2005 California Revenue and Taxation Code Sections 23604-23684 CHAPTER 3.5. TAX CREDITS

23604.  For each taxable year beginning on or after January 1, 1996,
there shall be allowed as a credit against the "tax" (as defined by
Section 23036) an amount determined as follows:
   (a) (1) (A) The amount of the credit shall be equal to one-third
of the federal credit computed in accordance with Section 43 of the
Internal Revenue Code.
   (B) If a taxpayer elects, under Section 43(e) of the Internal
Revenue Code, not to apply Section 43 for federal tax purposes, this
election is binding and irrevocable for state purposes, and for
purposes of subparagraph (A), the federal credit shall be zero.
   (2) "Qualified enhanced oil recovery project" shall include only
projects located within California.
   (3) The credit allowed under this subdivision shall not be allowed
to any taxpayer for whom a depletion allowance is not permitted to
be computed under Section 613 of the Internal Revenue Code by reason
of paragraphs (2), (3), or (4) of subsection (d) of Section 613A of
the Internal Revenue Code.
   (b) Section 43(d) of the Internal Revenue Code shall apply.
   (c) In the case where the credit allowed by this section exceeds
the "tax," the excess may be carried over to reduce the "tax" for the
succeeding 15 years.
   (d) In the case where property which qualifies as part of the
taxpayer's "qualified enhanced oil recovery costs" also qualifies for
a credit under any other section in this part, the taxpayer shall
make an election on its original return as to which section applies
to all costs allocable to that item of qualified property.  Any
election made under this section, and any specification contained in
that election, may not be revoked except with the consent of the
Franchise Tax Board.
   (e) No deduction shall be allowed as otherwise provided in this
part for that portion of any costs paid or incurred for the taxable
year which is equal to the amount of the credit allowed under this
section attributable to those costs.
   (f) The basis of any property for which a credit is allowed under
this section shall be reduced by the amount of the credit
attributable to the property.  The basis adjustment shall be made for
the taxable year for which the credit is allowed.
   (g) No credit may be claimed under this section with respect to
any amount for which any other credit has been claimed under this
part.
23608.  (a) In the case of a taxpayer who transports any
agricultural product donated in accordance with Chapter 5 (commencing
with Section 58501) of Part 1 of Division 21 of the Food and
Agricultural Code, for taxable years beginning on or after January 1,
1996, there shall be allowed as a credit against the "tax" (as
defined by Section 23036), an amount equal to 50 percent of the
transportation costs paid or incurred by the taxpayer in connection
with the transportation of that donated agricultural product.
   (b) If two or more taxpayers share in the expenses eligible for
the credit provided by this section, each taxpayer shall be eligible
to receive the tax credit in proportion to its respective share of
the expenses paid or incurred.
   (c) If any credit allowed by this section is claimed by the
taxpayer, any deduction otherwise allowed under this part for that
amount of the cost paid or incurred by the taxpayer which is eligible
for the credit that is claimed shall be reduced by the amount of the
credit allowed.
   (d) Upon delivery of the donated agricultural product by a
taxpayer authorized to claim a credit pursuant to subdivision (a),
the nonprofit charitable organization shall provide a certificate to
the taxpayer who transported the agricultural product.  The
certificate shall contain a statement signed and dated by a person
authorized by that organization that the product is donated under
Chapter 5 (commencing with Section 58501) of Part 1 of Division 21 of
the Food and Agricultural Code.  The certificate shall also contain
the following information:  the type and quantity of product donated,
the distance transported, the name of the transporter, the name of
the taxpayer donor, and the name and address of the donee.  Upon the
request of the Franchise Tax Board, the taxpayer shall provide a copy
of the certification to the Franchise Tax Board.
   (e) In the case where any credit allowed by this section exceeds
the "tax," the excess may be carried over to reduce the "tax" in the
following year, and succeeding years if necessary, until the credit
is exhausted.
23608.2.  (a) For taxable years beginning on or after January 1,
1997, there shall be allowed as a credit against the "tax," as
defined by Section 23036, an amount, subject to Section 42(h)(1) of
the Internal Revenue Code, that is otherwise equal to the lesser of
50 percent of the eligible costs, as determined under subdivision
(b), or the amount allocated under paragraph (2) of subdivision (e).
   (b) (1) For purposes of this section, the "eligible costs" shall
be equal to the total finance costs, construction costs, excavation
costs, installation costs, and permit costs paid or incurred to
construct or rehabilitate farmworker housing.  "Eligible costs"
include, but are not limited to, improvements to ensure compliance
with laws governing access for persons with disabilities and costs
related to reducing utility expenses.  Noneligible costs include land
and those costs financed by grants and below-market financing.
   (2) For purposes of paragraph (1), construction or rehabilitation
of the farmworker housing shall have commenced on or after January 1,
1997.
   (3) Notwithstanding any provision of this part, eligible costs
shall not include any costs paid or incurred prior to January 1,
1997.
   (c) Notwithstanding any other provision of this part, no credit
shall be allowed under this section unless the taxpayer first obtains
a certification from the committee that the amounts described in
subdivision (b) qualify for the credit under this section and the
total amount of the credit allocated to the taxpayer pursuant to the
Farmworker Housing Assistance Program.
   (d) The taxpayer shall do all of the following:
   (1) Apply to the committee for credit certification.
   (2) Retain a copy of the certification.
   (3) Make the certification available to the Franchise Tax Board
upon request.
   (e) The committee shall do all of the following:
   (1) Provide forms and instructions for applications for credit
certification, as specified pursuant to the Farmworker Housing
Assistance Program.
   (2) Accept applications and issue a certificate to the taxpayer
that includes a certification as to the eligible costs described in
subdivision (b) that qualify for the credit and the total amount of
the credit to which the taxpayer is entitled for the taxable year.
Credit in excess of the amount necessary to make the project feasible
shall not be allocated.  Credits shall be allocated through a
minimum of one competitive funding round per year.
   (3) Obtain the taxpayer's taxpayer identification number, or each
shareholder's taxpayer identification number in the case of an S
corporation, for tax administration purposes.
   (4) Provide an annual listing to the Franchise Tax Board, in the
form and manner agreed upon by the Franchise Tax Board and the
committee, containing the names, taxpayer identification numbers
pursuant to paragraph (3), eligible costs, and total amount of credit
certified to each taxpayer.
   (f) For purposes of this section:
   (1) "Compliance period" means, with respect to any farmworker
housing, the period of 30 consecutive taxable years, beginning with
the taxable year in which the credit is allowable.
   (2) "Construct or rehabilitate" includes reconstruction, but does
not include any costs related to acquisition or refinancing of
property or structures thereon.
   (3) "Farmworker Housing Assistance Program" means Chapter 3.7
(commencing with Section 50199.50) of Part 1 of Division 31 of the
Health and Safety Code.
   (4) "Qualified farmworker housing" means housing located within
this state which satisfies the requirements of the Farmworker Housing
Assistance Program.  The housing may be vacant or occupied, and it
need not be licensed pursuant to the Employee Housing Act at the time
of the initiation of construction or rehabilitation.
   (5) "Committee" means the California Tax Credit Allocation
Committee as defined in Section 50199.7 of the Health and Safety
Code.
   (6) "Qualified accountant" means an accountant licensed or
certified in this state who is neither an employee of the taxpayer,
nor related to the taxpayer within the meaning of Section 267 of the
Internal Revenue Code.
   (g) No deduction or other credit shall be allowed under this part
or Part 10 (commencing with Section 17001) to the extent of any
eligible costs, as defined in subdivision (b), that are taken into
account in computing the credit allowed under this section.
   (h) The farmworker housing tax credit shall not be allowed unless
the taxpayer:
   (1) Constructs or rehabilitates the property subject to the
covenants, conditions, and restrictions imposed by this section and
pursuant to the Farmworker Housing Assistance Program, which shall
include, but not necessarily be limited to, a requirement that the
taxpayer obtain, for approval by the committee, a construction cost
audit and certification of eligible costs from a qualified
accountant.
   (2) Subsequent to construction or rehabilitation of the farmworker
housing, owns or operates the farmworker housing pursuant to the
requirements of this section, or ensures the ownership and operation
of the farmworker housing pursuant to the requirements of this
section.
   (i) The requirements of this section shall be set forth in a
written agreement between the committee and the taxpayer.  The
agreement shall include, but not necessarily be limited to, the
requirements set forth in the Farmworker Housing Assistance Program.
   (j) 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 year, and succeeding years if necessary, until the credit
has been exhausted.
   (k) (1) In the case of any disqualifying event, as defined in
paragraph (2), there shall be added to the "tax," as defined in
Section 23036, for the taxable year in which the disqualifying event
occurs, the recapture amount computed under paragraph (3) and the
interest amount computed under paragraph (4).
   (2) For purposes of this subdivision, "disqualifying event" shall
mean:
   (A) The committee determines that the certification provided under
subdivision (e) was obtained by fraud or misrepresentation.
   (B) The taxpayer fails to comply with the requirements of the
Farmworker Housing Assistance Program, or any other requirement
imposed under this section.
   (3) For purposes of this subdivision, "recapture amount" means:
   (A) In the case of any disqualifying event described in
subparagraph (A) of paragraph (2), the entire amount of any credit
previously allowed under this section.
   (B) In the case of any disqualifying event described in
subparagraph (B) of paragraph (2), an amount determined by
multiplying the entire amount of the credit previously allowed under
this section by a fraction, the numerator of which is the number of
years remaining in the compliance period and the denominator of which
is 30.
   (4) For purposes of this subdivision, "interest amount" means:
   (A) In the case of any disqualifying event described in
subparagraph (A) of paragraph (2), the amount of interest computed
using the adjusted annual rate established in Section 19521 from the
due date of the return for each taxable year in which the credit was
claimed to the date of payment of the additional tax resulting from
the application of this subdivision.
   (B) In the case of any disqualifying event described in
subparagraph (B) of paragraph (2), zero.
   (l) The annual amount of credit granted pursuant to this section
and Sections 17053.14 and 23608.3 shall not exceed five hundred
thousand dollars ($500,000), provided that the aggregate amount of
the credit granted pursuant to this section and Sections 17053.14 and
23608.3 for the calendar year 1998 and thereafter may exceed five
hundred thousand dollars ($500,000) per calendar year by an amount
equal to any unallocated credits under this section and Sections
17053.14 and 23608.3 for the preceding calendar year or years.
23608.3.  (a) For taxable years beginning on or after January 1,
1997, there shall be allowed as a credit against the "tax," as
defined in Section 23036, for a bank or financial corporation as
determined in subdivision (b).
   (b) (1) For purposes of this section, the credit shall be equal to
50 percent of the difference between the amount of interest income
which could have been collected by the bank or financial corporation
had the loan rate been one point above prime, or any other index used
by the lender, and the lesser amount of interest income actually due
for the term of the loan by the bank or financial corporation on
those portions of loans used to finance only eligible costs actually
paid or incurred to rehabilitate or construct qualified farmworker
housing.
   (2) The credit allowed under this section shall be taken in equal
installments over a period equal to the lesser of 10 years or the
term of the loan beginning in the taxpayer's taxable year during
which the qualified farmworker housing is completed and there is
initial occupancy by eligible farmworkers.  In the case where the
credit allowed by this section exceeds the "tax" for any taxable
year, the excess may not be carried over to reduce the "tax" in any
succeeding year.
   (3) The credit shall not apply to loans with a term of less than
three years or to loans funded prior to January 1, 1997.  The credit
shall apply only to interest income from the loan and shall not apply
to any other loan fees or other charges collected by the bank or
financial corporation with respect to the loan.
   (c) The taxpayer shall qualify for the credit by application to
and certification by the committee that the expenses qualify for the
credit under this section.
   (d) The taxpayer shall do all of the following:
   (1) Apply to the committee for credit certification prior to the
funding of the loan.
   (2) Retain a copy of the certification.
   (3) Make the certification available to the Franchise Tax Board
upon request.
   (e) The committee shall do all of the following:
   (1) Provide forms and instructions for applications for credit
certification, as specified pursuant to the Farmworker Housing
Assistance Program.
   (2) Accept applications and issue a certificate to the taxpayer
that includes the credit amount to which the taxpayer is entitled for
the taxable year.
   (3) Obtain the taxpayer's taxpayer identification number, and each
shareholder's taxpayer identification number in the case of an S
corporation, for tax administration purposes.
   (4) Provide an annual listing to the Franchise Tax Board, and in a
form and manner agreed upon by the Franchise Tax Board and the
committee, containing the names, taxpayer identification numbers
pursuant to paragraph (3), qualified amounts, and total amount of
credit certified to each taxpayer.
   (f) For the purposes of this section:
   (1) "Construct or rehabilitate" includes reconstruction, but does
not include any costs related to acquisition or refinancing of
property or structures thereon.
   (2) "Farmworker Housing Assistance Program" means Chapter 3.7
(commencing with Section 50199.50) of Part 1 of Division 31 of the
Health and Safety Code.
   (3) "Eligible costs" means those expenditures certified by the
committee to meet the requirements of Sections 17053.14 and 23608.2.
   (4) "Qualified farmworker housing" means housing within the state
that meets the requirements of the Farmworker Housing Assistance
Program.
   (g) (1) In the event that the committee determines that the
certification provided under subdivision (e) was obtained by fraud or
misrepresentation of the taxpayer, there shall be added to the "tax,"
as defined in Section 23036 for the taxable year in which the
disqualifying event occurs, the recapture amount computed under
paragraph (2) and the interest amount computed under paragraph (3).
   (2) For purposes of this subdivision, "recapture amount" means the
entire amount of any credit previously allowed under this section.
   (3) For purposes of this subdivision, "interest amount" means the
amount of interest computed using the adjusted annual rate
established in Section 19521 from the due date of the return for the
taxable year in which the credit was claimed to the date of payment
of the additional tax resulting from the application of this
subdivision.
   (h) (1) Except as provided in paragraph (2), if the bank or
financial corporation sells the loan to another bank or financial
corporation, the balance of the credit, if any, shall be transferred
to the assignee or transferee of the loan, subject to the same
conditions and limitations as set forth in this section.
   (2) A bank or financial corporation may assign, sell, or otherwise
transfer the loan to another person or entity and retain the right
to claim the credit granted under this section if the bank or
financial corporation also retains responsibility for servicing the
loan.
   (i) The annual amount of credit granted pursuant to this section
and Sections 17053.14 and 23608.2 shall not exceed five hundred
thousand dollars ($500,000), provided that the aggregate amount of
the credit granted pursuant to this section and Sections 17053.14 and
23608.2 for the 1998 calendar year and thereafter may exceed five
hundred thousand dollars ($500,000) per calendar year by an amount
equal to any unallocated credits under this section and Sections
17053.14 and 23608.2 for the preceding calendar year or years.
23609.  For each taxable year beginning on or after January 1, 1987,
there shall be allowed as a credit against the "tax" (as defined by
Section 23036) an amount determined in accordance with Section 41 of
the Internal Revenue Code, except as follows:
   (a) For each taxable year beginning before January 1, 1997, both
of the following modifications shall apply:
   (1) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code is modified to read "8 percent."
   (2) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "12 percent."
   (b) (1) For each taxable year beginning on or after January 1,
1997, and before January 1, 1999, both of the following modifications
shall apply:
   (A) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code is modified to read "11 percent."
   (B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "24 percent."
   (2) For each taxable year beginning on or after January 1, 1999,
and before January 1, 2000, both of the following shall apply:
   (A) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code is modified to read "12 percent."
   (B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "24 percent."
   (3) For each taxable year beginning on or after January 1, 2000,
both of the following shall apply:
   (A) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code is modified to read "15 percent."
   (B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "24 percent."
   (c) (1) With respect to any expense paid or incurred after the
operative date of Section 6378, Section 41(b)(1) of the Internal
Revenue Code is modified to exclude from the definition of "qualified
research expense" any amount paid or incurred for tangible personal
property that is eligible for the exemption from sales or use tax
provided by Section 6378.
   (2) "Qualified research" and "basic research" shall include only
research conducted in California.
   (d) The provisions of Section 41(e)(7)(A) of the Internal Revenue
Code, shall be modified so that "basic research," for purposes of
this section, includes any basic or applied research including
scientific inquiry or original investigation for the advancement of
scientific or engineering knowledge or the improved effectiveness of
commercial products, except that the term does not include any of the
following:
   (1) Basic research conducted outside California.
   (2) Basic research in the social sciences, arts, or humanities.
   (3) Basic research for the purpose of improving a commercial
product if the improvements relate to style, taste, cosmetic, or
seasonal design factors.
   (4) Any expenditure paid or incurred for the purpose of
ascertaining the existence, location, extent, or quality of any
deposit of ore or other mineral (including oil and gas).
   (e) (1) In the case of a taxpayer engaged in any biopharmaceutical
research activities that are described in codes 2833 to 2836,
inclusive, or any research activities that are described in codes
3826, 3829, or 3841 to 3845, inclusive, of the Standard Industrial
Classification (SIC) Manual published by the United States Office of
Management and Budget, 1987 edition, or any other biotechnology
research and development activities, the provisions of Section 41(e)
(6) of the Internal Revenue Code shall be modified to include both of
the following:
   (A) A qualified organization as described in Section 170(b)(1)(A)
(iii) of the Internal Revenue Code and owned by an institution of
higher education as described in Section 3304(f) of the Internal
Revenue Code.
   (B) A charitable research hospital owned by an organization that
is described in Section 501(c)(3) of the Internal Revenue Code, is
exempt from taxation under Section 501(a) of the Internal Revenue
Code, is not a private foundation, is designated a "specialized
laboratory cancer center," and has received Clinical Cancer Research
Center status from the National Cancer Institute.
   (2) For purposes of this subdivision:
   (A) "Biopharmaceutical research activities" means those activities
that use organisms or materials derived from organisms, and their
cellular, subcellular, or molecular components, in order to provide
pharmaceutical products for human or animal therapeutics and
diagnostics.  Biopharmaceutical activities make use of living
organisms to make commercial products, as opposed to pharmaceutical
activities that make use of chemical compounds to produce commercial
products.
   (B) "Other biotechnology research and development activities"
means research and development activities consisting of the
application of recombinant DNA technology to produce commercial
products, as well as research and development activities regarding
pharmaceutical delivery systems designed to provide a measure of
control over the rate, duration, and site of pharmaceutical delivery.
