Bill Text: CA AB1173 | 2013-2014 | Regular Session | Chaptered
Bill Title: Personal Income and Corporation Tax Law: nonqualified deferred compensation plan: tentative minimum tax: credits: exempt organizations.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Passed) 2013-10-04 - Chaptered by Secretary of State - Chapter 536, Statutes of 2013. [AB1173 Detail]
Download: California-2013-AB1173-Chaptered.html
BILL NUMBER: AB 1173 CHAPTERED
BILL TEXT
CHAPTER 536
FILED WITH SECRETARY OF STATE OCTOBER 4, 2013
APPROVED BY GOVERNOR OCTOBER 4, 2013
PASSED THE SENATE SEPTEMBER 12, 2013
PASSED THE ASSEMBLY SEPTEMBER 12, 2013
AMENDED IN SENATE SEPTEMBER 6, 2013
AMENDED IN ASSEMBLY MARCH 21, 2013
INTRODUCED BY Assembly Member Bocanegra
FEBRUARY 22, 2013
An act to amend Sections 19565, 23036, 23701, and 23701d of, and
to add Section 17508.2 to, the Revenue and Taxation Code, relating to
taxation.
LEGISLATIVE COUNSEL'S DIGEST
AB 1173, Bocanegra. Personal Income and Corporation Tax Law:
nonqualified deferred compensation plan: tentative minimum tax:
credits: exempt organizations.
The Personal Income Tax Law conforms to the federal income tax law
that includes in gross income the compensation from nonqualified
deferred compensation plans that fail to meet specified requirements.
These laws require the amount of tax imposed to be increased by the
amount of interest at the underpayment rate, as specified, and 20% of
the compensation that is required to be included in gross income.
This bill would substitute 5% in lieu of 20% for taxable years
beginning on or after January 1, 2013.
The Corporation Tax Law provides various credits against the taxes
imposed by that law, including a credit for qualified expenditures
for the production of qualified motion pictures in the state.
Existing 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 additionally allow, for taxable years beginning on
or after January 1, 2011, the credit for qualified expenditures for
the production of qualified motion pictures to reduce the tentative
minimum tax. This bill would make findings related to the public
purpose served by the bill.
The Corporation Tax Law, in modified conformity with federal
income tax laws, exempts various types of organizations from state
income taxes imposed by that law. Existing law establishes a
streamlined method by which organizations that have obtained a ruling
or determination from the Internal Revenue Service that it is exempt
from federal income taxes as an organization described in Section
501(c)(3) of the Internal Revenue Code may obtain exemption from
state income taxes, as provided.
This bill would allow an organization that has obtained a ruling
or determination from the Internal Revenue Service that it is exempt
from federal income taxes as an organization described in Section 501
(c)(3), (c)(4), (c)(5), (c)(6), or (c)(7) of the Internal Revenue
Code to use this streamlined method.
This bill would also make conforming changes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 17508.2 is added to the Revenue and Taxation
Code, to read:
17508.2. For taxable years beginning on or after January 1, 2013,
Section 409A of the Internal Revenue Code is modified as follows:
(a) By substituting the phrase "five percent" in lieu of the
phrase "20 percent" in Section 409A(a)(1)(B)(i)(II) of the Internal
Revenue Code.
(b) By substituting the phrase "five percent" in lieu of the
phrase "20 percent" in Section 409A(b)(5)(A)(ii) of the Internal
Revenue Code.
SEC. 2. Section 19565 of the Revenue and Taxation Code is amended
to read:
19565. (a) (1) If an organization is exempt from taxation under
Section 23701 for any taxable year, the application filed by the
organization with respect to which the Franchise Tax Board made its
determination that the organization was entitled to exemption under
Section 23701, together with any papers submitted in support of the
application, any letter or other document issued by the Franchise Tax
Board, with respect to the application, and any copy of the
notification issued by the Internal Revenue Service approving the
organization's tax-exempt status pursuant to the Internal Revenue
Code which is submitted by the organization to the Franchise Tax
Board, shall be open to public inspection. After the application of
any organization has been opened to public inspection under this
subdivision, the Franchise Tax Board shall, on the request of any
person with respect to the organization, furnish a statement
indicating the section which it has been determined describes the
organization.
