17053.10, 17053.17 and 17053.46
claimed for the same employee. The credit shall also be reduced by
the federal credit allowed under Section 51 of the Internal Revenue
Code.
   In addition, 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 the credit, prior
to any reduction required by subdivision (i) or (j).
   (i) In the case where the credit otherwise allowed under this
section exceeds the "net tax" for the taxable year, that portion of
the credit that exceeds the "net tax" may be carried over and added
to the credit, if any, in succeeding taxable years, until the credit
is exhausted. The credit shall be applied first to the earliest
taxable years possible.
   (j) (1) The amount of the credit otherwise allowed under this
section and Section 17053.70, including any credit carryover from
prior years, that may reduce the "net tax" for the taxable year shall
not exceed the amount of tax which would be imposed on the taxpayer'
s business income attributable to the enterprise zone determined as
if that attributable income represented all of the income of the
taxpayer subject to tax under this part.
   (2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the
enterprise zone. For that purpose, the taxpayer's business income
attributable to sources in this state first shall be determined in
accordance with Chapter 17 (commencing with Section 25101) of Part
11. That business income shall be further apportioned to the
enterprise zone in accordance with Article 2 (commencing with Section
25120) of Chapter 17 of Part 11, modified for purposes of this
section in accordance with paragraph (3).
   (3) Business income shall be apportioned to the enterprise zone by
multiplying the total California business income of the taxpayer by
a fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is two. For purposes of
this paragraph:
   (A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the enterprise zone during the
taxable year, and the denominator of which is the average value of
all the taxpayer's real and tangible personal property owned or
rented and used in this state during the taxable year.
   (B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the enterprise zone during
the taxable year for compensation, and the denominator of which is
the total compensation paid by the taxpayer in this state during the
taxable year.
   (4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "net tax" for the
taxable year, as provided in subdivision (i).
   (k) The changes made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 1997.
   (l) The changes made to this section by the act adding this
subdivision shall apply to any qualified employee who commences
employment on or after January 1, 2011.
  SEC. 3.  Section 17057.6 is added to the Revenue and Taxation Code,
to read:
   17057.6.  (a) For taxable years beginning on or after January 1,
2011, there shall be allowed to a qualified taxpayer as a credit
against the "net tax," as defined in Section 17039, an amount equal
to that allocated to a qualified taxpayer by the  State
Department of Education   Superintendent of Public
Instruction  pursuant to Section 64202 of the Education Code.
   (b) For purposes of this section a "qualified taxpayer" means an
applicant, as defined in Section 64201 of the Education Code, who is
either the sole owner if an individual, partners if the taxpayer is a
partnership, or shareholders if the taxpayer is an "S" corporation
 , and who was awarded an allocation of the career pathways
investment credit by the Superintendent of Public Instruction  .

   (c) Upon the request of the Franchise Tax Board, the qualified
taxpayer shall provide a copy of the certification provided pursuant
to Section 64202 of the Education Code to the Franchise Tax Board.
   (d) The aggregate amount of credits that may be allocated in any
calendar year pursuant to this section and Section 23610.6 shall be
an amount equal to the sum of the following:
   (1) Seventy-eight million dollars ($78,000,000) for the 2011
calendar year.
   (2) (A) One hundred million dollars ($100,000,000) for the 2012
calendar year, hereafter the baseline amount, and each calendar year
thereafter. For each subsequent calendar year, the baseline amount
shall be adjusted by the Franchise Tax Board to reflect the rate of
inflation or deflation from the previous date that the baseline
amount was established, as measured by the Consumer Price Index or
other method of measuring the rate of inflation or deflation which
the Franchise Tax Board determines is reliable and generally
accepted.
   (B) The unused credit allocation amount, if any, for the preceding
calendar year, or years.
   (e) In the case where the credit allowed under this section
exceeds the "net tax," the excess credit may be carried over to
reduce the "net tax" in the following taxable year, and succeeding
taxable years, if necessary, until the credit has been exhausted.
   (f) If a qualified taxpayer fails to comply with the requirements
of this section or with Part 38 (commencing with Section 64200) of
Division 4 of Title 2 of the Education Code, the credit shall be
disallowed and assessed and collected under Section 19051 until the
requirements are satisfied.