   (f) 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 year, and succeeding years if necessary, until the credit
has been exhausted.
   (g) For each taxable year beginning on or after January 1, 1998,
the reference to "Section 501(a)" in Section 41(b)(3)(C) of the
Internal Revenue Code, relating to contract research expenses, is
modified to read "this part or Part 10 (commencing with Section
17001)."
   (h) (1) For each taxable year beginning on or after January 1,
2000:
   (A) The reference to "2.65 percent" in Section 41(c)(4)(A)(i) of
the Internal Revenue Code is modified to read "one and forty-nine
hundredths of one percent."
   (B) The reference to "3.2 percent" in Section 41(c)(4)(A)(ii) of
the Internal Revenue Code is modified to read "one and ninety-eight
hundredths of one percent."
   (C) The reference to "3.75 percent" in Section 41(c)(4)(A)(iii) of
the Internal Revenue Code is modified to read "two and forty-eight
hundredths of one percent."
   (2) Section 41(c)(4)(B) shall not apply and in lieu thereof an
election under Section 41(c)(4)(A) of the Internal Revenue Code may
be made for any taxable year of the taxpayer beginning on or after
January 1, 1998.  That election shall apply to the taxable year for
which made and all succeeding taxable years unless revoked with the
consent of the Franchise Tax Board.
   (3) Section 41(c)(6) of the Internal Revenue Code, relating to
gross receipts, is modified to take into account only those gross
receipts from the sale of property held primarily for sale to
customers in the ordinary course of the taxpayer's trade or business
that is delivered or shipped to a purchaser within this state,
regardless of f.o.b. point or any other condition of the sale.
   (i) Section 41(h) of the Internal Revenue Code, relating to
termination, shall not apply.
   (j) Section 41(g) of the Internal Revenue Code, relating to
special rule for passthrough of credit, is modified by each of the
following:
   (1) The last sentence shall not apply.
   (2) If the amount determined under Section 41(a) of the Internal
Revenue Code for any taxable year exceeds the limitation of Section
41(g) of the Internal Revenue Code, that amount may be carried over
to other taxable years under the rules of subdivision (f), except
that the limitation of Section 41(g) of the Internal Revenue Code
shall be taken into account in each subsequent taxable year.
23610.  (a) For each taxable year beginning on or after January 1,
1997, and before January 1, 2008, there shall be allowed as a credit
against the amount of "tax," as defined in Section 23036, an amount
equal to fifteen dollars ($15) for each ton of rice straw, as defined
in Section 18944.33 of the Health and Safety Code, that is grown
within California and purchased during the taxable year by the
taxpayer.
   (b) The aggregate amount of tax credits granted to all taxpayers
pursuant to this section and Section 17052.10 shall not exceed four
hundred thousand dollars ($400,000) for each calendar year.
   (c) In the case where the credit allowed by this section exceeds
the "tax," the excess may be carried over to reduce the "tax" for the
next 10 taxable years, or until the credit has been exhausted,
whichever occurs first.
   (d) No deduction shall be claimed for the purchase of rice straw
for which a tax credit has been claimed pursuant to this section.
   (e) No credit shall be claimed for the purchase of rice straw for
which a tax credit has otherwise already been claimed pursuant to
this part.
   (f) The Department of Food and Agriculture shall do all of the
following:
   (1) Certify that the taxpayer has purchased the rice straw as
specified in subdivision (a).
   (2) Issue certificates in an aggregate amount that shall not
exceed the limit specified in subdivision (b).  The certificates
shall be issued on a "first come, first served" basis to reflect the
chronological order that the taxpayer submitted a valid request to
the Department of Food and Agriculture.
   (3) Provide an annual listing to the Franchise Tax Board
(preferably on computer readable form, and in a form or manner agreed
upon by the Franchise Tax Board and the Department of Food and
Agriculture) of the qualified taxpayers who were issued certificates
and the amount of rice straw purchased by each taxpayer.
   (4) As part of its allocation request for tax credits, provide the
taxpayer with a copy of the certification to retain for the taxpayer'
s records.
   (5) Obtain the taxpayer's identification number, or in the case of
a subchapter S corporation, the taxpayer identification numbers of
all shareholders.
   (6) On or before each June 1 immediately following each year for
which the credit under this section is available, provide to the
Legislature an informational report with respect to that year that
includes all of the following:
   (A) The number of tax credit certificates requested and issued.
   (B) The type of businesses receiving the tax credit certificates.
   (C) A general list of the methods used to process the rice straw.
   (D) Recommendations on how the credits can be issued in a manner
that will maximize the long term use of the California grown rice
straw.
   (g) To be eligible for the credit under this section the taxpayer
shall do all of the following:
   (1) As part of its allocation request for tax credits, provide the
Department of Food and Agriculture with documents, as deemed
necessary by the department, verifying the purchase of rice straw and
that it meets the requirements specified in this section.
   (2) Retain for the taxpayer's records a copy of the certificate
issued by the Department of Food and Agriculture as specified in
subdivision (f).
   (3) Provide a copy of the certification specified in subdivision
(f) to the Franchise Tax Board upon request.  If the taxpayer fails
to comply with the requirements of this subdivision, no credit shall
be allowed to that taxpayer under this section for any taxable year
unless the taxpayer subsequently complies.
   (4) Provide the Department of Food and Agriculture with the
taxpayer's identification number, or in the case of a subchapter S
corporation, the taxpayer identification numbers of all shareholders.
   (h) (1) For purposes of this section, a credit shall be allowed
only if the taxpayer is the "end user" of the rice straw.  For
purposes of this section, "end user" shall mean anyone who uses the
rice straw for processing, generation of energy, manufacturing,
export, prevention of erosion, or for any other purpose, exclusive of
open burning, that consumes the rice straw.
   (2) The credit shall not be allowed if the taxpayer is related,
within the meaning of Section 267 or 318 of the Internal Revenue
Code, to any person who grew the rice straw within California.
   (i) This section shall remain in effect only until December 1,
2008, and as of that date is repealed.
23610.4.  It is the intent of the Legislature that the amount of the
state low-income housing tax credit allocated to a project pursuant
to Section 23610.5 shall not exceed an amount in addition to the
federal tax credit that is necessary for the financial feasibility of
the project and its viability throughout the extended use period.
23610.5.  (a) (1) There shall be allowed as a credit against the
"tax" (as defined by Section 23036) a state low-income housing tax
credit in an amount equal to the amount determined in subdivision
(c), computed in accordance with Section 42 of the Internal Revenue
Code of 1986, except as otherwise provided in this section.
   (2) "Taxpayer," for purposes of this section, means the sole owner
in the case of a "C" corporation, the partners in the case of a
partnership, and the shareholders in the case of an "S" corporation.
   (3) "Housing sponsor," for purposes of this section, means the
sole owner in the case of a "C" corporation, the partnership in the
case of a partnership, and the "S" corporation in the case of an "S"
corporation.
   (b) (1) The amount of the credit allocated to any housing sponsor
shall be authorized by the California Tax Credit Allocation
Committee, or any successor thereof, based on a project's need for
the credit for economic feasibility in accordance with the
requirements of this section.
   (A) The low-income housing project shall be located in California
and shall meet either of the following requirements:
   (i) The project's housing sponsor has been allocated by the
California Tax Credit Allocation Committee a credit for federal
income tax purposes under Section 42 of the Internal Revenue Code.
   (ii) It qualifies for a credit under Section 42(h)(4)(B) of the
Internal Revenue Code.
   (B) The California Tax Credit Allocation Committee shall not
require fees for the credit under this section in addition to those
fees required for applications for the tax credit pursuant to Section
42 of the Internal Revenue Code. The committee may require a fee if
the application for the credit under this section is submitted in a
calendar year after the year the application is submitted for the
federal tax credit.
   (2) (A) The California Tax Credit Allocation Committee shall
certify to the housing sponsor the amount of tax credit under this
section allocated to the housing sponsor for each credit period.
   (B) In the case of a partnership or an "S" corporation, the
housing sponsor shall provide a copy of the California Tax Credit
Allocation Committee certification to the taxpayer.
   (C) The taxpayer shall, upon request, provide a copy of the
certification to the Franchise Tax Board.
   (D) All elections made by the taxpayer pursuant to Section 42 of
the Internal Revenue Code shall apply to this section.
   (E) For buildings located in designated difficult development
areas or qualified census tracts as defined in Section 42(d)(5)(C) of
the Internal Revenue Code, credits may be allocated under this
section in the amounts prescribed in subdivision (c), provided that
the amount of credit allocated under Section 42 of the Internal
Revenue Code is computed on 100 percent of the qualified basis of the
building.
   (c) Section 42(b) of the Internal Revenue Code shall be modified
as follows:
   (1) In the case of any qualified low-income building placed in
service by the housing sponsor during 1987, the term "applicable
percentage" means 9 percent for each of the first three years and 3
percent for the fourth year for new buildings (whether or not the
building is federally subsidized) and for existing buildings.
   (2) In the case of any qualified low-income building that receives
an allocation after 1989 and is a new building not federally
subsidized, the term "applicable percentage" means the following:
   (A) For each of the first three years, the percentage prescribed
by the Secretary of the Treasury for new buildings that are not
federally subsidized for the taxable year, determined in accordance
with the requirements of Section 42(b)(2) of the Internal Revenue
Code, in lieu of the percentage prescribed in Section 42(b)(1)(A).
   (B) For the fourth year, the difference between 30 percent and the
sum of the applicable percentages for the first three years.
   (3) In the case of any qualified low-income building that receives
an allocation after 1989 and that is a new building that is
federally subsidized or that is an existing building that is "at risk
of conversion," the term "applicable percentage" means the
following:
   (A) For each of the first three years, the percentage prescribed
by the Secretary of the Treasury for new buildings that are federally
subsidized for the taxable year.
   (B) For the fourth year, the difference between 13 percent and the
sum of the applicable percentages for the first three years.
   (4) For purposes of this section, the term "at risk of conversion,"
with respect to an existing property means a property that satisfies
all of the following criteria:
   (A) The property is a multifamily rental housing development in
which at least 50 percent of the units receive governmental
assistance pursuant to any of the following:
   (i) New construction, substantial rehabilitation, moderate
rehabilitation, property disposition, and loan management set-aside
programs, or any other program providing project-based assistance
pursuant to Section 8 of the United States Housing Act of 1937,
Section 1437f of Title 42 of the United States Code, as amended.
   (ii) The Below-Market-Interest-Rate Program pursuant to Section
221(d)(3) of the National Housing Act, Sections 1715l(d)(3) and (5)
of Title 12 of the United States Code.
   (iii) Section 236 of the National Housing Act, Section 1715z-1 of
Title 12 of the United States Code.
   (iv) Programs for rent supplement assistance pursuant to Section
101 of the Housing and Urban Development Act of 1965, Section 1701s
of Title 12 of the United States Code, as amended.
   (v) Programs pursuant to Section 515 of the Housing Act of 1949,
Section 1485 of Title 42 of the United States Code, as amended.
   (vi) The low-income housing credit program set forth in Section 42
of the Internal Revenue Code, provided that the property is not
eligible to receive an allocation of tax exempt private activity
mortgage revenue bonds from the California Debt Limit Allocation
Committee.
   (B) The restrictions on rent and income levels will terminate or
the federally insured mortgage on the property is eligible for
prepayment anytime in the five calendar years after the year of
application to the California Tax Credit Allocation Committee.
   (C) The entity acquiring the property enters into a regulatory
agreement that requires the property to be operated in accordance
with the requirements of this section for a period equal to the
greater of 55 years or the life of the property.
   (D) The property satisfies the requirements of Section 42(e) of
the Internal Revenue Code regarding rehabilitation expenditures,
except that the provisions of Section 42(e)(3)(A)(ii)(I) shall not
apply.
   (d) The term "qualified low-income housing project" as defined in
Section 42(c)(2) of the Internal Revenue Code is modified by adding
the following requirements:
   (1) The taxpayer shall be entitled to receive a cash distribution
from the operations of the project, after funding required reserves,
which, at the election of the taxpayer, shall be equal to:
   (A) An amount not to exceed 8 percent of the lesser of:
   (i) The owner equity, which shall include the amount of the
capital contributions actually paid to the housing sponsor and shall
not include any amounts until they are paid on an investor note.
   (ii) Twenty percent of the adjusted basis of the building as of
the close of the first taxable year of the credit period.
   (B) The amount of the cashflow from those units in the building
that are not low-income units. For purposes of computing cashflow
under this subparagraph, operating costs shall be allocated to the
low-income units using the "floor space fraction," as defined in
Section 42 of the Internal Revenue Code.
   (C) Any amount allowed to be distributed under subparagraph (A)
that is not available for distribution during the first five years of
the compliance period may accumulate and be distributed at any time
during the first 15 years of the compliance period but not
thereafter.
   (2) The limitation on return shall apply in the aggregate to the
partners if the housing sponsor is a partnership and in the aggregate
to the shareholders if the housing sponsor is an "S" corporation.
   (3) The housing sponsor shall apply any cash available for
distribution in excess of the amount eligible to be distributed under
paragraph (1) to reduce the rent on rent-restricted units or to
increase the number of rent-restricted units subject to the tests of
Section 42(g)(1) of the Internal Revenue Code.
   (e) The provisions of Section 42(f) of the Internal Revenue Code
shall be modified as follows:
   (1) The term "credit period" as defined in Section 42(f)(1) of the
Internal Revenue Code is modified by substituting "four taxable
years" for "10 taxable years."
   (2) The special rule for the first taxable year of the credit
period under Section 42(f)(2) of the Internal Revenue Code shall not
apply to the tax credit under this section.
   (3) Section 42(f)(3) of the Internal Revenue Code is modified to
read:
   If, as of the close of any taxable year in the compliance period,
after the first year of the credit period, the qualified basis of any
building exceeds the qualified basis of that building as of the
close of the first year of the credit period, the housing sponsor, to
the extent of its tax credit allocation, shall be eligible for a
credit on the excess in an amount equal to the applicable percentage
determined pursuant to subdivision (c) for the four-year period
beginning with the later of the taxable years in which the increase
in qualified basis occurs.
   (f) The provisions of Section 42(h) of the Internal Revenue Code
shall be modified as follows:
   (1) Section 42(h)(2) of the Internal Revenue Code shall not be
applicable and instead the following provisions shall be applicable:
   The total amount for the four-year credit period of the housing
credit dollars allocated in a calendar year to any building shall
reduce the aggregate housing credit dollar amount of the California
Tax Credit Allocation Committee for the calendar year in which the
allocation is made.
   (2) Paragraphs (3), (4), (5), (6)(E)(i)(II), (6)(F), (6)(G), (6)
(I), (7), and (8) of Section 42(h) of the Internal Revenue Code shall
not be applicable.
   (g) The aggregate housing credit dollar amount that may be
allocated annually by the California Tax Credit Allocation Committee
pursuant to this section, Section 12206, and Section 17058 shall be
an amount equal to the sum of all the following:
   (1) Seventy million dollars ($70,000,000) for the 2001 calendar
year, and, for the 2002 calendar year and each calendar year
thereafter, seventy million dollars ($70,000,000) increased by the
percentage, if any, by which the Consumer Price Index for the
preceding calendar year exceeds the Consumer Price Index for the 2001
calendar year. For the purposes of this paragraph, the term
"Consumer Price Index" means the last Consumer Price Index for all
urban consumers published by the federal Department of Labor.
   (2) The unused housing credit ceiling, if any, for the preceding
calendar years.
   (3) The amount of housing credit ceiling returned in the calendar
year. For purposes of this paragraph, the amount of housing credit
dollar amount returned in the calendar year equals the housing credit
dollar amount previously allocated to any project that does not
become a qualified low-income housing project within the period
required by this section or to any project with respect to which an
allocation is canceled by mutual consent of the California Tax Credit
Allocation Committee and the allocation recipient.
   (h) The term "compliance period" as defined in Section 42(i)(1) of
the Internal Revenue Code is modified to mean, with respect to any
building, the period of 30 consecutive taxable years beginning with
the first taxable year of the credit period with respect thereto.
   (i) Section 42(j) of the Internal Revenue Code shall not be
applicable and the following shall be substituted in its place:
   The requirements of this section shall be set forth in a
regulatory agreement between the California Tax Credit Allocation
Committee and the housing sponsor, and this agreement shall be
subordinated, when required, to any lien or encumbrance of any banks
or other institutional lenders to the project. The regulatory
agreement entered into pursuant to subdivision (f) of Section
50199.14 of the Health and Safety Code shall apply, provided that the
agreement includes all of the following provisions:
   (1) A term not less than the compliance period.
   (2) A requirement that the agreement be filed in the official
records of the county in which the qualified low-income housing
project is located.
   (3) A provision stating which state and local agencies can enforce
the regulatory agreement in the event the housing sponsor fails to
satisfy any of the requirements of this section.
   (4) A provision that the regulatory agreement shall be deemed a
contract enforceable by tenants as third-party beneficiaries thereto,
and that allows individuals, whether prospective, present, or former
occupants of the building, who meet the income limitation applicable
to the building the right to enforce the regulatory agreement in any
state court.
   (5) A provision incorporating the requirements of Section 42 of
the Internal Revenue Code as modified by this section.
   (6) A requirement that the housing sponsor notify the California
Tax Credit Allocation Committee or its designee if there is a
determination by the Internal Revenue Service that the project is not
in compliance with Section 42(g) of the Internal Revenue Code.
   (7) A requirement that the housing sponsor, as security for the
performance of the housing sponsor's obligations under the regulatory
agreement, assign the housing sponsor's interest in rents that it
receives from the project, provided that until there is a default
under the regulatory agreement, the housing sponsor is entitled to
collect and retain the rents.
   (8) A provision that the remedies available in the event of a
default under the regulatory agreement that is not cured within a
reasonable cure period include, but are not limited to, allowing any
of the parties designated to enforce the regulatory agreement to
collect all rents with respect to the project; taking possession of
the project and operating the project in accordance with the
regulatory agreement until the enforcer determines the housing
sponsor is in a position to operate the project in accordance with
the regulatory agreement; applying to any court for specific
performance; securing the appointment of a receiver to operate the
project; or any other relief as may be appropriate.