(2) Any inspection under paragraph (1) may be made at times, and
in the manner, as the Franchise Tax Board shall by regulation
prescribe.
(b) Upon request of the organization submitting any supporting
papers described in subdivision (a), the Franchise Tax Board shall
withhold from public inspection any information contained therein
which it determines relates to any trade secret, patent, process,
style of work, or apparatus, of the organization, if it determines
that public disclosure of the information would adversely affect the
organization. The Franchise Tax Board shall withhold from public
inspection any information contained in supporting papers described
in subdivision (a) the public disclosure of which it determines would
adversely affect the national defense.
(c) The Franchise Tax Board may impose a reasonable charge for
supplying any information the disclosure of which is permitted under
this section.
SEC. 3. 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).
(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. 4. Section 23701 of the Revenue and Taxation Code is amended
to read:
23701. Organizations which are organized and operated for
nonprofit purposes within the provisions of a specific section of
this article, or are defined in Section 23701h (relating to certain
title-holding companies) or Section 23701x (relating to certain
title-holding companies), are exempt from taxes imposed under this
part, except as provided in this article or in Article 2 (commencing
with Section 23731) of this chapter, if:
(a) An application for exemption is submitted in the form
prescribed by the Franchise Tax Board; and
(b) A filing fee of twenty-five dollars ($25) is paid with each
application for exemption filed with the Franchise Tax Board after
December 31, 1969; and
(c) The Franchise Tax Board issues a determination exempting the
organization from tax.
(d) (1) Notwithstanding subdivisions (a), (b), and (c), an
organization organized and operated for nonprofit purposes in
accordance with Section 23701a, 23701d, 23701e, 23701f, or 23701g
shall be exempt from taxes imposed by this part, except as provided
in this article or in Article 2 (commencing with Section 23731), upon
its submission to the Franchise Tax Board of one of the following:
(A) A copy of the determination letter or ruling issued by the
Internal Revenue Service recognizing the organization's exemption
from federal income tax under Section 501(a) of the Internal Revenue
Code, as an organization described in Section 501(c)(3), (c)(4), (c)
(5), (c)(6), or (c)(7) of the Internal Revenue Code.
(B) A copy of the group exemption letter issued by the Internal
Revenue Service that states that both the central organization and
all of its subordinates are tax-exempt under Section 501(c)(3), (c)
(4), (c)(5), (c)(6), or (c)(7) of the Internal Revenue Code and
substantiation that the organization is included in the federal group
exemption letter as a subordinate organization.
(2) (A) Upon receipt of the documents required in subparagraph (A)
or (B) of paragraph (1), the Franchise Tax Board shall issue an
acknowledgment that the organization is exempt from taxes imposed by
this part, except as provided in this article or in Article 2
(commencing with Section 23731). The acknowledgment may refer to the
organization's recognition by the Internal Revenue Service of
exemption from federal income tax as an organization described in
Section 501(c)(3), (c)(4), (c)(5), (c)(6), or (c)(7) of the Internal
Revenue Code and, if applicable, the organization's subordinate
organization status under a federal group exemption letter. The
effective date of an organization's exemption from state income tax
pursuant to this subdivision shall be no later than the effective
date of the organization's recognition of exemption from federal
income tax as an organization described in Section 501(c)(3), (c)(4),
(c)(5), (c)(6), or (c)(7) of the Internal Revenue Code, or its
status as a subordinate organization under a federal group exemption
letter, as applicable.
(B) Notwithstanding any other provision of this subdivision, an
organization formed as a California corporation or qualified to do
business in California that, as of the date of receipt by the
Franchise Tax Board of the documents required under paragraph (1), is
listed by the Secretary of the State or Franchise Tax Board as
"suspended" or "forfeited" may not establish its exemption under
paragraph (1) and shall not receive an acknowledgment referred to
under subparagraph (A) from the Franchise Tax Board until that
corporation is listed by the Secretary of State and the Franchise Tax
Board as an "active" corporation.
