BILL NUMBER: SB 414INTRODUCED BILL TEXT INTRODUCED BY Senator Knight FEBRUARY 20, 2013 An act to add Sections 17053.81, 17053.82, 23623.1, and 23623.2 to the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy. LEGISLATIVE COUNSEL'S DIGEST SB 414, as introduced, Knight. Income taxes: credits: qualified employees. The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws. This bill would, under both laws, for taxable years beginning on or after January 1, 2013, allow a credit to a qualified employer, as defined, in an amount equal to 50% of the tuition reimbursed to, and either 5% or 10% of the qualified wages paid to, a qualified employee working in qualified industry, as defined to include the manufacture of aerospace or defense hardware or software, aerospace maintenance, aerospace repair and overhaul, parts supply to the aerospace industry, provision of services and support relating to the aerospace industry, research and development of aerospace technology and systems, and the education and training of aerospace personnel, as provided. 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 17053.81 is added to the Revenue and Taxation Code, to read: 17053.81. (a) (1) For each taxable year beginning on or after January 1, 2013, there shall be allowed to a qualified employer a credit against the "net tax," as defined in Section 17039, in an amount equal to 50 percent, subject to paragraph (2), of the tuition reimbursed to a qualified employee by a qualified employer. (2) For each taxable year in which the credit is allowed, the credit amount shall not exceed 50 percent, per qualified employee, of the average annual tuition paid by a qualified employee that received an undergraduate or graduate degree at the University of California or the California State University. For purposes of this subdivision, "tuition" shall not include the cost of books, fees, or room and board. (3) The credit shall be allowed only for the first four years of employment of the qualified employee by the qualified employer. (b) For purposes of this section: (1) "Full-time" means either: (A) The employee is paid wages subject to Division 6 (commencing with Section 13000) of the Unemployment Insurance Code for not less than an average of 35 hours per week. (B) The employee is salaried and was paid compensation during the taxable year for full-time employment, within the meaning of Section 515 of the Labor Code. (2) "Qualified employee" means a person who is employed by, or contracts with, the qualified employer in a full-time position in the state within one year of being awarded an undergraduate or graduate degree from an engineering program accredited by the Engineering Accreditation Commission of the Accreditation Board for Engineering and Technology, offered by the University of California, the California State University, or a private college or university that is accredited by a national accrediting body, for work in a qualified industry and who was not employed by any qualified employer for work in a qualified industry prior to his or her current employment or contract. (3) "Qualified employer" means a person or entity who is engaged in a trade or business in a qualified industry. (4) "Qualified industry" means the manufacture of aerospace or defense hardware or software, aerospace maintenance, aerospace repair and overhaul, parts supply to the aerospace industry, provision of services and support relating to the aerospace industry, research and development of aerospace technology and systems, and the education and training of aerospace personnel. (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. (d) (1) The Franchise Tax Board may prescribe rules, guidelines, or procedures necessary or appropriate to carry out the purposes of this section. (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. SEC. 2. Section 17053.82 is added to the Revenue and Taxation Code, to read: 17053.82. (a) (1) For each taxable year beginning on or after January 1, 2013, there shall be allowed to a qualified employer as a credit against the "net tax," as defined in Section 17039, an amount as specified in paragraph (2) per each qualified employee employed during the taxable year by the qualified employer. (2) (A) Ten percent of the qualified wages of the qualified employee if he or she received an undergraduate or graduate degree from a public or private college or university located in this state. (B) Five percent of the qualified wages of the qualified employee if he or she received an undergraduate or graduate degree from a public or private college or university located outside of this state. (C) The maximum amount of credit allowed pursuant to this section is twelve thousand five hundred dollars ($12,500) per qualified employee per taxable year. (3) The credit shall be allowed only for the first five years of employment of the qualified employee by the qualified employer. (b) For purposes of this section: (1) "Full-time" means either: (A) The employee is paid wages subject to Division 6 (commencing with Section 13000) of the Unemployment Insurance Code for not less than an average of 35 hours per week. (B) The employee is salaried and was paid compensation during the taxable year for full-time employment, within the meaning of Section 515 of the Labor Code. (2) "Qualified employee" means a person who is employed by, or contracts with, the qualified employer in a full-time position in the state within one year of being awarded an undergraduate or graduate degree from a program that has been accredited by the Engineering Accreditation Commission of the Accreditation Board for Engineering and Technology offered by a public or private college or university accredited by a national accrediting body, for work in a qualified industry and who was not employed by any qualified employer for work in a qualified industry prior to his or her current employment or contract. (3) "Qualified employer" means a person or entity who is engaged in a trade or business in a qualified industry. (4) "Qualified industry" means the manufacture of aerospace or defense hardware or software, aerospace maintenance, aerospace repair and overhaul, parts supply to the aerospace industry, provision of services and support relating to the aerospace industry, research and development of aerospace technology and systems, and the education and training of aerospace personnel. (5) "Qualified wages" means wages subject to withholding tax pursuant to Division 6 (commencing with Section 13000) of the Unemployment Insurance Code paid to employee, salary, or other remuneration. "Qualified