   (j) (1) The committee shall allocate the housing credit on a
regular basis consisting of two or more periods in each calendar year
during which applications may be filed and considered. The committee
shall establish application filing deadlines, the maximum percentage
of federal and state low-income housing tax credit ceiling that may
be allocated by the committee in that period, and the approximate
date on which allocations shall be made. If the enactment of federal
or state law, the adoption of rules or regulations, or other similar
events prevent the use of two allocation periods, the committee may
reduce the number of periods and adjust the filing deadlines, maximum
percentage of credit allocated, and allocation dates.
   (2) The committee shall adopt a qualified allocation plan, as
provided in Section 42(m)(1) of the Internal Revenue Code. In
adopting this plan, the committee shall comply with the provisions of
Sections 42(m)(1)(B) and 42(m)(1)(C) of the Internal Revenue Code.
   (3) Notwithstanding Section 42(m) of the Internal Revenue Code,
the California Tax Credit Allocation Committee shall allocate housing
credits in accordance with the qualified allocation plan and
regulations, which shall include the following provisions:
   (A) All housing sponsors, as defined by paragraph (3) of
subdivision (a), shall demonstrate at the time the application is
filed with the committee that the project meets the following
threshold requirements:
   (i) The housing sponsor shall demonstrate that there is a need for
low-income housing in the community or region for which it is
proposed.
   (ii) The project's proposed financing, including tax credit
proceeds, shall be sufficient to complete the project and shall be
adequate to operate the project for the extended use period.
   (iii) The project shall have enforceable financing commitments,
either construction or permanent financing, for at least 50 percent
of the total estimated financing of the project.
   (iv) The housing sponsor shall have and maintain control of the
site for the project.
   (v) The housing sponsor shall demonstrate that the project
complies with all applicable local land use and zoning ordinances.
   (vi) The housing sponsor shall demonstrate that the project
development team has the experience and the financial capacity to
ensure project completion and operation for the extended use period.
   (vii) The housing sponsor shall demonstrate the amount of tax
credit that is necessary for the financial feasibility of the project
and its viability as a qualified low-income housing project
throughout the extended use period, taking into account operating
expenses, a supportable debt service, reserves, funds set aside for
rental subsidies, and required equity, and a development fee that
does not exceed a specified percentage of the eligible basis of the
project prior to inclusion of the development fee in the eligible
basis, as determined by the committee.
   (B) The committee shall give a preference to those projects
satisfying all of the threshold requirements of subparagraph (A) if
both of the following apply:
   (i) The project serves the lowest income tenants at rents
affordable to those tenants.
   (ii) The project is obligated to serve qualified tenants for the
longest period.
   (C) In addition to the provisions of subparagraphs (A) and (B),
the committee shall use the following criteria in allocating housing
credits:
   (i) Projects serving large families in which a substantial number,
as defined by the committee, of all residential units are low-income
units with three and more bedrooms.
   (ii) Projects providing single-room occupancy units serving very
low income tenants.
   (iii) Existing projects that are "at risk of conversion," as
defined by paragraph (4) of subdivision (c).
   (iv) Projects for which a public agency provides direct or
indirect long-term financial support for at least 15 percent of the
total project development costs or projects for which the owner's
equity constitutes at least 30 percent of the total project
development costs.
   (v) Projects that provide tenant amenities not generally available
to residents of low-income housing projects.
   (4) For purposes of allocating credits pursuant to this section,
the committee shall not give preference to any project by virtue of
the date of submission of its application except to break a tie when
two or more of the projects have an equal rating.
   (5) Not less than 20 percent of the low-income housing tax credits
available annually under this section, Section 12206, and Section
17058 shall be set aside for allocation to rural areas as defined in
Section 50199.21 of the Health and Safety Code. Any amount of credit
set aside for rural areas remaining on or after October 31 of any
calendar year shall be available for allocation to any eligible
project. No amount of credit set aside for rural areas shall be
considered available for any eligible project so long as there are
eligible rural applications pending on October 31.
   (k) Section 42(l) of the Internal Revenue Code shall be modified
as follows:
   The term "secretary" shall be replaced by the term "California
Franchise Tax Board."
   (l) In the case where the state credit allowed under this section
exceeds the "tax," the excess may be carried over to reduce the "tax"
in the following year, and succeeding years if necessary, until the
credit has been exhausted.
   (m) A project that received an allocation of a 1989 federal
housing credit dollar amount shall be eligible to receive an
allocation of a 1990 state housing credit dollar amount, subject to
all of the following conditions:
   (1) The project was not placed in service prior to 1990.
   (2) To the extent the amendments made to this section by the
Statutes of 1990 conflict with any provisions existing in this
section prior to those amendments, the prior provisions of law shall
prevail.
   (3) Notwithstanding paragraph (2), a project applying for an
allocation under this subdivision shall be subject to the
requirements of paragraph (3) of subdivision (j).
   (n) The credit period with respect to an allocation of credit in
1989 by the California Tax Credit Allocation Committee of which any
amount is attributable to unallocated credit from 1987 or 1988 shall
not begin until after December 31, 1989.
   (o) The provisions of Section 11407(a) of Public Law 101-508,
relating to the effective date of the extension of the low-income
housing credit, shall apply to calendar years after 1989.
   (p) The provisions of Section 11407(c) of Public Law 101-508,
relating to election to accelerate credit, shall not apply.
   (q) (1) A corporation may elect to assign any portion of any
credit allowed under this section to one or more affiliated
corporations for each taxable year in which the credit is allowed.
For purposes of this subdivision, "affiliated corporation" has the
meaning provided in subdivision (b) of Section 25110, as that section
was amended by Chapter 881 of the Statutes of 1993, as of the last
day of the taxable year in which the credit is allowed, except that
"100 percent" is substituted for "more than 50 percent" wherever it
appears in the section, as that section was amended by Chapter 881 of
the Statutes of 1993, and "voting common stock" is substituted for
"voting stock" wherever it appears in the section, as that section
was amended by Chapter 881 of the Statutes of 1993.
   (2) The election provided in paragraph (1):
   (A) May be based on any method selected by the corporation that
originally receives the credit.
   (B) Shall be irrevocable for the taxable year the credit is
allowed, once made.
   (C) May be changed for any subsequent taxable year if the election
to make the assignment is expressly shown on each of the returns of
the affiliated corporations that assign and receive the credits.
   (r) Any unused credit may continue to be carried forward, as
provided in subdivision (k), until the credit has been exhausted.
   This section shall remain in effect on or after December 1, 1990,
for as long as Section 42 of the Internal Revenue Code, relating to
low-income housing credits, remains in effect.
   (s) The amendments to this section made by the act adding this
subdivision shall apply only to taxable years beginning on or after
January 1, 1994, except that paragraph (1) of subdivision (q), as
amended, shall apply to taxable years beginning on or after January
1, 1993.
23612.2.  (a) There shall be allowed as a credit against the "tax"
(as defined by Section 23036) for the taxable year an amount equal to
the sales or use tax paid or incurred during the taxable year by the
taxpayer in connection with the taxpayer's purchase of qualified
property.
   (b) For purposes of this section:
   (1) "Taxpayer" means a corporation engaged in a trade or business
within an enterprise zone.
   (2) "Qualified property" means:
   (A) Any of the following:
   (i) Machinery and machinery parts used for fabricating,
processing, assembling, and manufacturing.
   (ii) Machinery and machinery parts used for the production of
renewable energy resources.
   (iii) Machinery and machinery parts used for either of the
following:
   (I) Air pollution control mechanisms.
   (II) Water pollution control mechanisms.
   (iv) Data-processing and communications equipment, including, but
not limited to, computers, computer-automated drafting systems, copy
machines, telephone systems, and faxes.
   (v) Motion picture manufacturing equipment central to production
and postproduction, including, but not limited to, cameras, audio
recorders, and digital image and sound processing equipment.
   (B) The total cost of qualified property purchased and placed in
service in any taxable year that may be taken into account by any
taxpayer for purposes of claiming this credit shall not exceed twenty
million dollars ($20,000,000).
   (C) The qualified property is used by the taxpayer exclusively in
an enterprise zone.
   (D) The qualified property is purchased and placed in service
before the date the enterprise zone designation expires, is no longer
binding, or becomes inoperative.
   (3) "Enterprise zone" means the 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.
   (c) If the taxpayer has purchased property upon which a use tax
has been paid or incurred, the credit provided by this section shall
be allowed only if qualified property of a comparable quality and
price is not timely available for purchase in this state.
   (d) In the case where the credit otherwise allowed under this
section exceeds the "tax" for the taxable year, that portion of the
credit which exceeds the "tax" may be carried over and added to the
credit, if any, in the following year, and succeeding years if
necessary, until the credit is exhausted.  The credit shall be
applied first to the earliest taxable years possible.
   (e) Any taxpayer who elects to be subject to this section shall
not be entitled to increase the basis of the qualified property as
otherwise required by Section 164(a) of the Internal Revenue Code
with respect to sales or use tax paid or incurred in connection with
the taxpayer's purchase of qualified property.
   (f) (1) The amount of credit otherwise allowed under this section
and Section 23622.7, 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 income
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
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 "tax" for the taxable
year, as provided in subdivision (d).
   (g) The amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 1998.
23617.  (a) For each taxable year beginning on or after January 1,
1988, and before January 1, 2007, there shall be allowed as a credit
against the "tax" (as defined by Section 23036) an amount equal to
the amount determined in subdivision (b).
   (b) (1) The amount of the credit allowed by this section shall be
30 percent of any of the following:
   (A) The cost paid or incurred by the taxpayer on or after
September 23, 1988, for the startup expenses of establishing a child
care program or constructing a child care facility in California, to
be used primarily by the children of the taxpayer's employees.
   (B) For each taxable year beginning on or after January 1, 1993,
the cost paid or incurred by the taxpayer for startup expenses of
establishing a child care program or constructing a child care
facility in California to be used primarily by the children of
employees of tenants leasing commercial or office space in a building
owned by the taxpayer.
   (C) The cost paid or incurred by the taxpayer on or after
September 23, 1988, for contributions to California child care
information and referral services, including, but not limited to,
those that identify local child care services, offer information
describing these resources to the taxpayer's employees, and make
referrals of the taxpayer's employees to child care services where
there are vacancies.
   In the case of a child care facility established by two or more
taxpayers, the credit shall be allowed if the facility is to be used
primarily by the children of the employees of each of the taxpayers
or the children of the employees of tenants of each of the taxpayers.
   (2) The amount of the credit allowed by this section shall not
exceed fifty thousand dollars ($50,000) for any taxable year.
   (c) For purposes of this section, "startup expenses" include, but
are not limited to, feasibility studies, site preparation, and
construction, renovation, or acquisition of facilities for purposes
of establishing or expanding onsite or nearsite centers by one or
more employers or one or more building owners leasing space to
employers.
   (d) If two or more taxpayers share in the costs eligible for the
credit provided by this section, each taxpayer shall be eligible to
receive a tax credit with respect to its respective share of the
costs paid or incurred.
   (e) (1) In the case where the credit allowed and limited under
subdivision (b) for the taxable year exceeds the "tax," the excess
may be carried over to reduce the "tax" in the following year, and
succeeding years if necessary, until the credit has been exhausted.
However, the excess from any one year shall not exceed fifty thousand
dollars ($50,000).
   (2) If the credit carryovers from preceding taxable years allowed
under paragraph (1) plus the credit allowed for the taxable year
under subdivision (b) would exceed an aggregate total of fifty
thousand dollars ($50,000), then the credit allowed to reduce the
"tax" under this section for the taxable year shall be limited to
fifty thousand dollars ($50,000) and the amount in excess of the
fifty thousand dollar ($50,000) limit may be carried over and applied
against the "tax" in the following year, and succeeding years if
necessary, in an amount which, when added to the credit allowed under
subdivision (b) for that succeeding taxable year, does not exceed
fifty thousand dollars ($50,000).
   (f) No deduction shall be allowed as otherwise provided in this
part for that portion of expenses paid or incurred for the taxable
year which is equal to the amount of the credit allowed under this
section attributable to those expenses.
   (g) In lieu of claiming the tax credit provided by this section,
the taxpayer may elect to take depreciation pursuant to Section
24371.5.  In addition, the taxpayer may take depreciation pursuant to
that section for the cost of a facility in excess of the amount of
the tax credit claimed under this section.
   (h) The basis for any child care facility for which a credit is
allowed shall be reduced by the amount of the credit attributable to
the facility.  The basis adjustment shall be made for the taxable
year for which the credit is allowed.
   (i) No credit shall be allowed under subparagraph (B) of paragraph
(1) of subdivision (b) in the case of any taxpayer that is required
by any local ordinance or regulation to provide a child care
facility.
   (j) (1) In order to be eligible for the credit allowed under
subparagraph (A) or (B) of paragraph (1) of subdivision (b), the
taxpayer shall submit to the Franchise Tax Board upon request a
statement certifying that the costs for which the credit is claimed
are incurred with respect to the startup expenses of establishing a
child care program or constructing a child care facility in
California to be used primarily by the children of the taxpayer's
employees or the children of the employees of tenants leasing
commercial or office space in a building owned by the taxpayer and
which will be in operation for at least 60 consecutive months after
completion.
   (2) If the child care center for which a credit is claimed
pursuant to this section is disposed of or ceases to operate within
60 months after completion, that portion of the credit claimed which
represents the remaining portion of the 60-month period shall be
added to the taxpayer's tax liability in the taxable year of that
disposition or nonuse.
   (k) In order to be allowed the credit under subparagraph (A) or
(B) of paragraph (1) of subdivision (b), the taxpayer shall indicate,
in the form and manner prescribed by the Franchise Tax Board, the
number of children that the child care program or facility will be
able to legally accommodate.
   (l) This section shall remain in effect only until December 1,
2007, and as of that date is repealed.
23617.5.  (a) For each taxable year beginning on or after January 1,
1995, and before January 1, 2007, there shall be allowed as a credit
against the "tax" (as defined by Section 23036) an amount equal to
the amount determined in subdivision (b).
   (b) (1) The amount of the credit allowed by this section shall be
30 percent of the cost paid or incurred by the taxpayer for
contributions to a qualified care plan made on behalf of any
qualified dependent of the taxpayer's qualified employee.
   (2) The amount of the credit allowed by this section in any
taxable year shall not exceed three hundred sixty dollars ($360) for
each qualified dependent.
   (c) For purposes of this section:
   (1) "Qualified care plan" means a plan providing qualified care.
   (2) "Qualified care" includes, but is not limited to, onsite
service, center-based service, in-home care or home-provider care,
and a dependent care center as defined by Section 21(b)(2)(D) of the
Internal Revenue Code that is a specialized center with respect to
short-term illnesses of an employee's dependents.  "Qualified care"
must be provided in this state under the authority of a license when
required by California law.
   (3) "Specialized center" means a facility that provides care to
mildly ill children and that may do all of the following:
   (A) Be staffed by pediatric nurses and day care workers.
   (B) Admit children suffering from common childhood ailments
(including colds, flu, and chickenpox).
   (C) Make special arrangements for well children with minor
problems associated with diabetes, asthma, breaks or sprains, and
recuperation from surgery.
   (D) Separate children according to their illness and symptoms in
order to protect them from cross-infection.
   (4) "Contributions" include direct payments to child care programs
or providers.  "Contributions" do not include amounts contributed to
a qualified care plan pursuant to a salary reduction agreement to
provide benefits under a dependent care assistance program within the
meaning of Section 129 of the Internal Revenue Code, as applicable,
for purposes of Part 10 (commencing with Section 17001) and this
part.
   (5) "Qualified employee" means any employee of the taxpayer who is
performing services for the taxpayer in this state, within the
meaning of Section 25133, during the period in which the qualified
care is performed.
   (6) "Employee" includes an individual who is an employee within
the meaning of Section 401(c)(1) of the Internal Revenue Code
(relating to self-employed individuals).
   (7) "Qualified dependent" means any dependent of a qualified
employee who is under the age of 12 years.
   (d) If an employer makes contributions to a qualified care plan
and also collects fees from parents to support a child care facility
owned and operated by the employer, no credit shall be allowed under
this section for contributions in the amount, if any, by which the
sum of the contributions and fees exceed the total cost of providing
care.  The Franchise Tax Board may require information about fees
collected from parents of children served in the facility from
taxpayers claiming credits under this section.
   (e) If the duration of the child care received is less than 42
weeks, the employer shall claim a prorated portion of the allowable
credit.  The employer shall prorate the credit using the ratio of the
number of weeks of care received divided by 42 weeks.
   (f) If the credit allowed under this section exceeds the "tax,"
the excess may be carried over to reduce the "tax" in the following
year, and succeeding years if necessary, until the credit has been
exhausted.
   (g) The credit shall not be available to an employer if the care
provided on behalf of an employee is provided by an individual who:
   (1) Qualifies as a dependent of that employee or that employee's
spouse under subdivision (d) of Section 17054.
   (2) Is (within the meaning of Section 17056) a son, stepson,
daughter, or stepdaughter of that employee and is under the age of 19
at the close of that taxable year.
   (h) The contributions to a qualified care plan shall not
discriminate in favor of employees who are officers, owners, or
highly compensated, or their dependents.
   (i) No deduction shall be allowed as otherwise provided in this
part for that portion of expenses paid or incurred for the taxable
year that is equal to the amount of the credit allowed under this
section.
   (j) If the credit is taken by an employer for contributions to a
qualified care plan that is used at a facility owned by the employer,
the basis of that facility shall be reduced by the amount of the
credit.  The basis adjustment shall be made for the taxable year for
which the credit is allowed.
   (k) This section shall remain in effect only until December 1,
2007, and as of that date is repealed.
23621.  (a) There shall be allowed as a credit against the "tax" (as
defined by Section 23036) an amount equal to 10 percent of the
amount of wages paid to each employee who is certified by the
Employment Development Department to meet the requirements of Section
328 of the Unemployment Insurance Code.
   The credit under this section shall not apply to an individual
unless, on or before the day on which that individual begins work for
the employer, the employer:
   (1) Has received a certification from the Employment Development
Department, or
   (2) Has requested in writing that certification from the
Employment Development Department.
