2009 California Revenue and Taxation Code - Section 23604-23685 :: 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.

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.

23610.4.  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) Except for projects to provide farmworker housing, as defined
in subdivision (h) of Section 50199.7 of the Health and Safety Code,
that are allocated credits solely under the set-aside described in
subdivision (c) of Section 50199.20 of the Health and Safety Code,
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.
   (C) (i) For a project that receives a preliminary reservation of
the state low-income housing tax credit, allowed pursuant to
subdivision (a), on or after January 1, 2009, and before January 1,
2016, the credit shall be allocated to the partners of a partnership
owning the project in accordance with the partnership agreement,
regardless of how the federal low-income housing tax credit with
respect to the project is allocated to the partners, or whether the
allocation of the credit under the terms of the agreement has
substantial economic effect, within the meaning of Section 704(b) of
the Internal Revenue Code.
   (ii) To the extent the allocation of the credit to a partner under
this section lacks substantial economic effect, any loss or
deduction otherwise allowable under this part that is attributable to
the sale or other disposition of that partner's partnership interest
made prior to the expiration of the federal credit shall not be
allowed in the taxable year in which the sale or other disposition
occurs, but shall instead be deferred until and treated as if it
occurred in the first taxable year immediately following the taxable
year in which the federal credit period expires for the project
described in clause (i).
   (iii) This subparagraph shall not apply to a project that receives
a preliminary reservation of state low-income housing tax credits
under the set-aside described in subdivision (c) of Section 50199.20
of the Health and Safety Code unless the project also receives a
preliminary reservation of federal low-income housing tax credits.
   (iv) This subparagraph shall cease to be operative with respect to
any project that receives a preliminary reservation of a credit on
or after January 1, 2016.
   (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.
   (B) The restrictions on rent and income levels will terminate or
the federally insured mortgage on the property is eligible for
prepayment any time within five years before or after the date 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.
   (4) Five hundred thousand dollars ($500,000) per calendar year for
projects to provide farmworker housing, as defined in subdivision
(h) of Section 50199.7 of the Health and Safety Code.
   (5) The amount of any unallocated or returned credits under former
Sections 17053.14, 23608.2, and 23608.3, as those sections read
prior to January 1, 2009, until fully exhausted for projects to
provide farmworker housing, as defined in subdivision (h) of Section
50199.7 of the Health and Safety Code.
   (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 (l), 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, 2012, 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) On or before January 1, 2011, the Franchise Tax Board shall
submit to the Legislature a report on the following:
   (1) The dollar amount of credits claimed annually.
   (2) The number of child care facilities established or constructed
by taxpayers claiming the credit.
   (3) The number of children served by these facilities.
   (m) This section shall remain in effect only until December 1,
2012, 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, 2012, 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) In order to be allowed the credit authorized under this
section, the taxpayer shall indicate, in the form and manner
prescribed by the Franchise Tax Board, the number of children of
employers served by the qualified child care plan.
   (l) On or before January 1, 2011, the Franchise Tax Board shall
submit to the Legislature a report on the following:
   (1) The dollar amount of credits claimed annually.
   (2) The number of children of employees served by the qualified
child care plan for which the taxpayer claimed a credit.
   (m) This section shall remain in effect only until December 1,
2012, 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.
   (i) The qualified 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
manufacturing enhancement area, a certification that provides that a
qualified disadvantaged individual meets the eligibility requirements
specified in paragraph (5) of subdivision (b). The Employment
Development Department may provide preliminary screening and referral
to a certifying agency. The Department of Housing and Community
Development shall develop regulations governing the issuance of
certificates pursuant to subdivision (d) of Section 7086 of the
Government Code and shall develop forms for this purpose.
   (2) Retain a copy of the certification and provide it upon request
to the Franchise Tax Board.

23623.  (a) For each taxable year beginning on or after January 1,
2009, there shall be allowed as a credit against the "tax," as
defined in Section 23036, three thousand dollars ($3,000) for each
net increase in qualified full-time employees, as specified in
subdivision (c), hired during the taxable year by a qualified
employer.
   (b) For purposes of this section:
   (1) "Acquired" includes any gift, inheritance, transfer incident
to divorce, or any other transfer, whether or not for consideration.
   (2) "Qualified full-time employee" means:
   (A) A qualified employee who was paid qualified wages during the
taxable year by the qualified employer for services of not less than
an average of 35 hours per week.
   (B) A qualified employee who was a salaried employee and was paid
compensation during the taxable year for full-time employment, within
the meaning of Section 515 of the Labor Code, by the qualified
employer.
   (3) A "qualified employee" shall not include any of the following:
   (A) An employee certified as a qualified employee in an enterprise
zone designated in accordance with Chapter 12.8 (commencing with
Section 7070) of Division 7 of Title 1 of the Government Code.
   (B) An employee certified as a qualified disadvantaged individual
in a manufacturing enhancement area designated in accordance with
Section 7073.8 of the Government Code.
   (C) An employee certified as a qualified employee in a targeted
tax area designated in accordance with Section 7097 of the Government
Code.
   (D) An employee certified as a qualified disadvantaged individual
or a qualified displaced employee in a local agency military base
recovery area (LAMBRA) designated in accordance with Chapter 12.97
(commencing with Section 7105) of Division 7 of Title 1 of the
Government Code.
   (E) An employee whose wages are included in calculating any other
credit allowed under this part.
   (4) "Qualified employer" means a taxpayer that, as of the last day
of the preceding taxable year, employed a total of 20 or fewer
employees.
   (5) "Qualified wages" means wages subject to Division 6
(commencing with Section 13000) of the Unemployment Insurance Code.
   (6) "Annual full-time equivalent" means either of the following:
   (A) In the case of a full-time employee paid hourly qualified
wages, "annual full-time equivalent" means the total number of hours
worked for the taxpayer by the employee (not to exceed 2,000 hours
per employee) divided by 2,000.
   (B) In the case of a salaried full-time employee, "annual
full-time equivalent" means the total number of weeks worked for the
taxpayer by the employee divided by 52.
   (c) The net increase in qualified full-time employees of a
qualified employer shall be determined as provided by this
subdivision:
   (1) (A) The net increase in qualified full-time employees shall be
determined on an annual full-time equivalent basis by subtracting
from the amount determined in subparagraph (C) the amount determined
in subparagraph (B).
   (B) The total number of qualified full-time employees employed in
the preceding taxable year by the taxpayer and by any trade or
business acquired by the taxpayer during the current taxable year.
   (C) The total number of full-time employees employed in the
current taxable year by the taxpayer and by any trade or business
acquired during the current taxable year.
   (2) For taxpayers who first commence doing business in this state
during the taxable year, the number of full-time employees for the
immediately preceding prior taxable year shall be zero.
   (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 succeeding seven years if necessary, until the
credit is exhausted.
   (e) Any deduction otherwise allowed under this part for qualified
wages shall not be reduced by the amount of the credit allowed under
this section.
   (f) For purposes of this section:
   (1) All employees of the trades or businesses that are treated as
related under either Section 267, 318, or 707 of the Internal Revenue
Code shall be treated as employed by a single taxpayer.
