Bill Text: CA SB1372 | 2013-2014 | Regular Session | Amended


Bill Title: Corporation taxes: tax rates: publicly held corporations: credits.

Status: (Introduced) 2014-08-28 - Read third time. Refused passage. (Ayes 18. Noes 17. Page 4953.) [SB1372 Detail]

Download: California-2013-SB1372-Amended.html
BILL NUMBER: SB 1372	AMENDED
	BILL TEXT

	AMENDED IN SENATE  AUGUST 21, 2014
	AMENDED IN SENATE  APRIL 29, 2014
	AMENDED IN SENATE  APRIL 21, 2014
	AMENDED IN SENATE  APRIL 1, 2014

INTRODUCED BY   Senators DeSaulnier and Hancock

                        FEBRUARY 21, 2014

   An act to amend  Section   Sections 18410.2
and  23151 of  , and to add Section 23635 to,  the
Revenue and Taxation Code, relating to taxation, to take effect
immediately, tax levy.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 1372, as amended, DeSaulnier. Corporation taxes: tax rates:
publicly held corporations.   corporations:
credits.  
    The 
    (1)     The  Corporation Tax Law
imposes taxes according to or measured by net income at a rate of
8.84%, or for financial institutions, at a rate of 10.84%, as
specified.
   This bill would, for taxable years beginning on and after January
1, 2015, revise that rate for taxpayers that are publicly held
corporations, as defined, and instead impose  an applicable
  a  tax rate from 7% to 13%, or for financial
institutions, from 9% to 15%, based on the compensation ratio, as
defined, of the corporation. This bill would increase the applicable
tax rate by 50% for those taxpayers that have a specified decrease in
full-time employees employed in the United States as compared to an
increase in contracted and foreign full-time employees, as described.

   (2) Existing law establishes the California Competes Tax Credit
Committee, which has specified duties in regard to tax credits for
economic development. Existing law establishes the Governor's Office
of Business and Economic Development, also known as "GO-Biz," to,
among other duties, serve the Governor as the lead entity for
economic strategy and the marketing of California on issues relating
to business development, private sector investment, and economic
growth. The Corporation Tax Law allows various credits against the
tax imposed by that law.  
   This bill, for taxable years beginning on or after January 1,
2015, would allow a credit to a qualified taxpayer, as defined, in an
amount as provided in a written agreement between GO-Biz and the
qualified taxpayer, agreed upon by the committee, and based on
specified factors, including the number of jobs the qualified
taxpayer will create or retain in the state and the amount of
investment in the state by the qualified taxpayer. The bill would
limit the total amount of the credit available to an amount equal to
the amount of revenue generated by the application of the
above-referenced tax rates on publicly held corporations. The bill
would also impose various duties upon GO-Biz, including the adoption
of regulations.  
   This 
    (3)     This  bill would include a
change in state statute that would result in a taxpayer paying a
higher tax within the meaning of Section 3 of Article XIII A of the
California Constitution, and thus would require for passage the
approval of 2/3 of the membership of each house of the Legislature.
   This act provides for a tax levy within the meaning of Article IV
of the Constitution and shall go into immediate effect.
   Vote: 2/3. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

