Bill Text: CA AB2754 | 2013-2014 | Regular Session | Chaptered
Bill Title: Income taxes: credits: electronic filing: charitable remainder trusts.
Spectrum: Partisan Bill (Democrat 6-0)
Status: (Passed) 2014-09-19 - Chaptered by Secretary of State - Chapter 478, Statutes of 2014. [AB2754 Detail]
Download: California-2013-AB2754-Chaptered.html
BILL NUMBER: AB 2754 CHAPTERED
BILL TEXT
CHAPTER 478
FILED WITH SECRETARY OF STATE SEPTEMBER 19, 2014
APPROVED BY GOVERNOR SEPTEMBER 19, 2014
PASSED THE SENATE AUGUST 26, 2014
PASSED THE ASSEMBLY AUGUST 28, 2014
AMENDED IN SENATE AUGUST 22, 2014
AMENDED IN SENATE JUNE 16, 2014
AMENDED IN ASSEMBLY MAY 23, 2014
INTRODUCED BY Committee on Revenue and Taxation (Bocanegra (Chair),
Gordon, Mullin, Pan, V. Manuel Pérez, and Ting)
MARCH 24, 2014
An act to amend Sections 17039, 17054, and 23036 of, to add
Sections 18621.10 and 19171 to, and to repeal and add Section 17755
of, the Revenue and Taxation Code, relating to taxation.
LEGISLATIVE COUNSEL'S DIGEST
AB 2754, Committee on Revenue and Taxation. Income taxes: credits:
electronic filing: charitable remainder trusts.
The Personal Income Tax Law allows for the computation of, and the
order of allowance of, various credits against the "net tax," as
defined. The Corporation Tax Law provides for a tentative minimum tax
and further provides that, except for specified credits, no other
credit shall reduce the tax imposed below the tentative minimum tax.
This bill would, for taxable years beginning on or after January
1, 2014, include the specified tax credit allocated by GO-Biz in the
order of credits allowed against the "net tax." This bill would also,
for taxable years beginning on or after January 1, 2014,
additionally allow the specified credit under the Corporation Tax Law
allocated by GO-Biz to reduce the tentative minimum tax.
The Personal Income Tax Law allows a credit for each dependent of
a taxpayer and does not require a tax identification number of the
dependent to be included on the return filed with the Franchise
Board.
This bill would require, for taxable years beginning on or after
January 1, 2015, the tax identification number of a dependent to be
included on the taxpayer's return and would allow the taxpayer who
did not provide the taxpayer identification number on the return to
thereafter claim a credit or refund of that amount, as provided.
Existing law requires every taxpayer subject to the Personal
Income Tax Law or the Corporation Tax Law to timely file a return
with the Franchise Tax Board, unless exempt, on a form prescribed by
the Franchise Tax Board.
This bill, for taxable years beginning on or after January 1,
2014, would require an acceptable return, as defined, of a business
entity, as defined, that was prepared using a tax preparation
software to be filed using electronic technology in a form and manner
prescribed by the Franchise Tax Board. This bill would require a
business entity that fails to comply with that filing requirement for
returns filed for taxable years beginning on or after January 1,
2017, to pay specified penalties for each failure unless the failure
is due to reasonable cause, and not willful neglect. This bill would
require the Franchise Tax Board to conduct programs to educate
business entities on these requirements and liberally interpret and
grant waivers of the penalty, as specified.
The Personal Income Tax Law does not conform to specified
provisions of federal law relating to the taxation of specified
trusts. Existing law exempts from tax for the taxable year any
charitable remainder annuity trust or charitable remainder unitrust
unless that trust has unrelated business taxable income for the
taxable year, in which case that trust shall be subject to tax, as
provided.
This bill, for taxable years beginning on or after January 1,
2014, would conform, as modified, to the federal provisions for a
charitable remainder annuity trust and a charitable remainder
unitrust by providing that a trust shall remain tax-exempt, even if
that trust has unrelated business taxable income, in which case that
income shall be taxed as provided.
