California's New Employment Credit Is Sunset — What Still Pays You to Hire
A lot of "California hiring tax credit" search results describe a program that stopped generating new credit for 2026 hires. Here's what's actually live.
The New Employment Credit (NEC) only applies to qualifying hires made in taxable years beginning before January 1, 2026. If you're hiring in 2026 or later, this specific credit does not apply to that hire — full stop, regardless of the role, census tract, or industry. Employers who made a qualifying hire before that date can keep claiming the credit for up to 60 months from the hire date, but no new hire generates fresh credit.
What the New Employment Credit covered
The NEC was an income tax credit for hiring qualified full-time employees, either in designated economic-development-area census tracts, or — under a later expansion for four specific "SEAL" industries (semiconductor manufacturing/R&D, electric airplane manufacturing, lithium production, lithium battery manufacturing) — anywhere in the state regardless of location. Both the general credit and the SEAL expansion share the same 2026 cutoff.
Is there a bill to bring it back?
Yes, but it hasn't passed. AB 2205 would extend the qualifying-hire sunset to before 2031, but as of the last verified status it remained held under submission in Assembly Appropriations — meaning it's stalled, not enacted. If you're planning 2026 hiring decisions around this credit coming back, don't; plan around current law, and revisit if AB 2205 actually gets signed.
What's actually still active for hiring
Two programs still generate real value for California employers who are hiring right now:
- Homeless Hiring Tax Credit — $2,500–$10,000 per qualifying hire (someone currently experiencing homelessness, or who was in the prior 180 days), subject to a $30 million annual statewide cap. This one is unaffected by the NEC sunset.
- Employment Training Panel (ETP) — not a hiring credit exactly, but reimburses $11–$28/hour of job-skills training costs for new or existing employees, paid only after training completes and the employee is retained 90+ days. Worth checking if you're onboarding and training new hires either way.
And if your hiring plans come with a broader capital investment or job-creation story, the competitive California Competes Tax Credit is still open to any size or industry — it just isn't automatic the way the old NEC was for a qualifying hire.
Check your specific situation
Run your hiring, training, and investment plans through our California Business Incentive Finder to see which of the currently active programs you're a plausible candidate for — and which ones (like NEC and the unfunded California Competes Grant Program) to stop chasing.
Frequently Asked Questions
Can I still claim the New Employment Credit for a 2026 hire?
No. The New Employment Credit only applies to qualifying hires made in taxable years beginning before January 1, 2026. A hire made in 2026 or later does not generate new credit under current law, even if your business and the role would have otherwise qualified.
What if I hired someone before 2026 under this credit — do I lose it now?
No. Employers with a qualifying pre-2026 hire can keep claiming the credit for up to 60 months from that hire's original start date. Only new hires made in 2026 or later are cut off.
Is there any pending legislation to bring the credit back?
AB 2205 would extend the sunset to before 2031, but as of the last verified status it had not passed — it was held under submission in Assembly Appropriations. Don't plan around it until it's actually signed into law.
This article is for general information only and is not tax or legal advice. Confirm your specific eligibility with the Franchise Tax Board or a licensed CPA before making hiring or tax-planning decisions.