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Multistate Tax Alert: California Enterprise Zone Hiring Credit

California Supreme Court holds FTB can audit certifications to confirm employee qualification


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The California Supreme Court recently issued its decision in Dicon Fiberoptics, Inc. v. Franchise Tax Board. At issue in the case was whether certification issued by a governmental agency constitutes prima facie proof that a worker is a qualified employee for purposes of claiming the Enterprise Zone (“EZ”) hiring credit. The EZ hiring credit, one of several tax incentives available to businesses located in an EZ, is a tax credit against California income or franchise tax based upon wages paid to “qualified employees.” In overruling the Court of Appeal, the Supreme Court held that a certificate issued by a local government agency was not enough to substantiate that a worker is a qualified employee for purposes of the EZ hiring credit. Rather, the Franchise Tax Board may require additional documentation to support an employee’s eligibility for the EZ hiring credit.

In the attached Tax Alert we summarize the California Supreme Court’s decision in this case.

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