This bill would incorporate additional changes in Section 23036 of
the Revenue and Taxation Code, proposed by AB 1839, to be operative
only if AB 1839 and this bill are both chaptered and become effective
on or before January 1, 2015, and this bill is chaptered last.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 17039 of the Revenue and Taxation Code is
amended to read:
17039. (a) Notwithstanding any provision in this part to the
contrary, for the purposes of computing tax credits, the term "net
tax" means the tax imposed under either Section 17041 or 17048 plus
the tax imposed under Section 17504 (relating to lump-sum
distributions) less the credits allowed by Section 17054 (relating to
personal exemption credits) and any amount imposed under paragraph
(1) of subdivision (d) and paragraph (1) of subdivision (e) of
Section 17560. Notwithstanding the preceding sentence, the "net tax"
shall not be less than the tax imposed under Section 17504 (relating
to the separate tax on lump-sum distributions), if any. Credits shall
be allowed against "net tax" in the following order:
(1) Credits that do not contain carryover or refundable
provisions, except those described in paragraphs (4) and (5).
(2) Credits that contain carryover provisions but do not contain
refundable provisions, except for those that are allowed to reduce
"net tax" below the tentative minimum tax, as defined by Section
17062.
(3) Credits that contain both carryover and refundable provisions.
(4) The minimum tax credit allowed by Section 17063 (relating to
the alternative minimum tax).
(5) Credits that are allowed to reduce "net tax" below the
tentative minimum tax, as defined by Section 17062.
(6) Credits for taxes paid to other states allowed by Chapter 12
(commencing with Section 18001).
(7) Credits that contain refundable provisions but do not contain
carryover provisions.
The order within each paragraph shall be determined by the
Franchise Tax Board.
(b) Notwithstanding the provisions of Sections 17061 (relating to
refunds pursuant to the Unemployment Insurance Code) and 19002
(relating to tax withholding), the credits provided in those sections
shall be allowed in the order provided in paragraph (6) of
subdivision (a).
(c) (1) Notwithstanding any other provision of this part, no tax
credit shall reduce the tax imposed under Section 17041 or 17048 plus
the tax imposed under Section 17504 (relating to the separate tax on
lump-sum distributions) below the tentative minimum tax, as defined
by Section 17062, except the following credits:
(A) The credit allowed by Section 17052.2 (relating to teacher
retention tax credit).
(B) The credit allowed by former Section 17052.4 (relating to
solar energy).
(C) The credit allowed by former Section 17052.5 (relating to
solar energy, repealed on January 1, 1987).
(D) The credit allowed by former Section 17052.5 (relating to
solar energy, repealed on December 1, 1994).
(E) The credit allowed by Section 17052.12 (relating to research
expenses).
(F) The credit allowed by former Section 17052.13 (relating to
sales and use tax credit).
(G) The credit allowed by former Section 17052.15 (relating to Los
Angeles Revitalization Zone sales tax credit).
(H) The credit allowed by Section 17052.25 (relating to the
adoption costs credit).
(I) The credit allowed by Section 17053.5 (relating to the renter'
s credit).
(J) The credit allowed by former Section 17053.8 (relating to
enterprise zone hiring credit).
(K) The credit allowed by former Section 17053.10 (relating to Los
Angeles Revitalization Zone hiring credit).
(L) The credit allowed by former Section 17053.11 (relating to
program area hiring credit).
(M) For each taxable year beginning on or after January 1, 1994,
the credit allowed by former Section 17053.17 (relating to Los
Angeles Revitalization Zone hiring credit).
(N) The credit allowed by Section 17053.33 (relating to targeted
tax area sales or use tax credit).
(O) The credit allowed by Section 17053.34 (relating to targeted
tax area hiring credit).
(P) The credit allowed by Section 17053.49 (relating to qualified
property).
(Q) The credit allowed by Section 17053.70 (relating to enterprise
zone sales or use tax credit).
(R) The credit allowed by Section 17053.74 (relating to enterprise
zone hiring credit).
(S) The credit allowed by Section 17054 (relating to credits for
personal exemption).
(T) The credit allowed by Section 17054.5 (relating to the credits
for a qualified joint custody head of household and a qualified
taxpayer with a dependent parent).
(U) The credit allowed by Section 17054.7 (relating to the credit
for a senior head of household).
(V) The credit allowed by former Section 17057 (relating to
clinical testing expenses).
(W) The credit allowed by Section 17058 (relating to low-income
housing).
(X) For taxable years beginning on or after January 1, 2014, the
credit allowed by Section 17059.2 (relating to GO-Biz California
Competes Credit).
(Y) The credit allowed by Section 17061 (relating to refunds
pursuant to the Unemployment Insurance Code).
(Z) Credits for taxes paid to other states allowed by Chapter 12
(commencing with Section 18001).
