2010 California Code
Revenue and Taxation Code
Chapter 2. Imposition Of Tax

17041.  (a) (1) There shall be imposed for each taxable year upon
the entire taxable income of every resident of this state who is not
a part-year resident, except the head of a household as defined in
Section 17042, taxes in the following amounts and at the following
rates upon the amount of taxable income computed for the taxable year
as if the resident were a resident of this state for the entire
taxable year and for all prior taxable years for any carryover items,
deferred income, suspended losses, or suspended deductions:

  If the taxable income   The tax is:
  is:
  Not over $3,650........ 1% of the taxable income
  Over $3,650 but         $36.50 plus 2% of the
  not                     excess
  over $8,650............ over $3,650
  Over $8,650 but         $136.50 plus 4% of the
  not                     excess
  over $13,650........... over $8,650
  Over $13,650 but        $336.50 plus 6% of the
  not                     excess
  over $18,950........... over $13,650
  Over $18,950 but        $654.50 plus 8%       of
  not                     the
  over $23,950........... excess
                          over $18,950
                          $1,054.50 plus 9.3% of
  Over $23,950........... the
                          excess
                          over $23,950

   (2) For taxable years beginning on or after January 1, 2009, and
before January 1, 2011, the percentages specified in the table in
paragraph (1) shall be increased by adding 0.25 percent to each
percentage.
   (b) (1) There shall be imposed for each taxable year upon the
taxable income of every nonresident or part-year resident, except the
head of a household as defined in Section 17042, a tax as calculated
in paragraph (2).
   (2) The tax imposed under paragraph (1) shall be calculated by
multiplying the "taxable income of a nonresident or part-year
resident," as defined in subdivision (i), by a rate (expressed as a
percentage) equal to the tax computed under subdivision (a) on the
entire taxable income of the nonresident or part-year resident as if
the nonresident or part-year resident were a resident of this state
for the taxable year and as if the nonresident or part-year resident
were a resident of this state for all prior taxable years for any
carryover items, deferred income, suspended losses, or suspended
deductions, divided by the amount of that income.
   (c) (1) There shall be imposed for each taxable year upon the
entire taxable income of every resident of this state who is not a
part-year resident for that taxable year, when the resident is the
head of a household, as defined in Section 17042, taxes in the
following amounts and at the following rates upon the amount of
taxable income computed for the taxable year as if the resident were
a resident of the state for the entire taxable year and for all prior
taxable years for carryover items, deferred income, suspended
losses, or suspended deductions:

  If the taxable income    The tax is:
  is:
  Not over $7,300......... 1% of the taxable
                           income
  Over $7,300 but          $73 plus 2% of the
  not                      excess
  over $17,300............ over $7,300
  Over $17,300 but         $273 plus 4% of the
  not                      excess
  over $22,300............ over $17,300
  Over $22,300 but         $473 plus 6% of the
  not                      excess
  over $27,600............ over $22,300
  Over $27,600 but         $791 plus 8% of the
  not                      excess
  over $32,600............ over $27,600
                           $1,191 plus 9.3% of the
  Over $32,600............ excess
                           over $32,600

   (2) For taxable years beginning on or after January 1, 2009, and
before January 1, 2011, the percentages specified in the table in
paragraph (1) shall be increased by adding 0.25 percent to each
percentage.
   (d) (1) There shall be imposed for each taxable year upon the
taxable income of every nonresident or part-year resident when the
nonresident or part-year resident is the head of a household, as
defined in Section 17042, a tax as calculated in paragraph (2).
   (2) The tax imposed under paragraph (1) shall be calculated by
multiplying the "taxable income of a nonresident or part-year
resident," as defined in subdivision (i), by a rate (expressed as a
percentage) equal to the tax computed under subdivision (c) on the
entire taxable income of the nonresident or part-year resident as if
the nonresident or part-year resident were a resident of this state
for the taxable year and as if the nonresident or part-year resident
were a resident of this state for all prior taxable years for any
carryover items, deferred income, suspended losses, or suspended
deductions, divided by the amount of that income.
   (e) There shall be imposed for each taxable year upon the taxable
income of every estate, trust, or common trust fund taxes equal to
the amount computed under subdivision (a) for an individual having
the same amount of taxable income.
   (f) The tax imposed by this part is not a surtax.
   (g) (1) Section 1(g) of the Internal Revenue Code, relating to
certain unearned income of children taxed as if parent's income,
shall apply, except as otherwise provided.
   (2) Section 1(g)(7)(B)(ii)(II) of the Internal Revenue Code is
modified, for purposes of this part, by substituting "1 percent" for
"10 percent."
   (h) For each taxable year beginning on or after January 1, 1988,
the Franchise Tax Board shall recompute the income tax brackets
prescribed in subdivisions (a) and (c). That computation shall be
made as follows:
   (1) The California Department of Industrial Relations shall
transmit annually to the Franchise Tax Board the percentage change in
the California Consumer Price Index for all items from June of the
prior calendar year to June of the current calendar year, no later
than August 1 of the current calendar year.
   (2) The Franchise Tax Board shall do both of the following:
   (A) Compute an inflation adjustment factor by adding 100 percent
to the percentage change figure that is furnished pursuant to
paragraph (1) and dividing the result by 100.
   (B) Multiply the preceding taxable year income tax brackets by the
inflation adjustment factor determined in subparagraph (A) and round
off the resulting products to the nearest one dollar ($1).
   (i) (1) For purposes of this part, the term "taxable income of a
nonresident or part-year resident" includes each of the following:
   (A) For any part of the taxable year during which the taxpayer was
a resident of this state (as defined by Section 17014), all items of
gross income and all deductions, regardless of source.
   (B) For any part of the taxable year during which the taxpayer was
not a resident of this state, gross income and deductions derived
from sources within this state, determined in accordance with Article
9 of Chapter 3 (commencing with Section 17301) and Chapter 11
(commencing with Section 17951).
   (2) For purposes of computing "taxable income of a nonresident or
part-year resident" under paragraph (1), the amount of any net
operating loss sustained in any taxable year during any part of which
the taxpayer was not a resident of this state shall be limited to
the sum of the following:
   (A) The amount of the loss attributable to the part of the taxable
year in which the taxpayer was a resident.
   (B) The amount of the loss which, during the part of the taxable
year the taxpayer is not a resident, is attributable to California
source income and deductions allowable in arriving at taxable income
of a nonresident or part-year resident.
   (3) For purposes of computing "taxable income of a nonresident or
part-year resident" under paragraph (1), any carryover items,
deferred income, suspended losses, or suspended deductions shall only
be includable or allowable to the extent that the carryover item,
deferred income, suspended loss, or suspended deduction was derived
from sources within this state, calculated as if the nonresident or
part-year resident, for the portion of the year he or she was a
nonresident, had been a nonresident for all prior years.



17041.5.  Notwithstanding any statute, ordinance, regulation, rule
or decision to the contrary, no city, county, city and county,
governmental subdivision, district, public and quasi-public
corporation, municipal corporation, whether incorporated or not or
whether chartered or not, shall levy or collect or cause to be levied
or collected any tax upon the income, or any part thereof, of any
person, resident or nonresident.
   This section shall not be construed so as to prohibit the levy or
collection of any otherwise authorized license tax upon a business
measured by or according to gross receipts.



17042.  Section 2(b) and (c) of the Internal Revenue Code, relating
to definitions of head of household and certain married individuals
living apart, respectively, shall apply, except as otherwise
provided.


17043.  (a) For each taxable year beginning on or after January 1,
2005, in addition to any other taxes imposed by this part, an
additional tax shall be imposed at the rate of 1 percent on that
portion of a taxpayer's taxable income in excess of one million
dollars ($1,000,000).
   (b) For purposes of applying Part 10.2 (commencing with Section
18401) of Division 2, the tax imposed under this section shall be
treated as if imposed under Section 17041.
   (c) The following shall not apply to the tax imposed by this
section:
   (1) The provisions of Section 17039, relating to the allowance of
credits.
   (2) The provisions of Section 17041, relating to filing status and
recomputation of the income tax brackets.
   (3) The provisions of Section 17045, relating to joint returns.



17045.  In the case of a joint return of a husband and wife under
Section 18521, the tax imposed by Section 17041 shall be twice the
tax which would be imposed if the taxable income were cut in half.
   For purposes of this section, a return of a surviving spouse (as
defined in Section 17046) shall be treated as a joint return of a
husband and wife.



17046.  For purposes of this part, "surviving spouse" has the same
meaning as that term is defined by Section 2(a) of the Internal
Revenue Code.


17048.  (a) In lieu of the tax imposed under Section 17041,
individuals with taxable income of such amounts as prescribed by the
Franchise Tax Board, shall compute their taxes under tax tables
prescribed by the Franchise Tax Board. The tax tables shall reflect
the tax imposed under Section 17041 in income progressions of not
less than one hundred dollars ($100), giving effect to the marital or
other status of the individual. For purposes of this part, the tax
imposed by this section shall be treated as tax imposed by Section
17041.
   (b) Subdivision (a) shall not apply to any of the following:
   (1) An individual to whom subdivision (b) of Section 17504
(relating to the tax on lump-sum distributions) applies for the
taxable year.
   (2) An individual making a return under Section 443(a)(1) of the
Internal Revenue Code for a period of less than 12 months on account
of a change in annual accounting period.
   (3) An estate or trust.