   For purposes of this subdivision, if on or before the day on which
the individual begins work for the employer, the individual has
received from the Employment Development Department a written
preliminary determination that he or she is a member of a targeted
group, then the requirement of paragraph (1) or (2) shall be
applicable on or before the fifth day on which the individual begins
work for the employer.
   (b) The credit under this section shall not apply to wages paid in
excess of three thousand dollars ($3,000) during an taxable year by
a taxpayer to the same individual.  With respect to each qualified
employee, the aggregate credit under this section shall not exceed
six hundred dollars ($600).
   (c) The credit under this section shall not apply to wages paid to
an individual:
   (1) Who is a dependent, as described in paragraphs (1) to (8),
inclusive, of Section 152(a) of the Internal Revenue Code, of an
individual who owns, directly or indirectly, more than 50 percent in
value of the outstanding stock of the taxpayer (determined with the
application of Section 267(c) of the Internal Revenue Code); or
   (2) Who is a dependent (as described in paragraph (9) of Section
152(a) of the Internal Revenue Code) of an individual described in
paragraph (1).
   (d) The credit under this section shall not apply to wages paid to
an individual if, prior to the hiring date of that individual, that
individual had been employed by the employer at any time during which
he or she was not certified by the Employment Development Department
to meet the requirements of Section 328 of the Unemployment
Insurance Code.
   (e) If the certification of an employee has been revoked pursuant
to subdivision (c) of Section 328 of the Unemployment Insurance Code,
the credit under this section shall not apply to wages paid by the
employer after the date on which notice of revocation is received by
the employer.
   (f) The credit under this section shall be in addition to any
deduction under  this part to which the taxpayer may be entitled, if
any.
   (g) The credit provided by this section shall be applied to wages
paid to each qualifying employee during the 24-month period beginning
on the date the employee begins working for the taxpayer.
   (h) (1) A taxpayer may elect to have this section not apply for
any taxable year.
   (2) An election under paragraph (1) for any taxable year may be
made (or revoked) at any time before the expiration of the four-year
period beginning on the last date prescribed by law for filing the
return for that taxable year (determined without regard to
extensions).
   (3) An election under paragraph (1) (or revocation thereof) shall
be made in any manner which the Franchise Tax Board may prescribe.
   (i) (1) In the case of a successor employer referred to in Section
3306(b)(1) of the Internal Revenue Code, the determination of the
amount of the credit under this section with respect to wages paid by
that successor employer shall be made in the same manner as if those
wages were paid by the predecessor employer referred to in that
section.
   (2) No credit shall be determined under this section with respect
to remuneration paid by an employer to an employee for services
performed by that employee for another person unless the amount
reasonably expected to be received by the employer for those services
from that other person exceeds the remuneration paid by the employer
to that employee for those services.
   (j) The term "wages" shall not include either of the following:
   (1) Payments defined in Section 51(c)(3) of the Internal Revenue
Code, relating to payments for services during labor disputes.
   (2) Any amounts paid or incurred to an individual who begins work
for an employer after December 31, 1993.
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:
   (aa) 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.
   (bb) 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.
   (cc) 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.
   (dd) 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.
   (ee) 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.
   (ff) 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.
   (gg) 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.
   (hh) 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 individual
shall be treated as convicted if he or she was placed on probation by
a state court without a finding of guilt.
   (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:
   (aa) Federal Supplemental Security Income benefits.
   (bb) Aid to Families with Dependent Children.
   (cc) Food stamps.
   (dd) 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) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a resident of a targeted
employment area (as defined in Section 7072 of the Government Code).
   (X) 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.
   (XI) 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 Job Training
Partnership Act or the Greater Avenues for Independence Act of 1985
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) Obtain from the Employment Development Department, as
permitted by federal law, the local county or city Job Training
Partnership Act administrative entity, the local county GAIN 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.
   (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 (hereinafter 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.
23622.8.  (a) For each taxable year beginning on or after January 1,
1998, there shall be allowed a credit against the "tax" (as defined
in Section 23036) to a qualified taxpayer for hiring a qualified
disadvantaged individual during the taxable year for employment in
the Manufacturing Enhancement Area.  The credit shall be equal to the
sum of each of the following:
   (1) Fifty percent of the qualified wages in the first year of
employment.
   (2) Forty percent of the qualified wages in the second year of
employment.
   (3) Thirty percent of the qualified wages in the third year of
employment.
   (4) Twenty percent of the qualified wages in the fourth year of
employment.
   (5) Ten percent of the qualified wages in the fifth year of
employment.
   (b) For purposes of this section:
   (1) "Qualified wages" means:
   (A) That portion of wages paid or incurred by the qualified
taxpayer during the taxable year to qualified disadvantaged
individuals that does not exceed 150 percent of the minimum wage.
   (B) The total amount of qualified wages which may be taken into
account for purposes of claiming the credit allowed under this
section shall not exceed two million dollars ($2,000,000) per taxable
year.
   (C) Wages received during the 60-month period beginning with the
first day the qualified disadvantaged individual commences employment
with the qualified taxpayer.  Reemployment in connection with any
increase, including a regularly occurring seasonal increase, in the
trade or business operations of the qualified taxpayer does not
constitute commencement of employment for purposes of this section.
   (D) Qualified wages do not include any wages paid or incurred by
the qualified taxpayer on or after the Manufacturing Enhancement Area
expiration date.  However, wages paid or incurred with respect to
qualified employees who are employed by the qualified taxpayer within
the Manufacturing Enhancement Area within the 60-month period prior
to the Manufacturing Enhancement Area expiration date shall continue
to qualify for the credit under this section after the Manufacturing
Enhancement Area expiration date, in accordance with all provisions
of this section applied as if the Manufacturing Enhancement Area
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) "Manufacturing Enhancement Area" means an area designated
pursuant to Section 7073.8 of the Government Code according to the
procedures of Chapter 12.8 (commencing with Section 7070) of Division
7 of Title 1 of the Government Code.
   (4) "Manufacturing Enhancement Area expiration date" means the
date the Manufacturing Enhancement Area designation expires, is no
longer binding, or becomes inoperative.
   (5) "Qualified disadvantaged individual" means an individual who
satisfies all of the following requirements:
   (A) (i) At least 90 percent of whose services for the qualified
taxpayer during the taxable year are directly related to the conduct
of the qualified taxpayer's trade or business located in a
Manufacturing Enhancement Area.
   (ii) Who performs at least 50 percent of his or her services for
the qualified taxpayer during the taxable year in the Manufacturing
Enhancement Area.
   (B) Who is hired by the qualified taxpayer after the designation
of the area as a Manufacturing Enhancement Area in which the
individual's services were primarily performed.
   (C) Who is any of the following immediately preceding the
individual's commencement of employment with the qualified taxpayer:
   (i) An individual who has been determined eligible for services
under the federal Job Training Partnership Act (29 U.S.C. Sec. 1501
et seq.) or its successor.
   (ii) Any voluntary or mandatory registrant under the Greater
Avenues for Independence Act of 1985, or its successor, as provided
pursuant to Article 3.2 (commencing with Section 11320) of Chapter 2
of Part 3 of Division 9 of the Welfare and Institutions Code.
   (iii) Any individual who has been certified eligible by the
Employment Development Department under the federal Targeted Jobs Tax
Credit Program, or its successor, whether or not this program is in
effect.
   (6) "Qualified taxpayer" means any corporation engaged in a trade
or business within a Manufacturing Enhancement Area designated
pursuant to Section 7073.8 of the Government Code and that meets all
of the following requirements:
   (A) Is engaged in those lines of business described in Codes 0211
to 0291, inclusive, Code 0723, or in Codes 2011 to 3999, inclusive,
of the Standard Industrial Classification (SIC) Manual published by
the United States Office of Management and Budget, 1987 edition.
   (B) At least 50 percent of the qualified taxpayer's workforce
hired after the designation of the Manufacturing Enhancement Area is
composed of individuals who, at the time of hire, are residents of
the county in which the Manufacturing Enhancement Area is located.
   (C) Of this percentage of local hires, at least 30 percent shall
be qualified disadvantaged individuals.
   (7) "Seasonal employment" means employment by a qualified taxpayer
that has regular and predictable substantial reductions in trade or
business operations.
   (c) (1) For purposes of this section, all of the following apply:
   (A) All employees of all corporations that are members of the same
controlled group of corporations shall be treated as employed by a
single qualified taxpayer.
   (B) The credit (if any) allowable by this section with respect to
each member shall be determined by reference to its proportionate
share of the expenses 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 a qualified taxpayer acquires the major portion of a trade
or business of another employer (hereinafter 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 (d)) for any calendar
year ending after that acquisition, the employment relationship
between a qualified disadvantaged individual and a qualified taxpayer
shall not be treated as terminated if the qualified disadvantaged
individual continues to be employed in that trade or business.
   (d) (1) (A) If the employment, other than seasonal employment, of
any qualified disadvantaged individual, with respect to whom
qualified wages are taken into account under subdivision (b) is
terminated by the qualified 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 qualified
disadvantaged individual completes 90 days of employment with the
qualified 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 qualified disadvantaged
individual.
   (B) If the seasonal employment of any qualified disadvantaged
individual, with respect to whom qualified wages are taken into
account under subdivision (a) is not continued by the qualified
taxpayer for a period of 270 days of employment during the 60-month
period beginning with the day the qualified disadvantaged individual
commences seasonal employment with the qualified taxpayer, the tax
imposed by this part, for the income year that includes the 60th
month following the month in which the qualified disadvantaged
individual commences seasonal employment with the qualified 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 disadvantaged individual.
   (2) (A) Subparagraph (A) of paragraph (1) does not apply to any of
the following:
   (i) A termination of employment of a qualified disadvantaged
individual who voluntarily leaves the employment of the qualified
taxpayer.
   (ii) A termination of employment of a qualified disadvantaged
individual who, before the close of the period referred to in
subparagraph (A) of paragraph (1), becomes disabled to perform the
services of that employment, unless that disability is removed before
the close of that period and the qualified taxpayer fails to offer
reemployment to that individual.
   (iii) A termination of employment of a qualified disadvantaged
individual, 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 individual.
   (iv) A termination of employment of a qualified disadvantaged
individual due to a substantial reduction in the trade or business
operations of the qualified taxpayer.
   (v) A termination of employment of a qualified disadvantaged
individual, if that individual is replaced by other qualified
disadvantaged individuals 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
disadvantaged individual who voluntarily fails to return to the
seasonal employment of the qualified taxpayer.
   (ii) A failure to continue the seasonal employment of a qualified
disadvantaged individual 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
qualified taxpayer fails to offer seasonal employment to that
qualified disadvantaged individual.
   (iii) A failure to continue the seasonal employment of a qualified
disadvantaged individual, 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 disadvantaged
individual.
   (iv) A failure to continue seasonal employment of a qualified
disadvantaged individual due to a substantial reduction in the
regular seasonal trade or business operations of the qualified
taxpayer.
   (v) A failure to continue the seasonal employment of a qualified
disadvantaged individual, if that qualified disadvantaged individual
is replaced by other qualified disadvantaged individuals 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 qualified taxpayer and a qualified disadvantaged
individual 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 disadvantaged individual
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 qualified taxpayer, if the qualified
disadvantaged individual continues to be employed in that trade or
business and the qualified 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.
   (e) The credit shall be reduced by the credit allowed under
Section 23621.  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 qualified taxpayer upon
which the credit is based shall be reduced by the amount of the
credit, prior to any reduction required by subdivision (f) or (g).
   (f) 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 years, until the credit is exhausted.
The credit shall be applied first to the earliest taxable years
possible.
   (g) (1) The amount of credit otherwise allowed under this section,
including prior year credit carryovers, that may reduce the "tax"
for the taxable year shall not exceed the amount of tax that would be
imposed on the qualified taxpayer's business income attributed to a
Manufacturing Enhancement Area determined as if that attributed
income represented all of the net income of the qualified taxpayer
subject to tax under this part.
   (2) Attributable income is that portion of the taxpayer's
California source business income that is apportioned to the
Manufacturing Enhancement Area.  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).  That business income shall be further apportioned to the
Manufacturing Enhancement Area in accordance with Article 2
(commencing with Section 25120) of Chapter 17, modified for purposes
of this section in accordance with paragraph (3).
   (3) Income shall be apportioned to a Manufacturing Enhancement
Area 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
the 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 Manufacturing Enhancement
Area 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 Manufacturing
Enhancement Area 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 "tax" for the taxable
year, as provided in subdivision (g).
   (h) If the taxpayer is allowed a credit pursuant to this section
for qualified wages paid or incurred, only one credit shall be
allowed to the taxpayer under this part with respect to any wage
consisting in whole or in part of those qualified wages.
23624.  (a) There shall be allowed as a credit against the "tax" (as
defined by Section 23036) an amount equal to 10 percent of the
amount of wages paid or incurred during the taxable year to each
prisoner who is employed in a joint venture program established
pursuant to Article 1.5 of Chapter 5 of Title 1 of Part 3 of the
Penal Code, through agreement with the Director of Corrections.
   (b) The Department of Corrections shall forward annually to the
Franchise Tax Board a list of all employers certified by the
Department of Corrections as active participants in a joint venture
program pursuant to Article 1.5 (commencing with Section 2717.1) of
Chapter 5 of Title 1 of Part 3 of the Penal Code.  The list shall
include the certified participant's federal employer identification
number.
23630.  (a) There shall be allowed as a credit against the "tax," as
defined in Section 23036, an amount equal to 55 percent of the fair
market value of any qualified contribution made on or after January
1, 2000, and not later than June 30, 2008, by the taxpayer during the
taxable year to the state, any local government, or any designated
nonprofit organization, pursuant to Division 28 (commencing with
Section 37000) of the Public Resources Code.
   (b) For purposes of this section, "qualified contribution" means a
contribution of property, as defined in Section 37002 of the Public
Resources Code, that has been approved for acceptance by the Wildlife
Conservation Board pursuant to Division 28 (commencing with Section
37000) of the Public Resources Code.
   (c) In the case of any passthrough entity, the fair market value
of any qualified contribution approved for acceptance under Division
28 (commencing with Section 37000) of the Public Resources Code shall
be passed through to the partners or shareholders of the passthrough
entity in accordance with their interest in the passthrough entity
as of the date of the qualified contribution.  For purposes of this
subdivision, the term "passthrough entity" means any partnership or
"S" corporation.
   (d) If the credit allowed by this section exceeds the "tax," the
excess may be carried over to reduce the "tax" in the following year,
and the succeeding seven years if necessary, until the credit is
exhausted.
   (e) This credit shall be in lieu of any other credit or deduction
that the taxpayer may otherwise claim pursuant to this part with
respect to the property or any interest therein that is contributed.
23633.  (a) For each taxable year beginning on or after January 1,
1998, there shall be allowed as a credit against the "tax" (as
defined by Section 23036) for the taxable year an amount equal to the
sales or use tax paid or incurred during the taxable year by the
qualified taxpayer in connection with the qualified taxpayer's
purchase of qualified property.
   (b) For purposes of this section:
   (1) "Qualified property" means property that meets all of the
following requirements:
   (A) Is any of the following:
   (i) Machinery and machinery parts used for fabricating,
processing, assembling, and manufacturing.
   (ii) Machinery and machinery parts used for the production of
renewable energy resources.
   (iii) Machinery and machinery parts used for either of the
following:
   (I) Air pollution control mechanisms.
   (II) Water pollution control mechanisms.
   (iv) Data-processing and communications equipment, such as
computers, computer-automated drafting systems, copy machines,
telephone systems, and faxes.
   (v) Motion picture manufacturing equipment central to production
and post production, such as cameras, audio recorders, and digital
image and sound processing equipment.
   (B) The total cost of qualified property purchased and placed in
service in any taxable year that may be taken into account by any
qualified taxpayer for purposes of claiming this credit shall not
exceed twenty million dollars ($20,000,000).
   (C) The qualified property is used by the qualified taxpayer
exclusively in a targeted tax area.
   (D) The qualified property is purchased and placed in service
before the date the targeted tax area designation expires, is
revoked, is no longer binding, or becomes inoperative.
   (2) (A) "Qualified taxpayer" means a corporation that meets both
of the following:
   (i) Is engaged in a trade or business within a targeted tax area
designated pursuant to Chapter 12.93 (commencing with Section 7097)
of Division 7 of Title 1 of the Government Code.
   (ii) Is engaged in those lines of business described in Codes 2000
to 2099, inclusive; 2200 to 3999, inclusive; 4200 to 4299,
inclusive; 4500 to 4599, inclusive; and 4700 to 5199, inclusive, of
the Standard Industrial Classification (SIC) Manual published by the
United States Office of Management and Budget, 1987 edition.
   (B) In the case of any pass-through entity, the determination of
whether a taxpayer is a qualified taxpayer under this section shall
be made at the entity level and any credit under this section or
Section 17053.33 shall be allowed to the pass-through entity and
passed through to the partners or shareholders in accordance with
applicable provisions of this part or Part 10 (commencing with
Section 17001).  For purposes of this subparagraph, the term
"pass-through entity" means any partnership or S corporation.
   (3) "Targeted tax area" means the area designated pursuant to
Chapter 12.93 (commencing with Section 7097) of Division 7 of Title 1
of the Government Code.
   (c) If the qualified taxpayer is allowed a credit for qualified
property pursuant to this section, only one credit shall be allowed
to the taxpayer under this part with respect to that qualified
property.
   (d) If the qualified taxpayer has purchased property upon which a
use tax has been paid or incurred, the credit provided by this
section shall be allowed only if qualified property of a comparable
quality and price is not timely available for purchase in this state.
   (e) 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 the following year, and succeeding years if
necessary, until the credit is exhausted.  The credit shall be
applied first to the earliest taxable years possible.
   (f) Any qualified taxpayer who elects to be subject to this
section shall not be entitled to increase the basis of the qualified
property as otherwise required by Section 164(a) of the Internal
Revenue Code with respect to sales or use tax paid or incurred in
connection with the qualified taxpayer's purchase of qualified
property.
   (g) (1) The amount of credit otherwise allowed under this section
and Section 23634, including any credit carryover from prior years,
that may reduce the "tax" for the taxable year shall not exceed the
amount of tax that would be imposed on the qualified taxpayer's
business income attributable to the targeted tax area determined as
if that attributable income represented all of the income of the
qualified 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 targeted
tax area.  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).  That
business income shall be further apportioned to the targeted tax area
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 targeted tax area
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 targeted tax area 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 targeted tax area 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 "tax" for the taxable
year, as provided in subdivision (e).