   (2) In determining whether the taxpayer has first commenced doing
business in this state during the taxable year, the provisions of
subdivision (f) of Section 17276, without application of paragraph
(7) of that subdivision, shall apply.
   (g) (1) (A) Credit under this section and Section 17053.80 shall
be allowed only for credits claimed on timely filed original returns
received by the Franchise Tax Board on or before the cut-off date
established by the Franchise Tax Board.
   (B) For purposes of this paragraph, the cut-off date shall be the
last day of the calendar quarter within which the Franchise Tax Board
estimates it will have received timely filed original returns
claiming credits under this section and Section 17053.80 that
cumulatively total four hundred million dollars ($400,000,000) for
all taxable years.
   (2) The date a return is received shall be determined by the
Franchise Tax Board.
   (3) (A) The determinations of the Franchise Tax Board with respect
to the cut-off date, the date a return is received, and whether a
return has been timely filed for purposes of this subdivision may not
be reviewed in any administrative or judicial proceeding.
   (B) Any disallowance of a credit claimed due to a determination
under this subdivision, including the application of the limitation
specified in paragraph (1), shall be treated as a mathematical error
appearing on the return. Any amount of tax resulting from such
disallowance may be assessed by the Franchise Tax Board in the same
manner as provided by Section 19051.
   (4) The Franchise Tax Board shall periodically provide notice on
its Web site with respect to the amount of credit under this section
and Section 17053.80 claimed on timely filed original returns
received by the Franchise Tax Board.
   (h) (1) The Franchise Tax Board may prescribe rules, guidelines or
procedures necessary or appropriate to carry out the purposes of
this section, including any guidelines regarding the limitation on
total credits allowable under this section and Section 17053.80 and
guidelines necessary to avoid the application of paragraph (2) of
subdivision (f) through split-ups, shell corporations, partnerships,
tiered ownership structures, or otherwise.
   (2) Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code does not apply to any
standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the Franchise Tax Board pursuant
to this section.
   (i) This section shall remain in effect only until December 1 of
the calendar year after the year of the cut-off date, and as of that
December 1 is repealed.

23623.  (a) For each taxable year beginning on or after January 1,
2009, there shall be allowed as a credit against the "tax," as
defined in Section 23036, three thousand dollars ($3,000) for each
net increase in qualified full-time employees, as specified in
subdivision (c), hired during the taxable year by a qualified
employer.
   (b) For purposes of this section:
   (1) "Acquired" includes any gift, inheritance, transfer incident
to divorce, or any other transfer, whether or not for consideration.
   (2) "Qualified full-time employee" means:
   (A) A qualified employee who was paid qualified wages during the
taxable year by the qualified employer for services of not less than
an average of 35 hours per week.
   (B) A qualified employee who was a salaried employee and was paid
compensation during the taxable year for full-time employment, within
the meaning of Section 515 of the Labor Code, by the qualified
employer.
   (3) A "qualified employee" shall not include any of the following:
   (A) An employee certified as a qualified employee in an enterprise
zone designated in accordance with Chapter 12.8 (commencing with
Section 7070) of Division 7 of Title 1 of the Government Code.
   (B) An employee certified as a qualified disadvantaged individual
in a manufacturing enhancement area designated in accordance with
Section 7073.8 of the Government Code.
   (C) An employee certified as a qualified employee in a targeted
tax area designated in accordance with Section 7097 of the Government
Code.
   (D) An employee certified as a qualified disadvantaged individual
or a qualified displaced employee in a local agency military base
recovery area (LAMBRA) designated in accordance with Chapter 12.97
(commencing with Section 7105) of Division 7 of Title 1 of the
Government Code.
   (E) An employee whose wages are included in calculating any other
credit allowed under this part.
   (4) "Qualified employer" means a taxpayer that, as of the last day
of the preceding taxable year, employed a total of 20 or fewer
employees.
   (5) "Qualified wages" means wages subject to Division 6
(commencing with Section 13000) of the Unemployment Insurance Code.
   (6) "Annual full-time equivalent" means either of the following:
   (A) In the case of a full-time employee paid hourly qualified
wages, "annual full-time equivalent" means the total number of hours
worked for the taxpayer by the employee (not to exceed 2,000 hours
per employee) divided by 2,000.
   (B) In the case of a salaried full-time employee, "annual
full-time equivalent" means the total number of weeks worked for the
taxpayer by the employee divided by 52.
   (c) The net increase in qualified full-time employees of a
qualified employer shall be determined as provided by this
subdivision:
   (1) (A) The net increase in qualified full-time employees shall be
determined on an annual full-time equivalent basis by subtracting
from the amount determined in subparagraph (C) the amount determined
in subparagraph (B).
   (B) The total number of qualified full-time employees employed in
the preceding taxable year by the taxpayer and by any trade or
business acquired by the taxpayer during the current taxable year.
   (C) The total number of full-time employees employed in the
current taxable year by the taxpayer and by any trade or business
acquired during the current taxable year.
   (2) For taxpayers who first commence doing business in this state
during the taxable year, the number of full-time employees for the
immediately preceding prior taxable year shall be zero.
   (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 succeeding seven years if necessary, until the
credit is exhausted.
   (e) Any deduction otherwise allowed under this part for qualified
wages shall not be reduced by the amount of the credit allowed under
this section.
   (f) For purposes of this section:
   (1) All employees of the trades or businesses that are treated as
related under either Section 267, 318, or 707 of the Internal Revenue
Code shall be treated as employed by a single taxpayer.
   (2) In determining whether the taxpayer has first commenced doing
business in this state during the taxable year, the provisions of
subdivision (f) of Section 17276, without application of paragraph
(7) of that subdivision, shall apply.
   (g) (1) (A) Credit under this section and Section 17053.80 shall
be allowed only for credits claimed on timely filed original returns
received by the Franchise Tax Board on or before the cut-off date
established by the Franchise Tax Board.
   (B) For purposes of this paragraph, the cut-off date shall be the
last day of the calendar quarter within which the Franchise Tax Board
estimates it will have received timely filed original returns
claiming credits under this section and Section 17053.80 that
cumulatively total four hundred million dollars ($400,000,000) for
all taxable years.
   (2) The date a return is received shall be determined by the
Franchise Tax Board.
   (3) (A) The determinations of the Franchise Tax Board with respect
to the cut-off date, the date a return is received, and whether a
return has been timely filed for purposes of this subdivision may not
be reviewed in any administrative or judicial proceeding.
   (B) Any disallowance of a credit claimed due to a determination
under this subdivision, including the application of the limitation
specified in paragraph (1), shall be treated as a mathematical error
appearing on the return. Any amount of tax resulting from such
disallowance may be assessed by the Franchise Tax Board in the same
manner as provided by Section 19051.
   (4) The Franchise Tax Board shall periodically provide notice on
its Web site with respect to the amount of credit under this section
and Section 17053.80 claimed on timely filed original returns
received by the Franchise Tax Board.
   (h) (1) The Franchise Tax Board may prescribe rules, guidelines or
procedures necessary or appropriate to carry out the purposes of
this section, including any guidelines regarding the limitation on
total credits allowable under this section and Section 17053.80 and
guidelines necessary to avoid the application of paragraph (2) of
subdivision (f) through split-ups, shell corporations, partnerships,
tiered ownership structures, or otherwise.