17049.  (a) If an item of income was included in the gross income of
an individual for a preceding taxable year or years because it
appeared that the individual had an unrestricted right to that item,
a deduction is allowable for the taxable year based on the repayment
of the item by the individual during the taxable year, and the amount
of that deduction exceeds three thousand dollars ($3,000), then the
tax imposed by this part for the taxable year on that individual
shall be the lesser of the following:
   (1) The tax for the taxable year computed with that deduction.
   (2) An amount equal to (A) the tax for the taxable year computed
without that deduction, minus (B) the decrease in tax under this part
for the preceding taxable year or years which would result solely
from the exclusion of the item or portion thereof from the gross
income required to be shown on the California return of that
individual for the preceding taxable year or years.
   (b) If the decrease in tax determined under subparagraph (B) of
paragraph (2) of subdivision (a) for the preceding taxable year or
years exceeds the tax imposed for the taxable year, computed without
the deduction, that excess shall be considered to be a payment of tax
on the last day prescribed for the payment of tax for the taxable
year, and shall be refunded or credited in the same manner as if it
were an overpayment for the taxable year.
   (c) Subdivision (a) does not apply to any deduction allowable with
respect to an item which was included in gross income by reason of
the sale or other disposition of stock in trade of the taxpayer, or
other property of a kind which would properly have been included in
the inventory of the taxpayer if on hand at the close of the prior
taxable year, or property held by the taxpayer primarily for sale to
customers in the ordinary course of his or her trade or business.
   (d) If the tax imposed by this part for the taxable year is the
amount determined under paragraph (2) of subdivision (a), then the
deduction referred to in subdivision (a) shall not be taken into
account for any purpose of this part, or Part 10.2 (commencing with
Section 18401), other than this section.
   (e) For purposes of determining whether paragraph (1) or paragraph
(2) of subdivision (a) applies, in any case where the exclusion
referred to in subparagraph (B) of paragraph (2) of subdivision (a)
results in a net operating loss or capital loss for the prior taxable
year, or years, that loss shall, for purposes of computing the
decrease in tax for the prior taxable year, or years, under
subparagraph (B) of paragraph (2) of subdivision (a), be carried over
to the same extent and in the same manner as is provided under
Section 17276, 17276.1, 17276.2, 17276.4, 17276.5, or 17276.7, or
Section 1212 of the Internal Revenue Code, as applicable for
California purposes, except that no carryover beyond the taxable year
shall be taken into account.
   (f) For purposes of this part, the net operating loss or capital
loss described in subdivision (e) shall, after the application of
paragraph (1) or (2) of subdivision (a) for the taxable year, be
taken into account under Section 17276, 17276.1, 17276.2, 17276.4,
17276.5, or 17276.7, or Section 1212 of the Internal Revenue Code, as
applicable for California purposes, for taxable years after the
taxable year to the same extent and in the same manner as either of
the following:
   (A) A net operating loss sustained for the taxable year, if
paragraph (1) of subdivision (a) applied.
   (B) A net operating loss or capital loss sustained for the prior
taxable year, or years, if paragraph (2) of subdivision (a) applied.
   (g) Regulations promulgated by the Secretary of the Treasury under
Section 1341 of the Internal Revenue Code shall apply, except to the
extent that those regulations conflict with this section, provisions
of this part, or with regulations promulgated by the Franchise Tax
Board.



17052.6.  (a) For each taxable year beginning on or after January 1,
2000, there shall be allowed as a credit against the "net tax", as
defined in Section 17039, an amount determined in accordance with
Section 21 of the Internal Revenue Code, except that the amount of
the credit shall be a percentage, as provided in subdivision (b) of
the allowable federal credit without taking into account whether
there is a federal tax liability.
   (b) For the purposes of subdivision (a), the percentage of the
allowable federal credit shall be determined as follows:
   (1) For taxable years beginning before January 1, 2003:

                                   The percentage
   If the adjusted gross income          of
               is:                   credit is:
  $40,000 or less..............         63%
  Over $40,000 but not over             53%
  $70,000......................
  Over $70,000 but not over             42%
  $100,000.....................
  Over $100,000................          0%

   (2) For taxable years beginning on or after January 1, 2003:

                                   The percentage
   If the adjusted gross income          of
               is:                   credit is:
  $40,000 or less..............         50%
  Over $40,000 but not over             43%
  $70,000......................
  Over $70,000 but not over             34%
  $100,000.....................
  Over $100,000................          0%

   (c) In the case of a taxpayer whose credits provided under this
section exceed the taxpayer's tax liability computed under this part,
the excess shall be credited against other amounts due, if any, from
the taxpayer and the balance, if any, shall be paid from the Tax
Relief and Refund Account and refunded to the taxpayer.
   (d) For purposes of this section, "adjusted gross income" means
adjusted gross income as computed for purposes of paragraph (2) of
subdivision (h) of Section 17024.5.
   (e) The credit authorized by this section shall be limited, as
follows:
   (1) Employment-related expenses, within the meaning of Section 21
of the Internal Revenue Code, shall be limited to expenses for
household services and care provided in this state.
   (2) Earned income, within the meaning of Section 21(d) of the
Internal Revenue Code, shall be limited to earned income subject to
tax under this part. For purposes of this paragraph, compensation
received by a member of the armed forces for active services as a
member of the armed forces, other than pensions or retired pay, shall
be considered earned income subject to tax under this part, whether
or not the member is domiciled in this state.
   (f) For purposes of this section, Section 21(b)(1) of the Internal
Revenue Code, relating to a qualifying individual, is modified to
additionally provide that a child, as defined in Section 151(c)(3) of
the Internal Revenue Code, shall be treated, for purposes of Section
152 of the Internal Revenue Code, as applicable for purposes of this
section, as receiving over one-half of his or her support during the
calendar year from the parent having custody for a greater portion
of the calendar year, that parent shall be treated as a "custodial
parent," within the meaning of Section 152(e) of the Internal Revenue
Code, as applicable for purposes of this section, and the child
shall be treated as a qualifying individual under Section 21(b)(1) of
the Internal Revenue Code, as applicable for purposes of this
section, if both of the following apply:
   (1) The child receives over one-half of his or her support during
the calendar year from his or her parents who never married each
other and who lived apart at all times during the last six months of
the calendar year.
   (2) The child is in the custody of one or both of his or her
parents for more than one-half of the calendar year.
   (g) The amendments to this section made by Section 1.5 of Chapter
824 of the Statutes of 2002 shall apply only to taxable years
beginning on or after January 1, 2002.



17052.8.  For each taxable year beginning on or after January 1,
1996, there shall be allowed as a credit against the "net tax" (as
defined by Section 17039) 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 "net tax," the excess may be carried over to reduce the "net 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.


17052.12.  For each taxable year beginning on or after January 1,
1987, there shall be allowed as a credit against the "net tax" (as
defined by Section 17039) for the taxable year 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, the
reference to "20 percent" in Section 41(a)(1) of the Internal Revenue
Code is modified to read "8 percent."
   (b) (1) For each taxable year beginning on or after January 1,
1997, and before January 1, 1999, the reference to "20 percent" in
Section 41(a)(1) of the Internal Revenue Code is modified to read "11
percent."
   (2) For each taxable year beginning on or after January 1, 1999,
and before January 1, 2000, the reference to "20 percent" in Section
41(a)(1) of the Internal Revenue Code is modified to read "12
percent."
   (3) For each taxable year beginning on or after January 1, 2000,
the reference to "20 percent" in Section 41(a)(1) of the Internal
Revenue Code is modified to read "15 percent."
   (c) Section 41(a)(2) of the Internal Revenue Code shall not apply.
   (d) "Qualified research" shall include only research conducted in
California.
   (e) In the case where the credit allowed under this section
exceeds the "net tax," the excess may be carried over to reduce the
"net tax" in the following year, and succeeding years if necessary,
until the credit has been exhausted.
   (f) (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) 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 11 (commencing with Section
23001)."
   (g) (1) For each taxable year beginning on or after January 1,
2000:
   (A) The reference to "3 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 "4 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 "5 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)(7) 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.
   (4) Section 41(c)(5) of the Internal Revenue Code, relating to
election of alternative simplified credit, shall not apply.
   (h) Section 41(h) of the Internal Revenue Code, relating to
termination, shall not apply.
   (i) 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 (e); except
that the limitation of Section 41(g) of the Internal Revenue Code
shall be taken into account in each subsequent taxable year.
   (j) Section 41(a)(3) of the Internal Revenue Code shall not apply.
   (k) Section 41(b)(3)(D) of the Internal Revenue Code, relating to
amounts paid to eligible small businesses, universities, and federal
laboratories, shall not apply.
   (l) Section 41(f)(6), relating to energy research consortium,
shall not apply.



17052.17.  (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 "net tax" (as defined by Section 17039) 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 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
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 to each taxpayer 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 the 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 his, her, or its respective
share of the costs paid or incurred.
   (e) (1) In the case where the credit allowed and limited under
subdivision (b) exceeds the "net tax," the excess may be carried over
to reduce the "net 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
"net 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 "net 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
17250. 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.