(AA) The credit allowed by Section 19002 (relating to tax
withholding).
(2) Any credit that is partially or totally denied under paragraph
(1) shall be allowed to be carried over and applied to the net tax
in succeeding taxable years, if the provisions relating to that
credit include a provision to allow a carryover when that credit
exceeds the net tax.
(d) Unless otherwise provided, any remaining carryover of a credit
allowed by a section that has been repealed or made inoperative
shall continue to be allowed to be carried over under the provisions
of that section as it read immediately prior to being repealed or
becoming inoperative.
(e) (1) Unless otherwise provided, if two or more taxpayers (other
than husband and wife) share in costs that would be eligible for a
tax credit allowed under this part, each taxpayer shall be eligible
to receive the tax credit in proportion to his or her respective
share of the costs paid or incurred.
(2) In the case of a partnership, the credit shall be allocated
among the partners pursuant to a written partnership agreement in
accordance with Section 704 of the Internal Revenue Code, relating to
partner's distributive share.
(3) In the case of a husband and wife who file separate returns,
the credit may be taken by either or equally divided between them.
(f) Unless otherwise provided, in the case of a partnership, any
credit allowed by this part shall be computed at the partnership
level, and any limitation on the expenses qualifying for the credit
or limitation upon the amount of the credit shall be applied to the
partnership and to each partner.
(g) (1) With respect to any taxpayer that directly or indirectly
owns an interest in a business entity that is disregarded for tax
purposes pursuant to Section 23038 and any regulations thereunder,
the amount of any credit or credit carryforward allowable for any
taxable year attributable to the disregarded business entity shall be
limited in accordance with paragraphs (2) and (3).
(2) The amount of any credit otherwise allowed under this part,
including any credit carryover from prior years, that may be applied
to reduce the taxpayer's "net tax," as defined in subdivision (a),
for the taxable year shall be limited to an amount equal to the
excess of the taxpayer's regular tax (as defined in Section 17062),
determined by including income attributable to the disregarded
business entity that generated the credit or credit carryover, over
the taxpayer's regular tax (as defined in Section 17062), determined
by excluding the income attributable to that disregarded business
entity. No credit shall be allowed if the taxpayer's regular tax (as
defined in Section 17062), determined by including the income
attributable to the disregarded business entity, is less than the
taxpayer's regular tax (as defined in Section 17062), determined by
excluding the income attributable to the disregarded business entity.
(3) If the amount of a credit allowed pursuant to the section
establishing the credit exceeds the amount allowable under this
subdivision in any taxable year, the excess amount may be carried
over to subsequent taxable years pursuant to subdivisions (c) and
(d).
(h) (1) Unless otherwise specifically provided, in the case of a
taxpayer that is a partner or shareholder of an eligible pass-thru
entity described in paragraph (2), any credit passed through to the
taxpayer in the taxpayer's first taxable year beginning on or after
the date the credit is no longer operative may be claimed by the
taxpayer in that taxable year, notwithstanding the repeal of the
statute authorizing the credit prior to the close of that taxable
year.
(2) For purposes of this subdivision, "eligible pass-thru entity"
means any partnership or "S" corporation that files its return on a
fiscal year basis pursuant to Section 18566, and that is entitled to
a credit pursuant to this part for the taxable year that begins
during the last year the credit is operative.
(3) This subdivision shall apply to credits that become
inoperative on or after the operative date of the act adding this
subdivision.
SEC. 2. Section 17054 of the Revenue and Taxation Code is amended
to read:
17054. In the case of individuals, the following credits for
personal exemption may be deducted from the tax imposed under Section
17041 or 17048, less any increases imposed under paragraph (1) of
subdivision (d) or paragraph (1) of subdivision (e), or both, of
Section 17560.
(a) In the case of a single individual, a head of household, or a
married individual making a separate return, a credit of fifty-two
dollars ($52).
(b) In the case of a surviving spouse (as defined in Section
17046), or a husband and wife making a joint return, a credit of one
hundred four dollars ($104). If one spouse was a resident for the
entire taxable year and the other spouse was a nonresident for all or
any portion of the taxable year, the personal exemption shall be
divided equally.
(c) In addition to any other credit provided in this section, in
the case of an individual who is 65 years of age or over by the end
of the taxable year, a credit of fifty-two dollars ($52).