   (2) Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code does not apply to any
standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the Franchise Tax Board pursuant
to this section.
   (i) This section shall remain in effect only until December 1 of
the calendar year after the year of the cut-off date, and as of that
December 1 is repealed.

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, and on or after January 1,
2010, and not later than June 30, 2015, 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 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 17053.34 shall be allowed to the passthrough 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
"passthrough 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 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
targeted tax area, 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 Department of Housing and
Community Development shall develop regulations for the issuance of
certificates pursuant to subdivision (g) of Section 7097 of the
Government Code, and shall develop forms 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.

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 the 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 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, or
the local government administering the LAMBRA, 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 Department of Housing and Community
Development shall develop regulations governing the issuance of
certificates pursuant to Section 7114.2 of the Government Code and
shall develop forms 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.

23657.  (a) For each taxable year beginning on or after January 1,
1997, and before January 1, 2012, 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 that is certified by the Department of
Insurance, California Organized Investment Network, or any successor
thereof.
   (b) (1) 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.
   (2) No credit shall be allowed by this section unless the
applicant and the taxpayer provide satisfactory substantiation to,
and in the form and manner requested by, the Department of Insurance,
California Organized Investment Network, or any successor thereof,
that the investment is a qualified investment, as defined in
paragraph (1) of subdivision (f). In addition, on or after January 1,
2007, the aggregate certified investments shall meet all of the
following:
   (A) Each year, until October 1, the total qualified investments
certified in any calendar year from any one community development
financial institution together with its affiliates, as defined in
Section 1215 of the Insurance Code, does not exceed the lesser of
either ten million dollars ($10,000,000) or 40 percent of the annual
aggregate amount of qualified investments authorized in the first
sentence of paragraph (3), or until a date or an amount determined in
regulations promulgated by the Insurance Commissioner.
   (B) Each year, until July 1, the annual aggregate amount of
qualified investments specified in the first sentence of paragraph
(3) that is reserved for investments by admitted insurers is 25
percent, or until a date or an amount determined in regulations
promulgated by the Insurance Commissioner.
   (C) Each year, until July 1, the annual aggregate amount of
qualified investments authorized in the first sentence of paragraph
(3) that is reserved for individual investment amounts of less than
or equal to three hundred thousand dollars ($300,000) is three
million dollars ($3,000,000), or until a date or amounts determined
in regulations promulgated by the Insurance Commissioner.
   (3) 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.
   (5) Submit reports to the department, COIN, or any successor
thereof, as required pursuant to subdivision (a) of Section 12939.1
of the Insurance Code.
   (d) The Insurance Commissioner may develop instructions,
procedures, and standards for applications, and for administering the
criteria for the evaluation of applications under this section. The
Insurance Commissioner may, from time to time, issue regulations to
implement the provisions of this section.
   (e) The Department of Insurance, California Organized Investment
Network, or any successor thereof, shall do all of the following:
   (1) Accept and evaluate applications for certification from
financial institutions and issue certificates that the applicant is a
Community Development Financial Institution qualified to receive
qualified investments. To receive a certificate, an applicant shall
satisfy the Department of Insurance, California Organized Investment
Network, or any successor thereof, that it meets the specific
requirements to be a community development financial institution for
this state program as defined in paragraph (2) of subdivision (f).
The certificate may be issued for a specified period of time, and may
include reasonable conditions to effectuate the intent of this
section. The Insurance Commissioner may suspend or revoke a
certification, after affording the institution notice and the
opportunity to be heard, if the commissioner finds that an
institution no longer meets the requirement for certification.
   (2) Accept and evaluate 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.
Applications for tax credits shall be accepted and evaluated
throughout the year. Certificates shall be issued in the order that
complete applications are received. If the aggregate amount of tax
credit applications exceeds the amount of tax credits available, tax
credits shall be approved for qualifying investments on a
first-come-first-served basis as determined by the order in which
complete applications are received. All applications received on the
same business day are deemed to be received at the same time. If the
aggregate amount of tax credit applications received on a single
business day exceeds the amount of tax credits available, tax credits
shall be approved for qualifying investments received on that day on
a pro rata basis.
   (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.
   (4) Include information specified pursuant to subdivision (b) of
Section 12939.1 of the Insurance Code in the report required by
Section 12922 of the Insurance Code.
   (f) For purposes of this section:
   (1) "Qualified investment" means an investment that is a deposit
or loan that does not earn interest, or an equity investment, or an
equitylike 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, or, in the absence of that prescription, as defined by
the Insurance Commissioner. The investment must be equal to or
greater than fifty thousand dollars ($50,000) and made for a minimum
duration of 60 months. During that 60-month period, the community
development financial institution shall have full use and control of
the proceeds of the entire amount of the investment as well as any
earnings on the investment for its community development purposes.
The entire amount of the investment shall be received by the
community development financial institution before the application
for the tax credit is submitted. The community development financial
institution shall use the proceeds of the investment for a purpose
that is consistent with its community development mission and for the
benefit of economically disadvantaged communities and low-income
people in California.
   (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, consistent with the legislative findings,
declarations, and intent in Section 12939 of the Insurance Code, 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, or a community development
venture fund.
   (g) (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.
   (h) 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.
   (i) 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.
   (j) This section shall remain in effect only until December 1,
2012, 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.

23663.  (a) (1) Notwithstanding any other law to the contrary, for
each taxable year beginning on or after July 1, 2008, any credit
allowed to a taxpayer under this chapter that is an "eligible credit
(within the meaning of paragraph (2) of subdivision (b)) may be
assigned by that taxpayer to any "eligible assignee" (within the
meaning of paragraph (3) of subdivision (b)).
   (2) A credit assigned under paragraph (1) may only be applied by
the eligible assignee against the "tax" of the eligible assignee in a
taxable year beginning on or after January 1, 2010.
   (3) Except as specifically provided in this section, following an
assignment of any eligible credit under this section, the eligible
assignee shall be treated as if it originally earned the assigned
credit.
   (b) For purposes of this section, the following definitions shall
apply:
   (1) "Affiliated corporation" means a corporation that is a member
of a commonly controlled group as defined in Section 25105.
   (2) "Eligible credit" shall mean:
   (A) Any credit earned by the taxpayer in a taxable year beginning
on or after July 1, 2008, or
   (B) Any credit earned in any taxable year beginning before July 1,
2008, that is eligible to be carried forward to the taxpayer's first
taxable year beginning on or after July 1, 2008, under the
provisions of this part.
   (3) "Eligible assignee" shall mean any affiliated corporation that
is properly treated as a member of the same combined reporting group
pursuant to Section 25101 or 25110 as the taxpayer assigning the
eligible credit as of:
   (A) In the case of credits earned in taxable years beginning
before July 1, 2008:
   (i) June 30, 2008, and
   (ii) The last day of the taxable year of the assigning taxpayer in
which the eligible credit is assigned.
   (B) In the case of credits earned in taxable years beginning on or
after July 1, 2008.
   (i) The last day of the first taxable year in which the credit was
allowed to the taxpayer, and
   (ii) The last day of the taxable year of the assigning taxpayer in
which the eligible credit is assigned.