(3) If, for federal income tax purposes, an organization's
exemption from tax as an organization described in Section 501(c)(3),
(c)(4), (c)(5), (c)(6), or (c)(7) of the Internal Revenue Code is
suspended or revoked, the organization shall notify the Franchise Tax
Board of the suspension or revocation, in the form and manner
prescribed by the Franchise Tax Board. Upon notification, the board
shall suspend or revoke, whichever is applicable, for state income
tax purposes, the organization's exemption under paragraph (1).
(4) This subdivision shall not be construed to prevent the
Franchise Tax Board from revoking the exemption of an organization
that is not organized or operated in accordance with California law,
this chapter, or Section 501(c)(3), (c)(4), (c)(5), (c)(6), or (c)(7)
of the Internal Revenue Code.
(5) If the Franchise Tax Board suspends or revokes the exemption
of an organization pursuant to paragraph (3) or (4), the exemption
shall be reinstated only upon compliance with this section,
regardless of whether the organization can establish exemption under
paragraph (1).
(e) This section shall not prevent a determination from having
retroactive effect and does not prevent the issuance of a
determination with respect to a domestic organization which was in
existence prior to January 1, 1970, and exempt under prior law
without the submission of a formal application or payment of a filing
fee. For the purpose of this section, the term "domestic" means
created or organized under the laws of this state.
(f) The Franchise Tax Board may prescribe rules and regulations to
implement the provisions of this article.
SEC. 5. Section 23701d of the Revenue and Taxation Code is amended
to read:
23701d. (a) A corporation, community chest or trust, organized
and operated exclusively for religious, charitable, scientific,
testing for public safety, literary, or educational purposes, or to
foster national or international amateur sports competition (but only
if no part of its activities involved the provision of athletic
facilities or equipment), or for the prevention of cruelty to
children or animals, no part of the net earnings of which inures to
the benefit of any private shareholder or individual, no substantial
part of the activities of which is carrying on propaganda or
otherwise attempting to influence legislation (except as otherwise
provided in Section 23704.5), and which does not participate in, or
intervene in (including the publishing or distribution of
statements), any political campaign on behalf of (or in opposition
to) any candidate for public office. An organization is not organized
exclusively for exempt purposes listed above unless its assets are
irrevocably dedicated to one or more purposes listed in this section.
Dedication of assets requires that in the event of dissolution of an
organization or the impossibility of performing the specific
organizational purposes the assets would continue to be devoted to
exempt purposes. Assets shall be deemed irrevocably dedicated to
exempt purposes if the articles of organization provide that upon
dissolution the assets will be distributed to an organization which
is exempt under this section or Section 501(c)(3) of the Internal
Revenue Code or to the federal government, or to a state or local
government for public purposes; or by a provision in the articles of
organization, satisfactory to the Franchise Tax Board; that the
property will be distributed in trust for exempt purposes; or by
establishing that the assets are irrevocably dedicated to exempt
purposes by operation of law. The irrevocable dedication requirement
shall not be a sole basis for revocation of an exempt determination
made by the Franchise Tax Board prior to the effective date of this
amendment.
(b) (1) In the case of a qualified amateur sports organization--
(A) The requirement of subdivision (a) that no part of its
activities involves the provision of athletic facilities or equipment
shall not apply.
(B) That organization shall not fail to meet the requirements of
subdivision (a) merely because its membership is local or regional in
nature.
(2) For purposes of this subdivision, "qualified amateur sports
organization" means any organization organized and operated
exclusively to foster national or international amateur sports
competition if that organization is also organized and operated
primarily to conduct national or international competition in sports
or to support and develop amateur athletes for national or
international competition in sports.
SEC. 6. The Legislature finds and declares that the retroactive
application of the amendments made to Section 23036 by this act
serves a public purpose by attracting equitable tax treatment to
taxpayers that are stimulating the economy of the state and does not
constitute a gift of public funds within the meaning of Section 6 of
Article XVI of the California Constitution.