17052.18.  (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 "net tax" (as defined by Section 17039) 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 11 (commencing with Section 23001) 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.
   (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 by this section exceeds the "net tax,"
the excess may be carried over to reduce the "net 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.



17052.25.  (a) For each taxable year beginning on or after January
1, 1994, there shall be allowed as a credit against the "net tax," as
defined in Section 17039, an amount equal to 50 percent of the costs
paid or incurred by a taxpayer for the adoption of any minor child
who is a citizen or legal resident of the United States and was in
the custody of a public agency of either this state or a political
subdivision of this state. The credit shall not exceed two thousand
five hundred dollars ($2,500) per minor child.
   (b) "Costs" eligible for the credit pursuant to subdivision (a)
shall include the following:
   (1) Fees for required services of either the Department of Social
Services or a licensed adoption agency.
   (2) Travel and related expenses for the adoptive family that are
directly related to the adoption process.
   (3) Medical fees and expenses that are not reimbursed by insurance
and are directly related to the adoption process.
   (c) The credit authorized by this section shall be claimed for the
taxable year in which the decree or order of adoption is entered
pursuant to Section 8612 of the Family Code. However, the allowable
credit claimed may include any costs of that adoption paid or
incurred in any prior taxable year.
   (d) In the case where the credit allowed by this section exceeds
the "net tax," the excess may be carried over to reduce the "net tax"
in the following year, and succeeding years if necessary, until the
total credit of two thousand five hundred dollars ($2,500) per minor
child is exhausted.
   (e) Any deduction otherwise allowed under this part for any amount
paid or incurred by the taxpayer upon which the credit is based
shall be reduced by the amount of the credit allowed under this
section.



17053.5.  (a) (1) For a qualified renter, there shall be allowed a
credit against his or her "net tax," as defined in Section 17039. The
amount of the credit shall be as follows:
   (A) For married couples filing joint returns, heads of household,
and surviving spouses, as defined in Section 17046, the credit shall
be equal to one hundred twenty dollars ($120) if adjusted gross
income is fifty thousand dollars ($50,000) or less.
   (B) For other individuals, the credit shall be equal to sixty
dollars ($60) if adjusted gross income is twenty-five thousand
dollars ($25,000) or less.
   (2) Except as provided in subdivision (b), a husband and wife
shall receive but one credit under this section. If the husband and
wife file separate returns, the credit may be taken by either or
equally divided between them, except as follows:
   (A) If one spouse was a resident for the entire taxable year and
the other spouse was a nonresident for part or all of the taxable
year, the resident spouse shall be allowed one-half the credit
allowed to married persons and the nonresident spouse shall be
permitted one-half the credit allowed to married persons, prorated as
provided in subdivision (e).
   (B) If both spouses were nonresidents for part of the taxable
year, the credit allowed to married persons shall be divided equally
between them subject to the proration provided in subdivision (e).
   (b) For a husband and wife, if each spouse maintained a separate
place of residence and resided in this state during the entire
taxable year, each spouse will be allowed one-half the full credit
allowed to married persons provided in subdivision (a).
   (c) For purposes of this section, a "qualified renter" means an
individual who satisfies both of the following:
   (1) Was a resident of this state, as defined in Section 17014.
   (2) Rented and occupied premises in this state which constituted
his or her principal place of residence during at least 50 percent of
the taxable year.
   (d) "Qualified renter" does not include any of the following:
   (1) An individual who for more than 50 percent of the taxable year
rented and occupied premises that were exempt from property taxes,
except that an individual, otherwise qualified, is deemed a qualified
renter if he or she or his or her landlord pays possessory interest
taxes, or the owner of those premises makes payments in lieu of
property taxes that are substantially equivalent to property taxes
paid on properties of comparable market value.
   (2) An individual whose principal place of residence for more than
50 percent of the taxable year is with another person who claimed
that individual as a dependent for income tax purposes.
   (3) An individual who has been granted or whose spouse has been
granted the homeowners' property tax exemption during the taxable
year. This paragraph does not apply to an individual whose spouse has
been granted the homeowners' property tax exemption if each spouse
maintained a separate residence for the entire taxable year.
   (e) An otherwise qualified renter who is a nonresident for any
portion of the taxable year shall claim the credits set forth in
subdivision (a) at the rate of one-twelfth of those credits for each
full month that individual resided within this state during the
taxable year.
   (f) A person claiming the credit provided in this section shall,
as part of that claim, and under penalty of perjury, furnish that
information as the Franchise Tax Board prescribes on a form supplied
by the board.
   (g) The credit provided in this section shall be claimed on
returns in the form as the Franchise Tax Board may from time to time
prescribe.
   (h) For purposes of this section, "premises" means a house or a
dwelling unit used to provide living accommodations in a building or
structure and the land incidental thereto, but does not include land
only, unless the dwelling unit is a mobilehome. The credit is not
allowed for any taxable year for the rental of land upon which a
mobilehome is located if the mobilehome has been granted a homeowners'
exemption under Section 218 in that year.
   (i) This section shall become operative on January 1, 1998, and
applies to any taxable year beginning on or after January 1, 1998.
   (j) For each taxable year beginning on or after January 1, 1999,
the Franchise Tax Board shall recompute the adjusted gross income
amounts set forth in subdivision (a). The computation shall be made
as follows:
   (1) The Department of Industrial Relations shall transmit annually
to the Franchise Tax Board the percentage change in the California
Consumer Price Index for all items from June of the prior calendar
year to June of the current year, no later than August 1 of the
current calendar year.
   (2) The Franchise Tax Board shall compute an inflation adjustment
factor by adding 100 percent to the portion of the percentage change
figure which is furnished pursuant to paragraph (1) and dividing the
result by 100.
   (3) The Franchise Tax Board shall multiply the amount in
subparagraph (B) of paragraph (1) of subdivision (d) for the
preceding taxable year by the inflation adjustment factor determined
in paragraph (2), and round off the resulting products to the nearest
one dollar ($1).
   (4) In computing the amounts pursuant to this subdivision, the
amounts provided in subparagraph (A) of paragraph (1) of subdivision
(a) shall be twice the amount provided in subparagraph (B) of
paragraph (1) of subdivision (a).



17053.6.  (a) There shall be allowed as a credit against the "net
tax" (as defined by Section 17039) 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.



17053.7.  (a) There shall be allowed as a credit against the "net
tax" (as defined by Section 17039) 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 the 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 a 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 bears any of the relationships described in paragraphs (1)
to (8), inclusive, of Section 152(a) of the Internal Revenue Code to
the taxpayer; or
   (2) Who, if the taxpayer is an estate or trust, is a grantor,
beneficiary, or fiduciary of the estate or trust, or is an individual
who bears any of the relationships described in paragraphs (1) to
(8), inclusive, of Section 152(a) of the Internal Revenue Code to a
grantor, beneficiary, or fiduciary of the estate or trust; or
   (3) Who is a dependent (as described in Section 152(a)(9) of the
Internal Revenue Code) of the taxpayer, or, if the taxpayer is an
estate or trust, of a grantor, beneficiary, or a fiduciary of the
estate or trust.
   (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 has 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 employment 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 the employer after December 31, 1993.



17053.12.  (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 "net tax" (as
defined by Section 17039), 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 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.
   (c) 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.
   (d) In the case where any credit allowed by this section exceeds
the "net tax," the excess may be carried over to reduce the "net tax"
in the following year, and succeeding years if necessary, until the
credit has been exhausted.



17053.30.  (a) There shall be allowed as a credit against the "net
tax," as defined in Section 17039, 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, "S"
corporation, or limited liability company treated as a partnership.
   (d) If the credit allowed by this section exceeds the "net tax,"
the excess may be carried over to reduce the "net 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
which the taxpayer may otherwise claim pursuant to this part with
respect to the property or any interest therein that is contributed.



17053.33.  (a) For each taxable year beginning on or after January
1, 1998, there shall be allowed as a credit against the "net tax" (as
defined in Section 17039) 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 one million dollars ($1,000,000).
   (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 person or entity that meets
both of the following:
   (i) Is engaged in a trade or business within a targeted tax area
designated pursuant to Chapter 12.93 (commencing with Section 7097)
of Division 7 of Title 1 of the Government Code.
   (ii) Is engaged in those lines of business described in Codes 2000
to 2099, inclusive; 2200 to 3999, inclusive; 4200 to 4299,
inclusive; 4500 to 4599, inclusive; and 4700 to 5199, inclusive, of
the Standard Industrial Classification (SIC) Manual published by the
United States Office of Management and Budget, 1987 edition.
   (B) In the case of any pass-through entity, the determination of
whether a taxpayer is a qualified taxpayer under this section shall
be made at the entity level and any credit under this section or
Section 23633 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 11 (commencing with Section 23001).
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 "net tax" for the taxable year, that portion of
the credit that exceeds the "net tax" may be carried over and added
to the credit, if any, in 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 the credit otherwise allowed under this
section and Section 17053.34, including any credit carryover from
prior years, that may reduce the "net 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) of Part
11. That business income shall be further apportioned to the targeted
tax area in accordance with Article 2 (commencing with Section
25120) of Chapter 17 of Part 11, modified for purposes of this
section in accordance with paragraph (3).
   (3) Business income shall be apportioned to the 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 "net 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 amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 1998.


