Bill Text: CA AB166 | 2011-2012 | Regular Session | Introduced
Bill Title: Corporation taxes: minimum franchise tax.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2012-02-01 - Died pursuant to Art. IV, Sec. 10(c) of the Constitution. From committee: Filed with the Chief Clerk pursuant to Joint Rule 56. [AB166 Detail]
Download: California-2011-AB166-Introduced.html
BILL NUMBER: AB 166 INTRODUCED
BILL TEXT
INTRODUCED BY Assembly Member Cook
JANUARY 20, 2011
An act to amend Sections 23151.1, 23151.2, and 23282 of, and to
amend and repeal Sections 23153 and 23221 of, the Revenue and
Taxation Code, relating to taxation, to take effect immediately, tax
levy.
LEGISLATIVE COUNSEL'S DIGEST
AB 166, as introduced, Cook. Corporation taxes: minimum franchise
tax.
The Corporation Tax Law generally imposes a franchise tax on
corporations doing business within the limits of this state,
including a minimum franchise tax on specified corporations, as
provided.
This bill would eliminate the minimum franchise tax and make
related technical amendments.
This bill would take effect immediately as a tax levy.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares all of the
following:
(a) This act will level the playing field with neighboring states
that either do not have a minimum franchise tax or one that is a
small fraction of California's.
(c) Nevada does not assess a tax on corporate income but rather
imposes a minimum fee of $100.
(d) Arizona assesses only a minimum tax of $50 on financial
institutions, corporations, and limited liability companies that
elect to be taxed as corporations, and imposes a business license fee
of $15.
(e) Oregon assesses a minimum excess tax of $10 on financial
institutions, corporations, and limited liability corporations that
elect to be taxed as corporations.
(f) Utah imposes only a minimum tax of $100 on "C" corporations.
(g) California has chronic high unemployment compared to
neighboring states due to the unfavorable business climate, which
includes excessively high taxes on small businesses.
(h) This act will both update and improve California's outdated
taxation system and make it more reflective of our state's economy,
and make it competitive in the national and international markets.
SEC. 2. Section 23151.1 of the Revenue and Taxation Code is
amended to read:
23151.1. Notwithstanding Section 23151, every corporation (except
banks and financial corporations) doing business within the limits
of this state and not 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 determined as follows:
(a) With respect to corporations, other than those described in
subdivision (b), which commence doing business within the state after
December 31, 1971, and before January 1, 2000, the tax for the
taxable year of commencement, whether or not for 12 full months,
shall be the minimum franchise tax prescribed in Section 23153.
(b) If after December 31, 1972, a corporation commences to do
business and ceases doing business in the same taxable year, the tax
for that taxable year shall be according to or measured by its net
income for the year, to be computed at the rate prescribed in Section
23151.
(c) (1) With respect to taxable years beginning after December 31,
1972, and before January 1, 2000, other than the year of
commencement described in subdivision (a) or (b) or the year of
cessation described in subdivision (d), the tax for that taxable year
shall be according to or measured by its net income for the next
preceding taxable year, to be computed at the rate prescribed in
Section 23151.
(2) With respect to taxable years beginning on or after January 1,
2000, (other than the first taxable year beginning on or after that
date), the tax for the taxable year (including the taxable year of
commencement and the taxable year of cessation) shall be according to
or measured by its net income for the taxable year to be computed at
the rate prescribed in Section 23151.
(d) With respect to corporations which cease doing business in a
taxable year beginning after December 31, 1972, and before January 1,
2000, other than those described in subdivision (b), the tax for the
taxable year of cessation shall be:
(1) According to or measured by its net income for the next
preceding taxable year, to be computed at the rate prescribed in
Section 23151, plus
(2) According to or measured by its net income for the taxable
year during which the corporation ceased doing business, to be
computed at the rate prescribed in Section 23151.
(e) In any event, the tax for any taxable year shall not be less
than the minimum tax provided for in Section 23153 for that taxable
year.
SEC. 3. Section 23151.2 of the Revenue and Taxation Code is
amended to read:
23151.2. Notwithstanding Section 23151, every corporation (except
banks and financial corporations) not exempted from taxation by the
provisions of the Constitution of this state or by this part which
dissolves or withdraws, shall pay a tax for its taxable year of
dissolution or withdrawal according to or measured by its net income
for the taxable year in which it ceased doing business, unless that
income has previously been included in the measure of tax for any
taxable year, to be computed at the rate prescribed in Section 23151
for its taxable year of dissolution or withdrawal. In any
event, the tax for the taxable year of its dissolution or withdrawal
shall not be less than the minimum tax provided for in Section 23153
for that taxable year.