  SEC. 4.  Section 23610.6 is added to the Revenue and Taxation Code,
to read:
   23610.6.  (a) For taxable years beginning on or after January 1,
2011, there shall be allowed to a qualified taxpayer as a credit
against the "tax," as defined in Section 23036, an amount equal to
that allocated to a qualified taxpayer by the  State
Department of Education   Superintendent of Public
Instruction  pursuant to Section 64202 of the Education Code.
   (b) For purposes of this section a "qualified taxpayer" means an
applicant, as defined in Section 64201 of the Education Code, that is
subject to the taxes imposed by this part.
   (c) Upon the request of the Franchise Tax Board, the qualified
taxpayer shall provide a copy of the certification provided pursuant
to Section 64202 of the Education Code to the Franchise Tax Board.
   (d) The aggregate amount of credits that may be allocated in any
calendar year pursuant to this section and Section 17057.6 shall be
an amount equal to the sum of the following:
   (1) Seventy-eight million dollars ($78,000,000) for the 2011
calendar year.
   (2) (A) One hundred million dollars ($100,000,000) for the 2012
calendar year, hereafter the baseline amount, and each calendar year
thereafter. For each subsequent calendar year, the baseline amount
shall be adjusted by the Franchise Tax Board to reflect the rate of
inflation or deflation from the previous date that the baseline
amount was established, as measured by the Consumer Price Index or
other method of measuring the rate of inflation or deflation which
the Franchise Tax Board determines is reliable and generally
accepted.
   (B) The unused credit allocation amount, if any, for the preceding
fiscal year, or years.
   (e) In the case where the credit allowed under this section
exceeds the "tax," the excess credit may be carried over to reduce
the "tax" in the following taxable year, and succeeding taxable
years, if necessary, until the credit has been exhausted.
   (f) If a qualified taxpayer fails to comply with the requirements
of this section or with Part 38 (commencing with Section 64200) of
Division 4 of Title 2 of the Education Code, the credit shall be
disallowed and assessed and collected under Section 19051 until the
requirements are satisfied.
  SEC. 5.  Section 23622.7 of the Revenue and Taxation Code is
amended to read:
   23622.7.  (a) There shall be allowed a credit against the "tax"
(as defined by Section 23036) to a taxpayer who employs a qualified
employee in an enterprise zone during the taxable year. The credit
shall be equal to the sum of each of the following:
   (1) Fifty percent of qualified wages in the first year of
employment.
   (2) Forty percent of qualified wages in the second year of
employment.
   (3) Thirty percent of qualified wages in the third year of
employment.
   (4) Twenty percent of qualified wages in the fourth year of
employment.
   (5) Ten percent of qualified wages in the fifth year of
employment.
   (b) For purposes of this section:
   (1) "Qualified wages" means:
   (A) (i) Except as provided in clause (ii), that portion of wages
paid or incurred by the taxpayer during the taxable year to qualified
employees that does not exceed 150 percent of the minimum wage.
   (ii) For up to 1,350 qualified employees who are employed by the
taxpayer in the Long Beach Enterprise Zone in aircraft manufacturing
activities described in Codes 3721 to 3728, inclusive, and Code 3812
of the Standard Industrial Classification (SIC) Manual published by
the United States Office of Management and Budget, 1987 edition,
"qualified wages" means that portion of hourly wages that does not
exceed 202 percent of the minimum wage.
   (B) Wages received during the 60-month period beginning with the
first day the employee commences employment with the taxpayer.
Reemployment in connection with any increase, including a regularly
occurring seasonal increase, in the trade or business operations of
the taxpayer does not constitute commencement of employment for
purposes of this section.
   (C) Qualified wages do not include any wages paid or incurred by
the taxpayer on or after the zone expiration date. However, wages
paid or incurred with respect to qualified employees who are employed
by the taxpayer within the enterprise zone within the 60-month
period prior to the zone expiration date shall continue to qualify
for the credit under this section after the zone expiration date, in
accordance with all provisions of this section applied as if the
enterprise zone designation were still in existence and binding.