(d) (1) A credit of two hundred twenty-seven dollars ($227) for
each dependent (as defined in Section 17056) for whom an exemption is
allowable under Section 151(c) of the Internal Revenue Code,
relating to additional exemption for dependents. The credit allowed
under this subdivision for taxable years beginning on or after
January 1, 1999, shall not be adjusted pursuant to subdivision (i)
for any taxable year beginning before January 1, 2000.
(2) (A) For taxable years beginning on or after January 1, 2015, a
credit shall not be allowed under paragraph (1) with respect to any
individual unless the identification number, as defined in Section
6109 of the Internal Revenue Code, of that individual is included on
the return claiming the credit.
(B) A disallowance of a credit due to the omission of a correct
identification number required under this paragraph, may be assessed
by the Franchise Tax Board in the same manner as is provided by
Section 19051 in the case of a mathematical error appearing on the
return. A claimant shall have the right to claim a credit or refund
of adjusted amounts within the period provided in Section 19306,
19307, 19308, or 19311, whichever period expires later.
(3) (A) For taxable years beginning on or after January 1, 2009,
the credit allowed under paragraph (1) for each dependent shall be
equal to the credit allowed under subdivision (a). This subparagraph
shall cease to be operative for taxable years beginning on or after
January 1, 2011, unless the Director of Finance makes the
notification pursuant to Section 99040 of the Government Code, in
which case this subparagraph shall cease to be operative for taxable
years beginning on or after January 1, 2013.
(B) For taxable years that subparagraph (A) ceases to be
operative, the credit allowed under paragraph (1) for each dependent
shall be equal to the amount that would be allowed if subparagraph
(A) had never been operative.
(e) A credit for personal exemption of fifty-two dollars ($52) for
the taxpayer if he or she is blind at the end of his or her taxable
year.
(f) A credit for personal exemption of fifty-two dollars ($52) for
the spouse of the taxpayer if a separate return is made by the
taxpayer, and if the spouse is blind and, for the calendar year in
which the taxable year of the taxpayer begins, has no gross income
and is not the dependent of another taxpayer.
(g) For the purposes of this section, an individual is blind only
if either (1) his or her central visual acuity does not exceed 20/200
in the better eye with correcting lenses, or (2) his or her visual
acuity is greater than 20/200 but is accompanied by a limitation in
the fields of vision such that the widest diameter of the visual
field subtends an angle no greater than 20 degrees.
(h) In the case of an individual with respect to whom a credit
under this section is allowable to another taxpayer for a taxable
year beginning in the calendar year in which the individual's taxable
year begins, the credit amount applicable to that individual for
that individual's taxable year is zero.
(i) For each taxable year beginning on or after January 1, 1989,
the Franchise Tax Board shall compute the credits prescribed in this
section. That computation shall be made as follows:
(1) The California Department of Industrial Relations shall
transmit annually to the Franchise Tax Board the percentage change in
the California Consumer Price Index for all items from June of the
prior calendar year to June of the current calendar year, no later
than August 1 of the current calendar year.
(2) The Franchise Tax Board shall add 100 percent to the
percentage change figure which is furnished to them pursuant to
paragraph (1), and divide the result by 100.
(3) The Franchise Tax Board shall multiply the immediately
preceding taxable year credits by the inflation adjustment factor
determined in paragraph (2), and round off the resulting products to
the nearest one dollar ($1).
(4) In computing the credits pursuant to this subdivision, the
credit provided in subdivision (b) shall be twice the credit provided
in subdivision (a).
SEC. 3. Section 17755 of the Revenue and Taxation Code is
repealed.
SEC. 4. Section 17755 is added to the Revenue and Taxation Code,
to read:
17755. For taxable years beginning on or after January 1, 2014,
Section 664(c)(2) of the Internal Revenue Code, relating to excise
tax, shall not apply and, in lieu thereof, the unrelated business
taxable income, as defined in Section 23732, of every charitable
remainder annuity trust or charitable remainder unitrust shall be
subject to tax under Section 17651.
SEC. 5. Section 18621.10 is added to the Revenue and Taxation
Code, to read:
18621.10. (a) For taxable years beginning on or after January 1,
2014, if an acceptable return of a business entity was prepared using
a tax preparation software, that return shall be filed using
electronic technology in a form and manner prescribed by the
Franchise Tax Board.