17053.34.  (a) For each taxable year beginning on or after January
1, 1998, there shall be allowed a credit against the "net tax" (as
defined in Section 17039) 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 guilty.
   (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 23634 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 11 (commencing with Section 23001).
For purposes of this subdivision, 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 governing 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 trades or businesses, which are not
incorporated, that are under common control shall be treated as
employed by a single taxpayer.
   (B) The credit, if any, allowable by this section with respect to
each trade or business shall be determined by reference to its
proportionate share of the expense of the qualified wages giving rise
to the credit, and shall be allocated in that manner.
   (C) Principles that apply in the case of controlled groups of
corporations, as specified in subdivision (d) of Section 23634, shall
apply with respect to determining employment.
   (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
qualified 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 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) In the case of an estate or trust, both of the following
apply:
   (1) The qualified wages for any taxable year shall be apportioned
between the estate or trust and the beneficiaries on the basis of the
income of the estate or trust allocable to each.
   (2) Any beneficiary to whom any qualified wages have been
apportioned under paragraph (1) shall be treated, for purposes of
this part, as the employer with respect to those wages.
   (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 "net tax" for the taxable year, that portion of
the credit that exceeds the "net tax" may be carried over and added
to the credit, if any, in succeeding taxable years, until the credit
is exhausted. The credit shall be applied first to the earliest
taxable years possible.
   (j) (1) The amount of the credit otherwise allowed under this
section and Section 17053.33, including any credit carryover from
prior years, that may reduce the "net 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) of Part
11. That business income shall be further apportioned to the targeted
tax area in accordance with Article 2 (commencing with Section
25120) of Chapter 17 of Part 11, modified for purposes of this
section in accordance with paragraph (3).
   (3) Business income shall be apportioned to the 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 "net 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
expiration date, the targeted tax area shall be deemed to remain in
existence for purposes of computing the limitation specified in this
subdivision.



17053.42.  (a) For each taxable year beginning on or after January
1, 1996, there shall be allowed as a credit against the "net tax," as
defined in Section 17039, 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 "net tax," the excess may be carried over to reduce the "net tax"
in the following year, and succeeding years if necessary, until the
credit is exhausted.


17053.45.  (a) For each taxable year beginning on or after January
1, 1995, there shall be allowed as a credit against the "net tax" (as
defined by Section 17039) 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 one million dollars ($1,000,000).
   (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 taxpayer 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 who 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 be allowed
only 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 "net tax" for the taxable year, that portion of
the credit which exceeds the "net 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 credit otherwise allowed under this section
and Section 17053.46, including any credit carryover from prior
years, that may reduce the "net 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 is 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) of Part 11. That
business income shall be further apportioned to the LAMBRA in
accordance with Article 2 (commencing with Section 25120) of Chapter
17 of Part 11, as 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 "net 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 net 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.



17053.46.  (a) For each taxable year beginning on or after January
1, 1995, there shall be allowed as a credit against the "net tax" (as
defined in Section 17039) 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 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 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 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.).
   (ii) Any voluntary or mandatory registrant under the Greater
Avenues for Independence Act of 1985 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) 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 taxpayer or partnership 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 who 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.
   (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 who
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 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
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 trades or businesses that are under common
control shall be treated as employed by a single employer.
   (B) The credit (if any) allowable by this section with respect to
each trade or business shall be determined by reference to its
proportionate share of the qualified wages giving rise to the credit.
   The regulations prescribed under this paragraph shall be based on
principles similar to the principles that apply in the case of
controlled groups of corporations as specified in subdivision (e) of
Section 23622.
   (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 (d)) 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, other than seasonal employment, of
any 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
(determined under those regulations) 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 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 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
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
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 individual is replaced by other
qualified displaced 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 an employee shall not be treated as
terminated by reason of a mere change in the form of conducting the
trade or business of the taxpayer, if the 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 net tax for the taxpayer's
second taxable year.
   (f) In the case of an estate or trust, both of the following
apply:
   (1) The qualified wages for any taxable year shall be apportioned
between the estate or trust and the beneficiaries on the basis of the
income of the estate or trust allocable to each.
   (2) Any beneficiary to whom any qualified wages have been
apportioned under paragraph (1) shall be treated (for purposes of
this part) as the employer with respect to those wages.
   (g) The credit shall be reduced by the credit allowed under
Section 17053.7. 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 "net tax" for the taxable year, that portion of
the credit that exceeds the "net tax" may be carried over and added
to the credit, if any, in succeeding 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 17053.45, including prior year credit carryovers, that
may reduce the "net 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 net 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) of Part 11. That
business income shall be further apportioned to the LAMBRA in
accordance with Article 2 (commencing with Section 25120) of Chapter
17 of Part 11, modified for purposes of this section in accordance
with paragraph (3).
   (3) 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 "net 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.



17053.47.  (a) For each taxable year beginning on or after January
1, 1998, there shall be allowed a credit against the "net tax" (as
defined in Section 17039) 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 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 taxpayer engaged in a trade or
business within a manufacturing enhancement area designated pursuant
to Section 7073.8 of the Government Code and who 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 trades or businesses that are under common
control shall be treated as employed by a single qualified taxpayer.
   (B) The credit (if any) allowable by this section with respect to
each trade or business shall be determined by reference to its
proportionate share of the expense of the qualified wages giving rise
to the credit and shall be allocated in that manner.
   (C) Principles that apply in the case of controlled groups of
corporations, as specified in subdivision (d) of Section 23622.7,
shall apply with respect to determining employment.
   (2) If 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 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) 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 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 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) In the case of an estate or trust, both of the following
apply:
   (1) The qualified wages for any taxable year shall be apportioned
between the estate or trust and the beneficiaries on the basis of the
income of the estate or trust allocable to each.
   (2) Any beneficiary to whom any qualified wages have been
apportioned under paragraph (1) shall be treated (for purposes of
this part) as the employer with respect to those wages.
   (f) The credit shall be reduced by the credit allowed under
Section 17053.7. 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 (g) or (h).
   (g) In the case where the credit otherwise allowed under this
section exceeds the "net tax" for the taxable year, that portion of
the credit that exceeds the "net tax" may be carried over and added
to the credit, if any, in succeeding years, until the credit is
exhausted. The credit shall be applied first to the earliest taxable
years possible.
   (h) (1) The amount of credit otherwise allowed under this section,
including prior year credit carryovers, that may reduce the "net 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 shall be 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 that is attributable to sources in this state first
shall be determined in accordance with Chapter 17 (commencing with
Section 25101) of Part 11. That business income shall be further
apportioned to the manufacturing enhancement area in accordance with
Article 2 (commencing with Section 25120) of Chapter 17 of Part 11,
modified for purposes of this section in accordance with paragraph
(3).
   (3) 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
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 "net tax" for the
taxable year, as provided in subdivision (g).
   (i) 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.
   (j) 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.



17053.57.  (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 "net tax," as defined in Section 17039,
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 23657
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
a partnership, the taxpayer identification numbers of all the
partners 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 a
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
"net tax," as defined in Section 17039, 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 "net tax," as defined in Section 17039, 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 "net tax," the excess may be carried over to reduce the "net 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.



17053.62.  (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 "net tax," as defined by Section
17039, 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 that 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 "net tax," the excess may be carried over to reduce the "net 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 "net
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 is repealed on January 1, 2018.



17053.70.  (a) There shall be allowed as a credit against the "net
tax" (as defined in Section 17039) 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 person or entity 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 one
million dollars ($1,000,000).
   (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 "net tax" for the taxable year, that portion of
the credit that exceeds the "net tax" may be carried over and added
to the credit, if any, in succeeding taxable years, until the credit
is exhausted. The credit shall be applied first to the earliest
taxable years possible.
   (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 the credit otherwise allowed under this
section and Section 17053.74, including any credit carryover from
prior years, that may reduce the "net tax" for the taxable year shall
not exceed the amount of tax that would be imposed on the taxpayer's
business income attributable to the enterprise zone determined as if
that attributable income represented all of the income of the
taxpayer subject to tax under this part.
   (2)  Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the
enterprise zone. For that purpose, the taxpayer's business income
attributable to sources in this state first shall be determined in
accordance with Chapter 17 (commencing with Section 25101) of Part
11. That business income shall be further apportioned to the
enterprise zone in accordance with Article 2 (commencing with Section
25120) of Chapter 17 of Part 11, modified for purposes of this
section in accordance with paragraph (3).
   (3) Business income shall be apportioned to the enterprise zone by
multiplying the total California business income of the taxpayer by
a fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is two. For purposes of
this paragraph:
   (A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the enterprise zone during the
taxable year, and the denominator of which is the average value of
all the taxpayer's real and tangible personal property owned or
rented and used in this state during the taxable year.
   (B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the enterprise zone during
the taxable year for compensation, and the denominator of which is
the total compensation paid by the taxpayer in this state during the
taxable year.
   (4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "net tax" for the
taxable year, as provided in subdivision (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.