   (c) (1) The election to assign any credit under subdivision (a)
shall be irrevocable once made, and shall be made by the taxpayer
allowed that credit on its original return for the taxable year in
which the assignment is made.
   (2) The taxpayer assigning any credit under this section shall
reduce the amount of its unused credit by the face amount of any
credit assigned under this section, and the amount of the assigned
credit shall not be available for application against the assigning
taxpayer's "tax" in any taxable year, nor shall it thereafter be
included in the amount of any credit carryover of the assigning
taxpayer.
   (3) The eligible assignee of any credit under this section may
apply all or any portion of the assigned credits against the "tax"
(as defined in Section 23036) of the eligible assignee for the
taxable year in which the assignment occurs, or any subsequent
taxable year, subject to any carryover period limitations that apply
to the assigned credit and also subject to the limitation in
paragraph (2) of subdivision (a).
   (4) In no case may the eligible assignee sell, otherwise transfer,
or thereafter assign the assigned credit to any other taxpayer.
   (d) (1) No consideration shall be required to be paid by the
eligible assignee to the assigning taxpayer for assignment of any
credit under this section.
   (2) In the event that any consideration is paid by the eligible
assignee to the assigning taxpayer for the transfer of an eligible
credit under this section, then:
   (A) No deduction shall be allowed to the eligible assignee under
this part with respect to any amounts so paid, and
   (B) No amounts so received by the assigning taxpayer shall be
includable in gross income under this part.
   (e) (1) The Franchise Tax Board shall specify the form and manner
in which the election required under this section shall be made, as
well as any necessary information that shall be required to be
provided by the taxpayer assigning the credit to the eligible
assignee.
   (2) Any taxpayer who assigns any credit under this section shall
report any information, in the form and manner specified by the
Franchise Tax Board, necessary to substantiate any credit assigned
under this section and verify the assignment and subsequent
application of any assigned credit.
   (3) Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code shall not apply to any
standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the Franchise Tax Board pursuant
to paragraphs (1) and (2).
   (4) The Franchise Tax Board may issue any regulations necessary to
implement the purposes of this section, including any regulations
necessary to specify the treatment of any assignment that does not
comply with the requirements of this section (including, for example,
where the taxpayer and eligible assignee are not properly treated as
members of the same combined reporting group on any of the dates
specified in paragraph (3) of subdivision (b).
   (f) (1) The taxpayer and the eligible assignee shall be jointly
and severally liable for any tax, addition to tax, or penalty that
results from the disallowance, in whole or in part, of any eligible
credit assigned under this section.
   (2) Nothing in this section shall limit the authority of the
Franchise Tax Board to audit either the assigning taxpayer or the
eligible assignee with respect to any eligible credit assigned under
this section.
   (g) On or before June 30, 2013, the Franchise Tax Board shall
report to the Joint Legislative Budget Committee, the Legislative
Analyst, and the relevant policy committees of both houses on the
effects of this section. The report shall include, but need not be
limited to, the following:
   (1) An estimate of use of credits in the 2010 and 2011 taxable
years by eligible taxpayers.
   (2) An analysis of effect of this section on expanding business
activity in the state related to these credits.
   (3) An estimate of the resulting tax revenue loss to the state.
   (4) The report shall cover all credits covered in this section,
but focus on the credits related to research and development,
economic incentive areas, and low income housing.

23685.  (a) (1) For taxable years beginning on or after January 1,
2011, there shall be allowed to a qualified taxpayer a credit against
the "tax," as defined in Section 23036, in an amount equal to the
applicable percentage, as specified in paragraph (4), of the
qualified expenditures for the production of a qualified motion
picture in California.
   (2) The credit shall be allowed for the taxable year in which the
California Film Commission issues the credit certificate pursuant to
subdivision (g) for the qualified motion picture, and shall be for
the applicable percentage of all qualified expenditures paid or
incurred by the qualified taxpayer in all taxable years for that
qualified motion picture.
   (3) The amount of the credit allowed to a qualified taxpayer shall
be limited to the amount specified in the credit certificate issued
to the qualified taxpayer by the California Film Commission pursuant
to subdivision (g).
   (4) For purposes of paragraphs (1) and (2), the applicable
percentage shall be:
   (A) Twenty percent of the qualified expenditures attributable to
the production of a qualified motion picture in California.
   (B) Twenty-five percent of the qualified expenditures attributable
to the production of a qualified motion picture in California where
the qualified motion picture is a television series that relocated to
California or an independent film.
   (b) For purposes of this section:
   (1) "Ancillary product" means any article for sale to the public
that contains a portion of, or any element of, the qualified motion
picture.
   (2) "Budget" means an estimate of all expenses paid or incurred
during the production period of a qualified motion picture. It shall
be the same budget used by the qualified taxpayer and production
company for all qualified motion picture purposes.
   (3) "Clip use" means a use of any portion of a motion picture,
other than the qualified motion picture, used in the qualified motion
picture.
   (4) "Credit certificate" means the certificate issued by the
California Film Commission pursuant to subparagraph (C) of paragraph
(2) of subdivision (g).
   (5) (A) "Employee fringe benefits" means the amount allowable as a
deduction under this part to the qualified taxpayer involved in the
production of the qualified motion picture, exclusive of any amounts
contributed by employees, for any year during the production period
with respect to any of the following:
   (i) Employer contributions under any pension, profit-sharing,
annuity, or similar plan.
   (ii) Employer-provided coverage under any accident or health plan
for employees.
   (iii) The employer's cost of life or disability insurance provided
to employees.
   (B) Any amount treated as wages under clause (i) of subparagraph
(A) of paragraph (18) shall not be taken into account under this
paragraph.
   (6) "Independent film" means a motion picture with a minimum
budget of one million dollars ($1,000,000) and a maximum budget of
ten million dollars ($10,000,000) that is produced by a company that
is not publicly traded and publicly traded companies do not own,
directly or indirectly, more than 25 percent of the producing
company.
   (7) "Licensing" means any grant of rights to distribute the
qualified motion picture, in whole or in part.
   (8) "New use" means any use of a motion picture in a medium other
than the medium for which it was initially created.
   (9) (A) "Postproduction" means the final activities in a qualified
motion picture's production, including editing, foley recording,
automatic dialogue replacement, sound editing, scoring and music
editing, beginning and end credits, negative cutting, negative
processing and duplication, the addition of sound and visual effects,
soundmixing, film-to-tape transfers, encoding, and color correction.
   (B) "Postproduction" does not include the manufacture or shipping
of release prints.
   (10) "Preproduction" means the process of preparation for actual
physical production which begins after a qualified motion picture has
received a firm agreement of financial commitment, or is greenlit,
with, for example, the establishment of a dedicated production
office, the hiring of key crew members, and includes, but is not
limited to, activities that include location scouting and execution
of contracts with vendors of equipment and stage space.
   (11) "Principal photography" means the phase of production during
which the motion picture is actually shot, as distinguished from
preproduction and postproduction.
   (12) "Production period" means the period beginning with
preproduction and ending upon completion of postproduction.
   (13) "Qualified entity" means a personal service corporation as
defined in Section 269A(b)(1) of the Internal Revenue Code, a payroll
services corporation, or any entity receiving qualified wages with
respect to services performed by a qualified individual.