(b) For purposes of this section:
(1) "Acceptable return" means any original or amended return that
is required to be filed pursuant to Article 2 (commencing with
Section 18601), Section 18633, Section 18633.5, or Article 3
(commencing with Section 23771) of Chapter 4 of Part 11, other than
the return for unrelated business taxable income required by Section
23771.
(2) "Business entity" means a corporation, including an "S"
corporation, an organization exempt from tax pursuant to Chapter 4
(commencing with Section 23701) of Part 11, a partnership, or a
limited liability company.
(3) "Tax preparation software" means any computer software program
used to prepare an acceptable return or for use in tax compliance.
(4) "Electronic technology" includes, but is not limited to, the
Internet, cloud computing, or an electronic information delivery
system.
(5) "Technology constraints" means an inability of the tax
preparation software used by a business entity to electronically file
the acceptable return as required by this section as a result of the
complex nature of the return or inadequacy of the software.
(c) Any business entity required to file a return electronically
under this section may annually request a waiver of the requirements
of this section from the Franchise Tax Board with respect to an
acceptable return filed for a taxable year. The Franchise Tax Board
may grant a waiver if it determines the business entity is unable to
comply with the requirements of this section due to, but not limited
to, technology constraints, where compliance would result in undue
financial burden, or due to circumstances that constitute reasonable
cause, and not willful neglect, as applicable with respect to the
penalty imposed under Section 19171.
(d) This section applies to an acceptable return required to be
filed on or after January 1, 2015.
SEC. 6. Section 19171 is added to the Revenue and Taxation Code,
to read:
19171. (a) A business entity required to electronically file a
return pursuant to Section 18621.10 that files a return in a manner
that fails to comply with Section 18621.10, shall be subject to a
penalty in the amount of one hundred dollars ($100) for an initial
failure and a penalty in the amount of five hundred dollars ($500)
for each subsequent failure unless the failure is due to reasonable
cause, and not willful neglect.
(b) If a group return is filed on behalf of eligible electing
taxpayer members of a combined reporting group, the penalties
described in subdivision (a) shall apply to the combined reporting
group and not to a taxpayer member of the combined reporting group.
(c) This section shall apply to returns filed for taxable years
beginning on or after January 1, 2017.
SEC. 7. Section 23036 of the Revenue and Taxation Code is amended
to read:
23036. (a) (1) The term "tax" includes any of the following:
(A) The tax imposed under Chapter 2 (commencing with Section
23101).
(B) The tax imposed under Chapter 3 (commencing with Section
23501).
(C) The tax on unrelated business taxable income, imposed under
Section 23731.
(D) The tax on "S" corporations imposed under Section 23802.
(2) The term "tax" does not include any amount imposed under
paragraph (1) of subdivision (e) of Section 24667 or paragraph (2) of
subdivision (f) of Section 24667.
(b) For purposes of Article 5 (commencing with Section 18661) of
Chapter 2, Article 3 (commencing with Section 19031) of Chapter 4,
Article 6 (commencing with Section 19101) of Chapter 4, and Chapter 7
(commencing with Section 19501) of Part 10.2, and for purposes of
Sections 18601, 19001, and 19005, the term "tax" also includes all of
the following:
(1) The tax on limited partnerships, imposed under Section 17935,
the tax on limited liability companies, imposed under Section 17941,
and the tax on registered limited liability partnerships and foreign
limited liability partnerships imposed under Section 17948.
(2) The alternative minimum tax imposed under Chapter 2.5
(commencing with Section 23400).
(3) The tax on built-in gains of "S" corporations, imposed under
Section 23809.
(4) The tax on excess passive investment income of "S"
corporations, imposed under Section 23811.
(c) Notwithstanding any other provision of this part, credits are
allowed against the "tax" in the following order:
(1) Credits that do not contain carryover provisions.
(2) Credits that, when the credit exceeds the "tax," allow the
excess to be carried over to offset the "tax" in succeeding taxable
years, except for those credits that are allowed to reduce the "tax"
below the tentative minimum tax, as defined by Section 23455. The
order of credits within this paragraph shall be determined by the
Franchise Tax Board.
(3) The minimum tax credit allowed by Section 23453.
(4) Credits that are allowed to reduce the "tax" below the
tentative minimum tax, as defined by Section 23455.
(5) Credits for taxes withheld under Section 18662.
(d) Notwithstanding any other provision of this part, each of the
following applies:
(1) A credit may not reduce the "tax" below the tentative minimum
tax (as defined by paragraph (1) of subdivision (a) of Section
23455), except the following credits:
(A) The credit allowed by former Section 23601 (relating to solar
energy).