17053.74.  (a) There shall be allowed a credit against the "net tax"
(as defined in Section 17039) to a taxpayer who employs a qualified
employee in an enterprise zone during the taxable year. The credit
shall be equal to the sum of each of the following:
   (1) Fifty percent of qualified wages in the first year of
employment.
   (2) Forty percent of qualified wages in the second year of
employment.
   (3) Thirty percent of qualified wages in the third year of
employment.
   (4) Twenty percent of qualified wages in the fourth year of
employment.
   (5) Ten percent of qualified wages in the fifth year of
employment.
   (b) For purposes of this section:
   (1) "Qualified wages" means:
   (A) (i) Except as provided in clause (ii), that portion of wages
paid or incurred by the taxpayer during the taxable year to qualified
employees that does not exceed 150 percent of the minimum wage.
   (ii) For up to 1,350 qualified employees who are employed by the
taxpayer in the Long Beach Enterprise Zone in aircraft manufacturing
activities described in Codes 3721 to 3728, inclusive, and Code 3812
of the Standard Industrial Classification (SIC) Manual published by
the United States Office of Management and Budget, 1987 edition,
"qualified wages" means that portion of hourly wages that does not
exceed 202 percent of the minimum wage.
   (B) Wages received during the 60-month period beginning with the
first day the employee commences employment with the taxpayer.
Reemployment in connection with any increase, including a regularly
occurring seasonal increase, in the trade or business operations of
the taxpayer does not constitute commencement of employment for
purposes of this section.
   (C) Qualified wages do not include any wages paid or incurred by
the taxpayer on or after the zone expiration date. However, wages
paid or incurred with respect to qualified employees who are employed
by the taxpayer within the enterprise zone within the 60-month
period prior to the zone expiration date shall continue to qualify
for the credit under this section after the zone expiration date, in
accordance with all provisions of this section applied as if the
enterprise zone designation were still in existence and binding.
   (2) "Minimum wage" means the wage established by the Industrial
Welfare Commission as provided for in Chapter 1 (commencing with
Section 1171) of Part 4 of Division 2 of the Labor Code.
   (3) "Zone expiration date" means the date the enterprise zone
designation expires, is no longer binding, or becomes inoperative.
   (4) (A) "Qualified employee" means an individual who meets all of
the following requirements:
   (i) At least 90 percent of whose services for the taxpayer during
the taxable year are directly related to the conduct of the taxpayer'
s trade or business located in an enterprise zone.
   (ii) Performs at least 50 percent of his or her services for the
taxpayer during the taxable year in an enterprise zone.
   (iii) Is hired by the taxpayer after the date of original
designation of the area in which services were performed as an
enterprise zone.
   (iv) Is any of the following:
   (I) Immediately preceding the qualified employee's commencement of
employment with the taxpayer, was a person eligible for services
under the federal Job Training Partnership Act (29 U.S.C. Sec. 1501
et seq.), or its successor, who is receiving, or is eligible to
receive, subsidized employment, training, or services funded by the
federal Job Training Partnership Act, or its successor.
   (II) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a person eligible to be a
voluntary or mandatory registrant under the Greater Avenues for
Independence Act of 1985 (GAIN) provided for pursuant to Article 3.2
(commencing with Section 11320) of Chapter 2 of Part 3 of Division 9
of the Welfare and Institutions Code, or its successor.
   (III) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was an economically disadvantaged
individual 14 years of age or older.
   (IV) Immediately preceding the qualified employee's commencement
of employment with the taxpayer, was a dislocated worker who meets
any of the following:
   (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 17053.8 or the program area
hiring credit under former Section 17053.11.
   (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 person or entity engaged in a trade or
business within an enterprise zone designated pursuant to Chapter
12.8 (commencing with Section 7070) of the Government Code.
   (6) "Seasonal employment" means employment by a taxpayer that has
regular and predictable substantial reductions in trade or business
operations.
   (c) The taxpayer shall do both of the following:
   (1) 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 which provides that a qualified
employee meets the eligibility requirements specified in clause (iv)
of subparagraph (A) of paragraph (4) of subdivision (b). The
Employment Development Department may provide preliminary screening
and referral to a certifying agency. The Employment Development
Department shall develop a form for this purpose. The Department of
Housing and Community Development shall develop regulations governing
the issuance of certificates by local governments pursuant to
subdivision (a) of Section 7086 of the Government Code.
   (2) Retain a copy of the certification and provide it upon request
to the Franchise Tax Board.
   (d) (1) For purposes of this section:
   (A) All employees of trades or businesses, which are not
incorporated, that are under common control shall be treated as
employed by a single taxpayer.
   (B) The credit, if any, allowable by this section with respect to
each trade or business shall be determined by reference to its
proportionate share of the expense of the qualified wages giving rise
to the credit, and shall be allocated in that manner.
   (C) Principles that apply in the case of controlled groups of
corporations, as specified in subdivision (d) of Section 23622.7,
shall apply with respect to determining employment.
   (2) If an employer acquires the major portion of a trade or
business of another employer (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 paragraph (1), becomes
disabled and unable to perform the services of that employment,
unless that disability is removed before the close of that period and
the taxpayer fails to offer reemployment to that employee.
   (iii) A termination of employment of a qualified employee, if it
is determined that the termination was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that employee.
   (iv) A termination of employment of a qualified employee due to a
substantial reduction in the trade or business operations of the
taxpayer.
   (v) A termination of employment of a qualified employee, if that
employee is replaced by other qualified employees so as to create a
net increase in both the number of employees and the hours of
employment.
   (B) Subparagraph (B) of paragraph (1) shall not apply to any of
the following:
   (i) A failure to continue the seasonal employment of a qualified
employee who voluntarily fails to return to the seasonal employment
of the taxpayer.
   (ii) A failure to continue the seasonal employment of a qualified
employee who, before the close of the period referred to in
subparagraph (B) of paragraph (1), becomes disabled and unable to
perform the services of that seasonal employment, unless that
disability is removed before the close of that period and the
taxpayer fails to offer seasonal employment to that qualified
employee.
   (iii) A failure to continue the seasonal employment of a qualified
employee, if it is determined that the failure to continue the
seasonal employment was due to the misconduct (as defined in Sections
1256-30 to 1256-43, inclusive, of Title 22 of the California Code of
Regulations) of that qualified employee.
   (iv) A failure to continue seasonal employment of a qualified
employee due to a substantial reduction in the regular seasonal trade
or business operations of the taxpayer.
   (v) A failure to continue the seasonal employment of a qualified
employee, if that qualified employee is replaced by other qualified
employees so as to create a net increase in both the number of
seasonal employees and the hours of seasonal employment.
   (C) For purposes of paragraph (1), the employment relationship
between the taxpayer and a qualified employee shall not be treated as
terminated by reason of a mere change in the form of conducting the
trade or business of the taxpayer, if the qualified employee
continues to be employed in that trade or business and the taxpayer
retains a substantial interest in that trade or business.
   (3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
   (f) In the case of an estate or trust, both of the following
apply:
   (1) The qualified wages for any taxable year shall be apportioned
between the estate or trust and the beneficiaries on the basis of the
income of the estate or trust allocable to each.
   (2) Any beneficiary to whom any qualified wages have been
apportioned under paragraph (1) shall be treated, for purposes of
this part, as the employer with respect to those wages.
   (g) For purposes of this section, "enterprise zone" means an area
designated as an enterprise zone pursuant to Chapter 12.8 (commencing
with Section 7070) of Division 7 of Title 1 of the Government Code.
   (h) The credit allowable under this section shall be reduced by
the credit allowed under Sections 17053.10, 17053.17 and 17053.46
claimed for the same employee. The credit shall also be reduced by
the federal credit allowed under Section 51 of the Internal Revenue
Code.
   In addition, any deduction otherwise allowed under this part for
the wages or salaries paid or incurred by the taxpayer upon which the
credit is based shall be reduced by the amount of the credit, prior
to any reduction required by subdivision (i) or (j).
   (i) In the case where the credit otherwise allowed under this
section exceeds the "net tax" for the taxable year, that portion of
the credit that exceeds the "net tax" may be carried over and added
to the credit, if any, in succeeding taxable years, until the credit
is exhausted. The credit shall be applied first to the earliest
taxable years possible.
   (j) (1) The amount of the credit otherwise allowed under this
section and Section 17053.70, including any credit carryover from
prior years, that may reduce the "net tax" for the taxable year shall
not exceed the amount of tax which would be imposed on the taxpayer'
s business income attributable to the enterprise zone determined as
if that attributable income represented all of the income of the
taxpayer subject to tax under this part.
   (2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the
enterprise zone. For that purpose, the taxpayer's business income
attributable to sources in this state first shall be determined in
accordance with Chapter 17 (commencing with Section 25101) of Part
11. That business income shall be further apportioned to the
enterprise zone in accordance with Article 2 (commencing with Section
25120) of Chapter 17 of Part 11, modified for purposes of this
section in accordance with paragraph (3).
   (3) Business income shall be apportioned to the enterprise zone by
multiplying the total California business income of the taxpayer by
a fraction, the numerator of which is the property factor plus the
payroll factor, and the denominator of which is two. For purposes of
this paragraph:
   (A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the enterprise zone during the
taxable year, and the denominator of which is the average value of
all the taxpayer's real and tangible personal property owned or
rented and used in this state during the taxable year.
   (B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the enterprise zone during
the taxable year for compensation, and the denominator of which is
the total compensation paid by the taxpayer in this state during the
taxable year.
   (4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "net tax" for the
taxable year, as provided in subdivision (i).
   (k) The changes made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 1997.



