Bill Text: CA AB1143 | 2013-2014 | Regular Session | Chaptered
Bill Title: Tax administration: suspension or forfeiture: limited liability companies: check the box regulations: property tax assessment.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Passed) 2014-09-15 - Chaptered by Secretary of State - Chapter 325, Statutes of 2014. [AB1143 Detail]
Download: California-2013-AB1143-Chaptered.html
BILL NUMBER: AB 1143 CHAPTERED
BILL TEXT
CHAPTER 325
FILED WITH SECRETARY OF STATE SEPTEMBER 15, 2014
APPROVED BY GOVERNOR SEPTEMBER 15, 2014
PASSED THE SENATE AUGUST 4, 2014
PASSED THE ASSEMBLY AUGUST 14, 2014
AMENDED IN SENATE JUNE 9, 2014
AMENDED IN ASSEMBLY APRIL 22, 2013
INTRODUCED BY Assembly Member Skinner
FEBRUARY 22, 2013
An act to amend Sections 402.5, 23038, 23304.1, and 23305.5 of the
Revenue and Taxation Code, relating to taxation, and declaring the
urgency thereof, to take effect immediately.
LEGISLATIVE COUNSEL'S DIGEST
AB 1143, Skinner. Tax administration: suspension or forfeiture:
limited liability companies: check the box regulations: property tax
assessment.
(1) Existing property tax law requires, when valuing property by
comparison with sales of other properties, that to be considered
comparable the sales be sufficiently near in time to the valuation
date, as defined, and that the properties sold be located
sufficiently near, and be sufficiently alike, the property being
valued, as specified.
This bill would revise that definition.
(2) Existing federal law imposes a tax, for each taxable year, on
the taxable income of every corporation, as defined, and includes an
association within the definition of a corporation. Existing federal
law permits specified business entities to elect their classification
for federal income tax purposes as an association, a partnership, or
disregarded as an entity separate from its owner and provides for a
default classification.
Existing state law, the Corporation Tax Law, generally imposes a
tax on every corporation, as defined, for each taxable year,
according to or measured by its net income. Existing law requires the
classification of a business entity, for state corporate income tax
purposes, to be determined pursuant to the regulations of the
Franchise Tax Board, consistent with federal regulations as in effect
January 1, 1997, that classify a business entity as a partnership or
an association taxable as a corporation or disregard the separate
existence of certain business entities for tax purposes. Existing law
requires that the state classification of an eligible business
entity to be the same as the federal classification of that entity
for tax purposes.
This bill would instead require that the regulations issued by the
Franchise Tax Board, related to the classification of a business
entity, be consistent with federal regulations as in effect May 1,
2014.
(3) Existing law provides that specified limited liability
companies and corporations that are suspended or forfeited for
failure to file a tax return or for failure to pay delinquent taxes,
penalties, or interest are subject to specified consequences,
including contract voidability.
This bill would subject foreign nonregistered limited liability
companies to contract voidability if the foreign nonregistered
limited liability company is subject to suspension or forfeiture for
failure to file a tax return or for failure to pay delinquent taxes,
penalties, or interest.
This bill would declare that it is to take effect immediately as
an urgency statute.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 402.5 of the Revenue and Taxation Code is
amended to read:
402.5. When valuing property by comparison with sales of other
properties, in order to be considered comparable, the sales shall be
sufficiently near in time to the valuation date, and the properties
sold shall be located sufficiently near the property being valued,
and shall be sufficiently alike in respect to character, size,
situation, usability, zoning, or other legal restriction as to use
unless rebutted pursuant to Section 402.1, to make it clear that the
properties sold and the properties being valued are comparable in
value and that the cash equivalent price realized for the properties
sold may fairly be considered as shedding light on the value of the
property being valued. "Near in time to the valuation date" does not
include any sale more than 90 days after the valuation date.
SEC. 2. Section 23038 of the Revenue and Taxation Code is amended
to read:
23038. (a) "Corporation" includes every corporation except
corporations expressly exempt from the tax by this part or the
Constitution of this state.
(b) (1) For the purposes of the tax imposed under Chapter 3
(commencing with Section 23501), "corporation" also includes
associations (including nonprofit associations that perform services,
borrow money or own property), other than banking associations, and
Massachusetts or business trusts. For the purposes of this part, a
Massachusetts or business trust includes every business organization
consisting essentially of an arrangement whereby property is conveyed
to one, or more than one, trustee for purposes other than the mere
conservation of assets, collecting and disbursing of fixed or
periodic income, or the securing of an obligation. This paragraph
shall apply for income or taxable years beginning before January 1,
1997.
(2) (A) For the purposes of the tax imposed under Chapter 3
(commencing with Section 23501), "corporation" also includes
associations (other than banking associations but including nonprofit
associations that perform services, borrow money or own property),
business trusts, and other business entities classified as
associations.
(B) (i) For purposes of the preceding subparagraph, the
classification of a business entity (including a business trust) as
an association taxable as a corporation (under Chapter 3 (commencing
with Section 23501)) shall be determined under regulations of the
Franchise Tax Board, that shall be consistent with federal
regulations as in effect May 1, 2014, that classify a business entity
as a partnership or an association taxable as a corporation or
disregard the separate existence of certain business entities for tax
purposes.
(ii) The classification of an eligible business entity as a
partnership or an association taxable as a corporation for purposes
of this part, Part 10 (commencing with Section 17001), and Part 10.2
(commencing with Section 18401) shall be the same as the
classification of the entity for federal tax purposes.