(B) The credit allowed by former Section 23601.4 (relating to
solar energy).
(C) The credit allowed by former Section 23601.5 (relating to
solar energy).
(D) The credit allowed by Section 23609 (relating to research
expenditures).
(E) The credit allowed by former Section 23609.5 (relating to
clinical testing expenses).
(F) The credit allowed by Section 23610.5 (relating to low-income
housing).
(G) The credit allowed by former Section 23612 (relating to sales
and use tax credit).
(H) The credit allowed by Section 23612.2 (relating to enterprise
zone sales or use tax credit).
(I) The credit allowed by former Section 23612.6 (relating to Los
Angeles Revitalization Zone sales tax credit).
(J) The credit allowed by former Section 23622 (relating to
enterprise zone hiring credit).
(K) The credit allowed by Section 23622.7 (relating to enterprise
zone hiring credit).
(L) The credit allowed by former Section 23623 (relating to
program area hiring credit).
(M) The credit allowed by former Section 23623.5 (relating to Los
Angeles Revitalization Zone hiring credit).
(N) The credit allowed by former Section 23625 (relating to Los
Angeles Revitalization Zone hiring credit).
(O) The credit allowed by Section 23633 (relating to targeted tax
area sales or use tax credit).
(P) The credit allowed by Section 23634 (relating to targeted tax
area hiring credit).
(Q) The credit allowed by former Section 23649 (relating to
qualified property).
(R) For taxable years beginning on or after January 1, 2011, the
credit allowed by Section 23685 (relating to qualified motion
pictures).
(S) For taxable years beginning on or after January 1, 2014, the
credit allowed by Section 23689 (relating to GO-Biz California
Competes Credit).
(2) A credit against the tax may not reduce the minimum franchise
tax imposed under Chapter 2 (commencing with Section 23101).
(e) Any credit which is partially or totally denied under
subdivision (d) is allowed to be carried over to reduce the "tax" in
the following year, and succeeding years if necessary, if the
provisions relating to that credit include a provision to allow a
carryover of the unused portion of that credit.
(f) Unless otherwise provided, any remaining carryover from a
credit that has been repealed or made inoperative is allowed to be
carried over under the provisions of that section as it read
immediately prior to being repealed or becoming inoperative.
(g) Unless otherwise provided, if two or more taxpayers share in
costs that would be eligible for a tax credit allowed under this
part, each taxpayer is eligible to receive the tax credit in
proportion to his or her respective share of the costs paid or
incurred.
(h) Unless otherwise provided, in the case of an "S" corporation,
any credit allowed by this part is computed at the "S" corporation
level, and any limitation on the expenses qualifying for the credit
or limitation upon the amount of the credit applies to the "S"
corporation and to each shareholder.
(i) (1) With respect to any taxpayer that directly or indirectly
owns an interest in a business entity that is disregarded for tax
purposes pursuant to Section 23038 and any regulations thereunder,
the amount of any credit or credit carryforward allowable for any
taxable year attributable to the disregarded business entity is
limited in accordance with paragraphs (2) and (3).
(2) The amount of any credit otherwise allowed under this part,
including any credit carryover from prior years, that may be applied
to reduce the taxpayer's "tax," as defined in subdivision (a), for
the taxable year is limited to an amount equal to the excess of the
taxpayer's regular tax (as defined in Section 23455), determined by
including income attributable to the disregarded business entity that
generated the credit or credit carryover, over the taxpayer's
regular tax (as defined in Section 23455), determined by excluding
the income attributable to that disregarded business entity. A credit
is not allowed if the taxpayer's regular tax (as defined in Section
23455), determined by including the income attributable to the
disregarded business entity is less than the taxpayer's regular tax
(as defined in Section 23455), determined by excluding the income
attributable to the disregarded business entity.
(3) If the amount of a credit allowed pursuant to the section
establishing the credit exceeds the amount allowable under this
subdivision in any taxable year, the excess amount may be carried
over to subsequent taxable years pursuant to subdivisions (d), (e),
and (f).
(j) (1) Unless otherwise specifically provided, in the case of a
taxpayer that is a partner or shareholder of an eligible pass-thru
entity described in paragraph (2), any credit passed through to the
taxpayer in the taxpayer's first taxable year beginning on or after
the date the credit is no longer operative may be claimed by the
taxpayer in that taxable year, notwithstanding the repeal of the
statute authorizing the credit prior to the close of that taxable
year.
