Fillable California Form 3527 - New Jobs Credit

Instructions for Form FTB 3527

New Jobs Credit

References in these instructions are to the Internal Revenue Code (IRC) as of January 1, 2009, and to the California Revenue and Taxation Code (R&TC).

General Information

unless those assets also constitute property described in IRC

Section 1221(1) in the hands of the acquiring taxpayer or

A Purpose

partnership (or related person).

2. Where a taxpayer or partnership (or any related person) is engaged

Use form FTB 3527, New Jobs Credit, to figure a credit for qualified

in one or more trade or business activities in this state, or has been

employers in the amount of $3,000 for each increase in qualified

engaged in one or more trade or business activities in this state

full-time employees hired in the current taxable year. The $3,000 credit

within the preceding 36 months (“prior trade or business activity”),

is prorated based on an annual full-time equivalent basis for full-time

and thereafter commenced an additional trade or business activity

employees employed less than a full year. See General Information

in this state, the additional trade or business activity shall only be

Section D, Definitions, for more information. The total amount of credit

treated as a new business if the additional trade or business activity

that the Franchise Tax Board (FTB) can allocate may not exceed four

is classified under a different division of the Standard Industrial

hundred million dollars ($400,000,000).

Classification (SIC) Manual (1987 edition), than are any of the

The credit must be claimed on a timely filed original tax return by a

taxpayer’s or partnership’s (or any related persons) current or prior

cut-off date that the FTB will establish based on allocations. The FTB

trade or business activities.

will post the cut-off date at the FTB website when the credit has been

3. Where a taxpayer or partnership, including all related persons, is

fully allocated. Only tax returns filed by the cut-off date will qualify to

engaged in trade or business activities wholly outside of this state

claim the credit. To ensure that you receive the credit if you qualify, you

and the taxpayer or partnership first commences doing business

must file your original tax return by the cut-off date. Go to ftb.ca.gov

in this state (within the meaning of R&TC Section 23101) after

and search for new jobs to find out if the credit has been fully allocated,

December 31, 1993 (other than by purchase or other acquisition

when the cut-off date will be, and to get any other updates for this credit.

described in paragraph 1), the trade or business activity shall be

The credit was not subject to the 50% limitation for business credits

treated as a new business for purposes of this credit.

under California Revenue and Taxation Code (R&TC) Sections 17039.2

4. Where the legal form under which a trade or business activity is

and 23036.2.

being conducted is changed, the change in form shall be disregarded

B Qualifications

and the determination of whether the trade or business activity is a

new business shall be made by treating the taxpayer or partnership

Net increases in qualified full-time employees are determined by

as having purchased or otherwise acquired all or any portion of the

comparing the number of full-time employees employed by the taxpayer

assets of an existing trade or business under the rules of paragraph 1.

in the current taxable year with the number of qualified full-time

Employees of related persons shall be treated as employed by a single

employees that were employed by the taxpayer in the preceding taxable

taxpayer.

year.

For more information on these rules, see Legal Rulings 96-5 and 99-2,

Qualified employers must have employed 20 or less employees on the

and R&TC Sections 17276(f) and 24416(g).

last day of the preceding taxable year and must have a net increase in

qualified full-time employees in the current taxable year compared to the

C Exceptions

number in the preceding taxable year. If an employer first commenced

An employer may not claim the credit for those employees who are any

doing business in California during the current taxable year, the number

of the following:

of qualified full-time employees for the immediately preceding taxable

year would be zero.

• Certified as a qualified employee in an enterprise zone or targeted

tax area.

In determining whether the taxpayer has first commenced doing

• Certified as a qualified disadvantaged individual in a manufacturing

business in this state during the current taxable year, the following rules

apply:

enhancement area.

• Certified as a qualified disadvantaged individual or qualified displaced

1. Where a taxpayer or partnership purchases or otherwise acquires

employee in a local agency military base recovery area.

all or any portion of the assets of an existing trade or business

• An employee whose wages are included in calculating any other

(irrespective of the form of entity) that is doing business in this state

credit allowed.

(within the meaning of R&TC Section 23101), the trade or business

thereafter conducted by the taxpayer or partnership (or any related

D Definitions

person) shall not be treated as a new business if the aggregate fair

market value (FMV) of the acquired assets (including real, personal,

Qualified Employer: A taxpayer that, as of the last day of the preceding

tangible, and intangible property) used by the taxpayer or partnership

taxable year, employed a total of 20 or fewer employees.

(or any related person) in the conduct of its trade or business

Qualified Full-time Employee:

exceeds 20% of the aggregate FMV of the total assets of the trade

• A qualified employee who was paid qualified wages by the qualified

or business being conducted by the taxpayer or partnership (or any

employer for services of not less than an average of 35 hours

related person).

per week. The average hours are determined based on the number

For purposes of this paragraph:

of hours worked divided by the number of weeks in the period of

(A) The determination of the relative FMVs of the acquired assets

employment. Qualified employees include only those employees who

and the total assets shall be made as of the last day of the first

work an average of 35 hours per week.

taxable year in which the taxpayer or partnership (or any related

• A qualified employee who was a salaried employee and was

person) first uses any of the acquired trade or business assets in

paid compensation during the current taxable year for full-time

its business activity.

employment, within the meaning of Section 515 of the Labor Code,

by the qualified employer.

(B) Any acquired assets that constituted property described in

IRC Section 1221(1) in the hands of the transferor shall not be

Qualified Wages: Wages subject to Div. 6 (commencing with

treated as assets acquired from an existing trade or business,

Section 13000) of the Unemployment Insurance Code.

FTB 3527 2012 Page 1

California Form 3527 - New Jobs Credit - 2012 Page 2

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