Income and corporation taxes: credits: work opportunity credit.

Assembly Member Ta's proposal to create tax incentives for hiring individuals with felony convictions introduces a targeted approach to employment-based reentry support. The measure would establish tax credits for small businesses that hire qualified employees within one year of their conviction or release from prison, offering a credit of 40% of first-year wages up to $5,000 per employee.

The tax credit program, scheduled to operate from 2026 through 2031, applies to both personal income and corporation taxes for employers with fewer than five employees. To qualify, employees must work for at least six months performing services in California. The credit excludes wages already covered by federal on-the-job training programs or those related to labor disputes. Employers cannot combine this credit with other wage-based tax incentives, and wage deductions must be reduced by the claimed credit amount.

The Franchise Tax Board would oversee the program's implementation and submit annual reports to the Legislature beginning December 2028. These reports must detail the number of employers utilizing the credit and the average value of credits claimed. The bill's findings indicate these metrics will serve as performance indicators for evaluating the program's role in reducing unemployment among recently released individuals with felony convictions.