   (5) In the event that a credit carryover is allowable under
subdivision (e) for any taxable year after the targeted tax area
designation has expired, has been revoked, is no longer binding, or
has become inoperative, the targeted tax area shall be deemed to
remain in existence for purposes of computing the limitation
specified in this subdivision.
   (h) The changes made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 1998.
23634.  (a) For each taxable year beginning on or after January 1,
1998, there shall be allowed a credit against the "tax" (as defined
by Section 23036) to a qualified taxpayer who employs a qualified
employee in a targeted tax area 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) That portion of wages paid or incurred by the qualified
taxpayer during the taxable year to qualified employees that does not
exceed 150 percent of the minimum wage.
   (B) Wages received during the 60-month period beginning with the
first day the employee commences employment with the qualified
taxpayer.  Reemployment in connection with any increase, including a
regularly occurring seasonal increase, in the trade or business
operations of the qualified 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 qualified taxpayer on or after the targeted tax area expiration
date.  However, wages paid or incurred with respect to qualified
employees who are employed by the qualified taxpayer within the
targeted tax area within the 60-month period prior to the targeted
tax area expiration date shall continue to qualify for the credit
under this section after the targeted tax area expiration date, in
accordance with all provisions of this section applied as if the
targeted tax area 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) "Targeted tax area expiration date" means the date the
targeted tax area designation expires, is revoked, 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 his or her services for the qualified
taxpayer during the taxable year are directly related to the conduct
of the qualified taxpayer's trade or business located in a targeted
tax area.
   (ii) Performs at least 50 percent of his or her services for the
qualified taxpayer during the taxable year in a targeted tax area.
   (iii) Is hired by the qualified taxpayer after the date of
original designation of the area in which services were performed as
a targeted tax area.
   (iv) Is any of the following:
   (I) Immediately preceding the qualified employee's commencement of
employment with the qualified 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 qualified 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 qualified taxpayer, was an economically
disadvantaged individual 14 years of age or older.
   (IV) Immediately preceding the qualified employee's commencement
of employment with the qualified taxpayer, was a dislocated worker
who meets any of the following:
   (aa) 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.
   (bb) 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.
   (cc) 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.
   (dd) 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.
   (ee) 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.
   (ff) 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.
   (gg) 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.
   (hh) 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 qualified 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 qualified taxpayer, was an ex-offender.  An
individual shall be treated as convicted if he or she was placed on
probation by a state court without a finding of guilt.
   (VII) Immediately preceding the qualified employee's commencement
of employment with the qualified taxpayer, was a person eligible for
or a recipient of any of the following:
   (aa) Federal Supplemental Security Income benefits.
   (bb) Aid to Families with Dependent Children.
   (cc) Food stamps.
   (dd) State and local general assistance.
   (VIII) Immediately preceding the qualified employee's commencement
of employment with the qualified taxpayer, was a member of a
federally recognized Indian tribe, band, or other group of Native
American descent.
   (IX) Immediately preceding the qualified employee's commencement
of employment with the qualified taxpayer, was a resident of a
targeted tax area.
   (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 Job Training
Partnership Act or the Greater Avenues for Independence Act of 1985
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) (A) "Qualified taxpayer" means a person or entity that meets
both of the following:
   (i) Is engaged in a trade or business within a targeted tax area
designated pursuant to Chapter 12.93 (commencing with Section 7097)
of Division 7 of Title 1 of the Government Code.
   (ii) Is engaged in those lines of business described in Codes 2000
to 2099, inclusive; 2200 to 3999, inclusive; 4200 to 4299,
inclusive; 4500 to 4599, inclusive; and 4700 to 5199, inclusive, of
the Standard Industrial Classification (SIC) Manual published by the
United States Office of Management and Budget, 1987 edition.
   (B) In the case of any pass-through entity, the determination of
whether a taxpayer is a qualified taxpayer under this section shall
be made at the entity level and any credit under this section or
Section 17053.34 shall be allowed to the pass-through entity and
passed through to the partners or shareholders in accordance with
applicable provisions of this part or Part 10 (commencing with
Section 17001).  For purposes of this subparagraph, the term
"pass-through entity" means any partnership or S corporation.
   (6) "Seasonal employment" means employment by a qualified taxpayer
that has regular and predictable substantial reductions in trade or
business operations.
   (c) If the qualified taxpayer is allowed a credit for qualified
wages pursuant to this section, only one credit shall be allowed to
the taxpayer under this part with respect to those qualified wages.
   (d) The qualified taxpayer shall do both of the following:
   (1) Obtain from either the Employment Development Department, as
permitted by federal law, or the local county or city Job Training
Partnership Act administrative entity or the local county GAIN office
or social services agency, as appropriate, 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.
   (2) Retain a copy of the certification and provide it upon request
to the Franchise Tax Board.
   (e) (1) For purposes of this section:
   (A) All employees of all corporations that 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 (hereinafter 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 (f)) 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.
   (f) (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 qualified
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 qualified 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 qualified 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 qualified 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
qualified 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 qualified 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 qualified 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 qualified 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
qualified 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 qualified 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 qualified 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 qualified taxpayer, if the qualified
employee continues to be employed in that trade or business and the
qualified 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.
   (g) Rules similar to the rules provided in Sections 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.
   (h) For purposes of this section, "targeted tax area" means an
area designated pursuant to Chapter 12.93 (commencing with Section
7097) of Division 7 of Title 1 of the Government Code.
   (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 23633, including any credit carryover from prior
years, that may reduce the "tax" for the taxable year shall not
exceed the amount of tax that would be imposed on the qualified
taxpayer's business income attributable to the targeted tax area
determined as if that attributable income represented all of the
income of the qualified 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 targeted
tax area.  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).  That
business income shall be further apportioned to the targeted tax area
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 targeted tax area
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 targeted tax area 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 targeted tax area 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 "tax" for the taxable
year, as provided in subdivision (h).
   (5) In the event that a credit carryover is allowable under
subdivision (h) for any taxable year after the targeted tax area
designation has expired or been revoked, the targeted tax area shall
be deemed to remain in existence for purposes of computing the
limitation specified in this subdivision.
23636.  (a) For each taxable year beginning on or after January 1,
2001, and before January 1, 2006, a qualified taxpayer shall be
allowed as a credit against the "tax," as defined in Section 23036,
an amount equal to the following:
   (1) Fifty percent of qualified wages paid or incurred during any
taxable year beginning on or after January 1, 2001, and before
January 1, 2002.
   (2) Forty percent of qualified wages paid or incurred during any
taxable year beginning on or after January 1, 2002, and before
January 1, 2003.
   (3) Thirty percent of the qualified wages paid or incurred during
any taxable year beginning on or after January 1, 2003, and before
January 1, 2004.
   (4) Twenty percent of the qualified wages paid or incurred during
any taxable year beginning on or after January 1, 2004, and before
January 1, 2005.
   (5) Ten percent of the qualified wages paid or incurred during any
taxable year beginning on or after January 1, 2005, and before
January 1, 2006.
   (b) For purposes of this section:
   (1) (A) "Qualified taxpayer" means any taxpayer under an initial
contract or subcontract to manufacture property for ultimate use in a
Joint Strike Fighter.
   (B) In the case of any pass-through entity, the determination of
whether a taxpayer is a qualified taxpayer under this section shall
be made at the entity level and any credit under this section or
Section 17053.36 shall be allowed to the pass-through entity and
passed through to the partners or shareholders in accordance with
applicable provisions of Part 10 (commencing with Section 17001) or
this part.  For purposes of this paragraph, "pass-through entity"
means any partnership or S corporation.
   (2) "Qualified wages" means that portion of wages paid or incurred
by the qualified taxpayer during the taxable year with respect to
qualified employees that are direct costs as defined in Section 263A
of the Internal Revenue Code allocable to property manufactured in
this state by the qualified taxpayer for ultimate use in a Joint
Strike Fighter.
   (3) "Qualified employee" means an individual whose services for
the qualified taxpayer are performed in this state and are at least
90 percent directly related to the qualified taxpayer's contract or
subcontract to manufacture property for ultimate use in a Joint
Strike Fighter.
   (4) "Joint Strike Fighter" means the next generation air combat
strike aircraft developed and produced under the Joint Strike Fighter
program.
   (5) "Joint Strike Fighter program" means the multiservice,
multinational project conducted by the United States government to
develop and produce the next generation of air combat strike
aircraft.
   (c) The credit allowed by this section shall not exceed ten
thousand dollars ($10,000) per year, per qualified employee.  For
employees that are qualified employees for part of a taxable year,
the credit shall not exceed ten thousand dollars ($10,000) multiplied
by a fraction, the numerator of which is the number of months of the
taxable year that the employee is a qualified employee and the
denominator of which is 12.
   (d) 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 year, and the seven succeeding years if necessary, until
the credit is exhausted.
   (e) No credit shall be allowed unless the credit is reflected
within the bid upon which the qualified taxpayer's contract or
subcontract to manufacture property for ultimate use in a Joint
Strike Fighter is based by reducing the amount of the bid by the
amount of the credit allowable.
   (f) All references to the credit and ultimate cost reductions
incorporated into any successful bid that was awarded a contract or
subcontract and for which a qualified taxpayer is making a claim
shall be made available to the Franchise Tax Board upon request.
   (g) This section shall remain in effect only until December 1,
2006, and as of that date is repealed.
23637.  (a) For each taxable year beginning on or after January 1,
2001, and before January 1, 2006, a qualified taxpayer shall be
allowed as a credit against the "tax," as defined in Section 23036,
an amount equal to 10 percent of the qualified cost of qualified
property that is placed in service in this state.
   (b) (1) For purposes of this section, "qualified cost" means any
costs that satisfy each of the following conditions:
   (A) Except as otherwise provided in this subparagraph, is a cost
paid or incurred by the qualified taxpayer for the construction,
reconstruction, or acquisition of qualified property on or after
January 1, 2001, and before January 1, 2006.  In the case of any
qualified property constructed, reconstructed, or acquired by the
qualified taxpayer (or any person related to the qualified taxpayer
within the meaning of Section 267 or 707 of the Internal Revenue
Code) pursuant to a binding contract in existence on or before
January 1, 2001, costs paid pursuant to that contract shall be
subject to allocation as follows.  Contract costs shall be allocated
to qualified property based on a ratio of costs actually paid prior
to January 1, 2001, and total contract costs actually paid.  "Cost
paid" shall include, without limitation, contractual deposits and
option payments.  To the extent of costs allocated, whether or not
currently deductible or depreciable for tax purposes, to a period
prior to January 1, 2001, the cost shall be deemed allocated to
property acquired before January 1, 2001, and is thus not a
"qualified cost."
   (B) Except for capitalized labor costs as described in
subparagraph (B) of paragraph (1) of subdivision (d), is an amount
upon which the qualified taxpayer has paid, directly or indirectly,
as a separately stated contract amount or as determined from the
records of the qualified taxpayer, sales or use tax under Part 1
(commencing with Section 6001).
   (C) Is an amount properly chargeable to the capital account of the
qualified taxpayer.
   (2) (A) For purposes of this subdivision, any contract entered
into on or after January 1, 2001, that is a successor or replacement
contract to a contract that was binding before January 1, 2001, shall
be treated as a binding contract in existence before January 1,
2001.
   (B) If a successor or replacement contract is entered into on or
after January 1, 2001, and the subject of the successor or
replacement contract relates both to amounts for the construction,
reconstruction, or acquisition of qualified property described in the
original binding contract and to costs for the construction,
reconstruction, or acquisition of qualified property not described in
the original binding contract, then the portion of those amounts
described in the successor or replacement contract that were not
described in the original binding contract shall not be treated as
costs paid or incurred pursuant to a binding contract in existence on
or prior to January 1, 2001, under subparagraph (A) of paragraph
(1).
   (3) (A) For purposes of this section, an option contract in
existence before January 1, 2001, under which a qualified taxpayer
(or any other person related to the qualified taxpayer within the
meaning of Section 267 or 707 of the Internal Revenue Code) had an
option to acquire qualified property, shall be treated as a binding
contract under the rules in paragraph (2).  For purposes of this
subparagraph, an option contract shall not include an option under
which the optionholder will forfeit an amount less than 10 percent of
the fixed option price in the event the option is not exercised.
   (B) For purposes of this section, a contract shall be treated as
binding even if the contract is subject to a condition.
   (c) (1) For purposes of this section, "qualified taxpayer" means
any taxpayer under an initial contract or subcontract to manufacture
property for ultimate use in a Joint Strike Fighter.
   (2) In the case of any passthrough entity, the determination of
whether a taxpayer is a qualified taxpayer under this section shall
be made at the entity level and any credit under this section or
Section 17053.37 shall be allowed to the passthrough entity and
passed through to the partners or shareholders in accordance with
applicable provisions of Part 10 (commencing with Section 17001) or
Part 11 (commencing with Section 23001).  For purposes of this
paragraph, the term "passthrough entity" means any partnership or S
corporation.
   (3) The Franchise Tax Board may prescribe regulations to carry out
the purposes of this section, including any regulations necessary to
prevent the avoidance of the effect of this section through
splitups, shell corporations, partnerships, tiered ownership
structures, sale-leaseback transactions, or otherwise.
   (d) (1) For purposes of this section, "qualified property" means
property that is described as either of the following:
   (A) Tangible personal property that is defined in Section 1245(a)
(3)(A) of the Internal Revenue Code for use by a qualified taxpayer
primarily in qualified activities to manufacture a product for
ultimate use in a Joint Strike Fighter.
   (B) The value of any capitalized labor costs that are direct costs
as defined in Section 263A of the Internal Revenue Code allocable to
the construction or modification of property described in
subparagraph (A).
   (2) Qualified property does not include any of the following:
   (A) Furniture.
   (B) Inventory.
   (C) Equipment used to store finished products that have completed
the manufacturing process.
   (D) Any tangible personal property that is used in administration,
general management, or marketing.
   (e) For purposes of this section:
   (1) "Fabricating" means to make, build, create, produce, or
assemble components or property to work in a new or different manner.
   (2) "Joint Strike Fighter" means the next generation air combat
strike aircraft developed and produced under the Joint Strike Fighter
program.
   (3) "Joint Strike Fighter program" means the multiservice,
multinational project conducted by the United States government to
develop and produce the next generation of air combat strike
aircraft.
   (4) "Manufacturing" means the activity of converting or
conditioning property by changing the form, composition, quality, or
character of the property for ultimate use in a Joint Strike Fighter.
  Manufacturing includes any improvements to tangible personal
property that result in a greater service life or greater
functionality than that of the original property.
   (5) "Primarily" means tangible personal property used 50 percent
or more of the time in an activity described in subparagraph (A) of
paragraph (1) of subdivision (d).
   (6) "Process" means the period beginning at the point at which any
raw materials are received by the qualified taxpayer and introduced
into the manufacturing, processing, or fabricating activity of the
qualified taxpayer and ending at the point at which the
manufacturing, processing, or fabricating activity of the qualified
taxpayer has altered tangible personal property to its completed
form, including packaging, if required.  Raw materials shall be
considered to have been introduced into the process when the raw
materials are stored on the same premises where the qualified
taxpayer's manufacturing, processing, or fabricating activity is
conducted.  Raw materials that are stored on premises other than
where the qualified taxpayer's manufacturing, processing, or
fabricating activity is conducted, shall not be considered to have
been introduced into the manufacturing, processing, or fabricating
process.
   (7) "Processing" means the physical application of the materials
and labor necessary to modify or change the characteristics of
property.
   (8) "Qualified activities" means manufacturing, processing, or
fabricating of property, beginning at the point at which any raw
materials are received by the qualified taxpayer and introduced into
the process and ending at the point at which the manufacturing,
processing, or fabricating has altered tangible personal property to
its completed form, including packaging, if required.
   (f) The credit allowed under subdivision (a) shall apply to
qualified property that is acquired by or subject to lease by a
qualified taxpayer, subject to the following special rules:
   (1) A lessor of qualified property, irrespective of whether the
lessor is a qualified taxpayer, shall not be allowed the credit
provided under subdivision (a) with respect to any qualified property
leased to another qualified taxpayer.
   (2) For purposes of paragraphs (2) and (3) of subdivision (b),
"binding contract" includes any lease agreement with respect to the
qualified property.
   (3) (A) For purposes of determining the qualified cost paid or
incurred by a lessee in any leasing transaction that is not treated
as a sale under Part 1 (commencing with Section 6001), the following
rules shall apply:
   (i) Except as provided by subparagraph (C) of this paragraph,
subparagraphs (A) and (C) of paragraph (1) of subdivision (b) shall
not apply.
   (ii) Except as provided in subparagraph (B) and clause (iii), the
"qualified cost" upon which the lessee shall compute the credit
provided under this section shall be equal to the original cost to
the lessor (within the meaning of Section 18031) of the qualified
property that is the subject of the lease.
   (iii) The requirement of subparagraph (B) of paragraph (1) of
subdivision (b) shall be treated as satisfied only if the lessor has
made a timely election under either Section 6094.1 or subdivision (d)
of Section 6244 and has paid sales tax reimbursement or use tax
measured by the purchase price of the qualified property (within the
meaning of paragraph (5) of subdivision (g) of Section 6006).  For
purposes of this subdivision, the amount of original cost to the
lessor which may be taken into account under clause (ii) shall not
exceed the purchase price upon which sales tax reimbursement or use
tax has been paid under the preceding sentence.
   (B) For purposes of applying subparagraph (A) only, the following
special rules shall apply:
   (i) The original cost to the lessor of the qualified property
shall be reduced by the amount of any original cost of that property
that was taken into account by a predecessor lessee in computing the
credit allowable under this section.
   (ii) Clause (i) shall not apply in any case where the predecessor
lessee was required to recapture the credit provided under this
section pursuant to the provisions of subdivision (g).
   (iii) For purposes of this section only, in any case where a
successor lessor has acquired qualified property from a predecessor
lessor in a transaction not treated as a sale under Part 1
(commencing with Section 6001), the original cost to the successor
lessor of the qualified property shall be reduced by the amount of
the original cost of the qualified property that was taken into
account by any lessee of the predecessor lessor in computing the
credit allowable under this section.
