California bill would establish tax credit for employers who hire the homeless

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A new bill introduced by California Assemblyman Richard Bloom, D-Santa Monica, would create a new tax credit that would encourage eligible employers to hire the homeless.

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According to the amended text of Assembly Bill 675, the homeless population in California has grown to exceed 130,000. Since 2011, Los Angeles’s homeless population has grown by 52 percent to over 50,000. Statewide, from 2015 to 2017, California’s homeless population grew by 16 percent.

"Despite significant investment by the state and local jurisdictions, including the County of Los Angeles, additional resources are needed to combat homelessness," the bill reads. "In the face of reports that the economy is at “full employment,” many homeless individuals experience stigma and difficulty when attempting to attain full-time, unsubsidized employment. The purpose of the California Homeless Hiring Tax Credit is to encourage qualified employers that provide family-sustaining career pathways to hire and retain employees from the homeless population who have systematically faced barriers to employment."

The bill would add and repeal Section 23628 of the Revenue and Taxation Code and, if approved, would be implemented immediately as a tax levy.

Under the bill, state Legislature would make certain findings and declarations related to the federal Equal Employment Opportunity Commission (EEOC) and the related federal Work Opportunity Tax Credit (WOTC) to ensure federal equal employment opportunity laws are enforced and are protecting those seeking WOTC benefits. In addition, the Legislature would find and declare that compliance with the Homeless Hiring Tax Credit's questions and forms is necessary to ensure proper documentation and certification for employees eligible for the credit allowed by the measure.

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Beginning on or after Jan. 1, 2022, and before Jan. 1, 2027, a qualified taxpayer that employs a homeless person during the taxable year could receive a tax credit of up to $30,000 per taxable year, depending on the amount of hours worked by the homeless person. The tax credits include:

  • $2,500 for each eligible individual that works 500 hours for the eligible employer during the taxable year in which the credit is claimed.
  • $5,000 for each eligible individual that works 1,000 hours for the eligible employer during the taxable year in which the credit is claimed.
  • $7,500 for each eligible individual that works 1,500 hours for the eligible employer during the taxable year in which the credit is claimed.
  • $10,000 for each eligible individual that works 2,000 hours for the eligible employer during the taxable year in which the credit is claimed.

An employer must submit an eligible employer certification and an eligible individual certification for each homeless person employed to the Franchise Tax Board in order to claim the tax credit. The certifications must be filed with the Employment Development Department and the certifications expire after a designated time period. For employers, the designated time period is two years after issuance while, for homeless people, the time period is one year after issuance.

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Eligible employers have 500 employees or less, pay wages subject to withholding, pay family supporting wages at or exceeding the jurisdiction's prevailing wage as determined by the Employment Development Department, and is certified as a "high-road" employer by the Labor and WorkForce Development Agency. A "high-road" employer pays family-supporting wages at or exceeding the jurisdiction’s prevailing wage, competes based on the quality of their services and products, and engages workers and their representatives in the project of building skills and competitiveness in an effort to advance the workers’ career objectives.

Meanwhile, eligible individuals include those who are homless on the date of hire or anytime during a 60-day period immediately before the hire, or someone who is receiving supportive services from a homeless services provider as designated by a local continuum of care or coordinated entry system.

A "person who is homeless" is defined as an individual who is fleeing, or is attempting to flee, domestic violence, has no other residence, and lacks the resources or support networks to obtain other permanent housing, an individual who will imminently lose their primary nighttime residence, provided that, the residence will be lost within 14 days of receiving certification, no subsequent residence has been identified, and the individual lacks the resources or support networks needed to obtain other permanent housing, or an individual that has not had a lease, ownership interest, or occupancy agreement in permanent housing in the 60 days before receiving certification.

Primary nighttime residences include a public or private place not designated for or ordinarily used as a regular housing accommodation, a sleeping accommodation for an individual, including a car, park, abandoned building, bus station, train station, airport, or camping ground, or a publicly or privately operated shelter designated to provide temporary living arrangements, including a permanent housing, permanent supportive, or transitional facility.

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The total aggregate amount of the credit is $30 million per calendar year and taxpayers have to claim the credit on a timely filed original return. The Franchise Tax Board would allocate credits to qualified taxpayers on a first-come-first-served basis. Any excess credit may be carried over for three years.

The state Legislature would find and declare that the effectiveness of the credit will be measured in an annual report created by  the Labor and Workforce Development Agency.

The report, which would be available on the Employment Development Department's website on or before Oct. 1, 2022, and annually thereafter while the credit is in effect, would include the number of employers, based on employer identification numbers, who applied for certification, the number and percentage of employees that applied for and received certificatioin, the distribution of employers and employees beased on industry sectors, and the wages of workers hired as a result of the credit.

The bill is expected to receive its first policy committee hearing on Monday.

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