The Tax Foundation found that California ranked the fourth worst state when it comes to taxes.  And that was before it added more taxes with Prop 30.  Jerry Brown is gunning for number 1 if he continues his attempts to minimize the Enterprise Zone tax credits.

Governor Brown released his 2013-2014 budget today which seeks to make it more difficult for businesses to utilize the Enterprise Zone credits.  At least a step up from last year when Brown proposed to eliminate the EZ program altogether, this year’s approach is more subtle.  Brown seeks to limit retroactive vouchering to one year, despite significant evidence and testimony that most of the businesses for which the credit is intended cannot process all their employee paperwork so quickly, i.e. the small businesses.  It seems that everyone but Brown recognizes that small businesses are the engine that runs California’s job market.  By making it more difficult for them, Brown is doing a disservice to the job market and to a large part of his constituency.

Brown also wants to require “third party” verification of employee residence in a TEA.  Assuming he means driver’s licenses instead of I-9s, again many of the lower income workers have no such third party verification and would thus be excluded from the credit.  The immediate result would be reduced hiring of those without California issued identification a result that I suspect Brown’s backers haven’t fully thought through yet.  Under Brown’s budget, there is a higher level of identification required for a tax credit than the law currently requires to allow someone to vote.  Perhaps an intended distinction….

Below is the full text of the Budget section discussing the Enterprise Zone:

Enterprise Zone Regulatory Reform

The Budget includes savings relating to new regulations for the Enterprise Zone program.  The proposed regulations will accomplish the following reforms:

Limit retrovouchering by requiring all voucher applications to be made within one year of the date of hire.

Require third party verification of employee residence within a Targeted Employment Area.

Streamline the vouchering process for hiring veterans and recipients of public assistance.

Create stricter zone audit procedures and audit failure procedures.

These regulatory reforms will primarily affect Corporation Tax revenue, but will also have an impact on Personal Income Tax revenue. The regulations, in total, are expected to increase General Fund revenue by $10 million in 2012‑13 and $50 million in 2013‑14. The Administration will be pursuing further Enterprise Zone reform through legislation.

I guess it could be worse.  Forbes ranked California as the 41st worst state to do business in.  An unfavorable tax structure tops the list of why California ranks so low. Here is the study.

From today’s Imperial Valley News:

Sacramento, California – Today, State Assembly Speaker John A. Pérez announced his new leadership team, appointing Assemblyman V. Manuel Pérez (D-Coachella) to the position of Democratic Whip.  The announcement was made during the swearing-in ceremony of the California State Assembly’s 2013-14 session.

“There is a lot of work to be done to keep the economy growing and get our communities back to work,” said Pérez, “and as a senior member of the Legislature entering my third and final term, I am pleased to be bringing my policy skills to bear as a member of the Speaker’s leadership team.”

As a member of Democratic leadership, Pérez will no longer serve as the committee chairman of the Assembly Committee on Jobs, Economic Development, and the Economy.

Also today, Pérez was nominated by his peers to serve as Vice Chair of the California Latino Legislative Caucus.  As Vice Chair, Pérez will work closely with State Senator Ricardo Lara, Chair, to set the direction and priorities of the Caucus.  The Vice Chair serves a one-year term.

Among his first actions of the 2013 session, Pérez introduced AB 28, a bill that adds accountability and transparency measures to the California Enterprise Zone program, a state program designed to attract business investment and support job creation in low-income and underserved communities.  Since his election to the State Assembly in 2008 and throughout his tenure as chair of the Assembly Jobs Committee, Pérez has been a vocal advocate to protect and strengthen this economic development program.

With the newly redrawn Assembly District lines, Pérez now represents the 56^th district, which comprises the cities of Blythe, Brawley, Bermuda Dunes, Calexico, Calipatria, Cathedral City, Coachella, Desert Hot Springs, El Centro, Holtville, Imperial, Indio, Mecca, Oasis, North Shore, Salton Sea, Thermal, Thousand Palms, and Westmorland.

This posted yesterday in the San Francisco Sentinel.

Allows San Francisco Businesses to Access Valuable Hiring Tax Credits Through Simple Web-Based Tool; Advances Mayor’s Jobs Plan Goal of Using Technology to Make the City Easier Navigate for Business

Mayor Edwin M. Lee today announced the launch of the San Francisco Enterprise Zone Web App, a web-based tool that allows San Francisco businesses to apply online for the City’s popular Enterprise Zone hiring tax credit program. The Enterprise Zone Web App will replace a completely paper-based process with a web based tool which increases government efficiency and makes it easier for businesses to utilize the program.