(iii) If the separate existence of an eligible business entity is
disregarded for federal tax purposes, the separate existence of that
business entity shall be disregarded for purposes of this part, Part
10 (commencing with Section 17001), and Part 10.2 (commencing with
Section 18401), other than Section 17941 (relating to the tax of a
limited liability company), Section 17942 (relating to the fee of a
limited liability company), Section 18633.5 (relating to the return
of a limited liability company), and Sections 17039 and 23036
(relating to tax credits).
(C) Notwithstanding clauses (ii) and (iii) of subparagraph (B), an
eligible business entity that, for any income year beginning within
the 60-month period preceding January 1, 1997, was properly
classified as an association taxable as a corporation for California
tax purposes shall continue to be an association taxable as a
corporation until it elects, under regulations issued pursuant to
subparagraph (B), to be classified or disregarded the same as the
entity is classified or disregarded for federal tax purposes. The
preceding sentence shall not apply to any entity that, during the
60-month period preceding January 1, 1997, was not doing business in
this state, did not derive income from sources within this state, and
had no owner who was a resident of this state.
(D) This paragraph shall apply for income or taxable years
beginning on and after January 1, 1997.
(c) In addition to the above, for purposes of the tax imposed
under Chapter 2 (commencing with Section 23101) for the purpose of
exercising its franchise within this state, "corporation" also
includes any limited liability company that is classified as an
association for California tax purposes.
(d) "Corporation" includes any "corporation" operated by any
receiver, liquidator, referee, trustee or other officers or agents
appointed by any court, or an assignee for the benefit of creditors.
"Corporation" includes any professional corporation incorporated
pursuant to Part 4 (commencing with Section 13400) of Division 3 of
Title 1 of the Corporations Code.
(e) Notwithstanding the above, "corporation" also includes a trust
organized and operated exclusively for purposes contained in Section
23701d.
(f) No provision of the act adding this subdivision shall be
construed to alter existing law with respect to the civil liability
of a limited liability company or its members.
SEC. 3. Section 23304.1 of the Revenue and Taxation Code is
amended to read:
23304.1. (a) Every contract made in this state by a taxpayer
during the time that the taxpayer's powers, rights, and privileges
are suspended or forfeited pursuant to Section 23301, 23301.5, or
23775 shall, subject to Section 23304.5, be voidable at the request
of any party to the contract other than the taxpayer.
(b) If a foreign taxpayer that neither is qualified to do business
nor has an account number from the Franchise Tax Board, fails to
file a tax return required under this part, any contract made in this
state by that taxpayer during the applicable period specified in
subdivision (c) shall, subject to Section 23304.5, be voidable at the
request of any party to the contract other than the taxpayer.
(c) (1) For purposes of subdivision (b), the applicable period
shall be the period beginning on January 1, 1991, or the first day of
the taxable year for which the taxpayer has failed to file a return,
whichever is later, and ending on the earlier of the date the
taxpayer qualified to do business in this state or the date the
taxpayer obtained an account number from the Franchise Tax Board.
(2) With regard to a limited liability company, the applicable
period shall be the period beginning on January 1, 2014, or the first
day of the taxable year for which the taxpayer has failed to file a
return, whichever is later, and ending on the earlier of the date the
taxpayer qualified to do business in this state or on the date the
taxpayer obtained an account number from the Franchise Tax Board.
(d) If a taxpayer fails to file a tax return required under this
part, to pay any tax or other amount owing to the Franchise Tax Board
under this part or to file any statement or return required under
Section 23772 or 23774, within 60 days after the Franchise Tax Board
mails a written demand therefor, any contract made in this state by
the taxpayer during the period beginning at the end of the 60-day
demand period and ending on the date relief is granted under Section
23305.1, or the date the taxpayer qualifies to do business in this
state, whichever is earlier, shall be voidable at the request of any
party to the contract other than the taxpayer. This subdivision shall
apply only to a taxpayer if the taxpayer has an account number from
the Franchise Tax Board, but has not qualified to do business under
the Corporations Code. In the case of a taxpayer that has not
complied with the 60-day demand, the taxpayer's name, Franchise Tax
Board account number, date of the demand, date of the first day after
the end of the 60-day demand period, and the fact that the taxpayer
did not within that period pay the tax or other amount or file the
statement or return, as the case may be, shall be a matter of public
record.
SEC. 4. Section 23305.5 of the Revenue and Taxation Code is
amended to read:
23305.5. For purposes of this article:
(a) "Taxpayer" means either:
(1) A corporation subject to tax under this chapter.
(2) A business entity organized under a statute or law, under a
state or a federally recognized Indian tribe, under another
jurisdiction, if the statute or law describes or refers to the entity
as a limited liability company or if regulations of the Franchise
Tax Board identify a business entity organized under the laws of a
foreign country as a limited liability company.
(b) With regard to a limited liability company:
(1) "Articles of incorporation" shall include a limited liability
company's articles of organization.
(2) "Tax" shall include the tax and fee imposed by Sections 17941
and 17942, or former Sections 23091 and 23092, respectively.
SEC. 5. This act is an urgency statute necessary for the immediate
preservation of the public peace, health, or safety within the
meaning of Article IV of the Constitution and shall go into immediate
effect. The facts constituting the necessity are:
In order to ensure that all entities doing business in California
are treated equally under the Revenue and Taxation Code and to ensure
that a necessary federal law reference for the classification of a
business entity for state corporate income tax purposes is updated as
soon as possible, it is necessary that this act take effect
immediately.