   (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) "Zone expiration date" means the date the enterprise zone
designation expires, is no longer binding, or becomes inoperative.
   (4) (A) "Qualified employee" means an individual who meets all of
the following requirements:
   (i) At least 90 percent of whose services for the taxpayer during
the taxable year are directly related to the conduct of the taxpayer'
s trade or business located in an enterprise zone.
   (ii) Performs at least 50 percent of his or her services for the
taxpayer during the taxable year in an enterprise zone.
   (iii) Is hired by the taxpayer after the date of original
designation of the area in which services were performed as an
enterprise zone.
   (iv) Is any of the following:
   (I) Immediately preceding the qualified employee's commencement of
employment with the taxpayer, was a person eligible for services
under the federal Job Training Partnership Act (29 U.S.C. Sec. 1501
et seq.), or its successor, who is receiving, or is eligible to
receive, subsidized employment, training, or services funded by the
federal Job Training Partnership Act, or its successor.
   (II) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a person eligible to be a
voluntary or mandatory registrant under the Greater Avenues for
Independence Act of 1985 (GAIN) provided for pursuant to Article 3.2
(commencing with Section 11320) of Chapter 2 of Part 3 of Division 9
of the Welfare and Institutions Code, or its successor.
   (III) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was an economically disadvantaged
individual 14 years of age or older.
   (IV) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a dislocated worker who meets
any of the following:
   (ia) Has been terminated or laid off or who has received a notice
of termination or layoff from employment, is eligible for or has
exhausted entitlement to unemployment insurance benefits, and is
unlikely to return to his or her previous industry or occupation.
   (ib) Has been terminated or has received a notice of termination
of employment as a result of any permanent closure or any substantial
layoff at a plant, facility, or enterprise, including an individual
who has not received written notification but whose employer has made
a public announcement of the closure or layoff.
   (ic) Is long-term unemployed and has limited opportunities for
employment or reemployment in the same or a similar occupation in the
area in which the individual resides, including an individual 55
years of age or older who may have substantial barriers to employment
by reason of age.
   (id) Was self-employed (including farmers and ranchers) and is
unemployed as a result of general economic conditions in the
community in which he or she resides or because of natural disasters.

   (ie) Was a civilian employee of the Department of Defense employed
at a military installation being closed or realigned under the
Defense Base Closure and Realignment Act of 1990.
   (if) Was an active member of the Armed Forces or National Guard as
of September 30, 1990, and was either involuntarily separated or
separated pursuant to a special benefits program.
   (ig) Is a seasonal or migrant worker who experiences chronic
seasonal unemployment and underemployment in the agriculture
industry, aggravated by continual advancements in technology and
mechanization.
   (ih) Has been terminated or laid off, or has received a notice of
termination or layoff, as a consequence of compliance with the Clean
Air Act.
   (V) Immediately preceding the qualified employee's commencement of
employment with the taxpayer, was a disabled individual who is
eligible for or enrolled in, or has completed a state rehabilitation
plan or is a service-connected disabled veteran, veteran of the
Vietnam era, or veteran who is recently separated from military
service.
   (VI) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was an ex-offender. An ex-offender
means an individual who has been convicted of a felony or a
misdemeanor offense punishable by incarceration or a person charged
with a felony offense or a misdemeanor offense punishable by
incarceration but placed on probation by a state court without a
finding of guilt. Ex-offender shall not include an individual whose
record has been expunged.
   (VII) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a person eligible for or a
recipient of any of the following:
   (ia) Federal Supplemental Security Income benefits.
   (ib) Temporary Assistance for Needy Families.
   (ic) Food stamps.
   (id) State and local general assistance.
   (VIII) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a member of a federally
recognized Indian tribe, band, or other group of Native American
descent.
   (IX) An employee who qualified the taxpayer for the enterprise
zone hiring credit under former Section 23622 or the program area
hiring credit under former Section 23623.
   (X) Immediately preceding the qualified employee's commencement of
employment with the taxpayer, was a member of a targeted group, as
defined in Section 51(d) of the Internal Revenue Code, or its
successor.