17053.75.  (a) There shall be allowed as a credit against the "net
tax" (as defined by Section 17039) for the taxable year an amount
equal to five percent of the qualified wages received by the taxpayer
during the taxable year.
   (b) For purposes of this section:
   (1) "Qualified employee" means a taxpayer who meets both of the
following:
   (A) Is described in clauses (i) and (ii) of subparagraph (A) of
paragraph (4) of subdivision (b) of Section 17053.74.
   (B) Is not an employee of the federal government or of this state
or of any political subdivision of this state.
   (2) (A) "Qualified wages" means "wages," as defined in subsection
(b) of Section 3306 of the Internal Revenue Code, attributable to
services performed for an employer with respect to whom the taxpayer
is a qualified employee in an amount that does not exceed one and
one-half times the dollar limitation specified in that subsection.
   (B) "Qualified wages" does not include any compensation received
from the federal government or this state or any political
subdivision of this state.
   (C) "Qualified wages" does not include any wages received on or
after the date the enterprise zone designation expires, is no longer
binding, or becomes inoperative.
   (3) "Enterprise zone" means any 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) For each dollar of income received by the taxpayer in excess
of qualified wages, as defined in this section, the credit shall be
reduced by nine cents ($0.09).
   (d) The amount of the credit allowed by this section in any
taxable year shall not exceed the amount of tax that would be imposed
on the taxpayer's income attributable to employment within the
enterprise zone as if that income represented all of the income of
the taxpayer subject to tax under this part.



17053.80.  (a) For each taxable year beginning on or after January
1, 2009, there shall be allowed as a credit against the "net tax," as
defined in Section 17039, 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 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 "net tax," the excess may be carried over to reduce the "net 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 23623 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 23623 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 23623 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 23623 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.



17053.80.  (a) For each taxable year beginning on or after January
1, 2009, there shall be allowed as a credit against the "net tax," as
defined in Section 17039, 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 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 "net tax," the excess may be carried over to reduce the "net 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 23623 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 23623 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 23623 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 23623 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.



17053.85.  (a) (1) For taxable years beginning on or after January
1, 2011, there shall be allowed to a qualified taxpayer a credit
against the "net tax," as defined in Section 17039, 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 expenditure" 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) 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.
   (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 this state.
   (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 this state 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 this state 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 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.
   (2) 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.
   (3) In the case where the credit allowed under this section
exceeds the "net tax," the excess credit may be carried over to
reduce the "net tax" in the following taxable year, and succeeding
five taxable years, if necessary, until the credit has been
exhausted.
   (4) 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.
   (5) A party that has acquired tax credits under this section shall
be subject to the requirements of this section.
   (6) 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.
   (7) 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.
   (8) 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 23685, 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 may be 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 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 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
taxpayers.
   (i) (1) The aggregate amount of credits that may be allocated in
any fiscal year pursuant to this section and Section 23686 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.



17053.85.  (a) (1) For taxable years beginning on or after January
1, 2011, there shall be allowed to a qualified taxpayer a credit
against the "net tax," as defined in Section 17039, 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 expenditure" 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) 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.
   (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 this state.
   (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 this state 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 this state 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 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.
   (2) 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.
   (3) In the case where the credit allowed under this section
exceeds the "net tax," the excess credit may be carried over to
reduce the "net tax" in the following taxable year, and succeeding
five taxable years, if necessary, until the credit has been
exhausted.
   (4) 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.
   (5) A party that has acquired tax credits under this section shall
be subject to the requirements of this section.
   (6) 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.
   (7) 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.
   (8) 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 23685, 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 may be 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 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 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
taxpayers.
   (i) (1) The aggregate amount of credits that may be allocated in
any fiscal year pursuant to this section and Section 23686 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.



17054.  In the case of individuals, the following credits for
personal exemption may be deducted from the tax imposed under Section
17041 or 17048, less any increases imposed under paragraph (1) of
subdivision (d) or paragraph (1) of subdivision (e), or both, of
Section 17560.
   (a) In the case of a single individual, a head of household, or a
married individual making a separate return, a credit of fifty-two
dollars ($52).
   (b) In the case of a surviving spouse (as defined in Section
17046), or a husband and wife making a joint return, a credit of one
hundred four dollars ($104). If one spouse was a resident for the
entire taxable year and the other spouse was a nonresident for all or
any portion of the taxable year, the personal exemption shall be
divided equally.
   (c) In addition to any other credit provided in this section, in
the case of an individual who is 65 years of age or over by the end
of the taxable year, a credit of fifty-two dollars ($52).
   (d) (1) A credit of two hundred twenty-seven dollars ($227) for
each dependent (as defined in Section 17056) for whom an exemption is
allowable under Section 151(c) of the Internal Revenue Code,
relating to additional exemption for dependents. The credit allowed
under this subdivision for taxable years beginning on or after
January 1, 1999, shall not be adjusted pursuant to subdivision (i)
for any taxable year beginning before January 1, 2000.
   (2) The credit allowed under paragraph (1) may not be denied on
the basis that the identification number of the dependent, as defined
in Section 17056, for whom an exemption is allowable under Section
151(c) of the Internal Revenue Code, relating to additional exemption
for dependents, is not included on the return claiming the credit.
   (3) (A) For taxable years beginning on or after January 1, 2009,
the credit allowed under paragraph (1) for each dependent shall be
equal to the credit allowed under subdivision (a). This subparagraph
shall cease to be operative for taxable years beginning on or after
January 1, 2011, unless the Director of Finance makes the
notification pursuant to Section 99040 of the Government Code, in
which case this subparagraph shall cease to be operative for taxable
years beginning on or after January 1, 2013.
   (B) For taxable years that subparagraph (A) ceases to be
operative, the credit allowed under paragraph (1) for each dependent
shall be equal to the amount that would be allowed if subparagraph
(A) had never been operative.
   (e) A credit for personal exemption of fifty-two dollars ($52) for
the taxpayer if he or she is blind at the end of his or her taxable
year.
   (f) A credit for personal exemption of fifty-two dollars ($52) for
the spouse of the taxpayer if a separate return is made by the
taxpayer, and if the spouse is blind and, for the calendar year in
which the taxable year of the taxpayer begins, has no gross income
and is not the dependent of another taxpayer.
   (g) For the purposes of this section, an individual is blind only
if either (1) his or her central visual acuity does not exceed 20/200
in the better eye with correcting lenses, or (2) his or her visual
acuity is greater than 20/200 but is accompanied by a limitation in
the fields of vision such that the widest diameter of the visual
field subtends an angle no greater than 20 degrees.
   (h) In the case of an individual with respect to whom a credit
under this section is allowable to another taxpayer for a taxable
year beginning in the calendar year in which the individual's taxable
year begins, the credit amount applicable to that individual for
that individual's taxable year is zero.
   (i) For each taxable year beginning on or after January 1, 1989,
the Franchise Tax Board shall compute the credits prescribed in this
section. That computation shall be made as follows:
   (1) The California Department of Industrial Relations shall
transmit annually to the Franchise Tax Board the percentage change in
the California Consumer Price Index for all items from June of the
prior calendar year to June of the current calendar year, no later
than August 1 of the current calendar year.
   (2) The Franchise Tax Board shall add 100 percent to the
percentage change figure which is furnished to them pursuant to
paragraph (1), and divide the result by 100.
   (3) The Franchise Tax Board shall multiply the immediately
preceding taxable year credits by the inflation adjustment factor
determined in paragraph (2), and round off the resulting products to
the nearest one dollar ($1).
   (4) In computing the credits pursuant to this subdivision, the
credit provided in subdivision (b) shall be twice the credit provided
in subdivision (a).


17054.1.  (a) (1) In the case of any taxpayer whose federal adjusted
gross income for the taxable year exceeds the threshold amount, each
credit to which this section applies shall be reduced by six dollars
($6) for each two thousand five hundred dollars ($2,500), or
fraction thereof, by which the taxpayer's federal adjusted gross
income exceeds the threshold amount.
   (2) In the case of credit allowed by subdivision (b) of Section
17054 (relating to joint returns and surviving spouses), the "six
dollars ($6)" referred to in paragraph (1) shall be applied by
substituting "twelve dollars ($12)."
   (3) In the case of a married individual filing a separate return,
the "two thousand five hundred dollars ($2,500)" referred to in
paragraph (1) shall be applied by substituting "one thousand two
hundred fifty dollars ($1,250)."
   (4) Under no circumstances shall any credit reduced by paragraph
(1) be reduced below zero.
   (b) For purposes of this section, "threshold amount" means the
following:
   (1) Two hundred thousand dollars ($200,000) in the case of a joint
return or a surviving spouse, as defined by Section 17046.
   (2) One hundred fifty thousand dollars ($150,000) in the case of a
head of a household, as defined by Section 17042.
   (3) One hundred thousand dollars ($100,000) in the case of an
individual who is not married and who is not a surviving spouse or
head of a household.
   (4) One hundred thousand dollars ($100,000) in the case of a
married individual filing a separate return.
   (c) This section shall apply to the following credits:
   (1) Each of the credits allowed by Section 17054.
   (2) The credit allowed by Section 17054.6.
   (d) In the case of a taxpayer filing a nonresident or part-year
resident return, the reduction of exemption credits, as provided by
this section, shall be applicable prior to proration of those credits
as provided by Section 17055.
   (e) For purposes of this section, marital status shall be
determined under Section 17021.5.
   (f) For taxable years beginning on or after January 1, 1992, the
threshold amounts specified in subdivision (b) shall be recomputed
annually in the same manner as the recomputation of income tax
brackets under subdivision (h) of Section 17041.
   (g) This section shall apply to taxable years beginning on or
after January 1, 1991.



