Bill Text: CA AB1500 | 2011-2012 | Regular Session | Amended

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Corporation taxes: apportionment: single sales factor:

Spectrum: Partisan Bill (Democrat 61-0)

Status: (Engrossed - Dead) 2012-09-01 - Withdrawn from committee. Ordered to third reading. (Ayes 24. Noes 11. Page 5122.) Read third time. Urgency clause refused adoption. (Ayes 22. Noes 15. Page 5122.) [AB1500 Detail]

Download: California-2011-AB1500-Amended.html

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BILL NUMBER: AB 1500	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  FEBRUARY 9, 2012

INTRODUCED BY    Committee on Budget   (
  Blumenfield (Chair), Alejo, Bonilla, Brownley,
Buchanan, Butler, Cedillo, Chesbro, Dickinson, Feuer, Gordon,
Huffman, Mitchell, Monning, and Swanson   )
  Assembly Member   John A. Pérez 
    (   Coauthors:   Assembly Members 
 Alejo,   Allen,   Ammiano,   Atkins,
  Beall,   Block,   Blumenfield, 
 Bonilla,   Bradford,   Brownley,  
Buchanan,   Butler,   Charles Calderon,  
Campos,   Carter,   Cedillo,   Chesbro,
  Davis,   Dickinson,   Eng,  
Feuer,   Fuentes,   Furutani,   Galgiani,
  Gatto,   Gordon,   Hall,  
Hayashi,   Roger Hernández,   Hill,  
Huber,   Hueso,   Huffman,   Lara, 
 Bonnie Lowenthal,   Ma,   Mitchell,  
Monning,   Pan,   Perea,   V. Manuel
Pérez,   Skinner,   Solorio,   Torres,
  Wieckowski,   Williams,   and Yamada
  ) 

                        JANUARY 10, 2012

   An act  relating to the Budget Act of 2012  
to add Article 21.7 (commencing with Section 70200) to Chapter 2 of
Part 42 of   Division 5 of Title 3 of the Education Code,
and to amend Sections 23101 and 25128 of, to amend and repeal Section
25128.5 of, to amend, repeal, and add Section 25136 of, and to add
Sections 25128.7 and 25136.1 to, the Revenue and Taxation Code,
relating to taxation, and declaring the urgency thereof, to take
effect immediately  .



	LEGISLATIVE COUNSEL'S DIGEST


   AB 1500, as amended,  Committee on Budget  
John A. Pérez  .  Budget Act of 2012.  
Corporation taxes: single sales factor: Middle Class Scholarship
Fund.  
   The Corporation Tax Law imposes taxes measured by income and, in
the case of a business with income derived from or attributable to
sources both within and without this state, apportions the income
between this state and other states and foreign countries in
accordance with a specified 4-factor formula based on the property,
payroll, and sales within and without this state, except that in the
case of an apportioning trade or business that derives more than 50%
of its gross business receipts from conducting one or more qualified
business activities, as defined, business income is apportioned in
accordance with a specified 3-factor formula. That law, for taxable
years beginning on or after January 1, 2011, allows a taxpayer to
apportion its income in accordance with a single sales factor
formula, except as provided, pursuant to an irrevocable annual
election, as specified. That law also provides that sales of tangible
personal property and sales of other than tangible personal property
are in this state in accordance with specified criteria.  
   This bill would, for taxable years beginning on or after January
1, 2012, revise the rules that determine whether a taxpayer is doing
business in this state, revise the provisions that determine whether
sales other than tangible personal property occur in this state,
including specific provisions for cable systems or networks, and
require a taxpayer, except as provided, to apportion its income in
accordance with a single sales factor.  
   This bill would require any aggregate increase in revenues derived
from its provisions, as provided, to be deposited into the Middle
Class Scholarship Fund, which the bill would establish, and, upon
appropriation by the Legislature, allocate those revenues for the
purpose of increasing the affordability of higher education. 

   This bill would declare that it is to take effect immediately as
an urgency statute.  
   This bill would express the intent of the Legislature to enact
statutory changes relating to the Budget Act of 2012. 
   Vote:  majority    . Appropriation: no.
Fiscal committee:  no   yes  .
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
   
  SECTION 1.    Article 21.7 (commencing with Section 70200)
is added to Chapter 2 of Part 42 of Division 5 of Title 3 of the
Education Code, to read:

      Article 21.7.  Middle Class Scholarship Fund


   70200.  (a) The Franchise Tax Board shall report to the Department
of Finance, pursuant to a time schedule prescribed by the Director
of Finance, the estimated increase or decrease in revenues for the
2012-13 fiscal year, and each subsequent fiscal year, as the result
of the amendment, addition, or repeal of Sections 23101, 25128,
25128.5, 25128.7, 25136, and 25136.1 of the Revenue and Taxation Code
by the act adding this section.
   (b) The Franchise Tax Board shall report to the Department of
Finance, pursuant to a time schedule prescribed by the Director of
Finance, the actual increase or decrease in revenues for the 2012-13
fiscal year and each subsequent fiscal year, as a result of the
amendment, addition, or repeal of Sections 23101, 25128, 25128.5,
25128.7, 25136, and 25136.1 of the Revenue and Taxation Code by the
act adding this section.
   (c) The Director of Finance shall direct the Controller to make
the following deposits in the Middle Class Scholarship Fund:
   (1) On or before September 1, 2012, an amount equal to the
estimated increase in revenues provided pursuant to subdivision (a)
for the 2012-13 fiscal year.
   (2) On or before September 1, 2013, an amount equal to the
estimated increase in revenues provided pursuant to subdivision (a)
for the 2013-14 fiscal year.
   (3) On or before September 1, 2014, an amount equal to the
estimated increase in revenues provided pursuant to subdivision (a)
for the 2014-15 fiscal year.
   (4) On or before September 1, 2015, an amount equal to the
estimated increase in revenues provided pursuant to subdivision (a)
for the 2015-16 fiscal year.
   (5) On or before September 1, 2016, and each September 1
thereafter, an amount equal to the estimated increase in revenues
provided pursuant to subdivision (a) for the preceding fiscal year,
as adjusted by that amount calculated pursuant to subdivision (d).
   (d) The Director of Finance shall, on or before September 1, 2016,
and each September 1 thereafter, calculate the difference between
the estimated increase in revenues for the fiscal year enduring four
years previously provided pursuant to subdivision (a) and the actual
increase in revenues for that fiscal year provided pursuant to
subdivision (b).
   70201.  The Middle Class Scholarship Fund is hereby established in
the State Treasury. Moneys in the fund shall be allocated, upon
appropriation by the Legislature, for the purpose of increasing the
affordability of higher education. 
   SEC. 2.    Section 23101 of the   Revenue
and Taxation Code   is amended to read: 
   23101.  (a) "Doing business" means actively engaging in any
transaction for the purpose of financial or pecuniary gain or profit.