   (14) (A) "Qualified individual" means any individual who performs
services during the production period in an activity related to the
production of a qualified motion picture.
   (B) "Qualified individual" shall not include either of the
following:
   (i) Any individual related to the qualified taxpayer as described
in subparagraph (A), (B), or (C) of Section 51(i)(1) of the Internal
Revenue Code.
   (ii) Any 5 percent owner, as defined in Section 416(i)(1)(B) of
the Internal Revenue Code, of the qualified taxpayer.
   (15) (A) "Qualified motion picture" means a motion picture that is
produced for distribution to the general public, regardless of
medium that is one of the following:
   (i) A feature with a minimum production budget of one million
dollars ($1,000,000) and a maximum production budget of seventy-five
million dollars ($75,000,000).
   (ii) A movie of the week or miniseries with a minimum production
budget of five hundred thousand dollars ($500,000).
   (iii) A new television series produced in California with a
minimum production budget of one million dollars ($1,000,000)
licensed for original distribution on basic cable.
   (iv) An independent film.
   (v) A television series that relocated to California.
   (B) To qualify as a "qualified motion picture," all of the
following conditions shall be satisfied:
   (i) At least 75 percent of the production days occur wholly in
California or 75 percent of the production budget is incurred for
payment for services performed within the state and the purchase or
rental of property used within the state.
   (ii) Production of the qualified motion picture is completed
within 30 months from the date on which the qualified taxpayer's
application is approved by the California Film Commission. For
purposes of this section, a qualified motion picture is "completed"
when the process of postproduction has been finished.
   (iii) The copyright for the motion picture is registered with the
United States Copyright Office pursuant to Title 17 of the United
States Code.
   (iv) Principal photography of the qualified motion picture
commences after the date on which the application is approved by the
California Film Commission, but no later than 180 days after the date
of that approval.
   (C) For the purposes of subparagraph (A), in computing the total
wages paid or incurred for the production of a qualified motion
picture, all amounts paid or incurred by all persons or entities that
share in the costs of the qualified motion picture shall be
aggregated.
   (D) "Qualified motion picture" shall not include commercial
advertising, music videos, a motion picture produced for private
noncommercial use, such as weddings, graduations, or as part of an
educational course and made by students, a news program, current
events or public events program, talk show, game show, sporting event
or activity, awards show, telethon or other production that solicits
funds, reality television program, clip-based programming if more
than 50 percent of the content is comprised of licensed footage,
documentaries, variety programs, daytime dramas, strip shows,
one-half hour (air time) episodic television shows, or any production
that falls within the recordkeeping requirements of Section 2257 of
Title 18 of the United States Code.
   (16) "Qualified expenditures" means amounts paid or incurred to
purchase or lease tangible personal property used within this state
in the production of a qualified motion picture and payments,
including qualified wages, for services performed within this state
in the production of a qualified motion picture.
   (17) (A) "Qualified taxpayer" means a taxpayer who has paid or
incurred qualified expenditures and has been issued a credit
certificate by the California Film Commission pursuant to subdivision
(g).
   (B) (i) 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
is not allowed to the passthrough entity, but shall be 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,
"passthrough entity" means any entity taxed as a partnership or "S"
corporation.
   (ii) In the case of an "S" corporation, the credit allowed under
this section shall not be used by an "S" corporation as a credit
against a tax imposed under Chapter 4.5 (commencing with Section
23800) of Part 11 of Division 2.
   (18) (A) "Qualified wages" means all of the following:
   (i) Any wages required to be reported under Section 13050 of the
Unemployment Insurance Code that were paid or incurred by any
taxpayer involved in the production of a qualified motion picture
with respect to a qualified individual for services performed on the
qualified motion picture production within California.
   (ii) The portion of any employee fringe benefits paid or incurred
by any taxpayer involved in the production of the qualified motion
picture that are properly allocable to qualified wage amounts
described in clause (i).
   (iii) Any payments made to a qualified entity for services
performed in California by qualified individuals within the meaning
of paragraph (14).
   (iv) Remuneration paid to an independent contractor who is a
qualified individual for services performed within California by that
qualified individual.
   (B) "Qualified wages" shall not include any of the following:
   (i) Expenses, including wages, related to new use, reuse, clip
use, licensing, secondary markets, or residual compensation, or the
creation of any ancillary product, including, but not limited to, a
soundtrack album, toy, game, trailer, or teaser.
   (ii) Expenses, including wages, paid or incurred with respect to
acquisition, development, turnaround, or any rights thereto.
   (iii) Expenses, including wages, related to financing, overhead,
marketing, promotion, or distribution of a qualified motion picture.
   (iv) Expenses, including wages, paid per person per qualified
motion picture for writers, directors, music directors, music
composers, music supervisors, producers, and performers, other than
background actors with no scripted lines.
   (19) "Residual compensation" means supplemental compensation paid
at the time that a motion picture is exhibited through new use,
reuse, clip use, or in secondary markets, as distinguished from
payments made during production.
   (20) "Reuse" means any use of a qualified motion picture in the
same medium for which it was created, following the initial use in
that medium.
   (21) "Secondary markets" means media in which a qualified motion
picture is exhibited following the initial media in which it is
exhibited.
   (22) "Television series that relocated to California" means a
television series, without regard to episode length or initial media
exhibition, that filmed all of its prior season or seasons outside of
California and for which the taxpayer certifies that the credit
provided pursuant to this section is the primary reason for
relocating to California.
   (c) (1) Notwithstanding subdivision (i) of Section 23036, relating
to credits attributable to a passthrough business entity, in the
case where the credit allowed by this section exceeds the taxpayer's
tax liability computed under this part, a qualified taxpayer may
elect to assign any portion of the 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, and "voting common stock"
is substituted for "voting stock" wherever it appears in the
section.
   (2) The election provided in paragraph (1):
   (A) May be based on any method selected by the qualified taxpayer
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
qualified taxpayer and a qualified taxpayer's affiliated corporations
that assign and receive the credits.
   (3) (A) Notwithstanding any other law, a qualified taxpayer, may
sell any credit allowed under this section that is attributable to an
independent film, as defined in paragraph (6) of subdivision (b), to
an unrelated party.
   (B) The qualified taxpayer shall report to the Franchise Tax Board
prior to the sale of the credit, in the form and manner specified by
the Franchise Tax Board, all required information regarding the
purchase and sale of the credit, including the social security or
other taxpayer identification number of the unrelated party to whom
the credit has been sold, the face amount of the credit sold, and the
amount of consideration received by the qualified taxpayer for the
sale of the credit.
   (4) In the case where the credit allowed under this section
exceeds the "tax," the excess credit may be carried over to reduce
the "tax" in the following taxable year, and succeeding five taxable
years, if necessary, until the credit has been exhausted.
   (5) A credit shall not be sold pursuant to this subdivision to
more than one taxpayer, nor may the credit be resold by the unrelated
party to another taxpayer or other party.
   (6) A party that has been assigned or acquired tax credits under
this paragraph shall be subject to the requirements of this section.
   (7) In no event may a qualified taxpayer assign or sell any tax
credit to the extent the tax credit allowed by this section is
claimed on any tax return of the qualified taxpayer.