17054.5.  (a) (1) There shall be allowed as a credit against the
"net tax" (as defined in Section 17039) of a qualified individual an
amount equal to 30 percent of the net tax.
   (2) For taxable years beginning on or after January 1, 1987, and
before January 1, 1988, a qualified individual means a qualified
joint custody head of household as defined in subdivision (c).
   (3) For taxable years beginning on or after January 1, 1988, a
qualified individual means either of the following:
   (A) A "qualified joint custody head of household" as defined in
subdivision (c).
   (B) A "qualified taxpayer" as defined in subdivision (e).
   (4) The amount of the credit under this section shall not exceed
two hundred dollars ($200) for any taxable year.
   (b) For each taxable year beginning on or after January 1, 1988,
the Franchise Tax Board shall recompute the maximum credit prescribed
in subdivision (a). That computation shall be made as follows:
   (1) The California Department of Industrial Relations shall
transmit annually to the Franchise Tax Board the percentage change in
the California Consumer Price Index as modified for rental
equivalent homeownership for all items from June of the prior
calendar year to June of the current calendar year, no later than
August 1 of the current calendar year.
   (2) The Franchise Tax Board shall add 100 percent to the
percentage change figure which is furnished to them pursuant to
paragraph (1) and divide the result by 100.
   (3) The Franchise Tax Board shall multiply the immediately
preceding taxable year credit by the inflation adjustment factor
determined in paragraph (2), and round off the resulting product to
the nearest one dollar ($1).
   (c) "Qualified joint custody head of household" means an
individual who meets all of the following:
   (1) Is not married at the close of the taxable year, or files a
separate return and does not have his or her spouse as a member of
his or her household during the entire taxable year.
   (2) Maintains as his or her home a household which constitutes for
the taxable year the principal place of abode for a qualifying
child, as defined in subdivision (d), for no less than 146 days of
the taxable year but no more than 219 days of the taxable year, under
a decree of dissolution or separate maintenance, or under a written
agreement between the parents prior to the issuance of a decree of
dissolution or separate maintenance where the proceedings have been
initiated.
   (3) Furnishes over one-half the cost of maintaining the household
during the taxable year.
   (4) Does not qualify as a head of household under Section 17042 or
as a surviving spouse under Section 17046.
   (d) For purposes of this section, a "qualifying child" means a
son, stepson, daughter, or stepdaughter of the taxpayer or a
descendant of a son or daughter of the taxpayer, but if that son,
stepson, daughter, stepdaughter, or descendant is married at the
close of the taxpayer's taxable year, only if the taxpayer is
entitled to a credit for the taxable year for that person under
Section 17054.
   (e) "Qualified taxpayer" means an individual who meets all of the
following:
   (1) Is married and files a separate return.
   (2) During the last six months of the taxable year the taxpayer's
spouse was not a member of the taxpayer's household.
   (3) Maintains a household, whether or not the taxpayer's home,
which constitutes the principal place of abode of a dependent mother
or father of the taxpayer for the taxable year.
   (4) Furnishes over one-half of the cost of maintaining the
household during the taxable year.
   (5) Does not qualify as a head of household under Section 17042 or
as a surviving spouse under Section 17046.



17054.7.  (a) There shall be allowed as a credit against the "net
tax" (as defined in Section 17039) for a "qualified senior head of
household" (as defined in subdivision (c)) an amount equal to 2
percent of the taxable income.
   (b) For each taxable year beginning on or after January 1, 1991,
the Franchise Tax Board shall recompute the adjusted gross income
specified in paragraph (3) of subdivision (c). Those computations
shall be made as follows:
   (1) The California Department of Industrial Relations shall
transmit annually to the Franchise Tax Board the percentage change in
the California Consumer Price Index as modified for rental
equivalent home ownership for all items from June of the prior
calendar year to June of the current calendar year, no later than
August 1 of the current calendar year.
   (2) The Franchise Tax Board shall add 100 percent to the
percentage change figure which is furnished pursuant to paragraph (1)
and divide the result by 100.
   (3) The Franchise Tax Board shall multiply the amount for the
immediately preceding taxable year for the adjusted gross income
limitation specified in paragraph (3) of subdivision (c) by the
inflation adjustment factor determined in paragraph (2), and round
off the resulting product to the nearest one dollar ($1).
   (c) "Qualified senior head of household" means an individual who
meets all of the following:
   (1) Attained the age of 65 before the close of the taxable year.
   (2) Qualified as the head of household in accordance with Section
17042 for either of the two taxable years immediately preceding the
taxable year by providing a household for a qualifying individual who
died during either of the two taxable years immediately preceding
the taxable year.
   (3) Whose adjusted gross income for the taxable year does not
exceed thirty-seven thousand five hundred dollars ($37,500).



17055.  (a) Any individual who is a nonresident or a part-year
resident shall be allowed all credits provided under this part
against the "net tax" (as defined by Section 17039), except those
described in subdivision (b) and in Section 17053.5 (relating to the
renter's credit), and Section 18002 (relating to taxes paid to
another state), in the same proportion as the ratio that "taxable
income of a nonresident or part-year resident" computed under
paragraph (1) of subdivision (i) of Section 17041 bears to "total
taxable income" (as defined in Section 17301.5).
   (b) Credits allowed under this part which are conditional upon a
transaction occurring wholly within California shall be allowed in
their entirety.


17056.  For the purposes of this part, the term "dependents" has the
same meaning as that term is defined by Section 152 of the Internal
Revenue Code.


17057.5.  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 17058 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.




17058.  (a) (1) There shall be allowed as a credit against the
amount of net tax (as defined in Section 17039) a state low-income
housing credit in an amount equal to the amount determined in
subdivision (c), computed in accordance with the provisions of
Section 42 of the Internal Revenue Code, except as otherwise provided
in this section.
   (2) "Taxpayer" for purposes of this section means the sole owner
in the case of an individual, 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 an individual, 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 shall have 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 shall qualify 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) of
the Internal Revenue Code.
   (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 federal 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,
that, at the election of the taxpayer, is equal to:
   (A) An amount not to exceed 8 percent of the lesser of:
   (i) The owner equity that 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 be accumulated and distributed 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 taxable year 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 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 to this section.
   (g) The aggregate housing credit dollar amount which may be
allocated annually by the California Tax Credit Allocation Committee
pursuant to this section, Section 12206, and Section 23610.5 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 requirements of this section shall be
set forth in a regulatory agreement between the California Tax Credit
Allocation Committee and the housing sponsor, which 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, providing 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 which 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) 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 the 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 there is a need and
demand 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 that the
proposed operating income 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 is comprised of
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.
   (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 credit allowed under this section
exceeds the net tax, the excess credit may be carried over to reduce
the net tax in the following year, and succeeding taxable 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) 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 and after December 1, 1990,
for as long as Section 42 of the Internal Revenue Code, relating to
low-income housing credits, remains in effect.
   (r) The amendments to this section by the act adding this
subdivision shall apply only to taxable years beginning on or after
January 1, 1994.


17059.  (a) (1) In the case of any taxpayer who purchases a
qualified principal residence on and after March 1, 2009, and before
March 1, 2010, there shall be allowed as a credit against the "net
tax," as defined in Section 17039, an amount equal to the lesser of 5
percent of the purchase price of the qualified principal residence
or ten thousand dollars ($10,000).
   (2) The amount of any credit allowed under paragraph (1) shall be
applied in equal amounts over the three successive taxable years
beginning with the taxable year in which the purchase of the
qualified principal residence is made.
   (3) The credit under this section shall be allowed for the
purchase of only one qualified principal residence with respect to
any taxpayer.
   (b) (1) For purposes of this section, "qualified principal
residence" means a single-family residence, whether detached or
attached, that has never been occupied, that is purchased to be the
principal residence of the taxpayer for a minimum of two years and is
eligible for the homeowner's exemption under Section 218.
   (2) No credit shall be allowed under this section unless the
taxpayer submits with his or her tax return a certification by the
seller of the qualified principal residence that the residence has
never been previously occupied. The seller shall provide the
certification to the taxpayer and to the Franchise Tax Board within
one week of the sale of the qualified principal residence.
   (3) If the taxpayer does not occupy the qualified principal
residence as his or her principal residence for at least two years
immediately following the purchase the credit shall be canceled, and
the taxpayer shall be liable for any credit allowed under this
section on previous tax returns.
   (c) (1) In the case of two married taxpayers filing separately,
the credit allowed under subdivision (a) shall be equally apportioned
between the two taxpayers.
   (2) If two or more taxpayers who are not married purchase a
qualified principal residence, the amount of the credit allowed under
subdivision (a) shall be allocated among the taxpayers in the same
manner as each taxpayer's percentage of ownership, except that the
total amount of the credits allowed to all of these taxpayers shall
not exceed ten thousand dollars ($10,000).
   (d) The total amount of credit that may be allowed pursuant to
this section shall not exceed one hundred million dollars
($100,000,000).
   (e) (1) Upon receipt of the certification from the seller, as
described in paragraph (2) of subdivision (b), the Franchise Tax
Board shall allocate the credit to the taxpayer on a first-come,
first-served basis.
   (2) The taxpayer shall claim the credit on a timely filed original
return.
   (3) The date a certification is received shall be determined by
the Franchise Tax Board.
   (4) (A) The determinations of the Franchise Tax Board with respect
to the date a certification 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 that
disallowance may be assessed by the Franchise Tax Board in the same
manner as provided by Section 19051.
   (f) The Franchise Tax Board may prescribe rules, guidelines, or
procedures necessary or appropriate to carry out the purposes of this
section, including any guidelines regarding the allocation of the
credit allowed under this section. Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code does not apply to any rule, guideline, or procedure prescribed
by the Franchise Tax Board pursuant to this section.
   (g) The credit allowed by this section is not a business credit
within the meaning of Section 17039.2.
   (h) This section shall remain in effect only until December 1,
2013, and as of that date is repealed.