   (B) Priority for employment shall be provided to an individual who
is enrolled in a qualified program under the federal Workforce
Investment Act or the California Work Opportunity and Responsibility
to Kids Act (CalWORKs) or who is eligible as a member of a targeted
group under the Work Opportunity Tax Credit (Section 51 of the
Internal Revenue Code), or its successor.
   (5) "Taxpayer" means a corporation engaged in a trade or business
within an enterprise zone designated pursuant to Chapter 12.8
(commencing with Section 7070) of Division 7 of Title 1 of the
Government Code.
   (6) "Seasonal employment" means employment by a taxpayer that has
regular and predictable substantial reductions in trade or business
operations.
   (c) The taxpayer shall do both of the following:
   (1) (A) Obtain, within 42 days from the commencement date of
employment, from the Employment Development Department, as permitted
by federal law, the local county or city Workforce Investment Act
administrative entity, the local county CalWORKs office or social
services agency, or the local government administering the enterprise
zone, a certification that provides that a qualified employee meets
the eligibility requirements specified in clause (iv) of subparagraph
(A) of paragraph (4) of subdivision (b). The Employment Development
Department may provide preliminary screening and referral to a
certifying agency.                                                The
Employment Development Department shall develop a form for this
purpose. The Department of Housing and Community Development shall
develop regulations governing the issuance of certificates by local
governments pursuant to subdivision (a) of Section 7086 of the
Government Code.
   (B) Applications for certification shall be submitted to the
certifying agency within 28 days of the commencement date of
employment for the employee. The certifying agency shall not provide
a certification for any employee whose employment commenced more than
28 days before the taxpayer requests a certification.
   (2) Retain a copy of the certification and provide it upon request
to the Franchise Tax Board.
   (d) (1) For purposes of this section:
   (A) All employees of all corporations which are members of the
same controlled group of corporations shall be treated as employed by
a single taxpayer.
   (B) The credit, if any, allowable by this section to each member
shall be determined by reference to its proportionate share of the
expense of the qualified wages giving rise to the credit, and shall
be allocated in that manner.
   (C) For purposes of this subdivision, "controlled group of
corporations" means "controlled group of corporations" as defined in
Section 1563(a) of the Internal Revenue Code, except that:
   (i) "More than 50 percent" shall be substituted for "at least 80
percent" each place it appears in Section 1563(a)(1) of the Internal
Revenue Code.
   (ii) The determination shall be made without regard to subsections
(a)(4) and (e)(3)(C) of Section 1563 of the Internal Revenue Code.
   (2) If an employer acquires the major portion of a trade or
business of another employer (hereafter in this paragraph referred to
as the "predecessor") or the major portion of a separate unit of a
trade or business of a predecessor, then, for purposes of applying
this section (other than subdivision (e)) for any calendar year
ending after that acquisition, the employment relationship between a
qualified employee and an employer shall not be treated as terminated
if the employee continues to be employed in that trade or business.
   (e) (1) (A) If the employment, other than seasonal employment, of
any qualified 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 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.
   (B) If the seasonal employment of any qualified employee, with
respect to whom qualified wages are taken into account under
subdivision (a) is not continued by the taxpayer for a period of 270
days of employment during the 60-month period beginning with the day
the qualified employee commences seasonal employment with the
taxpayer, the tax imposed by this part, for the taxable year that
includes the 60th month following the month in which the qualified
employee commences seasonal employment with the taxpayer, shall be
increased by an amount 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 qualified
employee.
   (2) (A) Subparagraph (A) of paragraph (1) shall not apply to any
of the following:
   (i) A termination of employment of a qualified employee who
voluntarily leaves the employment of the taxpayer.
   (ii) A termination of employment of a qualified employee who,
before the close of the period referred to in subparagraph (A) of
paragraph (1), becomes disabled and unable 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
employee.
   (iii) A termination of employment of a qualified employee, if it
is determined that the termination was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that employee.
   (iv) A termination of employment of a qualified employee due to a
substantial reduction in the trade or business operations of the
taxpayer.
   (v) A termination of employment of a qualified employee, if that
employee is replaced by other qualified employees so as to create a
net increase in both the number of employees and the hours of
employment.
