POSTED ON March 05, 2013

By Richard Ruvelson

The California New Jobs Credit, initially effective for taxable years beginning after January 1, 2009 remains in effect and is available to tax-exempt employers with 20 or fewer employees.

The $3,000 per qualified new employee credit is determined by comparing the number of qualified full-time employees for the taxable year being reported with the number of qualified full-time employees that were employed during the preceding taxable year. The credit is prorated on an annual full-time equivalent basis for employees employed less than a full year and may be claimed by a nonprofit organization on a timely filed (including extension) CA Form 109, California Exempt Organization Business Income Tax Return submitted before the cutoff date determined by the Franchise Tax Board.

The credit is a nonrefundable credit and as such may only reduce tax liability for the current year or be carried over to reduce tax liability for eight years or until the statewide $400 million credit cap expires, whichever is earliest.

Additional charactieristics of the California New Jobs Credit are as follows:

  • The credit is not subject to the 50% limitation for business credits.
  • The total amount of credit available to be claimed by all taxpayers is capped at $400 million. As of December 31, 2012 the approximately $138 million of the credit has been claimed which means that it is unlikely the credit will be denied for 2012 and 2013 returns.
    • Taxpayers claiming the credit on an original return received by the Franchise Tax Board after the cut-off date is met will be notified that the credit has been denied.
    • Taxpayers that have been denied the credit as a result of the cut-off date being reached will not be assessed an underpayment of estimated tax or underpayment of tax penalty to the extent the underpayment was created or increased by the disallowance of this credit.

If you have any questions about the New Jobs Tax Credit contact Akash Sehgal, State and Local Tax Director at 310.873.1622 or ASehgal@greenhassonjanks.com