Analysis of California AB 1139

The California Association of Enterprise Zones (CAEZ) keeps an updated Legislative Bill Report on its website, listing proposed California legislation that would affect Economic Development Areas (EDAs) in California.  The entry for ABA 1139, which we have been following here, was updated as of April 30th.
As you may recall, RestaWOTC opposes AB 1139, which would institute profoundly detrimental changes to California’s enterprise zone hiring credit program.  The CAEZ’s brief synopsis provides a good spring board for our own brief discussion.  As currently proposed, the bill would:
1. “The bill would essentially eliminate retroactive vouchering.”
ZC COMMENT: Specifically, the bill would require employee certification applications to be submitted to the enterprise zone’s vouchering agent within 21 days of an employee’s hire date. As a result, zone businesses without the current technical expertise or HR capacity to keep up with the program’s procedural requirements in a timely manner would be unable claim their tax benefits — even though they are hiring eligible employees!
Anyone truly experienced with the hiring credit program also realizes that 21 days is not enough time to acquire the documentation needed to determine eligibility under the program’s most important eligibility categories. Correspondence by fax and letter with multiple county, state, and federal agencies is often needed before an application is ready to submit. As a result, zone businesses would probably be forced to submit thousands of incomplete applications while further documentation is still being sought.
2. “The bill would . . . eliminate the use of the TEA (“Targeted Employment Area”) and TTA residency as eligibility criteria.”
ZC COMMENT: A Targeted Employment Area or “TEA” is an economically depressed residential area associated with most California enterprise zones. The families and individuals living in the TEA are the very people the program is supposed to assist. In most zones, eliminating this category would significantly reduce the ability of zone businesses to effectively identify qualifying employees. (Note, TTA residency is similar to the enterprise zone’s TEA, except it applies to a different kind of zone — called a Targetted Tax Area.)

3.  The bill would . . . add onerous reporting requirements for zone businesses.”
ZC COMMENT: Specifically, the bill would require zone businesses to report certain facts about each qualified employee to the enterprise zone administrator by March 1 every year. This would include (a) each employee’s total compensation for the year, (b) the type of work performed by each employee, (c) each employee’s length of employment, and (d) information about employee benefits provided. If a zone business fails to report this information, the enterprise zone may refuse to certify additional qualified employees for that business.
4. The bill would . . . modify the calculation of the hiring credit by deleting the current threshold of 150% of minimum wage.  The bill would instead establish two new and yet to be determined percentage thresholds.”
ZC COMMENT: The bill, in its current draft, does not specify what the new thresholds would be. Logic suggests, however, that the threshold for most businesses would be reduced. Employers that provide a combination of full-time work and healthcare benefits, on the other hand, would be eligible for a higher threshold. This would tend to favor unionized labor (which by way sponsors this bill).
For most employers, this bill would NOT eliminate the value of the California enterprise zone hiring credit. But, unfortunately, it would reduce the net benefit available while increasing the overhead costs associated with identifying, documenting, certifying, tracking, and reporting on qualified employees.
As we reported previously, this bill was heard by the legislative Assembly Committee on Jobs, Economic Development and the Economy on April 29th (last month). At that time, the decision was made to hold the bill in committee until 2010, when it will be revisited. In the mean time, RestaWOTC will continue to lend its support to the bill’s opposition coalition. We suggest that you do the same.

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