BILL NUMBER: AB 340INTRODUCED BILL TEXT INTRODUCED BY Assembly Member Knight FEBRUARY 18, 2009 An act to add Sections 17053.80 and 23623 to the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy. LEGISLATIVE COUNSEL'S DIGEST AB 340, as introduced, Knight. Income taxes: credits: hiring credit. The Personal Income Tax Law and the Bank and Corporation Tax Law authorize various credits against the taxes imposed by those laws. This bill would, for taxable years beginning on and after January 1, 2009, authorize a credit to a qualified taxpayer equal to 5% of the wages of all qualified employees, as defined, employed by the qualified taxpayer during the taxable year. This bill would take effect immediately as a tax levy. Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 17053.80 is added to the Revenue and Taxation Code, to read: 17053.80. (a) For each taxable year beginning on or after January 1, 2009, there shall be allowed a credit against the "net tax," as defined in Section 17039, equal to 5 percent of the wages of all qualified employees employed during the taxable year by a qualified employer. (b) For purposes of this section, "qualified employee" means an employee who is employed by the taxpayer and is a resident of California. (c) 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. (d) Any deduction otherwise allowed under this part for qualified wages shall not be reduced by the amount of the credit allowed under this section. (e) For purposes of this section: (1) (A) All employees of all corporations that are members of the same controlled group of corporations shall be treated as employed by a single taxpayer. (B) For purposes of this paragraph, "controlled group of corporations" has the same meaning as provided in Section 1563(a) of the Internal Revenue Code, except that both of the following apply: (i) "More than 50 percent" shall be substituted for "at least 80 percent" each place it appears in Section 1563(a)(1) of the Internal Revenue Code. (ii) Sections 1563(a)(4) and 1563(e)(3)(C) of the Internal Revenue Code shall not apply. (2) The Franchise Tax Board may prescribe appropriate regulations to carry out the purposes of this paragraph, including any regulations necessary to avoid the application of this paragraph through split-ups, shell corporations, partnerships, tiered ownership structures, or otherwise. SEC. 2. Section 23623 is added to the Revenue and Taxation Code, to read: 23623. (a) For each taxable year beginning on or after January 1, 2009, there shall be allowed a credit against the "tax," as defined in Section 23036, of 5 percent of the wages of a qualified employee employed during the taxable year by a qualified employer. (b) For purposes of this section, "qualified employee" means an employee who is employed by the taxpayer and is a resident of California. (c) In the case where the credit allowed under this section exceeds the "tax," the excess may be carried over to reduce the "tax" in the following year, and succeeding years if necessary, until the credit has been exhausted. (d) Any deduction otherwise allowed under this part for qualified wages shall not be reduced by the amount of the credit allowed under this section. (e) For purposes of this section: (1) (A) All employees of all corporations that are members of the same controlled group of corporations shall be treated as employed by a single taxpayer. (B) For purposes of this paragraph, "controlled group of corporations" has the same meaning as provided in Section 1563(a) of the Internal Revenue Code, except that both of the following apply: (i) "More than 50 percent" shall be substituted for "at least 80 percent" each place it appears in Section 1563(a)(1) of the Internal Revenue Code. (ii) Sections 1563(a)(4) and 1563(e)(3)(C) of the Internal Revenue Code shall not apply. (2) The Franchise Tax Board may prescribe appropriate regulations to carry out the purposes of this paragraph, including any regulations necessary to avoid the application of this paragraph through split-ups, shell corporations, partnerships, tiered ownership structures, or otherwise. SEC. 3. This act provides for a tax levy within the meaning of Article IV of the Constitution and shall go into immediate effect.