   (8) In the event that both the taxpayer originally allocated a
credit under this section by the California Film Commission and a
taxpayer to whom the credit has been sold both claim the same amount
of credit on their tax returns, the Franchise Tax Board may disallow
the credit of either taxpayer, so long as the statute of limitations
upon assessment remains open.
   (9) Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code does not apply to any
standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the Franchise Tax Board pursuant
to this subdivision.
   (d) No credit shall be allowed pursuant to this section unless the
qualified taxpayer provides the following to the California Film
Commission:
   (1) Identification of each qualified individual.
   (2) The specific start and end dates of production.
   (3) The total wages paid.
   (4) The amount of qualified wages paid to each qualified
individual.
   (5) The copyright registration number, as reflected on the
certificate of registration issued under the authority of Section 410
of Title 17 of the United States Code, relating to registration of
claim and issuance of certificate. The registration number shall be
provided on the return claiming the credit.
   (6) The total amounts paid or incurred to purchase or lease
tangible personal property used in the production of a qualified
motion picture.
   (7) Information to substantiate its qualified expenditures.
   (8) Information required by the California Film Commission under
regulations promulgated pursuant to subdivision (g) necessary to
verify the amount of credit claimed.
   (e) The California Film Commission may prescribe rules and
regulations to carry out the purposes of this section including any
rules and regulations necessary to establish procedures, processes,
requirements, and rules identified in or required to implement this
section. The regulations shall include provisions to set aside a
percentage of annual credit allocations for independent films.
   (f) If the qualified taxpayer fails to provide the copyright
registration number as required in paragraph (5) of subdivision (d),
the credit shall be disallowed and assessed and collected under
Section 19051 until the procedures are satisfied.
   (g) For purposes of this section, the California Film Commission
shall do the following:
   (1) On or after July 1, 2009, and before July 1, 2014, allocate
tax credits to applicants.
   (A) Establish a procedure for applicants to file with the
commission a written application, on a form jointly prescribed by the
commission and the Franchise Tax Board for the allocation of the tax
credit. The application shall include, but not be limited to, the
following information:
   (i) The budget for the motion picture production.
   (ii) The number of production days.
   (iii) A financing plan for the production.
   (iv) The diversity of the workforce employed by the applicant,
including, but not limited to, the ethnic and racial makeup of the
individuals employed by the applicant during the production of the
qualified motion picture, to the extent possible.
   (v) Any other information deemed relevant by the commission or the
Franchise Tax Board.
   (B) Establish criteria, consistent with the requirements of this
section, for allocating tax credits.
   (C) Determine and designate applicants who meet the requirements
of this section.
   (D) Process and approve, or reject, all applications on a
first-come-first-served basis.
   (E) Subject to the annual cap established as provided in
subdivision (i), allocate an aggregate amount of credits under this
section and Section 17053.85, and allocate any carryover of
unallocated credits from prior years.
   (2) Certify tax credits allocated to qualified taxpayers.
   (A) Establish a verification procedure for the amount of qualified
expenditures paid or incurred by the applicant.
   (B) Establish audit requirements that must be satisfied before a
credit certificate maybe issued by the California Film Commission.
   (C) Issue a credit certificate to a qualified taxpayer upon
completion of the qualified motion picture, reflecting the credit
amount allocated after qualified expenditures have been verified
under this section. The amount of a credit shown in the credit
certificate shall not exceed the amount of credit allocated to that
qualified taxpayer pursuant to this section.
   (h) The California Film Commission shall provide the Franchise Tax
Board and the board annually with a list of qualified taxpayers and
the tax credit amounts allocated to each qualified taxpayer by the
California Film Commission. The list shall include the names and
taxpayer identification numbers, including taxpayer identification
numbers of each partner or shareholder, as applicable, of the
qualified taxpayer.
   (i) (1) The aggregate amount of credits that may be allocated in
any fiscal year pursuant to this section and Section 17053.85 shall
be an amount equal to the sum of all of the following:
   (A) One hundred million dollars ($100,000,000) in credits for the
2009-10 fiscal year and each fiscal year thereafter, through and
including the 2013-14 fiscal year.
   (B) The unused allocation credit amount, if any, for the preceding
fiscal year.
   (C) The amount of previously allocated credits not certified.
   (2) If the amount of credits applied for in any particular fiscal
year exceeds the aggregate amount of tax credits authorized to be
allocated for under this section, such excess shall be treated as
having been applied for on the first day of the subsequent fiscal
year. However, credits may not be allocated from a fiscal year other
than the fiscal year in which the credit was originally applied for
or the immediately succeeding fiscal year.
   (3) Notwithstanding the foregoing, the Film Commission shall set
aside up to ten million ($10,000,000) of tax credits each fiscal year
for independent films allocated in accordance with rules and
regulations developed pursuant to subdivision (e).
   (4) Any act that reduces the amount that may be allocated pursuant
to paragraph (1) constitutes a change in state taxes for the purpose
of increasing revenues within the meaning of Section 3 of Article
XIII A of the California Constitution and may be passed by not less
than two-thirds of all Members elected to each of the two houses of
the Legislature.
   (j) The film commission shall have the authority to allocate tax
credits in accordance with this section and in accordance with any
regulations prescribed pursuant to subdivision (e) upon adoption.

23685.  (a) (1) For taxable years beginning on or after January 1,
2011, there shall be allowed to a qualified taxpayer a credit against
the "tax," as defined in Section 23036, in an amount equal to the
applicable percentage, as specified in paragraph (4), of the
qualified expenditures for the production of a qualified motion
picture in California.
   (2) The credit shall be allowed for the taxable year in which the
California Film Commission issues the credit certificate pursuant to
subdivision (g) for the qualified motion picture, and shall be for
the applicable percentage of all qualified expenditures paid or
incurred by the qualified taxpayer in all taxable years for that
qualified motion picture.
   (3) The amount of the credit allowed to a qualified taxpayer shall
be limited to the amount specified in the credit certificate issued
to the qualified taxpayer by the California Film Commission pursuant
to subdivision (g).
   (4) For purposes of paragraphs (1) and (2), the applicable
percentage shall be:
   (A) Twenty percent of the qualified expenditures attributable to
the production of a qualified motion picture in California.
   (B) Twenty-five percent of the qualified expenditures attributable
to the production of a qualified motion picture in California where
the qualified motion picture is a television series that relocated to
California or an independent film.
   (b) For purposes of this section:
   (1) "Ancillary product" means any article for sale to the public
that contains a portion of, or any element of, the qualified motion
picture.
   (2) "Budget" means an estimate of all expenses paid or incurred
during the production period of a qualified motion picture. It shall
be the same budget used by the qualified taxpayer and production
company for all qualified motion picture purposes.
   (3) "Clip use" means a use of any portion of a motion picture,
other than the qualified motion picture, used in the qualified motion
picture.
   (4) "Credit certificate" means the certificate issued by the
California Film Commission pursuant to subparagraph (C) of paragraph
(2) of subdivision (g).
   (5) (A) "Employee fringe benefits" means the amount allowable as a
deduction under this part to the qualified taxpayer involved in the
production of the qualified motion picture, exclusive of any amounts
contributed by employees, for any year during the production period
with respect to any of the following:
   (i) Employer contributions under any pension, profit-sharing,
annuity, or similar plan.