   SECTION 1.    Section 18410.2 of the  
Revenue and Taxation Code   is amended to read: 
   18410.2.  (a) The California Competes Tax Credit Committee is
hereby established. The committee shall consist of the Treasurer, the
Director of Finance, and the Director of the Governor's Office of
Business and Economic Development, who shall serve as chair of the
committee, or their designated representatives, and one appointee
each by the Speaker of the Assembly and the Senate Committee on
Rules. A Member of the Legislature shall not be appointed.
   (b) For purposes of Sections  17059.2 and 23689, 
 17059.2, 23635, and 23689,  the California Competes Tax
Credit Committee shall do all of the following:
   (1) Approve or reject any written agreement for a tax credit
allocation by resolution at a duly noticed public meeting held in
accordance with the Bagley-Keene Open Meeting Act (Article 9
(commencing with Section 11120) of Chapter 1 of Part 1 of Division 3
of Title 2 of the Government Code), but only after receipt of the
fully executed written agreement between the taxpayer and the
Governor's Office of Business and Economic Development.
   (2) Approve or reject any recommendation to recapture, in whole or
in part, a tax credit allocation by resolution at a duly noticed
public meeting held in accordance with the Bagley-Keene Open Meeting
Act (Article 9 (commencing with Section 11120) of Chapter 1 of Part 1
of Division 3 of Title 2 of the Government Code), but only after
receipt of the recommendation from the Governor's Office of Business
and Economic Development pursuant to the terms of the fully executed
written agreement.
   SECTION 1.   SEC. 2.   Section 23151 of
the Revenue and Taxation Code is amended to read:
   23151.  (a) With the exception of banks and financial
corporations, every corporation doing business within the limits of
this state and not expressly exempted from taxation by the provisions
of the Constitution of this state or by this part, shall annually
pay to the state, for the privilege of exercising its corporate
franchises within this state, a tax according to or measured by its
net income, to be computed at the rate of 7.6 percent upon the basis
of its net income for the next preceding income year, or if greater,
the minimum tax specified in Section 23153.
   (b) For calendar or fiscal years ending after June 30, 1973, the
rate of tax shall be 9 percent instead of 7.6 percent as provided by
subdivision (a).
   (c) For calendar or fiscal years ending in 1980 to 1986,
inclusive, the rate of tax shall be 9.6 percent.
   (d) For calendar or fiscal years ending in 1987 to 1996,
inclusive, and for any income year beginning before January 1, 1997,
the tax rate shall be 9.3 percent.
   (e) For any income year beginning on or after January 1, 1997, the
tax rate shall be 8.84 percent. The change in rate provided in this
subdivision shall be made without proration otherwise required by
Section 24251.
   (f) (1) For the first taxable year beginning on or after January
1, 2000, the tax imposed under this section shall be the sum of both
of the following:
   (A) A tax according to or measured by net income, to be computed
at the rate of 8.84 percent upon the basis of the net income for the
next preceding income year, but not less than the minimum tax
specified in Section 23153.
   (B) A tax according to or measured by net income, to be computed
at the rate of 8.84 percent upon the basis of the net income for the
first taxable year beginning on or after January 1, 2000, but not
less than the minimum tax specified in Section 23153.
   (2) Except as provided in paragraph (1) and subdivision (g), for
taxable years beginning on or after January 1, 2000, the tax imposed
under this section shall be a tax according to or measured by net
income, to be computed at the rate of 8.84 percent upon the basis of
the net income for that taxable year, but not less than the minimum
tax specified in Section 23153.
   (g) (1) For taxable years beginning on or after January 1, 2015,
the tax imposed under this section upon a publicly held corporation,
as defined in Section 162(m)(2)  of the Internal Revenue Code
 , relating to publicly held corporation,  of the
Internal Revenue Code,  shall be a tax according to or
measured by net income, to be computed at the applicable tax rate
upon the basis of the net income for that taxable year, as determined
by paragraph (2), but not less than the minimum tax specified in
Section 23153.
   (2) The applicable tax rate shall be determined as follows:

If the compensation      The applicable tax rate
ratio is:                is:
Over zero but not over   7% upon the basis of
25                       net income
Over 25 but not over 50  7.5% upon the basis of
                          net income
Over 50 but not over 100 8% upon the basis of
                          net income
Over 100 but not over    9% upon the basis of
150                      net income
Over 150 but not over    9.5% upon the
200                      basis of net income
Over 200 but not over    10% upon the basis of
250                      net income
Over 250 but not over    11% upon the basis of
300                      net income
Over 300 but not over    12% upon the basis of
400                      net income
Over 400                 13% upon the basis of
                          net income


   (3) For purposes of this subdivision:
   (A) "Client employer" means an individual or entity that receives
workers to perform labor or services within the usual course of
business of the individual or entity from a labor contractor.
   (B) (i) "Compensation," in the case of employees of the taxpayer
other than the chief operating officer or the highest paid employee,
means wages as defined in Section 3121(a) of the Internal Revenue
Code, relating to wages, paid by the taxpayer during a calendar year
to employees of the taxpayer.
   (ii) "Compensation," in the case of the chief operating officer or
the highest paid employee of the taxpayer, means total compensation
as reported in the Summary Compensation Table reported to the United
States Securities and Exchange Commission pursuant to Item 402 of
Regulation S-K of the Securities and Exchange Commission.
   (C) (i) "Compensation ratio" for a taxable year means a ratio
where the numerator is the amount equal to the greater of the
compensation of the chief operating officer or the highest paid
employee of the taxpayer for the calendar year preceding the
beginning of the taxable year and the denominator is the amount equal
to the median compensation of all employees employed by the
taxpayer, including all contracted employees under contract with the
taxpayer, in the United States for the calendar year preceding the
beginning of the taxable year.
   (ii) For taxpayers that are required to be included in a combined
report under Section 25101 or authorized to be included in a combined
report under Section 25101.15, the calculation of the ratio in
clause (i) shall be made by treating all taxpayers that are required
to be or authorized to be included in a combined report as a single
taxpayer.
   (D) "Contracted employee" means an employee who works for a labor
contractor.
   (E) "Labor contractor" means an individual or entity that
contracts with a client employer to supply workers to perform labor
or services or otherwise provides workers to perform labor or
services within the usual course of business for the client employer.