   (C) In determining the original cost of any qualified property
under this paragraph, only amounts paid or incurred by the lessor on
or after January 1, 2001, and before January 1, 2006, shall be taken
into account.  In the case of any qualified property constructed,
reconstructed, or acquired by a lessor pursuant to a binding contract
in existence on or prior to January 1, 2001, the allocation rule
specified in subparagraph (A) of paragraph (1) of subdivision (b)
shall apply in determining the original cost to the lessor of
qualified property.
   (D) Notwithstanding subparagraph (A), in the case of any leasing
transaction for which the lessee is allowed the credit under this
section and thereafter the lessee (or any party related to the lessee
within the meaning of Section 267 or 318 of the Internal Revenue
Code) acquires the qualified property from the lessor (or any
successor lessor) within one year from the date the qualified
property is first used by the lessee under the terms of the lease,
the lessee's (or related party's) acquisition of the qualified
property from the lessor (or successor lessor) shall be treated as a
disposition by the lessee of the qualified property that was subject
to the lease under subdivision (g).
   (4) For purposes of determining the qualified cost paid or
incurred by a lessee in any leasing transaction that is treated as a
sale under Part 1 (commencing with Section 6001), the following rules
shall apply:
   (A) Subparagraph (A) of paragraph (1) of subdivision (b) shall be
applied by substituting the term "purchase" for the term
"construction, reconstruction, or acquisition."
   (B) Subparagraph (C) of paragraph (1) of subdivision (b) shall
apply.
   (C) The requirement of subparagraph (B) of paragraph (1) of
subdivision (b) shall be treated as satisfied at the time that either
the lessor or the qualified taxpayer pays sales or use tax under
Part 1 (commencing with Section 6001).
   (5) (A) In the case of any leasing transaction described in
paragraph (3), the lessor shall provide a statement to the lessee
specifying the amount of the lessor's original cost of the qualified
property and the amount of that cost upon which a sales or use tax
was paid within 45 days after the close of the lessee's taxable year
in which the credit is allowable to the lessee under this section.
   (B) The statement required under subparagraph (A) shall be made
available to the Franchise Tax Board upon request.
   (g) No credit shall be allowed if the qualified property is
removed from the state, is disposed of to an unrelated party, or is
used for any purpose not qualifying for the credit provided in this
section in the same taxable year in which the taxpayer first places
the qualified property in service in this state.  If any qualified
property for which a credit is allowed pursuant to this section is
thereafter removed from this state, disposed of to an unrelated
party, or used for any purpose not qualifying for the credit provided
in this section within one year from the date the taxpayer first
places the qualified property in service in this state, the amount of
the credit allowed by this section for that qualified property shall
be recaptured by adding that credit amount to the tax of the
qualified taxpayer for the taxable year in which the qualified
property is disposed of, removed, or put to an ineligible use.
   (h) 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 year, and the seven succeeding years if necessary, until
the credit is exhausted.
   (i) (1) No credit shall be allowed under this section if a credit
is claimed under Section 23649 in connection with the same property.
   (2) No credit shall be allowed unless the credit is reflected
within the bid upon which the qualified taxpayer's contract or
subcontract to manufacture property for ultimate use in a Joint
Strike Fighter is based by reducing the amount of the bid by the
amount of the credit allowable.
   (j) All references to the credit and ultimate cost reductions
incorporated into any successful bid that was awarded a contract or
subcontract and for which a qualified taxpayer is making a claim
shall be made available to the Franchise Tax Board upon request.
   (k) This section shall remain in effect only until December 1,
2006, and as of that date is repealed.
23642.  (a) For each taxable year beginning on or after January 1,
1996, there shall be allowed as a credit against the "tax," as
defined in Section 23036, the amount paid or incurred for eligible
access expenditures.  The credit shall be allowed in accordance with
Section 44 of the Internal Revenue Code, relating to expenditures to
provide access to disabled individuals, except that the credit amount
specified in subdivision (b) shall be substituted for the credit
amount specified in Section 44(a) of the Internal Revenue Code.
   (b) The credit amount allowed under this section shall be 50
percent of so much of the eligible access expenditures for the
taxable year as do not exceed two hundred fifty dollars ($250).
   (c) 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 year, and succeeding years if necessary, until the credit
is exhausted.
23645.  (a) For each taxable year beginning on or after January 1,
1995, there shall be allowed as a credit against the "tax" (as
defined by Section 23036) for the taxable year an amount equal to the
sales or use tax paid or incurred by the taxpayer in connection with
the purchase of qualified property to the extent that the qualified
property does not exceed a value of twenty million dollars
($20,000,000).
   (b) For purposes of this section:
   (1) "LAMBRA" means a local agency military base recovery area
designated in accordance with Section 7114 of the Government Code.
   (2) "Taxpayer" means a corporation that conducts a trade or
business within a LAMBRA and, for the first two taxable years, has a
net increase in jobs (defined as 2,000 paid hours per employee per
year) of one or more employees in the LAMBRA.
   (A) The net increase in the number of jobs shall be determined by
subtracting the total number of full-time employees (defined as 2,000
paid hours per employee per year) the taxpayer employed in this
state in the taxable year prior to commencing business operations in
the LAMBRA from the total number of full-time employees the taxpayer
employed in this state during the second taxable year after
commencing business operations in the LAMBRA.  For taxpayers who
commence doing business in this state with their LAMBRA business
operation, the number of employees for the taxable year prior to
commencing business operations in the LAMBRA shall be zero.  If the
taxpayer has a net increase in jobs in the state, the credit shall be
allowed only if one or more full-time employees is employed within
the LAMBRA.
   (B) The total number of employees employed in the LAMBRA shall
equal the sum of both of the following:
   (i) The total number of hours worked in the LAMBRA for the
taxpayer by employees (not to exceed 2,000 hours per employee) who
are paid an hourly wage divided by 2,000.
   (ii) The total number of months worked in the LAMBRA for the
taxpayer by employees that are salaried employees divided by 12.
   (C) In the case of a taxpayer who first commences doing business
in the LAMBRA during the taxable year, for purposes of clauses (i)
and (ii), respectively, of subparagraph (B) the divisors "2,000" and
"12" shall be multiplied by a fraction, the numerator of which is the
number of months of the taxable year that the taxpayer was doing
business in the LAMBRA and the denominator of which is 12.
   (3) "Qualified property" means property that is each of the
following:
   (A) Purchased by the taxpayer for exclusive use in a trade or
business conducted within a LAMBRA.
   (B) Purchased before the date the LAMBRA designation expires, is
no longer binding, or becomes inoperative.
   (C) Any of the following:
   (i) High technology equipment, including, but not limited to,
computers and electronic processing equipment.
   (ii) Aircraft maintenance equipment, including, but not limited
to, engine stands, hydraulic mules, power carts, test equipment,
handtools, aircraft start carts, and tugs.
   (iii) Aircraft components, including, but not limited to, engines,
fuel control units, hydraulic pumps, avionics, starts, wheels, and
tires.
   (iv) Section 1245 property, as defined in Section 1245(a)(3) of
the Internal Revenue Code.
   (c) The credit provided under subdivision (a) shall only be
allowed for qualified property manufactured in California unless
qualified property of a comparable quality and price is not available
for timely purchase and delivery from a California manufacturer.
   (d) In the case where the credit otherwise allowed under this
section exceeds the "tax" for the taxable year, that portion of the
credit which exceeds the "tax" may be carried over and added to the
credit, if any, in succeeding years, until the credit is exhausted.
The credit shall be applied first to the earliest taxable years
possible.
   (e) Any taxpayer who elects to be subject to this section shall
not be entitled to increase the basis of the property as otherwise
required by Section 164(a) of the Internal Revenue Code with respect
to sales or use tax paid or incurred in connection with the purchase
of qualified property.
   (f) (1) The amount of the credit otherwise allowed under this
section and Section 23646, including any credit carryovers from prior
years, that may reduce the "tax" for the taxable year shall not
exceed the amount of tax that would be imposed on the taxpayer's
business income attributed to a LAMBRA determined as if that
attributable income represented all 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 LAMBRA.
For that purpose, the taxpayer's business income that is
attributable to sources in this state shall first be determined in
accordance with Chapter 17 (commencing with Section 25101).  That
business income shall be further apportioned to the LAMBRA in
accordance with Article 2 (commencing with Section 25120) of Chapter
17, modified for purposes of this section in accordance with
paragraph (3).
   (3) Income shall be apportioned to a LAMBRA 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 LAMBRA 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 LAMBRA 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 "tax" for the taxable
year, as provided in subdivision (d).
   (g) (1) If the qualified property is disposed of or no longer used
by the taxpayer in the LAMBRA, at any time before the close of the
second taxable year after the property is placed in service, the
amount of the credit previously claimed, with respect to that
property, shall be added to the taxpayer's tax liability in the
taxable year of that disposition or nonuse.
   (2) At the close of the second taxable year, if the taxpayer has
not increased the number of its employees as determined by paragraph
(2) of subdivision (b), then the amount of the credit previously
claimed shall be added to the taxpayer's tax for the taxpayer's
second taxable year.
   (h) If the taxpayer is allowed a credit for qualified property
pursuant to this section, only one credit shall be allowed to the
taxpayer under this part with respect to that qualified property.
   (i) The amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 1998.
23646.  (a) For each taxable year beginning on or after January 1,
1995, there shall be allowed as a credit against the "tax" (as
defined in Section 23036) to a qualified taxpayer for hiring a
qualified disadvantaged individual or a qualified displaced employee
during the taxable year for employment in the LAMBRA.  The credit
shall be equal to the sum of each of the following:
   (1) Fifty percent of the qualified wages in the first year of
employment.
   (2) Forty percent of the qualified wages in the second year of
employment.
   (3) Thirty percent of the qualified wages in the third year of
employment.
   (4) Twenty percent of the qualified wages in the fourth year of
employment.
   (5) Ten percent of the qualified wages in the fifth year of
employment.
   (b) For purposes of this section:
   (1) "Qualified wages" means:
   (A) That portion of wages paid or incurred by the employer during
the taxable year to qualified disadvantaged individuals or qualified
displaced employees that does not exceed 150 percent of the minimum
wage.
   (B) The total amount of qualified wages which may be taken into
account for purposes of claiming the credit allowed under this
section shall not exceed two million dollars ($2,000,000) per taxable
year.
   (C) Wages received during the 60-month period beginning with the
first day the individual commences employment with the taxpayer.
Reemployment in connection with any increase, including a regularly
occurring seasonal increase, in the trade or business operation of
the qualified taxpayer does not constitute commencement of employment
for purposes of this section.
   (D) Qualified wages do not include any wages paid or incurred by
the qualified taxpayer on or after the LAMBRA expiration date.
However, wages paid or incurred with respect to qualified
disadvantaged individuals or qualified displaced employees who are
employed by the qualified taxpayer within the LAMBRA within the
60-month period prior to the LAMBRA expiration date shall continue to
qualify for the credit under this section after the LAMBRA
expiration date, in accordance with all provisions of this section
applied as if the LAMBRA 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) "LAMBRA" means a local agency military base recovery area
designated in accordance with the provisions of Section 7114 of the
Government Code.
   (4) "Qualified disadvantaged individual" means an individual who
satisfies all of the following requirements:
   (A) (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 a LAMBRA.
   (ii) Who performs at least 50 percent of his or her services for
the taxpayer during the taxable year in the LAMBRA.
   (B) Who is hired by the employer after the designation of the area
as a LAMBRA in which the individual's services were primarily
performed.
   (C) Who is any of the following immediately preceding the
individual's commencement of employment with the taxpayer:
   (i) An individual who has been determined eligible for services
under the federal Job Training Partnership Act (29 U.S.C. Sec. 1501
et seq.), or its successor.
   (ii) Any voluntary or mandatory registrant under the Greater
Avenues for Independence Act of 1985 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.
   (iii) An economically disadvantaged individual age 16 years or
older.
   (iv) A dislocated worker who meets any of the following
conditions:
   (I) 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.
   (II) 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 such a closure or layoff.
   (III) 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.
   (IV) 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.
   (V) 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.
   (VI) 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.
   (VII) Experiences chronic seasonal unemployment and
underemployment in the agriculture industry, aggravated by continual
advancements in technology and mechanization.
   (VIII) 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) An individual who is 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) An ex-offender.  An individual shall be treated as convicted
if he or she was placed on probation by a state court without a
finding of guilty.
   (vii) A recipient of:
   (I) Federal Supplemental Security Income benefits.
   (II) Aid to Families with Dependent Children.
   (III) Food stamps.
   (IV) State and local general assistance.
   (viii) Is a member of a federally recognized Indian tribe, band,
or other group of Native American descent.
   (5) "Qualified taxpayer" means a corporation that conducts a trade
or business within a LAMBRA and, for the first two taxable years,
has a net increase in jobs (defined as 2,000 paid hours per employee
per year) of one or more employees as determined below in the LAMBRA.
   (A) The net increase in the number of jobs shall be determined by
subtracting the total number of full-time employees (defined as 2,000
paid hours per employee per year) the taxpayer employed in this
state in the taxable year prior to commencing business operations in
the LAMBRA from the total number of full-time employees the taxpayer
employed in this state during the second taxable year after
commencing business operations in the LAMBRA.  For taxpayers who
commence doing business in this state with their LAMBRA business
operation, the number of employees for the taxable year prior to
commencing business operations in the LAMBRA shall be zero.  If the
taxpayer has a net increase in jobs in the state, the credit shall be
allowed only if one or more full-time employees is employed within
the LAMBRA.
   (B) The total number of employees employed in the LAMBRA shall
equal the sum of both of the following:
   (i) The total number of hours worked in the LAMBRA for the
taxpayer by employees (not to exceed 2,000 hours per employee) who
are paid an hourly wage divided by 2,000.
   (ii) The total number of months worked in the LAMBRA for the
taxpayer by employees who are salaried employees divided by 12.
   (C) In the case of a qualified taxpayer that first commences doing
business in the LAMBRA during the taxable year, for purposes of
clauses (i) and (ii), respectively, of subparagraph (B) the divisors
"2,000" and "12" shall be multiplied by a fraction, the numerator of
which is the number of months of the taxable year that the taxpayer
was doing business in the LAMBRA and the denominator of which is 12.
   (6) "Qualified displaced employee" means an individual who
satisfies all of the following requirements:
   (A) Any civilian or military employee of a base or former base
that has been displaced as a result of a federal base closure act.
   (B) (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 a LAMBRA.
   (ii) Who performs at least 50 percent of his or her services for
the taxpayer during the taxable year in a LAMBRA.
   (C) Who is hired by the employer after the designation of the area
in which services were performed as a LAMBRA.
   (7) "Seasonal employment" means employment by a qualified taxpayer
that has regular and predictable substantial reductions in trade or
business operations.
   (8) "LAMBRA expiration date" means the date the LAMBRA designation
expires, is no longer binding, or becomes inoperative.
   (c) For qualified disadvantaged individuals or qualified displaced
employees hired on or after January 1, 2001, the taxpayer shall do
both of the following:
   (1) Obtain from either the Employment Development Department, as
permitted by federal law, the administrative entity of the local
county or city for the federal Job Training Partnership Act, or its
successor, the local county GAIN office, or social services agency,
as appropriate, a certification that provides that a qualified
disadvantaged individual or qualified displaced employee meets the
eligibility requirements specified in subparagraph (C) of paragraph
(4) of subdivision (b) or subparagraph (A) of paragraph (6) 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.
   (2) Retain a copy of the certification and provide it upon request
to the Franchise Tax Board.
   (d) (1) For purposes of this section, both of the following apply:
   (A) All employees of all corporations that are members of the same
controlled group of corporations shall be treated as employed by a
single employer.
   (B) The credit (if any) allowable by this section to each member
shall be determined by reference to its proportionate share of the
qualified wages giving rise to the credit.
   (2) For purposes of this subdivision, "controlled group of
corporations" has the meaning given to that term by Section 1563(a)
of the Internal Revenue Code, except that both of the following
apply:
   (A) "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.
   (B) The determination shall be made without regard to Section 1563
(a)(4) and Section 1563(e)(3)(C) of the Internal Revenue Code.
   (3) If an employer acquires the major portion of a trade or
business of another employer (hereinafter 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 an
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 of any employee, other than seasonal
employment, 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 income years attributable to qualified wages paid or
incurred with respect to that employee.
   (B) If the seasonal employment of any qualified disadvantaged
individual, with respect to whom qualified wages are taken into
account under subdivision (a) is not continued by the qualified
taxpayer for a period of 270 days of employment during the 60-month
period beginning with the day the qualified disadvantaged individual
commences seasonal employment with the qualified taxpayer, the tax
imposed by this part, for the taxable year that includes the 60th
month following the month in which the qualified disadvantaged
individual commences seasonal employment with the qualified 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 disadvantaged individual.
   (2) (A) Subparagraph (A) of paragraph (1) shall not apply to any
of the following:
   (i) A termination of employment of an employee who voluntarily
leaves the employment of the taxpayer.
   (ii) A termination of employment of an individual who, before the
close of the period referred to in paragraph (1), becomes disabled to
perform the services of that employment, unless that disability is
removed before the close of that period and the taxpayer fails to
offer reemployment to that individual.
   (iii) A termination of employment of an individual, if it is
determined 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 individual.
   (iv) A termination of employment of an individual due to a
substantial reduction in the trade or business operations of the
taxpayer.
   (v) A termination of employment of an individual, if that
individual is replaced by other qualified employees so as to create a
net increase in both the number of employees and the hours of
employment.
   (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
disadvantaged individual who voluntarily fails to return to the
seasonal employment of the qualified taxpayer.
   (ii) A failure to continue the seasonal employment of a qualified
disadvantaged individual 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
qualified taxpayer fails to offer seasonal employment to that
qualified disadvantaged individual.
   (iii) A failure to continue the seasonal employment of a qualified
disadvantaged individual, 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 individual.
   (iv) A failure to continue seasonal employment of a qualified
disadvantaged individual due to a substantial reduction in the
regular seasonal trade or business operations of the qualified
taxpayer.