   (ii) Employer-provided coverage under any accident or health plan
for employees.
   (iii) The employer's cost of life or disability insurance provided
to employees.
   (B) Any amount treated as wages under clause (i) of subparagraph
(A) of paragraph (18) shall not be taken into account under this
paragraph.
   (6) "Independent film" means a motion picture with a minimum
budget of one million dollars ($1,000,000) and a maximum budget of
ten million dollars ($10,000,000) that is produced by a company that
is not publicly traded and publicly traded companies do not own,
directly or indirectly, more than 25 percent of the producing
company.
   (7) "Licensing" means any grant of rights to distribute the
qualified motion picture, in whole or in part.
   (8) "New use" means any use of a motion picture in a medium other
than the medium for which it was initially created.
   (9) (A) "Postproduction" means the final activities in a qualified
motion picture's production, including editing, foley recording,
automatic dialogue replacement, sound editing, scoring and music
editing, beginning and end credits, negative cutting, negative
processing and duplication, the addition of sound and visual effects,
soundmixing, film-to-tape transfers, encoding, and color correction.
   (B) "Postproduction" does not include the manufacture or shipping
of release prints.
   (10) "Preproduction" means the process of preparation for actual
physical production which begins after a qualified motion picture has
received a firm agreement of financial commitment, or is greenlit,
with, for example, the establishment of a dedicated production
office, the hiring of key crew members, and includes, but is not
limited to, activities that include location scouting and execution
of contracts with vendors of equipment and stage space.
   (11) "Principal photography" means the phase of production during
which the motion picture is actually shot, as distinguished from
preproduction and postproduction.
   (12) "Production period" means the period beginning with
preproduction and ending upon completion of postproduction.
   (13) "Qualified entity" means a personal service corporation as
defined in Section 269A(b)(1) of the Internal Revenue Code, a payroll
services corporation, or any entity receiving qualified wages with
respect to services performed by a qualified individual.
   (14) (A) "Qualified individual" means any individual who performs
services during the production period in an activity related to the
production of a qualified motion picture.
   (B) "Qualified individual" shall not include either of the
following:
   (i) Any individual related to the qualified taxpayer as described
in subparagraph (A), (B), or (C) of Section 51(i)(1) of the Internal
Revenue Code.
   (ii) Any 5 percent owner, as defined in Section 416(i)(1)(B) of
the Internal Revenue Code, of the qualified taxpayer.
   (15) (A) "Qualified motion picture" means a motion picture that is
produced for distribution to the general public, regardless of
medium that is one of the following:
   (i) A feature with a minimum production budget of one million
dollars ($1,000,000) and a maximum production budget of seventy-five
million dollars ($75,000,000).
   (ii) A movie of the week or miniseries with a minimum production
budget of five hundred thousand dollars ($500,000).
   (iii) A new television series produced in California with a
minimum production budget of one million dollars ($1,000,000)
licensed for original distribution on basic cable.
   (iv) An independent film.
   (v) A television series that relocated to California.
   (B) To qualify as a "qualified motion picture," all of the
following conditions shall be satisfied:
   (i) At least 75 percent of the production days occur wholly in
California or 75 percent of the production budget is incurred for
payment for services performed within the state and the purchase or
rental of property used within the state.
   (ii) Production of the qualified motion picture is completed
within 30 months from the date on which the qualified taxpayer's
application is approved by the California Film Commission. For
purposes of this section, a qualified motion picture is "completed"
when the process of postproduction has been finished.
   (iii) The copyright for the motion picture is registered with the
United States Copyright Office pursuant to Title 17 of the United
States Code.
   (iv) Principal photography of the qualified motion picture
commences after the date on which the application is approved by the
California Film Commission, but no later than 180 days after the date
of that approval.
   (C) For the purposes of subparagraph (A), in computing the total
wages paid or incurred for the production of a qualified motion
picture, all amounts paid or incurred by all persons or entities that
share in the costs of the qualified motion picture shall be
aggregated.
   (D) "Qualified motion picture" shall not include commercial
advertising, music videos, a motion picture produced for private
noncommercial use, such as weddings, graduations, or as part of an
educational course and made by students, a news program, current
events or public events program, talk show, game show, sporting event
or activity, awards show, telethon or other production that solicits
funds, reality television program, clip-based programming if more
than 50 percent of the content is comprised of licensed footage,
documentaries, variety programs, daytime dramas, strip shows,
one-half hour (air time) episodic television shows, or any production
that falls within the recordkeeping requirements of Section 2257 of
Title 18 of the United States Code.
   (16) "Qualified expenditures" means amounts paid or incurred to
purchase or lease tangible personal property used within this state
in the production of a qualified motion picture and payments,
including qualified wages, for services performed within this state
in the production of a qualified motion picture.
   (17) (A) "Qualified taxpayer" means a taxpayer who has paid or
incurred qualified expenditures and has been issued a credit
certificate by the California Film Commission pursuant to subdivision
(g).
   (B) (i) 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
is not allowed to the passthrough entity, but shall be 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,
"passthrough entity" means any entity taxed as a partnership or "S"
corporation.
   (ii) In the case of an "S" corporation, the credit allowed under
this section shall not be used by an "S" corporation as a credit
against a tax imposed under Chapter 4.5 (commencing with Section
23800) of Part 11 of Division 2.
   (18) (A) "Qualified wages" means all of the following:
   (i) Any wages required to be reported under Section 13050 of the
Unemployment Insurance Code that were paid or incurred by any
taxpayer involved in the production of a qualified motion picture
with respect to a qualified individual for services performed on the
qualified motion picture production within California.
   (ii) The portion of any employee fringe benefits paid or incurred
by any taxpayer involved in the production of the qualified motion
picture that are properly allocable to qualified wage amounts
described in clause (i).
   (iii) Any payments made to a qualified entity for services
performed in California by qualified individuals within the meaning
of paragraph (14).
   (iv) Remuneration paid to an independent contractor who is a
qualified individual for services performed within California by that
qualified individual.
   (B) "Qualified wages" shall not include any of the following:
   (i) Expenses, including wages, related to new use, reuse, clip
use, licensing, secondary markets, or residual compensation, or the
creation of any ancillary product, including, but not limited to, a
soundtrack album, toy, game, trailer, or teaser.
   (ii) Expenses, including wages, paid or incurred with respect to
acquisition, development, turnaround, or any rights thereto.
   (iii) Expenses, including wages, related to financing, overhead,
marketing, promotion, or distribution of a qualified motion picture.
   (iv) Expenses, including wages, paid per person per qualified
motion picture for writers, directors, music directors, music
composers, music supervisors, producers, and performers, other than
background actors with no scripted lines.
   (19) "Residual compensation" means supplemental compensation paid
at the time that a motion picture is exhibited through new use,
reuse, clip use, or in secondary markets, as distinguished from
payments made during production.
   (20) "Reuse" means any use of a qualified motion picture in the
same medium for which it was created, following the initial use in
that medium.
   (21) "Secondary markets" means media in which a qualified motion
picture is exhibited following the initial media in which it is
exhibited.
