Dicon Fiberoptics, Inc. v. Franchise Tax Board

The Enterprise Zone Act (Gov. Code, § 7070 et seq.) was enacted “to stimulate business and industrial growth” in “areas within the state that are economically depressed due to a lack of investment in the private sector.” (Id., § 7071, subd. (a).) Among the incentives available to businesses that operate within an enterprise zone is a hiring tax credit in the amount of a percentage of the wages paid to a “qualified employee.” (Rev. & Tax. Code, § 23622.7, subd. (a).) A “qualified employee” is an employee who falls into one of several categories, such as being eligible for the federal Job Training Partnership Act ( 29 U.S.C., § 1501 et seq.) or the Greater Avenues for Independence Act of 1985 (GAIN; Welf. & Inst. Code, § 11320.33). To claim the tax credit, the employer must satisfy several requirements, including obtaining from a governmental agency “a certification that provides that a qualified employee meets the eligibility requirements.” (Rev. & Tax. Code, § 23622.7, subd. (c).)

Dicon Fiberoptics, Inc. (Dicon), is a California corporation that does business in an enterprise zone. Dicon hired workers for whom it had obtained the required certifications, and it claimed a…