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

NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Corporation taxes: tax rates: publicly held corporations: credits.

Spectrum: Partisan Bill (Democrat 2-0)

Status: (Introduced - Dead) 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  APRIL 1, 2014

INTRODUCED BY   Senators DeSaulnier and Hancock

                        FEBRUARY 21, 2014

   An act to amend Section  17151   23151 
of the Revenue and Taxation Code, relating to taxation  , to take
effect immediately, tax levy  .



	LEGISLATIVE COUNSEL'S DIGEST


   SB 1372, as amended, DeSaulnier.  Personal income tax:
educational assistance credit.   Corporation taxes: tax
rates: publicly held corporations. 
   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 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.  
   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. 

   The Personal Income Tax Law provides for an exclusion from the
gross income of an employee for amounts paid or incurred by an
employer for educational assistance to the employee, as specified, up
to $5,250 during a calendar year.  
   This bill would make technical, nonsubstantive changes to these
provisions. 
   Vote:  majority  2/3  . Appropriation:
no. Fiscal committee:  no   yes  .
State-mandated local program: no.


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

   SECTION 1.    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), 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 basis of 
 200                      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) (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
and the highest paid employee of the taxpayer, means total
compensation as reported in the Summary Compensation Table reported
to the Securities and Exchange Commission pursuant to Item 402 of
Regulation S-K of the Securities and Exchange Commission.  
   (B) (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
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.  
   (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) "Contracted full-time employee" means an individual engaged
by the taxpayer to provide a specific set of services established
pursuant to the terms and conditions of a written employment contract
that delineates the length of employment, the salary and bonuses (if
any) to be paid, and the benefits that accrue to that individual.
 
   (iii) "Foreign full-time employee" means a full-time employee of
the taxpayer that is employed at a location other than the United
States.  
   (iv) "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 35 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. 2.    This act provides for a tax levy within
the meaning of Article IV of the Constitution and shall go into
immediate effect.  
  SECTION 1.   Section 17151 of the Revenue and
Taxation Code is amended to read:
   17151.  (a) Gross income of an employee does not include any
amounts, not exceeding an aggregate amount of five thousand two
hundred fifty dollars ($5,250) per calendar year, that is paid or
incurred by the employer for educational assistance to the employee
pursuant to an educational assistance program.
   (b) For purposes of this section, the following definitions shall
apply:
   (1) "Educational assistance" means the payment by an employer of
expenses incurred by, or on behalf of, an employee for the employee's
education, and includes, but is not limited to, payments for books,
supplies, equipment, tuition, and fees, and similar payments.
"Educational assistance" includes the provision by an employer of
courses of instruction for an employee, including the provision of
books, supplies, and equipment. "Educational assistance" does not
include any payment for, or the provision of, any of the following:
   (A) Any tools or supplies that may be retained by the employee
after completion of a course of instruction.
   (B) Any meals, lodging, or transportation.
   (C) Any course or education involving sports, games, or hobbies.
   (D) Any course or education taken at the graduate level of a kind
normally taken by an individual pursuing a program leading to a law,
business, medical, or other advanced academic or professional degree.
This subparagraph applies only to any course or education taken at
the graduate level beginning after June 30, 1996, and before January
1, 2000.
   (2) "Educational assistance program" means a separate written plan
of an employer for the exclusive benefit of his or her employees to
provide those employees with educational assistance. The program
shall meet the following requirements:
   (A) The program benefits employees who qualify under a
classification established by the employer and found by the Franchise
Tax Board not to be discriminatory in favor of employees who are
highly compensated employees (within the meaning of Section 414(q) of
the Internal Revenue Code) or their dependents. For purposes of this
subparagraph, there shall be excluded from consideration employees
who are not included in the program and who are included in a unit of
employees covered by an agreement that the Franchise Tax Board finds
to be a collective bargaining agreement between employee
representatives and one or more employers, if there is evidence that
educational assistance benefits were the subject of good faith
bargaining between the employee representatives and the employer or
employers.
   (B) Not more than 5 percent of the amounts paid or incurred by the
employer for educational assistance during the year may be provided
for the class of individuals who are owners (or their spouses or
dependents), each of whom, on any day of the year, owns more than 5
percent of the capital or profits interest in the employer.
   (C) The program does not provide eligible employees with a choice
between educational assistance and other remuneration includable in
gross income. For purposes of this section, the business practices of
the employer, as well as the written program, shall be taken into
account.
   (D) The program need not be funded.
   (E) Reasonable notification of the availability and terms of the
program is provided to eligible employees.
   (3) "Employee" includes self-employed individuals within the
meaning of Section 401(c)(1) of the Internal Revenue Code.
   (c) For purposes of this section:
   (1) Any individual who owns the entire interest in an
unincorporated trade or business shall be treated as his or her own
employee.
   (2) A partnership shall be treated as the employer of each partner
who is an employee within the meaning of paragraph (3) of
subdivision (b).
   (3) (A) An educational assistance program shall not be considered
to fail to meet any of the requirements of paragraph (2) of
subdivision (b) on the sole basis of either of the following:
   (i) Different utilization rates for the different types of
educational assistance made available under the program.
   (ii) Successful completion or attainment of a particular course
grade is required for or considered in determining reimbursement
under the program.
   (B) This section shall not be construed to affect the deduction or
inclusion in income of amounts that are paid or incurred or received
as reimbursement for educational expenses under Section 117, 162, or
212 of the Internal Revenue Code.
   (d) A deduction or credit shall not be allowed to the employee
with respect to any amount that the employee excludes from income
pursuant to this section.
   (e) Section 127 of the Internal Revenue Code shall not apply.
   (f) This section shall apply with respect to expenses relating to
courses beginning after June 30, 1996. 
                     
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