   (b) For taxable years beginning on or after January 1, 2011, a
taxpayer is doing business in this state for a taxable year if any of
the following conditions has been satisfied:
   (1) The taxpayer is organized or commercially domiciled in this
state.
   (2) Sales, as defined in subdivision (e) or (f) of Section 25120
as applicable for the taxable year, of the taxpayer in this state
exceed the lesser of five hundred thousand dollars ($500,000) or 25
percent of the taxpayer's total sales. For purposes of this
paragraph, sales of the taxpayer include sales by an agent or
independent contractor of the taxpayer. For purposes of this
paragraph, sales in this state shall be determined using the rules
for assigning sales under  Section   Sections
 25135 and  subdivision (b) of Section 25136
 ,  and the regulations thereunder, as modified by
regulations under Section 25137.
   (3) The real property and tangible personal property of the
taxpayer in this state exceed the lesser of fifty thousand dollars
($50,000) or 25 percent of the taxpayer's total real property and
tangible personal property. The value of real and tangible personal
property and the determination of whether property is in this state
shall be determined using the rules contained in Sections 25129 to
25131, inclusive, and the regulations thereunder, as modified by
 regulation   regulations  under Section
25137.
   (4) The amount paid in this state by the taxpayer for
compensation, as defined in subdivision (c) of Section 25120, exceeds
the lesser of fifty thousand dollars ($50,000) or 25 percent of the
total compensation paid by the taxpayer. Compensation in this state
shall be determined using the rules for assigning payroll contained
in Section 25133 and the regulations thereunder, as modified by
regulations under Section 25137.
   (c) (1) The Franchise Tax Board shall annually revise the amounts
in paragraphs (2), (3), and (4) of subdivision (b) in accordance with
subdivision (h) of Section 17041.
   (2) For purposes of the adjustment required by paragraph (1),
subdivision (h) of Section 17041 shall be applied by substituting
"2012" in lieu of "1988."
   (d) The sales, property, and payroll of the taxpayer include the
taxpayer's pro rata or distributive share of  pass-through
entities   a pass-thru entity  . For purposes of
this subdivision,  "pass-through entities"   a
"pass-thru entity"  means a partnership or an "S" corporation.
   SEC. 3.    Section 25128 of the   Revenue
and Taxation Code   is amended to read: 
   25128.  (a)  (1)    Notwithstanding Section
38006,  for taxable years beginning before January 1, 2012, 
all business income shall be apportioned to this state by
multiplying the business income by a fraction, the numerator of which
is the property factor plus the payroll factor plus twice the sales
factor, and the denominator of which is four, except as provided in
subdivision (b) or (c). 
   (2) Notwithstanding Section 38006, for taxable years beginning on
or after January 1, 2012, all business income of an apportioning
trade or business shall be apportioned to this state by multiplying
the business income by the sales factor, unless the trade or business
meets the criteria of subdivision (b) or makes an election to
apportion its income in accordance with Section 25128.7. 
   (b) If an apportioning trade or business derives more than 50
percent of its "gross business receipts" from conducting one or more
qualified business activities, all business income of the
apportioning trade or business shall be apportioned to this state by
multiplying business income by a fraction, the numerator of which is
the property factor plus the payroll factor plus the sales factor,
and the denominator of which is three.
   (c) For purposes of this section, a "qualified business activity"
means the following:
   (1) An agricultural business activity.
   (2) An extractive business activity.
   (3) A savings and loan activity.
   (4) A banking or financial business activity.
   (d) For purposes of this section:
   (1) "Gross business receipts" means gross receipts described in
subdivision (e) or (f) of Section 25120 (other than gross receipts
from sales or other transactions within an apportioning trade or
business between members of a group of corporations whose income and
apportionment factors are required to be included in a combined
report under Section 25101, limited, if applicable, by Section
25110), whether or not the receipts are excluded from the sales
factor by operation of Section 25137.
   (2) "Agricultural business activity" means activities relating to
any stock, dairy, poultry, fruit, furbearing animal, or truck farm,
plantation, ranch, nursery, or range. "Agricultural business activity"
also includes activities relating to cultivating the soil or raising
or harvesting any agricultural or horticultural commodity,
including, but not limited to, the raising, shearing, feeding, caring
for, training, or management of animals on a farm as well as the
handling, drying, packing, grading, or storing on a farm any
agricultural or horticultural commodity in its unmanufactured state,
but only if the owner, tenant, or operator of the farm regularly
produces more than one-half of the commodity so treated.
   (3) "Extractive business activity" means activities relating to
the production, refining, or processing of oil, natural gas, or
mineral ore.
   (4) "Savings and loan activity" means any activities performed by
savings and loan associations or savings banks which have been
chartered by federal or state law.
   (5) "Banking or financial business activity" means activities
attributable to dealings in money or moneyed capital in substantial
competition with the business of national banks.
   (6) "Apportioning trade or business" means a distinct trade or
business whose business income is required to be apportioned under
Sections 25101 and 25120, limited, if applicable, by Section 25110,
using the same denominator for each of the applicable payroll,
property, and sales factors.
   (7) Paragraph (4) of subdivision (c) shall apply only if the
Franchise Tax Board adopts the Proposed Multistate Tax Commission
Formula for the Uniform Apportionment of Net Income from Financial
Institutions, or its substantial equivalent, and shall become
operative upon the same operative date as the adopted formula.
   (8) In any case where the income and apportionment factors of two
or more savings associations or corporations are required to be
included in a combined report under Section 25101, limited, if
applicable, by Section 25110, both of the following shall apply:
   (A) The application of the more than 50 percent test of
subdivision (b) shall be made with respect to the "gross business
receipts" of the entire apportioning trade or business of the group.
   (B) The entire business income of the group shall be apportioned
in accordance with either subdivision (a) or (b), or 
subdivision (b) of  Section  25128.5  
25128.7  , as applicable.
   SEC. 4.    Section 25128.5 of the   Revenue
and Taxation Code   is amended to read: 
   25128.5.  (a) Notwithstanding Section 38006, for taxable years
beginning on or after January 1, 2011,  and before January 1,
2012,  any apportioning trade or business, other than an
apportioning trade or business described in subdivision (b) of
Section 25128, may make an irrevocable annual election on an original
timely filed return, in the manner and form prescribed by the
Franchise Tax Board to apportion its income in accordance with this
section, and not in accordance with Section 25128.
   (b) Notwithstanding Section 38006, for taxable years beginning on
or after January 1, 2011,  and   before January 1, 2012,
 all business income of an apportioning trade or business
making an election described in subdivision (a) shall be apportioned
to this state by multiplying the business income by the sales factor.

   (c) The Franchise Tax Board is authorized to issue regulations
necessary or appropriate regarding the making of an election under
this section, including regulations that are consistent with rules
prescribed for making an election under Section 25113. 
   (d) This section shall not apply to taxable years beginning on or
after January 1, 2012, and as of December 1, 2012, is repealed. 

