How exactly are these credit transfers going to work for EZ credits? In “What We Know So Far Part 2,” I reported that an FTB representative told me that they were leaning in the direction of the most strict interpretation of SX1 28. The FTB has now issued the following statement in an email:
New Revenue and Taxation Code section 23663(a)(3) provides that “following an assignment of any eligible credit under this section, the eligible assignee shall be treated as if it originally earned the assigned credit.” Section 8(a) of SBX1 28 further provides that “[f]or purposes of applying Section 23663 of the Revenue and Taxation Code, . . .any limitations on allowance of any credit against the ‘tax’ that would apply to the assigning taxpayer in the absence of an assignment shall also apply to the same extent to the allowance of that assigned credit against the ‘tax’ of the eligible assignee.”
Reading these two provisions together, it is clear that the Legislature intended the eligible assignee of any assigned credit under new Revenue and Taxation Code section 23663 to “step into the shoes” of the affiliated assignor that originally was allowed the credit, with the result that the zone limitation provisions restricting application of zone credits against income earned from that same zone would apply equally to the eligible assignee as they would have applied to the assignor in the absence of an assignment under this new section.
Another reader pointed out that the intent of the legislature was made explicitly clear in the Senate floor analysis of the bill:
Second, AB 1452 additionally allowed taxpayers to assign tax credits to an affiliated corporation within the commonly controlled group. The bill provided that the affiliated corporation receiving the credit shall be treated as if it originally earned the credit, and existing law requires that the value of enterprise zone hiring credits cannot exceed the amount of a taxpayer’s business income apportioned to the enterprise zone. This bill provides that for purposes of the enterprise zone hiring credit, any limitations on the assigning party also apply to the affiliated corporation receiving the credit.