   (v) A failure to continue the seasonal employment of a qualified
disadvantaged individual, if that individual is replaced by other
qualified disadvantaged individuals 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 an employee shall not be treated as
terminated by either of the following:
   (i) A transaction to which Section 381(a) of the Internal Revenue
Code applies, if the employee continues to be employed by the
acquiring corporation.
   (ii) A mere change in the form of conducting the trade or business
of the taxpayer, if the employee continues to be employed in that
trade or business and the taxpayer retains a substantial interest in
that trade or business.
   (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.
   (4) At the close of the second taxable year, if the taxpayer has
not increased the number of its employees as determined by paragraph
(5) of subdivision (b), then the amount of the credit previously
claimed shall be added to the taxpayer's tax for the taxpayer's
second taxable year.
   (f) In the case of an organization to which Section 593 of the
Internal Revenue Code applies, and a regulated investment company or
a real estate investment trust subject to taxation under this part,
rules similar to the rules provided in Section 46(e) and Section 46
(h) of the Internal Revenue Code shall apply.
   (g) The credit shall be reduced by the credit allowed under
Section 23621.  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 (h) or (i).
   (h) 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 years, until the credit is exhausted.
The credit shall be applied first to the earliest taxable years
possible.
   (i) (1) The amount of credit otherwise allowed under this section
and Section 23645, including any prior year carryovers, that may
reduce the "tax" for the taxable year shall not exceed the amount of
tax that would be imposed on the taxpayer's business income
attributed to a LAMBRA determined as if that attributed 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 LAMBRA.
For that purpose, the taxpayer's business income that is
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 LAMBRA in
accordance with Article 2 (commencing with Section 25120) of Chapter
17, modified for purposes of this section in accordance with
paragraph (3).
   (3) Income shall be apportioned to a LAMBRA 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 LAMBRA 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 LAMBRA 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 "tax" for the taxable
year, as provided in subdivision (h).
   (j) If the taxpayer is allowed a credit pursuant to this section
for qualified wages paid or incurred, only one credit shall be
allowed to the taxpayer under this part with respect to any wage
consisting in whole or in part of those qualified wages.
23649.  (a) (1) A qualified taxpayer shall be allowed a credit
against the "tax," as defined in Section 23036, equal to 6 percent of
the qualified cost of qualified property that is placed in service
in this state.
   (2) In the case of any qualified costs paid or incurred on or
after January 1, 1994, and prior to the first taxable year of the
qualified taxpayer beginning on or after January 1, 1995, the credit
provided under paragraph (1) shall be claimed by the qualified
taxpayer on the qualified taxpayer's return for the first taxable
year beginning on or after January 1, 1995.  No credit shall be
claimed under this section on a return filed for any taxable year
commencing prior to the qualified taxpayer's first taxable year
beginning on or after January 1, 1995.
   (b) (1) For purposes of this section, "qualified cost" means any
cost that satisfies each of the following conditions:
   (A) Except as otherwise provided in this subparagraph, is a cost
paid or incurred by the qualified taxpayer for the construction,
reconstruction, or acquisition of qualified property on or after
January 1, 1994, and prior to the date this section ceases to be
operative under paragraph (2) of subdivision (i).  In the case of any
qualified property constructed, reconstructed, or acquired by the
qualified taxpayer (or any person related to the qualified taxpayer
within the meaning of Section 267 or 707 of the Internal Revenue
Code) pursuant to a binding contract in existence on or prior to
January 1, 1994, costs paid pursuant to that contract shall be
subject to allocation as follows:  contract costs shall be allocated
to qualified property based on a ratio of costs actually paid prior
to January 1, 1994, and total contract costs actually paid.  "Cost
paid" shall include, without limitation, contractual deposits and
option payments.  To the extent of cost allocated, whether or not
currently deductible or depreciable for tax purposes, to a period
prior to January 1, 1994, the cost shall be deemed allocated to
property acquired before January 1, 1994, and is thus not a
"qualified cost."
   (B) Except as provided in paragraph (3) of subdivision (d) and
subparagraph (B) of paragraph (4) of subdivision (d), is an amount
upon which the qualified taxpayer has paid, directly or indirectly as
a separately stated contract amount or as determined from the
records of the qualified taxpayer, sales or use tax under Part 1
(commencing with Section 6001).
   (C) Is an amount properly chargeable to the capital account of the
qualified taxpayer.
   (2) (A) For purposes of this subdivision, any contract entered
into on or after January 1, 1994, that is a successor or replacement
contract to a contract that was binding prior to January 1, 1994,
shall be treated as a binding contract in existence prior to January
1, 1994.
   (B) If a successor or replacement contract is entered into on or
after January 1, 1994, and the subject of the successor or
replacement contract relates both to amounts for the construction,
reconstruction, or acquisition of qualified property described in the
original binding contract and to costs for the construction,
reconstruction, or acquisition of qualified property not described in
the original binding contract, then the portion of those amounts
described in the successor or replacement contract that were not
described in the original binding contract shall not be treated as
costs paid or incurred pursuant to a binding contract in existence on
or prior to January 1, 1994, under subparagraph (A) of paragraph
(1).
   (3) (A) For purposes of this section, an option contract in
existence prior to January 1, 1994, under which a qualified taxpayer
(or any other person related to the qualified taxpayer within the
meaning of Section 267 or 707 of the Internal Revenue Code) had an
option to acquire qualified property, shall be treated as a binding
contract under the rules in paragraph (2).  For purposes of this
subparagraph, an option contract shall not include an option under
which the optionholder will forfeit an amount less than 10 percent of
the fixed option price in the event the option is not exercised.
   (B) For purposes of this section, a contract shall be treated as
binding even if the contract is subject to a condition.
   (4) For purposes of this subdivision, in the case of any qualified
taxpayer engaged in those lines of business described in Codes 7371
to 7373, inclusive, of the Standard Industrial Classification (SIC)
Manual published by the United States Office of Management and
Budget, 1987 edition, "the first taxable year beginning on or after
January 1, 1998," shall be substituted for "January 1, 1994," in each
place in which it appears.
   (c) (1) For purposes of this section, "qualified taxpayer" means
any taxpayer engaged in those lines of business described in Codes
2011 to 3999, inclusive, or Codes 7371 to 7373, inclusive, of the
Standard Industrial Classification (SIC) Manual published by the
United States Office of Management and Budget, 1987 edition.
   (2) In the case of any passthrough entity, the determination of
whether a taxpayer is a qualified taxpayer shall be made at the
entity level and any credit under this section or Section 17053.49
shall be allowed to the passthrough entity and passed through to the
partners or shareholders in accordance with applicable provisions of
Part 10 (commencing with Section 17001) or Part 11 (commencing with
Section 23001).  For purposes of this paragraph, the term
"passthrough entity" means any partnership or S corporation.
   (3) The Franchise Tax Board may prescribe regulations to carry out
the purposes of this section, including any regulations necessary to
prevent the avoidance of the effect of this section through
splitups, shell corporations, partnerships, tiered ownership
structures, sale-leaseback transactions, or otherwise.
   (d) For purposes of this section, "qualified property" means
property that is described as either of the following:
   (1) Tangible personal property that is defined in Section 1245(a)
of the Internal Revenue Code for use by a qualified taxpayer in those
lines of business described in Codes 2011 to 3999, inclusive, of the
Standard Industrial Classification (SIC) Manual published by the
United States Office of Management and Budget, 1987 edition, that is
primarily used for any of the following:
   (A) For the manufacturing, processing, refining, fabricating, or
recycling of property, beginning at the point at which any raw
materials are received by the qualified taxpayer and introduced into
the process and ending at the point at which the manufacturing,
processing, refining, fabricating, or recycling has altered tangible
personal property to its completed form, including packaging, if
required.
   (B) In research and development.
   (C) To maintain, repair, measure, or test any property described
in this paragraph.
   (D) For pollution control that meets or exceeds standards
established by the state or by any local or regional governmental
agency within the state.
   (E) For recycling.
   (2) Computers and computer peripheral equipment, as defined in
Section 168(i)(2)(B) of the Internal Revenue Code, that is tangible
personal property as defined in Section 1245(a) of the Internal
Revenue Code for use by a qualified taxpayer in those lines of
business described in SIC Codes 7371 to 7373, inclusive, of the SIC
Manual, 1987 edition, that is primarily used to develop or
manufacture prepackaged software or custom software prepared to the
special order of the purchaser who uses the program to produce and
sell or license copies of the program as prepackaged software.
   (3) The value of any capitalized labor costs that are directly
allocable to the construction or modification of property described
in paragraph (1) or (2).
   (4) In the case of any qualified taxpayer engaged in manufacturing
activities described in SIC Code 357 or 367, those activities
related to biotechnology described in SIC Code 8731, those activities
related to biopharmaceutical establishments only that are described
in SIC Codes 2833 to 2836, inclusive, those activities related to
space vehicles and parts described in SIC Codes 3761 to 3769,
inclusive, those activities related to space satellites and
communications satellites and equipment described in SIC Codes 3663
and 3812 (but only with respect to "qualified property" that is
placed in service on or after January 1, 1996), or those activities
related to semiconductor equipment manufacturing described in SIC
Code 3559 (but only with respect to "qualified property" that is
placed in service on or after January 1, 1997), "qualified property"
also includes the following:
   (A) Special purpose buildings and foundations that are constructed
or modified for use by the qualified taxpayer primarily in a
manufacturing, processing, refining, or fabricating process, or as a
research or storage facility primarily used in connection with a
manufacturing process.
   (B) The value of any capitalized labor costs that are directly
allocable to the construction or modification of special purpose
buildings and foundations that are used primarily in the
manufacturing, processing, refining, or fabricating process, or as a
research or storage facility primarily used in connection with a
manufacturing process.
   (C) (i) For purposes of this paragraph, "special purpose building
and foundation" means only a building and the foundation immediately
underlying the building that is specifically designed and constructed
or reconstructed for the installation, operation, and use of
specific machinery and equipment with a special purpose, which
machinery and equipment, after installation, will become affixed to
or a fixture of the real property, and the construction or
reconstruction of which is specifically designed and used exclusively
for the specified purposes as set forth in subparagraph (A) ("
qualified purpose").
   (ii) A building is specifically designed and constructed or
modified for a qualified purpose if it is not economical to design
and construct the building for the intended purpose and then use the
structure for a different purpose.
   (iii) For purposes of clause (i) and clause (vi), a building is
used exclusively for a qualified purpose only if its use does not
include a use for which it was not specifically designed and
constructed or modified.  Incidental use of a building for
nonqualified purposes does not preclude the building from being a
special purpose building.  "Incidental use" means a use which is both
related and subordinate to the qualified purpose.  It will be
conclusively presumed that a use is not subordinate if more than
one-third of the total usable volume of the building is devoted to a
use which is not a qualified purpose.
   (iv) In the event an entire building does not qualify as a special
purpose building, a taxpayer may establish that a portion of a
building, and the foundation immediately underlying the portion,
qualifies for treatment as a special purpose building and foundation
if the portion satisfies all of the definitional provisions in this
subparagraph.
   (v) To the extent that a building is not a special purpose
building as defined above, but a portion of the building qualifies
for treatment as a special purpose building, then all equipment which
exclusively supports the qualified purpose occurring within that
portion and which would qualify as Internal Revenue Code Section 1245
property if it were not a fixture or affixed to the building shall
be treated as a cost of the portion of the building which qualifies
for treatment as a special purpose building.
   (vi) Buildings and foundations which do not meet the definition of
a special purpose building and foundation set forth above include,
but are not limited to:  buildings designed and constructed or
reconstructed principally to function as a general purpose
manufacturing, industrial, or commercial building; research
facilities that are used primarily prior to or after, or prior to and
after, the manufacturing process; or storage facilities that are
used primarily prior to or after, or prior to and after, completion
of the manufacturing process.  A research facility shall not be
considered to be used primarily prior to or after, or prior to and
after, the manufacturing process if its purpose and use relate
exclusively to the development and regulatory approval of the
manufacturing process for specific biopharmaceutical products.  A
research facility which is used primarily in connection with the
discovery of an organism from which a biopharmaceutical product or
process is developed does not meet the requirements of the preceding
sentence.
   (5) Subject to the provisions in subparagraph (B) of paragraph (1)
of subdivision (b), qualified property also includes computer
software that is primarily used for those purposes set forth in
paragraph (1) or (2) of this subdivision.
   (6) Qualified property does not include any of the following:
   (A) Furniture.
   (B) Facilities used for warehousing purposes after completion of
the manufacturing process.
   (C) Inventory.
   (D) Equipment used in the extraction process.
   (E) Equipment used to store finished products that have completed
the manufacturing process.
   (F) Any tangible personal property that is used in administration,
general management, or marketing.
   (G) Any vehicle for which a credit is claimed pursuant to Section
17052.11 or 23603.
   (e) For purposes of this section:
   (1) "Biopharmaceutical activities" means those activities that use
organisms or materials derived from organisms, and their cellular,
subcellular, or molecular components, in order to provide
pharmaceutical products for human or animal therapeutics and
diagnostics.  Biopharmaceutical activities make use of living
organisms to make commercial products, as opposed to pharmaceutical
activities which make use of chemical compounds to produce commercial
products.
   (2) "Fabricating" means to make, build, create, produce, or
assemble components or property to work in a new or different manner.
   (3) "Manufacturing" means the activity of converting or
conditioning property by changing the form, composition, quality, or
character of the property for ultimate sale at retail or use in the
manufacturing of a product to be ultimately sold at retail.
Manufacturing includes any improvements to tangible personal property
that result in a greater service life or greater functionality than
that of the original property.
   (4) "Other biotechnology activities" means activities consisting
of the application of recombinant DNA technology to produce
commercial products, as well as activities regarding pharmaceutical
delivery systems designed to provide a measure of control over the
rate, duration, and site of pharmaceutical delivery.
   (5) "Primarily" means tangible personal property used 50 percent
or more of the time in an activity described in subdivision (d).
   (6) "Process" means the period beginning at the point at which any
raw materials are received by the qualified taxpayer and introduced
into the manufacturing, processing, refining, fabricating, or
recycling activity of the qualified person and ending at the point at
which the manufacturing, processing, refining, fabricating, or
recycling activity of the qualified taxpayer has altered tangible
personal property to its completed form, including packaging, if
required.  Raw materials shall be considered to have been introduced
into the process when the raw materials are stored on the same
premises where the qualified taxpayer's manufacturing, processing,
refining, fabricating, or recycling activity is conducted.  Raw
materials that are stored on premises other than where the qualified
taxpayer's manufacturing, processing, refining, fabricating, or
recycling activity is conducted, shall not be considered to have been
introduced into the manufacturing, processing, refining,
fabricating, or recycling process.
   (7) "Processing" means the physical application of the materials
and labor necessary to modify or change the characteristics of
property.
   (8) "Refining" means the process of converting a natural resource
to an intermediate or finished product.
   (9) "Research and development" means those activities that are
described in Section 174 of the Internal Revenue Code or in any
regulations thereunder.
   (10) "Small business" means a qualified taxpayer that meets any of
the following requirements during the taxable year for which the
credit is allowed:
   (A) Has gross receipts of less than fifty million dollars
($50,000,000).
   (B) Has net assets of less than fifty million dollars
($50,000,000).
   (C) Has a total credit of less than one million dollars
($1,000,000).
   (D) For taxable years beginning on or after January 1, 1997, is
engaged in biopharmaceutical activities or other biotechnology
activities that are described in Codes 2833 to 2836, inclusive, of
the Standard Industrial Classification (SIC) Manual published by the
United States Office of Management and Budget, 1987 edition, and has
not received regulatory approval for any product from the United
States Food and Drug Administration.
   (f) The credit allowed under subdivision (a) shall apply to
qualified property that is acquired by or subject to lease by a
qualified taxpayer, subject to the following special rules:
   (1) A lessor of qualified property, irrespective of whether the
lessor is a qualified taxpayer, shall not be allowed the credit
provided under subdivision (a) with respect to any qualified property
leased to another qualified taxpayer.
   (2) For purposes of paragraphs (2) and (3) of subdivision (b),
"binding contract" shall include any lease agreement with respect to
the qualified property.
   (3) (A) For purposes of determining the qualified cost paid or
incurred by a lessee in any leasing transaction that is not treated
as a sale under Part 1 (commencing with Section 6001), the following
rules shall apply:
   (i) Except as provided by subparagraph (C) of this paragraph,
subparagraphs (A) and (C) of paragraph (1) of subdivision (b) shall
not apply.
   (ii) Except as provided in subparagraph (B) and clause (iii), the
"qualified cost" upon which the lessee shall compute the credit
provided under this section shall be equal to the original cost to
the lessor (within the meaning of Section 24912) of the qualified
property that is the subject of the lease.
   (iii) Except as provided in clause (iv), the requirement of
subparagraph (B) of paragraph (1) of subdivision (b) shall be treated
as satisfied only if the lessor has made a timely election under
either Section 6094.1 or subdivision (d) of Section 6244 and has paid
sales tax reimbursement or use tax measured by the purchase price of
the qualified property (within the meaning of paragraph (5) of
subdivision (g) of Section 6006).  For purposes of this subdivision
and clause (iv), the amount of original cost to the lessor which may
be taken into account under clause (ii) shall not exceed the purchase
price upon which sales tax reimbursement or use tax has been paid
under the preceding sentence or under clause (iv).
   (iv) With respect to leases entered into between January 1, 1994,
and the effective date of this clause, the lessor may elect to pay
use tax measured by the purchase price of the property by reporting
and paying the tax with the return of the lessor for the fourth
calendar quarter of 1994.  In computing the use tax under the
preceding sentence, a credit shall be allowed under Part 1
(commencing with Section 6001) for all sales or use tax previously
paid on the lease.
   (B) For purposes of applying subparagraph (A) only, the following
special rules shall apply:
   (i) The original cost to the lessor of the qualified property
shall be reduced by the amount of any original cost of that property
that was taken into account by any predecessor lessee in computing
the credit allowable under this section.
   (ii) Clause (i) shall not apply in any case where the predecessor
lessee was required to recapture the credit provided under this
section pursuant to subdivision (g).
   (iii) For purposes of this section only, in any case where a
successor lessor has acquired qualified property from a predecessor
lessor in a transaction not treated as a sale under Part 1
(commencing with Section 6001), the original cost to the successor
lessor of the qualified property shall be reduced by the amount of
the original cost of the qualified property that was taken into
account by any lessee of the predecessor lessor in computing the
credit allowable under this section.