   SEC. 5.    Section 25128.7 is added to the  
Revenue and Taxation Code   , to read:  
   25128.7.  (a) Notwithstanding Section 38006, for taxable years
beginning on or after January 1, 2012, any apportioning trade or
business, other than an apportioning trade or business described in
subdivision (b) of Section 25128, may make an irrevocable annual
election on an original timely filed return, in the manner and form
prescribed by the Franchise Tax Board, to apportion its income in
accordance with this section, and not in accordance with Section
25128, if the "tax," as defined in Section 23036 before the
application of any credits, using this section to apportion its
business income, is not less than the "tax," as defined in Section
23036 before the application of any credits, using paragraph (2) of
subdivision (a) of Section 25128 to apportion its business income.
   (b) Notwithstanding Section 38006, for taxable years beginning on
or after January 1, 2012, all business income of an apportioning
trade or business making an election under subdivision (a) shall be
apportioned to this state by multiplying the business income by a
fraction, the numerator of which is the property factor plus the
payroll factor plus twice the sales factor, and the denominator of
which is four.
   (c) The Franchise Tax Board is authorized to issue regulations
necessary or appropriate regarding the making of an election under
this section, including regulations that are consistent with rules
prescribed for making an election under Section 25113. 
   SEC. 6.    Section 25136 of the   Revenue
and Taxation Code   is amended to read: 
   25136.  (a) For taxable years beginning before January 1, 2011,
and for taxable years beginning on or after January 1, 2011,  and
before January 1, 2012,  for which Section 25128.5 is operative
and an election under subdivision (a) of Section 25128.5 has not
been made, sales, other than sales of tangible personal property, are
in this state if:
   (1) The income-producing activity is performed in this state; or
   (2) The income-producing activity is performed both in and outside
this state and a greater proportion of the income-producing activity
is performed in this state than in any other state, based on costs
of performance.
   (3) This subdivision shall apply, and subdivision (b) shall not
apply, for any taxable year beginning on or after January 1, 2011,
 and before January 1, 2012,  for which Section 25128.5 is
not operative for any taxpayer subject to the tax imposed under this
part.
   (b) For taxable years beginning on or after January 1, 2011  ,
and before January 1, 2012  :
   (1) Sales from services are in this state to the extent the
purchaser of the service received the benefit of the service in this
state.
   (2) Sales from intangible property are in this state to the extent
the property is used in this state. In the case of marketable
securities, sales are in this state if the customer is in this state.

   (3) Sales from the sale, lease, rental, or licensing of real
property are in this state if the real property is located in this
state.
   (4) Sales from the rental, lease, or licensing of tangible
personal property are in this state if the property is located in
this state.
    (5)     For taxable years beginning on or
after January 1, 2011, and before January 1, 2012:  
   (5) (A) 
    (A)  If Section 25128.5 is operative, then this
subdivision shall apply in lieu of subdivision (a) for any taxable
year for which an election has been made under subdivision (a) of
Section 25128.5.
   (B) If Section 25128.5 is not operative, then this subdivision
shall not apply and subdivision (a) shall apply for any taxpayer
subject to the tax imposed under this part.
   (C) Notwithstanding subparagraphs (A) or (B), this subdivision
shall apply for purposes of paragraph (2) of subdivision (b) of
Section 23101.
   (c) The Franchise Tax Board may prescribe those regulations as
necessary or appropriate to carry out the purposes of subdivision
(b). 
   (d) This section shall not apply to taxable years beginning on or
after January 1, 2012, and as of December 1, 2012, is repealed. 

   SEC. 7.    Section 25136 is added to the  
Revenue and Taxation Code   , to read:  
   25136.  (a) Notwithstanding Section 38006, for taxable years
beginning on or after January 1, 2012, sales, other than sales of
tangible personal property, are in this state if:
   (1) Sales from services are in this state to the extent the
purchaser of the service received the benefit of the services in this
state.
   (2) Sales from intangible property are in this state to the extent
the property is used in this state. In the case of marketable
securities, sales are in this state if the customer is in this state.