17059.1.  (a) (1) In the case of any taxpayer who purchases a
qualified principal residence on and after May 1, 2010, and on or
before December 31, 2010, or any taxpayer who purchases a qualified
principal residence on and after December 31, 2010, and before August
1, 2011, pursuant to an enforceable contract executed on or before
December 31, 2010, there shall be allowed as a credit against the
"net tax," as defined in Section 17039, an amount equal to the lesser
of 5 percent of the purchase price of the qualified principal
residence or ten thousand dollars ($10,000).
   (2) The amount of any credit allowed under paragraph (1) shall be
applied in equal amounts over the three successive taxable years
beginning with the taxable year in which the purchase of the
qualified principal residence is made.
   (3) The credit under this section shall be allowed for the
purchase of only one qualified principal residence with respect to
any taxpayer.
   (4) A qualified principal residence is purchased on the date on
which escrow closes with respect to the purchase of the qualified
principal residence.
   (b) For purposes of this section:
   (1) "Qualified principal residence" means a single-family
residence, whether detached or attached, that is purchased to be the
principal residence of the taxpayer, is eligible for the homeowner's
exemption under Section 218, and has either never been occupied or is
purchased by a first-time home buyer.
   (2) "First-time home buyer" means any individual, or individual's
spouse, who had no present ownership interest in a principal
residence during the preceding three-year period ending on the date
of the purchase of the qualified principal residence.
   (c) (1) (A) A taxpayer may, but is not required to, reserve a
credit prior to close of escrow for the purchase of a qualified
principal residence that has never been occupied. To reserve a
credit, the taxpayer and seller shall jointly sign and submit to the
Franchise Tax Board a certification that they have entered into an
enforceable contract on or after May 1, 2010, and on or before
December 31, 2010. Upon receipt of the joint certification, the
Franchise Tax Board shall notify the taxpayer that the board has
reserved the credit for the taxpayer, pending receipt, within two
weeks after the close of escrow, of the information required under
paragraph (2) for a qualified principal residence that has never been
occupied.
   (B) The reservation of a credit shall be canceled if a taxpayer
does not provide either the information required under paragraph (2)
or a notification of cancellation before August 16, 2011.
   (2) No credit shall be allowed under this section unless the
taxpayer submits to the Franchise Tax Board, within two weeks after
the date of the purchase of the qualified principal residence, a copy
of the properly executed settlement statement and either one of the
following:
   (A) If the qualified principal residence has never been occupied,
a certification by the seller, made under penalty of perjury, that
the residence has never been previously occupied.
   (B) If the qualified principal residence is purchased by a
taxpayer who is a first-time home buyer, a certification from the
taxpayer, made under penalty of perjury, that he or she is a
first-time home buyer.
   (d) If the taxpayer does not occupy the qualified principal
residence as his or her principal residence for at least two years
immediately following the purchase, any remaining unapplied credit
shall be canceled and any previously applied credit shall be
recaptured, and the taxpayer shall be liable for any increase in tax
attributable to the recapture of any credit previously allowed under
this section.
   (e) (1) In the case of two married taxpayers filing separately,
the credit allowed under subdivision (a) shall be equally apportioned
between the two taxpayers.
   (2) If two or more taxpayers who are not married purchase a
qualified principal residence, the amount of the credit allowed under
subdivision (a) shall be allocated among the taxpayers in the same
manner as each taxpayer's percentage of ownership, except that the
total amount of the credits allowed to all of these taxpayers shall
not exceed an amount equal to the lesser of 5 percent of the purchase
price of the qualified principal residence or ten thousand dollars
($10,000).
   (f) (1) The total amount of credit that may be allocated pursuant
to this section shall not exceed one hundred million dollars
($100,000,000) for the purchase of qualified principal residences
that have never been occupied and one hundred million dollars
($100,000,000) for the purchase of qualified principal residences by
first-time home buyers.
   (A) For each certification or reservation received from a taxpayer
for the purchase of a qualified principal residence that has never
been occupied, the total amount of credit available for allocation
shall be reduced by an amount equal to 70 percent of the amount of
the credit for the purchase of a qualified principal residence that
has never been occupied.
   (B) For each certification received from a taxpayer for the
purchase of a qualified principal residence by a first-time home
buyer, the total amount of credit available for allocation shall be
reduced by an amount equal to 57 percent of the amount of the credit
for the purchase of a qualified principal residence by a first-time
home buyer.
   (2) Once the credits allocated for qualified principal residences
that have never been occupied exceed the limit established in
subparagraph (A) of paragraph (1), the Franchise Tax Board shall
establish a wait list for subsequently received certifications or
reservations, with an order of priority based on the date
certification or reservation was received by the Franchise Tax Board.
The Franchise Tax Board shall notify taxpayers on the wait list no
later than December 31, 2011, as to whether they have been allocated
a credit and the amount allocated.
   (3) In the case where a taxpayer is both a first-time home buyer,
as described in paragraph (2) of subdivision (b), and the purchaser
of a qualified principal residence that has never been occupied, the
Franchise Tax Board shall allocate that taxpayer their credit amount
from the one hundred million dollars ($100,000,000) for qualified
principal residences that have never been occupied.
   (g) (1) Upon receipt of the information described in subdivision
(c), the Franchise Tax Board shall allocate the credit to the
taxpayer on a first-come-first-served basis.
   (2) (A) Except as provided in subparagraph (B), the taxpayer shall
claim the credit on a timely filed original return.
   (B) Taxpayers on the wait list, as described in paragraph (2) of
subdivision (f), that are allocated a credit for a qualified
principal residence that was purchased in the 2010 taxable year may
claim the credit on an amended income tax return for that taxable
year.
   (3) The date the information described in subdivision (c) is
received shall be determined by the Franchise Tax Board.
   (4) (A) The determinations of the Franchise Tax Board with respect
to the date the information described in subdivision (c) is
received, the allocation and reservation of credit, 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 subdivision (f), shall be treated as a mathematical
error appearing on the return. Any amount of tax resulting from that
disallowance may be assessed by the Franchise Tax Board in the same
manner as provided by Section 19051.
   (h) The Franchise Tax Board may prescribe rules, guidelines, or
procedures necessary or appropriate to carry out the purposes of this
section, including any guidelines regarding the allocation of the
credit allowed under this section. Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code does not apply to any rule, guideline, or procedure prescribed
by the Franchise Tax Board pursuant to this section.
   (i) The credit allowed by this section is not a business credit
within the meaning of Section 17039.2.
   (j) No credit shall be allowed under this section if any of the
following apply:
   (1) The taxpayer was allowed a credit under Section 17059.
   (2) The taxpayer is not 18 years of age or older as of the date of
purchase. A taxpayer who is married at the date of purchase shall be
considered to be 18 years of age if the spouse of the taxpayer is 18
years of age or older on the date of purchase.
   (3) The taxpayer or the taxpayer's spouse, if the taxpayer is
married, is related to the seller within the meaning of Section 267
of the Internal Revenue Code, related to losses, expenses, and
interest with respect to transactions between related taxpayers.
   (4) The taxpayer qualifies as a dependent, as defined in Section
17056, of any other taxpayer for the taxable year of the purchase.
   (k) This section shall remain in effect only until December 1,
2014, and as of that date is repealed.



17061.  (a) In the case of a person entitled to a refund pursuant to
Section 1176 of the Unemployment Insurance Code, there shall be a
credit against the tax imposed under this part in the amount of such
refund. If the tax due after deduction of any other credit under this
part is less than the credit allowable pursuant to this section, the
difference shall be a tax refund.
   (b) If the Franchise Tax Board disallows the refund or credit
provided for by this section, the Franchise Tax Board shall notify
the claimant accordingly. The Franchise Tax Board's action upon the
credit or refund is final unless the claimant files a protest with
the Director of Employment Development pursuant to Section 1176.5 of
the Unemployment Insurance Code. None of the remedies provided by
this part shall be available to such claimant.