(2) For purposes of this subdivision, "eligible pass-thru entity"
means any partnership or "S" corporation that files its return on a
fiscal year basis pursuant to Section 18566, and that is entitled to
a credit pursuant to this part for the taxable year that begins
during the last year a credit is operative.
(3) This subdivision applies to credits that become inoperative on
or after the operative date of the act adding this subdivision.
SEC. 7.5. Section 23036 of the Revenue and Taxation Code is
amended to read:
23036. (a) (1) The term "tax" includes any of the following:
(A) The tax imposed under Chapter 2 (commencing with Section
23101).
(B) The tax imposed under Chapter 3 (commencing with Section
23501).
(C) The tax on unrelated business taxable income, imposed under
Section 23731.
(D) The tax on "S" corporations imposed under Section 23802.
(2) The term "tax" does not include any amount imposed under
paragraph (1) of subdivision (e) of Section 24667 or paragraph (2) of
subdivision (f) of Section 24667.
(b) For purposes of Article 5 (commencing with Section 18661) of
Chapter 2, Article 3 (commencing with Section 19031) of Chapter 4,
Article 6 (commencing
with Section 19101) of Chapter 4, and Chapter 7 (commencing with
Section 19501) of Part 10.2, and for purposes of Sections 18601,
19001, and 19005, the term "tax" also includes all of the following:
(1) The tax on limited partnerships, imposed under Section 17935,
the tax on limited liability companies, imposed under Section 17941,
and the tax on registered limited liability partnerships and foreign
limited liability partnerships imposed under Section 17948.
(2) The alternative minimum tax imposed under Chapter 2.5
(commencing with Section 23400).
(3) The tax on built-in gains of "S" corporations, imposed under
Section 23809.
(4) The tax on excess passive investment income of "S"
corporations, imposed under Section 23811.
(c) Notwithstanding any other provision of this part, credits are
allowed against the "tax" in the following order:
(1) Credits that do not contain carryover provisions.
(2) Credits that, when the credit exceeds the "tax," allow the
excess to be carried over to offset the "tax" in succeeding taxable
years, except for those credits that are allowed to reduce the "tax"
below the tentative minimum tax, as defined by Section 23455. The
order of credits within this paragraph shall be determined by the
Franchise Tax Board.
(3) The minimum tax credit allowed by Section 23453.
(4) Credits that are allowed to reduce the "tax" below the
tentative minimum tax, as defined by Section 23455.
(5) Credits for taxes withheld under Section 18662.
(d) Notwithstanding any other provision of this part, each of the
following applies:
(1) A credit may not reduce the "tax" below the tentative minimum
tax (as defined by paragraph (1) of subdivision (a) of Section
23455), except the following credits:
(A) The credit allowed by former Section 23601 (relating to solar
energy).
(B) The credit allowed by former Section 23601.4 (relating to
solar energy).
(C) The credit allowed by former Section 23601.5 (relating to
solar energy).
(D) The credit allowed by Section 23609 (relating to research
expenditures).
(E) The credit allowed by former Section 23609.5 (relating to
clinical testing expenses).
(F) The credit allowed by Section 23610.5 (relating to low-income
housing).
(G) The credit allowed by former Section 23612 (relating to sales
and use tax credit).
(H) The credit allowed by Section 23612.2 (relating to enterprise
zone sales or use tax credit).
(I) The credit allowed by former Section 23612.6 (relating to Los
Angeles Revitalization Zone sales tax credit).
(J) The credit allowed by former Section 23622 (relating to
enterprise zone hiring credit).
(K) The credit allowed by Section 23622.7 (relating to enterprise
zone hiring credit).
(L) The credit allowed by former Section 23623 (relating to
program area hiring credit).
(M) The credit allowed by former Section 23623.5 (relating to Los
Angeles Revitalization Zone hiring credit).
(N) The credit allowed by former Section 23625 (relating to Los
Angeles Revitalization Zone hiring credit).
(O) The credit allowed by Section 23633 (relating to targeted tax
area sales or use tax credit).
(P) The credit allowed by Section 23634 (relating to targeted tax
area hiring credit).
(Q) The credit allowed by former Section 23649 (relating to
qualified property).
(R) For taxable years beginning on or after January 1, 2011, the
credit allowed by Section 23685 (relating to qualified motion
pictures).