   (4) A taxpayer subject to this subdivision shall furnish a
detailed compensation report to the Franchise Tax Board with its
timely filed original return.
   (5) (A) If the total number of full-time employees, determined on
an annual full-time equivalent basis, employed by the taxpayer in the
United States for a taxable year is reduced by more than 10 percent,
as compared to the total number of full-time employees, determined
on an annual full-time equivalent basis, employed by the taxpayer in
the United States for the preceding taxable year and the total number
of contracted employees or foreign full-time employees, determined
on an annual full-time equivalent basis, of the taxpayer for that
taxable year has increased, as compared with the total number of
contracted employees or foreign full-time employees, determined on an
annual full-time equivalent basis, of the taxpayer for the preceding
taxable year, then the applicable tax rate determined under
paragraph (2) shall be increased by 50 percent. For taxpayers who
first commence doing business in this state during the taxable year,
the number of full-time employees, contracted employees, and foreign
full-time employees for the immediately preceding prior taxable year
shall be zero.
   (B) For purposes of this paragraph:
   (i) "Annual full-time equivalent" means either of the following:
   (I) In the case of a full-time employee paid hourly qualified
wages, "annual full-time equivalent" means the total number of hours
worked for the qualified taxpayer by the employee, not to exceed
2,000 hours per employee, divided by 2,000.
   (II) In the case of a salaried full-time employee, "annual
full-time equivalent" means the total number of weeks worked for the
qualified taxpayer by the employee divided by 52.
   (ii) "Foreign full-time employee" means a full-time employee of
the taxpayer that is employed at a location other than the United
States.
   (iii) "Full-time employee" means an employee of the taxpayer that
satisfies either of the following requirements:
   (I) Is paid compensation by the taxpayer for services of not less
than an average of 30 hours per week.
   (II) Is a salaried employee of the taxpayer and is paid
compensation during the taxable year for full-time employment, within
the meaning of Section 515 of the Labor Code.
   (6) The Franchise Tax Board may prescribe rules, guidelines, or
procedures necessary or appropriate to carry out the purposes of this
subdivision, including any guidelines regarding the determination of
wages, average compensation, and compensation ratio. Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2 of
the Government Code shall not apply to any rule, guideline, or
procedure prescribed by the Franchise Tax Board pursuant to this
subdivision.
   SEC. 3.    Section 23635 is added to the  
Revenue and Taxation Code   , to read:  
   23635.  (a) For each taxable year beginning on or after January 1,
2015, in taxable years in which there is a qualified amount, there
shall be allowed to each qualified taxpayer a credit against the
"tax," as defined in Section 23036, in an amount determined by the
committee pursuant to subdivision (c) and approved pursuant to
Section 18410.2.
   (b) For purposes of this section:
   (1) "Committee" means the California Competes Tax Credit Committee
established pursuant to Section 18410.2.
   (2) "Compensation ratio" shall be determined for a qualified
corporation in the same manner as under Section 23151.
   (3) "GO-Biz" means the Governor's Office of Business and Economic
Development.
   (4) "Qualified amount" means the amount equal to the amount of
revenue derived by subdivision (g) of Section 23151 in excess of the
revenue that would have been derived by subdivision (f) of Section
23151, as determined by the Franchise Tax Board, for the taxable
year.
   (5) "Qualified taxpayer" means a corporation subject to the tax
imposed by subdivision (g) of Section 23151 that has a compensation
ratio that is greater than zero but not more than 100.
   (6) "Small business" means a trade or business that has aggregate
gross receipts, less returns and allowances reportable to this state,
of less than two million dollars ($2,000,000) during the previous
taxable year.
   (c) The amount of credit allowed to a qualified taxpayer shall be
a portion of the qualified amount as set forth in a written agreement
between GO-Biz and the qualified taxpayer and shall be based on the
following factors:
   (1) The number of jobs the qualified taxpayer will create or
retain in this state.
   (2) The compensation paid by the taxpayer to its employees,
including wages and fringe benefits.
   (3) The amount of investment in this state by the qualified
taxpayer.
   (4) The overall economic impact in this state of the qualified
taxpayer's project or business.
   (d) The written agreement entered into pursuant to subdivision (c)
shall include:
   (1) Verification that the taxpayer is a qualified taxpayer.
   (2) The amount of credit that the qualified taxpayer is allocated.

   (e) GO-Biz shall do the following:
   (1) Give priority to a qualified taxpayer whose business is
located in an area of high unemployment or poverty.
   (2) Negotiate with a qualified taxpayer the amount of credit
allowed to that qualified taxpayer based on the factors in
subdivision (c).
   (3) Provide a negotiated written agreement to the committee for
its approval pursuant to Section 18410.2.
   (4) Inform the Franchise Tax Board of the terms of the written
agreement upon approval of the written agreement by the committee.
   (5) Adopt regulations as necessary or appropriate to carry out the
purposes of this section.
   (f) On or before January 1, 2016, and each year thereafter, the
Franchise Tax Board shall provide to GO-Biz an estimate of the
qualified amount.
   (g) Each fiscal year, 25 percent of the qualified amount shall be
reserved for small business.
   (h) Each fiscal year, no more than 20 percent of the qualified
amount that may be allocated pursuant to this section may be
allocated to any one qualified taxpayer. 
   SEC. 2.   SEC. 4.   This act provides
for a tax levy within the meaning of Article IV of the Constitution
and shall go into immediate effect.
                                            
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