“I am committed to making it easier for local businesses to operate and grow jobs in San Francisco,” said Mayor Lee. “The Enterprise Zone Web App takes a powerful tax incentive program and brings it online so small businesses, manufacturers and other firms can save time while they save money.”

“At SFMade we make sure that all of our manufacturers are aware of the Enterprise Zone hiring tax credits and the potential savings it offers,” said SFMade Executive Director Kate Sofis. “My staff works closely with small business owners with limited resources. Having the Enterprise Zone Web App instead of a paper process will make a big difference in terms of administrative costs, time and use of this important tax credit.”

“The Enterprise Zone hiring tax credit is really important to our company,” said Marissa Andres, Controller at Mackenzie Warehouse, an auto parts distributor located in Potrero Hill. “The savings we earn in tax credits are used for hiring and retaining employees. The online tool is simple and straight-forward and saves me valuable time.”

The Enterprise Zone is a State of California program which provides tax credits and other incentives to encourage business investment and promote the creation of new jobs. In place since 1997, the San Francisco Enterprise Zone is one of 42 Enterprise Zones in the state and is administered locally by the Office of Economic and Workforce Development (OEWD). The San Francisco Enterprise Zone areas include the following areas: Bay View Hunters Point/ South Bayshore; Chinatown; the Mission; Mission Bay Project Area; Potrero Hill; south of Market; the Tenderloin; and the Western Addition and some portions of North Beach and Financial District.

The tool was developed using Firmstep’s AchieveForms software. The switch to an on-line app will not only decrease costs in paper and postage, but will also speed up the processing time getting businesses approved for tax credits more quickly and efficiently.

The San Francisco Enterprise Zone Web App can be found at http://sfezapp.oewd.org For more information on the San Francisco Enterprise Zone Program, go to: http://www.oewd.org/Enterprise-Zone.aspx For more information from the State on the Enterprise Zones Program, go to: www.hcd.ca.gov/fa/ez/ <http://www.hcd.ca.gov/fa/ez/>

The Sacramento Bee is reporting that the Democrats have gained a two thirds majority in both legislative houses.  Consequently, they can raise taxes without any Republican opposition.  What this means for the EZs is yet to be seen.  There are some bright spots.  First, many Democratic legislators have EZs in their districts and they have come out in favor of continuing the program.  Second, given that Prop 30 passed, it is yet to be seen how aggressively the democrats will pursue further tax hikes, particularly employment related credits, in a still sensitive economy.  Stay tuned….

Governor Brown’s May Revise does not specifically mention enterprise zones.  In a number of places, the budget blames lower revenues on increased and “unpredictable” use of corporate tax credits as well as the lack of the type of credit limitations that existed in 2008-2009.

In an unanimous opinion today, the California Supreme Court ruled  that the FTB can in fact audit behind the EZ voucher.  The voucher certificate is no longer considered “prima facie” evidence that the worker is qualified for the EZ program.  The opinion states:

We reverse the Court of Appeal’s holding that a certification issued by a governmental agency for purposes of the hiring tax credit under Revenue and Taxation Code section 23622.7 constitutes “prima facie proof of a worker is a ‘qualified employee,’ ” which shifts to the Franchise Tax board the “burden of demonstrating an employee is not a qualified worker for which no voucher should have issued. ” In all other respects, the Franchise Tax Board does not challenge the Court of Appeal’s judgment, and it is affirmed. Majority Opinion by Liu, J. — joined by Cantil-Sakauye, C.J., Kennard, Baxter, Werdegar, Chin, and Corrigan, JJ.

An article in Fox Business lists all the reasons NOT to do business in California.  Yet despite all the negatives, entrepeneurs seem to flourish in the state.    One of the bright spots is undoubtedly the Enterprise Zone tax credits. “Other business ventures that benefit California’s populace may be eligible for numerous tax credits, including enterprise zone credits, economic development area credits and targeted tax area credits.”

Read the full article.

The Sequoia Valley Enterprise Zone, designated as such in January 2009, currently consists of 33,902 acres, and includes commercial, industrial, non-commercial and non-industrial areas, according to a Porterville Economic Development Department staff report.

The proposed expansion would increase Porterville’s boundaries by 72 parcels for a total of 143 acres. Tulare County’s enterprise zone, which includes the south county communities of Terra Bella, Tipton and Richgrove among 10 others, would be expanded by approximately 3,310 acres.

Read the full article.