   (3) Sales from the sale, lease, rental, or licensing of real
property are in this state if the real property is located in this
state.
   (4) Sales from the rental, lease, or licensing of tangible
personal property are in this state if the property is located in
this state.
   (b) The Franchise Tax Board may prescribe regulations as necessary
or appropriate to carry out the purposes of this section. 
   SEC. 8.    Section 25136.1 is added to the  
Revenue and Taxation Code   , to read:  
   25136.1.  (a) For taxable years beginning on or after January 1,
2012, a qualified taxpayer that apportions its business income under
Section 25128 shall apply the following provisions:
   (1) Notwithstanding Section 25137, qualified sales assigned to
this state shall be equal to 50 percent of the amount of qualified
sales that would be assigned to this state pursuant to Section 25136
but for the application of this section. The remaining 50 percent
shall not be assigned to this state.
   (2) All other sales shall be assigned pursuant to Section 25135 or
25136.
   (b) For purposes of this section:
   (1) "Qualified taxpayer" means a member, as defined in paragraph
(10) of subdivision (b) of Section 25106.5 of Title 18 of the
California Code of Regulations, as in effect on the effective date of
the act adding this section, of a combined reporting group that is
also a qualified group.
   (2) "Qualified group" means a combined reporting group, as defined
in paragraph (3) of subdivision (b) of Section 25106.5 of Title 18
of the California Code of Regulations, as in effect on the effective
date of the act adding this section, that satisfies the following
conditions:
   (A) Has satisfied the minimum investment requirement for the
taxable year.
   (B) For the combined reporting group's taxable year beginning in
the 2006 calendar year, the combined reporting group derived more
than 50 percent of its United States network gross business receipts
from the operation of one or more cable systems.
   (C) For purposes of satisfying the requirements of subparagraph
(B), the following rules shall apply:
   (i) If a member of the combined reporting group for the taxable
year was not a member of the same combined reporting group for the
taxable year beginning in the 2006 calendar year, the gross business
receipts of that nonincluded member shall be included in determining
the combined reporting group's gross business receipts for its
taxable year beginning in the 2006 calendar year as if the
nonincluded member were a member of the combined reporting group for
the taxable year beginning in the 2006 calendar year.
   (ii) The gross business receipts shall include the gross business
receipts of a qualified partnership, but only to the extent of a
member's interest in the partnership.
   (3) "Cable system" and "network" shall have the same meaning as
defined in Section 5830 of the Public Utilities Code, as in effect on
the effective date of the act adding this section. "Network services"
means video, cable, voice, or data services.
   (4) "Gross business receipts" means gross receipts as defined in
paragraph (2) of subdivision (f) of Section 25120 (other than gross
receipts from sales or other transactions between or among members of
a combined reporting group, limited, if applicable, by Section
25110).
   (5) "Minimum investment requirement" means qualified expenditures
of not less than two hundred fifty million dollars ($250,000,000) by
a combined reporting group during the calendar year that includes the
beginning of the taxable year.
   (6) "Qualified expenditures" means any combination of expenditures
attributable to this state for tangible property, payroll, services,
franchise fees, or any intangible property distribution or other
rights, paid or incurred by or on behalf of a member of a combined
reporting group.
   (A) An expenditure for other than tangible property shall be
attributable to this state if the member of the combined reporting
group received the benefit of the purchase or expenditure in this
state.
   (B) A purchase of or expenditure for tangible property shall be
attributable to this state if the property is placed in service in
this state.
   (C) Qualified expenditures shall include expenditures by a
combined reporting group for property or services purchased, used, or
rendered by independent contractors in this state.
   (D) Qualified expenditures shall also include expenditures by a
qualified partnership, but only to the extent of the member's
interest in the partnership.
   (7) "Qualified partnership" means a partnership if the partnership'
s income and apportionment factors are included in the income and
apportionment factors of a member of the combined reporting group,
but only to the extent of the member's interest in the partnership.
   (8) "Qualified sales" means gross business receipts from the
provision of any network services, other than gross business receipts
from the sale or rental of customer premises equipment. "Qualified
sales" shall include qualified sales by a qualified partnership, but
only to the extent of a member's interest in the partnership.
   (c) The requirements in this section with respect to qualified
sales by a qualified partnership are intended to be consistent with
the rules for partnerships under paragraph (3) of subdivision (f) of
Section 25137-1 of Title 18 of the California Code of Regulations.

   SEC. 9.    This act shall become operative only if
Assembly Bill 1501 of the 2011-12 Regular Session is chaptered and
establishes a middle-class scholarship program. 
   SEC. 10.    This act is an urgency statute necessary
for the immediate preservation of the public peace, health, or safety
within the meaning of Article IV of the Constitution and shall go
into immediate effect. The facts constituting the necessity are:
 
   In order to provide urgently needed financial aid to California
public postsecondary students in time for the beginning of the
2012-13 academic year, it is necessary for this act to take effect
immediately.  
       
  SECTION 1.    It is the intent of the Legislature
to enact statutory changes relating to the Budget Act of 2012.

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