   (B) Subparagraph (B) of paragraph (1) shall not apply to any of
the following:
   (i) A failure to continue the seasonal employment of a qualified
employee who voluntarily fails to return to the seasonal employment
of the taxpayer.
   (ii) A failure to continue the seasonal employment of a qualified
employee who, before the close of the period referred to in
subparagraph (B) of paragraph (1), becomes disabled and unable to
perform the services of that seasonal employment, unless that
disability is removed before the close of that period and the
taxpayer fails to offer seasonal employment to that qualified
employee.
   (iii) A failure to continue the seasonal employment of a qualified
employee, if it is determined that the failure to continue the
seasonal employment was due to the misconduct (as defined in Sections
1256-30 to 1256-43, inclusive, of Title 22 of the California Code of
Regulations) of that qualified employee.
   (iv) A failure to continue seasonal employment of a qualified
employee due to a substantial reduction in the regular seasonal trade
or business operations of the taxpayer.
   (v) A failure to continue the seasonal employment of a qualified
employee, if that qualified employee is replaced by other qualified
employees so as to create a net increase in both the number of
seasonal employees and the hours of seasonal employment.
   (C) For purposes of paragraph (1), the employment relationship
between the taxpayer and a qualified employee shall not be treated as
terminated by either of the following:
   (i) By a transaction to which Section 381(a) of the Internal
Revenue Code applies, if the qualified employee continues to be
employed by the acquiring corporation.
   (ii) By reason of a mere change in the form of conducting the
trade or business of the taxpayer, if the qualified employee
continues to be employed in that trade or business and the taxpayer
retains a substantial interest in that trade or business.
   (3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
   (f) Rules similar to the rules provided in Section 46(e) and (h)
of the Internal Revenue Code shall apply to both of the following:
   (1) An organization to which Section 593 of the Internal Revenue
Code applies.
   (2) A regulated investment company or a real estate investment
trust subject to taxation under this part.
   (g) For purposes of this section, "enterprise zone" means an area
designated as an enterprise zone pursuant to Chapter 12.8 (commencing
with Section 7070) of Division 7 of Title 1 of the Government Code.
   (h) The credit allowable under this section shall be reduced by
the credit allowed under Sections 23623.5, 23625, and 23646 claimed
for the same employee. The credit shall also be reduced by the
federal credit allowed under Section 51 of the Internal Revenue Code.

   In addition, 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 the credit, prior
to any reduction required by subdivision (i) or (j).
   (i) In the case where the credit otherwise allowed under this
section exceeds the "tax" for the taxable year, that portion of the
credit that exceeds the "tax" may be carried over and added to the
credit, if any, in succeeding taxable years, until the credit is
exhausted. The credit shall be applied first to the earliest taxable
years possible.
   (j) (1) The amount of the credit otherwise allowed under this
section and Section 23612.2, including any credit carryover from
prior years, that may reduce the "tax" for the taxable year shall not
exceed the amount of tax which would be imposed on the taxpayer's
business income attributable to the enterprise zone determined as if
that attributable income represented all of the income of the
taxpayer subject to tax under this part.
   (2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the
enterprise zone. For that purpose, the taxpayer's business
attributable to sources in this state first shall be determined in
accordance with Chapter 17 (commencing with Section 25101). That
business income shall be further apportioned to the enterprise zone
in accordance with Article 2 (commencing with Section 25120) of
Chapter 17, modified for purposes of this section in accordance with
paragraph (3).
   (3) Business income shall be apportioned to the enterprise zone by
multiplying the total California business income of the taxpayer by
a fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is two. For purposes of
this paragraph:
   (A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the enterprise zone during the
income year, and the denominator of which is the average value of all
the taxpayer's real and tangible personal property owned or rented
and used in this state during the income year.
   (B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the enterprise zone during
the income year for compensation, and the denominator of which is the
total compensation paid by the taxpayer in this state during the
income year.
   (4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "tax" for the taxable
year, as provided in subdivision (i).
   (k) The changes made to this section by the act adding this
subdivision shall apply to taxable years on or after January 1, 1997.

   (l) The changes made to this section by the act adding this
subdivision shall apply to any qualified employee who commences
employment on or after January 1, 2011.
  SEC. 6.  This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.