   (22) "Television series that relocated to California" means a
television series, without regard to episode length or initial media
exhibition, that filmed all of its prior season or seasons outside of
California and for which the taxpayer certifies that the credit
provided pursuant to this section is the primary reason for
relocating to California.
   (c) (1) Notwithstanding subdivision (i) of Section 23036, relating
to credits attributable to a passthrough business entity, in the
case where the credit allowed by this section exceeds the taxpayer's
tax liability computed under this part, a qualified taxpayer may
elect to assign any portion of the 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, and "voting common stock"
is substituted for "voting stock" wherever it appears in the
section.
   (2) The election provided in paragraph (1):
   (A) May be based on any method selected by the qualified taxpayer
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
qualified taxpayer and a qualified taxpayer's affiliated corporations
that assign and receive the credits.
   (3) (A) Notwithstanding any other law, a qualified taxpayer, may
sell any credit allowed under this section that is attributable to an
independent film, as defined in paragraph (6) of subdivision (b), to
an unrelated party.
   (B) The qualified taxpayer shall report to the Franchise Tax Board
prior to the sale of the credit, in the form and manner specified by
the Franchise Tax Board, all required information regarding the
purchase and sale of the credit, including the social security or
other taxpayer identification number of the unrelated party to whom
the credit has been sold, the face amount of the credit sold, and the
amount of consideration received by the qualified taxpayer for the
sale of the credit.
   (4) In the case where the credit allowed under this section
exceeds the "tax," the excess credit may be carried over to reduce
the "tax" in the following taxable year, and succeeding five taxable
years, if necessary, until the credit has been exhausted.
   (5) A credit shall not be sold pursuant to this subdivision to
more than one taxpayer, nor may the credit be resold by the unrelated
party to another taxpayer or other party.
   (6) A party that has been assigned or acquired tax credits under
this paragraph shall be subject to the requirements of this section.
   (7) In no event may a qualified taxpayer assign or sell any tax
credit to the extent the tax credit allowed by this section is
claimed on any tax return of the qualified taxpayer.
   (8) In the event that both the taxpayer originally allocated a
credit under this section by the California Film Commission and a
taxpayer to whom the credit has been sold both claim the same amount
of credit on their tax returns, the Franchise Tax Board may disallow
the credit of either taxpayer, so long as the statute of limitations
upon assessment remains open.
   (9) Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code does not apply to any
standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the Franchise Tax Board pursuant
to this subdivision.
   (d) No credit shall be allowed pursuant to this section unless the
qualified taxpayer provides the following to the California Film
Commission:
   (1) Identification of each qualified individual.
   (2) The specific start and end dates of production.
   (3) The total wages paid.
   (4) The amount of qualified wages paid to each qualified
individual.
   (5) The copyright registration number, as reflected on the
certificate of registration issued under the authority of Section 410
of Title 17 of the United States Code, relating to registration of
claim and issuance of certificate. The registration number shall be
provided on the return claiming the credit.
   (6) The total amounts paid or incurred to purchase or lease
tangible personal property used in the production of a qualified
motion picture.
   (7) Information to substantiate its qualified expenditures.
   (8) Information required by the California Film Commission under
regulations promulgated pursuant to subdivision (g) necessary to
verify the amount of credit claimed.
   (e) The California Film Commission may prescribe rules and
regulations to carry out the purposes of this section including any
rules and regulations necessary to establish procedures, processes,
requirements, and rules identified in or required to implement this
section. The regulations shall include provisions to set aside a
percentage of annual credit allocations for independent films.
   (f) If the qualified taxpayer fails to provide the copyright
registration number as required in paragraph (5) of subdivision (d),
the credit shall be disallowed and assessed and collected under
Section 19051 until the procedures are satisfied.
   (g) For purposes of this section, the California Film Commission
shall do the following:
   (1) On or after July 1, 2009, and before July 1, 2014, allocate
tax credits to applicants.
   (A) Establish a procedure for applicants to file with the
commission a written application, on a form jointly prescribed by the
commission and the Franchise Tax Board for the allocation of the tax
credit. The application shall include, but not be limited to, the
following information:
   (i) The budget for the motion picture production.
   (ii) The number of production days.
   (iii) A financing plan for the production.
   (iv) The diversity of the workforce employed by the applicant,
including, but not limited to, the ethnic and racial makeup of the
individuals employed by the applicant during the production of the
qualified motion picture, to the extent possible.
   (v) Any other information deemed relevant by the commission or the
Franchise Tax Board.
   (B) Establish criteria, consistent with the requirements of this
section, for allocating tax credits.
   (C) Determine and designate applicants who meet the requirements
of this section.
   (D) Process and approve, or reject, all applications on a
first-come-first-served basis.
   (E) Subject to the annual cap established as provided in
subdivision (i), allocate an aggregate amount of credits under this
section and Section 17053.85, and allocate any carryover of
unallocated credits from prior years.
   (2) Certify tax credits allocated to qualified taxpayers.
   (A) Establish a verification procedure for the amount of qualified
expenditures paid or incurred by the applicant.
   (B) Establish audit requirements that must be satisfied before a
credit certificate maybe issued by the California Film Commission.
   (C) Issue a credit certificate to a qualified taxpayer upon
completion of the qualified motion picture, reflecting the credit
amount allocated after qualified expenditures have been verified
under this section. The amount of a credit shown in the credit
certificate shall not exceed the amount of credit allocated to that
qualified taxpayer pursuant to this section.
   (h) The California Film Commission shall provide the Franchise Tax
Board and the board annually with a list of qualified taxpayers and
the tax credit amounts allocated to each qualified taxpayer by the
California Film Commission. The list shall include the names and
taxpayer identification numbers, including taxpayer identification
numbers of each partner or shareholder, as applicable, of the
qualified taxpayer.
   (i) (1) The aggregate amount of credits that may be allocated in
any fiscal year pursuant to this section and Section 17053.85 shall
be an amount equal to the sum of all of the following:
   (A) One hundred million dollars ($100,000,000) in credits for the
2009-10 fiscal year and each fiscal year thereafter, through and
including the 2013-14 fiscal year.
   (B) The unused allocation credit amount, if any, for the preceding
fiscal year.
   (C) The amount of previously allocated credits not certified.
   (2) If the amount of credits applied for in any particular fiscal
year exceeds the aggregate amount of tax credits authorized to be
allocated under this section, such excess shall be treated as having
been applied for on the first day of the subsequent fiscal year.
However, credits may not be allocated from a fiscal year other than
the fiscal year in which the credit was originally applied for or the
immediately succeeding fiscal year.
   (3) Notwithstanding the foregoing, the Film Commission shall set
aside up to ten million ($10,000,000) of tax credits each fiscal year
for independent films allocated in accordance with rules and
regulations developed pursuant to subdivision (e).
   (4) Any act that reduces the amount that may be allocated pursuant
to paragraph (1) constitutes a change in state taxes for the purpose
of increasing revenues within the meaning of Section 3 of Article
XIII A of the California Constitution and may be passed by not less
than two-thirds of all Members elected to each of the two houses of
the Legislature.
   (j) The film commission shall have the authority to allocate tax
credits in accordance with this section and in accordance with any
regulations prescribed pursuant to subdivision (e) upon adoption.