wages" shall not include employer-provided retirement, medical or health care benefits, reimbursement for travel, meals, lodging, or any other expense. (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. (d) (1) The Franchise Tax Board may prescribe rules, guidelines, or procedures necessary or appropriate to carry out the purposes of this section. (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. SEC. 3. Section 23623.1 is added to the Revenue and Taxation Code, to read: 23623.1. (a) (1) For each taxable year beginning on or after January 1, 2013, there shall be allowed to a qualified employer a credit against the "tax," as defined in Section 23036, in an amount equal to 50 percent, subject to paragraph (2), of the tuition reimbursed to a qualified employee by a qualified employer. (2) For each taxable year in which the credit is allowed, the credit amount shall not exceed 50 percent, per qualified employee, of the average annual tuition paid by a qualified employee that received an undergraduate or graduate degree at the University of California or the California State University. For purposes of this subdivision, "tuition" shall not include the cost of books, fees, or room and board. (3) The credit shall be allowed only for the first four years of employment of the qualified employee by the qualified employer. (b) For purposes of this section: (1) "Full-time" means either: (A) The employee is paid wages subject to Division 6 (commencing with Section 13000) of the Unemployment Insurance Code for not less than an average of 35 hours per week. (B) The employee is salaried and was paid compensation during the taxable year for full-time employment, within the meaning of Section 515 of the Labor Code. (2) "Qualified employee" means a person who is employed by, or contracts with, the qualified employer in a full-time position in the state within one year of being awarded an undergraduate or graduate degree from an engineering program accredited by the Engineering Accreditation Commission of the Accreditation Board for Engineering and Technology, offered by the University of California, the California State University, or a private college or university that is accredited by a national accrediting body, for work in a qualified industry and who was not employed by any qualified employer for work in a qualified industry prior to his or her current employment or contract. (3) "Qualified employer" means a person or entity who is engaged in a trade or business in a qualified industry. (4) "Qualified industry" means the manufacture of aerospace or defense hardware or software, aerospace maintenance, aerospace repair and overhaul, parts supply to the aerospace industry, provision of services and support relating to the aerospace industry, research and development of aerospace technology and systems, and the education and training of aerospace personnel. (c) In the case where the credit allowed by this section exceeds the "tax," the excess may be carried over to reduce the "tax" in the following year, and succeeding years if necessary, until the credit is exhausted. (d) (1) The Franchise Tax Board may prescribe rules, guidelines, or procedures necessary or appropriate to carry out the purposes of this section. (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. SEC. 4. Section 23623.2 is added to the Revenue and Taxation Code, to read: 23623.2. (a) (1) For each taxable year beginning on or after January 1, 2013, there shall be allowed to a qualified employer as a credit against the "tax," as defined in Section 23036, an amount as specified in paragraph (2) per each qualified employee employed during the taxable year by the qualified employer. (2) (A) Ten percent of the qualified wages of the qualified employee if he or she received an undergraduate or graduate degree from a public or private college or university located in this state. (B) Five percent of the qualified wages of the qualified employee if he or she received an undergraduate or graduate degree from a public or private college or university located outside of this state. (C) The maximum amount of credit allowed pursuant to this section is twelve thousand five hundred dollars ($12,500) per qualified employee per taxable year. (3) The credit shall be allowed only for the first five years of employment of the qualified employee by the qualified employer. (b) For purposes of this section: (1) "Full-time" means either: (A) The employee is paid wages subject to Division 6 (commencing with Section 13000) of the Unemployment Insurance Code for not less than an average of 35 hours per week. (B) The employee is salaried and was paid compensation during the taxable year for full-time employment, within the meaning of Section 515 of the Labor Code. (2) "Qualified employee" means a person who is employed by, or contracts with, the qualified employer in a full-time position in the state within one year of being awarded an undergraduate or graduate degree from a program that has been accredited by the Engineering Accreditation Commission of the Accreditation Board for Engineering and Technology offered by a public or private college or university accredited by a national accrediting body, for work in a qualified industry and who was not employed by any qualified employer for work in a qualified industry prior to his or her current employment or contract. (3) "Qualified employer" means a person or entity who is engaged in a trade or business in a qualified industry. (4) "Qualified industry" means the manufacture of aerospace or defense hardware or software, aerospace maintenance, aerospace repair and overhaul, parts supply to the aerospace industry, provision of services and support relating to the aerospace industry, research and development of aerospace technology and systems, and the education and training of aerospace personnel. (5) "Qualified wages" means wages subject to withholding tax pursuant to Division 6 (commencing with Section 13000) of the Unemployment Insurance Code paid to employee, salary, or other remuneration. "Qualified wages" shall not include employer-provided retirement, medical or health care benefits, reimbursement for travel, meals, lodging, or any other expense. (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. (d) (1) The Franchise Tax Board may prescribe rules, guidelines, or procedures necessary or appropriate to carry out the purposes of this section. (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. SEC. 5. This act provides for a tax levy within the meaning of Article IV of the Constitution and shall go into immediate effect.