(S) For taxable years beginning on or after January 1, 2014, the
credit allowed by Section 23689 (relating to GO-Biz California
Competes Credit).
(T) For taxable years beginning on or after January 1, 2016, the
credit allowed by Section 23695 (relating to qualified motion
pictures).
(2) A credit against the tax may not reduce the minimum franchise
tax imposed under Chapter 2 (commencing with Section 23101).
(e) Any credit which is partially or totally denied under
subdivision (d) is allowed to be carried over to reduce the "tax" in
the following year, and succeeding years if necessary, if the
provisions relating to that credit include a provision to allow a
carryover of the unused portion of that credit.
(f) Unless otherwise provided, any remaining carryover from a
credit that has been repealed or made inoperative is allowed to be
carried over under the provisions of that section as it read
immediately prior to being repealed or becoming inoperative.
(g) Unless otherwise provided, if two or more taxpayers share in
costs that would be eligible for a tax credit allowed under this
part, each taxpayer is eligible to receive the tax credit in
proportion to his or her respective share of the costs paid or
incurred.
(h) Unless otherwise provided, in the case of an "S" corporation,
any credit allowed by this part is computed at the "S" corporation
level, and any limitation on the expenses qualifying for the credit
or limitation upon the amount of the credit applies to the "S"
corporation and to each shareholder.
(i) (1) With respect to any taxpayer that directly or indirectly
owns an interest in a business entity that is disregarded for tax
purposes pursuant to Section 23038 and any regulations thereunder,
the amount of any credit or credit carryforward allowable for any
taxable year attributable to the disregarded business entity is
limited in accordance with paragraphs (2) and (3).
(2) The amount of any credit otherwise allowed under this part,
including any credit carryover from prior years, that may be applied
to reduce the taxpayer's "tax," as defined in subdivision (a), for
the taxable year is limited to an amount equal to the excess of the
taxpayer's regular tax (as defined in Section 23455), determined by
including income attributable to the disregarded business entity that
generated the credit or credit carryover, over the taxpayer's
regular tax (as defined in Section 23455), determined by excluding
the income attributable to that disregarded business entity. A credit
is not allowed if the taxpayer's regular tax (as defined in Section
23455), determined by including the income attributable to the
disregarded business entity is less than the taxpayer's regular tax
(as defined in Section 23455), determined by excluding the income
attributable to the disregarded business entity.
(3) If the amount of a credit allowed pursuant to the section
establishing the credit exceeds the amount allowable under this
subdivision in any taxable year, the excess amount may be carried
over to subsequent taxable years pursuant to subdivisions (d), (e),
and (f).
(j) (1) Unless otherwise specifically provided, in the case of a
taxpayer that is a partner or shareholder of an eligible pass-thru
entity described in paragraph (2), any credit passed through to the
taxpayer in the taxpayer's first taxable year beginning on or after
the date the credit is no longer operative may be claimed by the
taxpayer in that taxable year, notwithstanding the repeal of the
statute authorizing the credit prior to the close of that taxable
year.
(2) For purposes of this subdivision, "eligible pass-thru entity"
means any partnership or "S" corporation that files its return on a
fiscal year basis pursuant to Section 18566, and that is entitled to
a credit pursuant to this part for the taxable year that begins
during the last year a credit is operative.
(3) This subdivision applies to credits that become inoperative on
or after the operative date of the act adding this subdivision.
SEC. 8. The Franchise Tax Board shall conduct a robust education
program advising business entities affected by Section 18621.10 of
the Revenue and Taxation Code of the requirements of that section and
liberally interpret and grant waivers of the penalty imposed under
Section 19171 of the Revenue and Taxation Code to minimize any
unnecessary adverse impacts to business entities that experience
difficulty complying with these new requirements.
SEC. 9. Section 7.5 of this bill incorporates amendments to
Section 23036 of the Revenue and Taxation Code proposed by this bill
and Assembly Bill 1839. It shall only become operative if (1) both
bills are enacted and become effective on or before January 1, 2015,
(2) each bill amends Section 23036 of the Revenue and Taxation Code,
and (3) this bill is enacted after Assembly Bill 1839, in which case
Section 23036 of the Revenue and Taxation Code, as amended by
Assembly Bill 1839, shall remain operative only until the operative
date of this bill, at which time Section 7.5 of this bill shall
become operative, and Section 7 of this bill shall not become
operative.