   (C) In determining the original cost of any qualified property
under this paragraph, only amounts paid or incurred by the lessor on
or after January 1, 1994, and prior to the date this section ceases
to be operative under paragraph (2) of subdivision (i), shall be
taken into account.  In the case of any qualified property
constructed, reconstructed, or acquired by a lessor pursuant to a
binding contract in existence on or prior to January 1, 1994, the
allocation rule specified in subparagraph (A) of paragraph (1) of
subdivision (b) shall apply in determining the original cost to the
lessor of qualified property.
   (D) Notwithstanding subparagraph (A), in the case of any leasing
transaction for which the lessee is allowed the credit under this
section and thereafter the lessee (or any party related to the lessee
within the meaning of Section 267 or 318 of the Internal Revenue
Code) acquires the qualified property from the lessor (or any
successor lessor) within one year from the date the qualified
property is first used by the lessee under the terms of the lease,
the lessee's (or related party's) acquisition of the qualified
property from the lessor (or successor lessor) shall be treated as a
disposition by the lessee of the qualified property that was subject
to the lease under subdivision (g).
   (4) For purposes of determining the qualified cost paid or
incurred by a lessee in any leasing transaction that is treated as a
sale under Part 1 (commencing with Section 6001), the following rules
shall apply:
   (A) Subparagraph (A) of paragraph (1) of subdivision (b) shall be
applied by substituting the term "purchase" for the term
"construction, reconstruction, or acquisition."
   (B) Subparagraph (C) of paragraph (1) of subdivision (b) shall
apply.
   (C) The requirement of subparagraph (B) of paragraph (1) of
subdivision (b) shall be treated as satisfied at the time that either
the lessor or the qualified taxpayer pays sales or use tax under
Part 1 (commencing with Section 6001).
   (5) (A) In the case of any leasing transaction described in
paragraph (3), the lessor shall provide a statement to the lessee
specifying the amount of the lessor's original cost of the qualified
property and the amount of that cost upon which a sales or use tax
was paid within 45 days after the close of the lessee's taxable year
in which the credit is allowable to the lessee under this section.
   (B) The statement required under subparagraph (A) shall be made
available to the Franchise Tax Board upon request.
   (6) For purposes of this subdivision, in the case of any qualified
taxpayer engaged in those lines of business described in Codes 7371
to 7373, inclusive, of the Standard Industrial Classification (SIC)
Manual published by the United States Office of Management and
Budget, 1987 edition, "the first taxable year beginning on or after
January 1, 1998," shall be substituted for "January 1, 1994," in each
place in which it appears.  In addition, "the effective date of this
paragraph" shall be substituted for "the effective date of this
clause" and "fourth calendar quarter of 1998" shall be substituted
for "fourth calendar quarter of 1994."
   (g) No credit shall be allowed if the qualified property is
removed from the state, is disposed of to an unrelated party, or is
used for any purpose not qualifying for the credit provided in this
section in the same taxable year in which the qualified property is
first placed in service in this state.  If any qualified property for
which a credit is allowed pursuant to this section is thereafter
removed from this state, disposed of to an unrelated party, or used
for any purpose not qualifying for the credit provided in this
section within one year from the date the qualified property is first
placed in service in this state, the amount of the credit allowed by
this section for that qualified property shall be recaptured by
adding that credit amount to the net tax of the qualified taxpayer
for the taxable year in which the qualified property is disposed of,
removed, or put to an ineligible use.  The sale of stock for which an
election was made or deemed to have been made pursuant to Section
338(g) or 338(h)(10) of the Internal Revenue Code may not be treated
as a disposition of qualified property to an unrelated party for
purposes of this subdivision.
   (h) 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 year, and succeeding years as follows:
   (1) Except as provided in paragraph (2), for the seven succeeding
years if necessary, until the credit is exhausted.
   (2) In the case of a small business, for the nine succeeding
years, if necessary, until the credit is exhausted.
   (i) (1) This section shall remain in effect until the date
specified in paragraph (2) on which date this section shall cease to
be operative, and as of that date is repealed.
   (2) (A) This section shall cease to be operative on January 1,
2001, or on January 1 of the earliest year thereafter, if the total
employment in this state, as determined by the Employment Development
Department on the preceding January 1, does not exceed by 100,000
jobs the total employment in this state on January 1, 1994.  The
department shall report to the Legislature annually with respect to
the determination required by the preceding sentence.
   (B) For purposes of this paragraph, "total employment" means the
total employment in the manufacturing sector, excluding employment in
the aerospace sector.
   (j) The amendments made by the act adding this subdivision shall
be operative for taxable years beginning on or after January 1, 1997,
except as provided in paragraph (3) of subdivision (d).
   (k) The amendments made by the act adding this subdivision shall
be operative for taxable years beginning on or after January 1, 1998.
23657.  (a) For each taxable year beginning on or after January 1,
1997, and before January 1, 2007, there shall be allowed as a credit
against the amount of "tax," as defined in Section 23036, an amount
equal to 20 percent of the amount of each qualified  investment made
by a taxpayer during the taxable year into a community development
financial institution.
   (b) Notwithstanding any other provision of this part, no credit
shall be allowed under this section unless the California Organized
Investment Network, or its successor within the Department of
Insurance, certifies that the investment described in subdivision (a)
qualifies for the credit under this section and certifies the total
amount of the credit allocated to the taxpayer pursuant to this
section.  The aggregate amount of qualified investments made by all
taxpayers pursuant to this  section, Section 12209, and Section
17053.57 shall not exceed ten million dollars ($10,000,000) for each
calendar year.  However, if the aggregate amount of qualified
investments made in any calendar year is less than ten million
dollars ($10,000,000), the difference may be carried over to the next
year, and any succeeding year during which this section remains in
effect, and added to the aggregate amount authorized for those years.
   (c) The Community Development Financial Institution shall do all
of the following:
   (1) Apply to the Department of Insurance, California Organized
Investment Network, or its successor, for certification of its status
as a Community Development Financial Institution.
   (2) Apply to the Department of Insurance, California Organized
Investment Network, or its successor, on behalf of the taxpayer, for
certification of the amount of the investment and the credit amount
allocated to the taxpayer, obtain the certification, and retain a
copy of the certification.
   (3) Obtain the taxpayer's identification number, or in the case of
an "S corporation," the taxpayer identification numbers of all the
shareholders for tax administration purposes and provide this
information to the Department of Insurance, California Organized
Investment Network, or its successor, with the application required
in paragraph (2).
   (4) Provide an annual listing to the Franchise Tax Board, in the
form and manner agreed upon by the Franchise Tax Board and the
Department of Insurance, California Organized Investment Network, or
its successor, of the names and taxpayer identification numbers of
any taxpayer who makes any withdrawal or partial withdrawal of a
qualified investment before the expiration of 60 months from the date
of the qualified investment.
   (d) The Department of Insurance, California Organized Investment
Network, or any successor thereof, shall do all of the following:
   (1) Accept applications for certification from financial
institutions and issue certificates that the applicant is a Community
Development Financial Institution qualified to receive qualified
investments.
   (2) Accept applications for certification from any Community
Development Financial Institution on behalf of the taxpayer and issue
certificates to taxpayers in an aggregate amount that shall not
exceed the limit specified in subdivision (b).  The certificate shall
include the amount eligible to be made as an investment that
qualifies for the credit and the total amount of the credit to which
the taxpayer is entitled for the taxable year.  Certificates shall be
issued in the order that the applications are received.
   (3) Provide an annual listing to the Franchise Tax Board, in the
form or manner agreed upon by the Franchise Tax Board and the
Department of Insurance, California Organized Investment Network, or
its successor, of the taxpayers who were issued certificates, their
respective tax identification numbers, the amount of the qualified
investment made by each taxpayer, and the total amount of all
qualified investments.
   (e) For purposes of this section:
   (1) "Qualified investment" means a deposit or loan that does not
earn interest, or an equity investment, or an equity-like debt
instrument that conforms to the specifications for these instruments
as prescribed by the United States Department of the Treasury,
Community Development Financial Institutions Fund, or its successor.
All qualified investments must be equal to or greater than fifty
thousand dollars ($50,000) and made for a minimum duration of 60
months.
   (2) "Community development financial institution" means a private
financial institution located in this state that is certified by the
Department of Insurance, California Organized Investment Network, or
its successor, that has community development as its primary mission,
and that lends in urban, rural, or reservation-based communities in
this state.  A community development financial institution may
include a community development bank, a community development loan
fund, a community development credit union, a microenterprise fund, a
community development corporation-based lender, and a community
development venture fund.
   (f) (1) If a qualified investment is withdrawn before the end of
the 60th month and not reinvested in another Community Development
Financial Institution within 60 days, there shall be added to the
"tax," as defined in Section 23036, for the taxable year in which the
withdrawal occurs, the entire amount of any credit previously
allowed under this section.
   (2) If a qualified investment is reduced before the end of the
60th month, but not below fifty thousand dollars ($50,000), there
shall be added to the "tax," as defined in Section 23036, for the
taxable year in which the reduction occurs, an amount equal to 20
percent of the total reduction for the taxable year.
   (g) In the case where the credit allowed by this section exceeds
the "tax," the excess may be carried over to reduce the "tax" for the
next four taxable years, or until the credit has been exhausted,
whichever occurs first.
   (h) The Franchise Tax Board shall, as requested by the Department
of Insurance, California Organized Investment Network or its
successor, advise and assist in the administration of this section.
   (i) This section shall remain in effect only until December 1,
2007, and as of that date is repealed.
23662.  (a) For each taxable year beginning on or after July 1,
2005, and before January 1, 2018, there shall be allowed as an
environmental tax credit against the "tax," as defined by Section
23036, an amount equal to five cents ($0.05) for each gallon of ultra
low sulfur diesel fuel produced during the taxable year by a small
refiner at any facility located in this state.
   (b) The aggregate credit determined under subdivision (a) for any
taxable year with respect to any facility shall not exceed 25 percent
of the qualified capital costs incurred by the small refiner with
respect to that facility, reduced by the aggregate credits determined
under this section for all prior taxable years with respect to that
facility.
   (c) For purposes of this section:
   (1) "Small refiner" means any refiner who owns or operates a
refinery in California that:
   (A) Has and at all times had since January 1, 1978, a crude oil
capacity of not more than 55,000 barrels per stream day.
   (B) Has not been at any time since September 1, 1988, owned or
controlled by any refiner that at the same time owned or controlled
refineries in California with a total combined crude oil capacity of
more than 55,000 barrels per stream day.
   (C) Has not been at any time since September 1, 1988, owned or
controlled by any refiner that at the same time owned or controlled
refineries in the United States with a total combined crude oil
capacity of more than 137,500 barrels per stream day.
   (2) (A) "Qualified capital costs" means, with respect to any
facility, those costs paid or incurred during the applicable period
for items certified by the California Air Resources Board (CARB)
under subparagraph (B) for compliance with the applicable EPA or CARB
regulations with respect to that facility, including, but not
limited to, expenditures for the construction of new process
operation units or the dismantling and reconstruction of existing
process units to be used in the production of ultra low sulfur diesel
fuel, associated adjacent or offsite equipment (including tankage,
catalyst, and power supply), engineering, construction period
interest, site work, and permitting.
   (B) (i) Before claiming a credit under this section, a small
refiner shall request from the California Air Resources Board a
certification that both of the following are true:
   (I) That the items for which qualified capital costs were paid or
incurred are for compliance with the applicable EPA or CARB
regulations described in subparagraph (A).
   (II) That the items for which qualified capital costs were paid or
incurred have been placed in service by the small refiner.
   (ii) The request described in clause (i) shall be in a form and
contain sufficient information to allow the California Air Resources
Board to determine that the items that are requested to be certified
were placed in service for compliance with applicable EPA and CARB
regulations, which information shall include the date on which the
items were placed in service.
   (C) The California Air Resources Board shall make a determination
regarding a request described in subparagraph (B) on or before 60
days after the request is submitted. If the board does not make a
determination within this time period, the certification will be
deemed to be granted.
   (D) If certification from the Secretary of the Treasury of the
United States, after consultation with the Administrator of the
Environmental Protection Agency, that the taxpayer's qualified
capital costs with respect to a facility are, or will result, in
compliance with applicable EPA regulations, has been received, then
the taxpayer shall be allowed the credit without obtaining
certification from the CARB, unless CARB demonstrates that the fuel
produced does not meet CARB regulations.
   (3) "Facility" means a small refiner's petroleum refinery located
in the State of California that has incurred qualified capital costs
to produce ultra low sulfur diesel fuel.
   (4) "Applicable EPA regulations" means the Highway Diesel Fuel
Sulfur Control Requirements of the Environmental Protection Agency.
   (5) "Applicable CARB regulations" means the Vehicular Diesel Fuel
Sulfur Control Requirements of the California Air Resources Board
(CARB) under Section 2281 of Article 2 of Chapter 5 of Division 3 of
Title 13 of the California Code of Regulations.
   (6) "Applicable period" means, with respect to any facility, the
period beginning on January 1, 2004, and ending on May 31, 2007.
   (7) "Ultra low sulfur diesel fuel" means both of the following:
   (A) Diesel fuel with a sulfur content of 15 parts per million or
less.
   (B) (i) Subject to clause (ii), either of the following:
   (I) Vehicular diesel fuel produced and sold by a small refiner on
or after June 1, 2006.
   (II) Vehicular diesel fuel produced and sold by the small refiner
before June 1, 2006, that the small refiner specifically identifies
and supports through internal test reports as meeting applicable CARB
regulations.
   (ii) For purposes of this section, it is rebuttably presumed that
the fuel described in clause (i) is ultra low sulfur diesel fuel. The
California Air Resources Board may rebut this presumption by
demonstrating that the fuel does not comply with applicable CARB
regulations.
   (8) "Barrels per stream day" means the maximum number of barrels
of input that a distillation facility can process within a 24-hour
period when running at full capacity under optimal crude and product
slate conditions with no allowance for downtime.
   (d) For purposes of this section, if a credit is determined under
this section for any expenditure with respect to any property, the
increase in basis of that property that would (but for this
subdivision) result from that expenditure shall be reduced by the
amount of the credit so determined.
   (e) No deduction shall be allowed for that portion of the expenses
otherwise allowable as a deduction for the taxable year which is
equal to the amount of the credit determined for the taxable year
under this section.
   (f) 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 year, and the 10 succeeding years if necessary, until the
credit is exhausted.
   (g) If a small refiner that claims a credit under this section
sells, transfers, or otherwise disposes of, either directly or
indirectly, a facility within five years of the taxable year during
which it first claimed the credit, there shall be added to the "tax"
of the small refiner during the taxable year of sale, transfer, or
disposition an amount equal to the total credit claimed multiplied by
a fraction, the numerator of which is the remaining term of five
years and the denominator of which is 5.
   (h) This section shall remain in effect only until January 1,
2018, and as of that date is repealed.
23684.  (a) For each taxable year beginning on or after January 1,
2001, and before January 1, 2004, there shall be allowed as a credit
against the "tax," as defined in Section 23036, an amount equal to
the lesser of 15 percent of the cost that is paid or incurred by a
taxpayer, after deducting the value of any other municipal, state, or
federal sponsored financial incentives, during the taxable year for
the purchase and installation of any solar or wind energy system
installed on property in this state, or the applicable dollar amount
per rated watt of that solar or wind energy system, as determined by
the Franchise Tax Board in consultation with the State Energy
Resources Conservation and Development Commission.
   (b) For each taxable year beginning on or after January 1, 2004,
and before January 1, 2006, there shall be allowed as a credit
against the "net tax," as defined in Section 17039, an amount equal
to the lesser of 7.5 percent of the cost that is paid or incurred by
a taxpayer, after deducting the value of any other municipal, state,
or federal sponsored financial incentives, during the taxable year
for the purchase and installation of any solar or wind energy system
installed on property in this state, or the applicable dollar amount
per rated watt of that solar or wind energy system, as determined by
the Franchise Tax Board in consultation with the State Energy
Resources Conservation and Development Commission.
   (c) For purposes of this section:
   (1) "Applicable dollar amount" means four dollars and fifty cents
($4.50) for any taxable year beginning on or after January 1, 2001,
and before January 1, 2006.
   (2) "Solar energy system" means a solar energy device, in the form
of a photovoltaic system, with a peak generating capacity of up to,
but not more than 200 kilowatts, used for the individual function of
generating electricity, that is certified by the State Energy
Resources Conservation and Development Commission and installed with
a five-year warranty against breakdown or undue degradation.
   (3) "Wind energy system" means a wind energy conversion system
consisting of a wind turbine, a tower, and associated control or
conversion electronics, with a peak generating capacity of up to, but
not exceeding, 200 kilowatts, used for the individual function of
generating electricity, that is certified by the State Energy
Resources Conservation and Development Commission and installed with
a five-year warranty against breakdown or undue degradation.
   (4) A credit may be allowed under this section with respect to
only one solar or wind energy system per each separate legal parcel
of property or per each address of the taxpayer in the state.
   (5) No credit may be allowed under this section unless the solar
or wind energy system is actually used for purposes of producing
electricity and is primarily used to meet the taxpayer's own energy
needs.
   (d) No other credit and no deduction may be allowed under this
part for any cost for which a credit is allowed by this section.  The
basis of the solar or wind energy system shall be reduced by the
amount allowed as a credit under subdivision (a) or (b).
   (e) No credit may be allowed to any taxpayer engaged in those
lines of business described in Sector 22 of the North American
Industry Classification System (NAICS) Manual published by the United
States Office of Management and Budget, 1997 edition.
   (f) If any solar or wind energy system for which a credit is
allowed pursuant to this section is thereafter sold or removed from
this state within one year from the date the solar or wind energy
system is first placed in service in this state, the amount of credit
allowed by this section for that solar or wind energy system shall
be recaptured by adding that credit amount to the tax of the taxpayer
for the taxable year in which the solar or wind energy system is
sold or removed.
   (g) 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 year, and the succeeding seven years if necessary, until
the credit is exhausted.
   (h) This section shall remain in effect only until December 1,
2006, and as of that date is repealed.