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Legislative Update: Including the “Kick Them When They’re Down Act”

Here are some of the notable legislative updates in recent days that Sacramento has graced us with.

AB 2044. The bill has been amended such that on the one hand, the bill would dramatically increase the amount of the Enterprise Zone hiring credit by increasing the credit calculation cap from 150% of the minimum wage to 250% of the minimum wage. But on the other hand, the bill places a limit on the total amount of credits that the State will be able to provide in a given year to $250 million. Apparently first come, first served. This would mean that about 75% of the credits that taxpayers could make use of (because of the increase in the credit), would not be available and would be pushed into future years. I’m afraid one of the unintended consequences of this idea would be to effectively make it impossible for small or new businesses to get any benefit from the program.

SB 974 was part of Senate Leader Steinberg’s “Jobs Package.” The original “spot” language cited the negative PPIC report and opined about various perceived problems with the Enterprise Zone program. The amended bill does little more to the Enterprise Zone program than codify in law Senator Steinberg’s negative opinion of the program and calls for “rigorous evaluation” of all tax expenditure programs.

SB 1391 by Senator Yee goes after businesses that claim a tax credit in a very original manner. I’m dubbing it the “Kick Them When They’re Down Act.”

This bill would require a taxpayer doing business in California that claims a tax credit to submit to the Franchise Tax Board on the original return specified information, including the number of employees employed by the taxpayer in the state, the amount of tax credits claimed by the taxpayer on the return, and the number of jobs created by the tax credit.

The bill would also require, in cases in which a taxpayer subject to the above provisions has a net decrease in the number of full-time employees for a credit added by statute on or after January 1, 2011, the credit to be disallowed and the entire amount of any credit previously allowed to be recaptured and the taxpayer to be liable for any credits on previous tax returns, as specified.

I really don’t know what to say. In the words of my three-year-old son, this bill sounds like a “bad good idea.” Basically, this would make the risk to a business for participating in an incentive program much greater than any possible benefit they could receive. Maybe that’s exactly the idea.

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