SEC. 4. Section 23153 of the Revenue and Taxation Code is amended
to read:
23153. (a) Every corporation described in subdivision (b) shall
be subject to the minimum franchise tax specified in subdivision (d)
from the earlier of the date of incorporation, qualification, or
commencing to do business within this state, until the effective date
of dissolution or withdrawal as provided in Section 23331 or, if
later, the date the corporation ceases to do business within the
limits of this state.
(b) Unless expressly exempted by this part or the California
Constitution, subdivision (a) shall apply to each of the following:
(1) Every corporation that is incorporated under the laws of this
state.
(2) Every corporation that is qualified to transact intrastate
business in this state pursuant to Chapter 21 (commencing with
Section 2100) of Division 1 of Title 1 of the Corporations Code.
(3) Every corporation that is doing business in this state.
(c) The following entities are not subject to the minimum
franchise tax specified in this section:
(1) Credit unions.
(2) Nonprofit cooperative associations organized pursuant to
Chapter 1 (commencing with Section 54001) of Division 20 of the Food
and Agricultural Code that have been issued the certificate of the
board of supervisors prepared pursuant to Section 54042 of the Food
and Agricultural Code. The association shall be exempt from the
minimum franchise tax for five consecutive taxable years, commencing
with the first taxable year for which the certificate is issued
pursuant to subdivision (b) of Section 54042 of the Food and
Agricultural Code. This paragraph only applies to nonprofit
cooperative associations organized on or after January 1, 1994.
(d) (1) Except as provided in paragraph (2), paragraph (1) of
subdivision (f) of Section 23151, paragraph (1) of subdivision (f) of
Section 23181, and paragraph (1) of subdivision (c) of Section
23183, corporations subject to the minimum franchise tax shall pay
annually to the state a minimum franchise tax of eight hundred
dollars ($800).
(2) The minimum franchise tax shall be twenty-five dollars ($25)
for each of the following:
(A) A corporation formed under the laws of this state whose
principal business when formed was gold mining, which is inactive and
has not done business within the limits of the state since 1950.
(B) A corporation formed under the laws of this state whose
principal business when formed was quicksilver mining, which is
inactive and has not done business within the limits of the state
since 1971, or has been inactive for a period of 24 consecutive
months or more.
(3) For purposes of paragraph (2), a corporation shall not be
considered to have done business if it engages in other than mining.
(e) Notwithstanding subdivision (a), for taxable years beginning
on or after January 1, 1999, and before January 1, 2000, every
"qualified new corporation" shall pay annually to the state a minimum
franchise tax of five hundred dollars ($500) for the second taxable
year. This subdivision shall apply to any corporation that is a
qualified new corporation and is incorporated on or after January 1,
1999, and before January 1, 2000.
(1) The determination of the gross receipts of a corporation, for
purposes of this subdivision, shall be made by including the gross
receipts of each member of the commonly controlled group, as defined
in Section 25105, of which the corporation is a member.
(2) "Gross receipts, less returns and allowances reportable to
this state," means the sum of the gross receipts from the production
of business income, as defined in subdivision (a) of Section 25120,
and the gross receipts from the production of nonbusiness income, as
defined in subdivision (d) of Section 25120.
(3) "Qualified new corporation" means a corporation that is
incorporated under the laws of this state or has qualified to
transact intrastate business in this state, that begins business
operations at or after the time of its incorporation and that
reasonably estimates that it will have gross receipts, less returns
and allowances, reportable to this state for the taxable year of one
million dollars ($1,000,000) or less. "Qualified new corporation"
does not include any corporation that began business operations as a
sole proprietorship, a partnership, or any other form of business
entity prior to its incorporation. This subdivision shall not apply
to any corporation that reorganizes solely for the purpose of
reducing its minimum franchise tax.
(4) This subdivision shall not apply to limited partnerships, as
defined in Section 17935, limited liability companies, as defined in
Section 17941, limited liability partnerships, as defined in Section
17948, charitable organizations, as described in Section 23703,
regulated investment companies, as defined in Section 851 of the
Internal Revenue Code, real estate investment trusts, as defined in
Section 856 of the Internal Revenue Code, real estate mortgage
investment conduits, as defined in Section 860D of the Internal
Revenue Code, qualified Subchapter S subsidiaries, as defined in
Section 1361(b)(3) of the Internal Revenue Code, or to the formation
of any subsidiary corporation, to the extent applicable.
(5) For any taxable year beginning on or after January 1, 1999,
and before January 1, 2000, if a corporation has qualified to pay
five hundred dollars ($500) for the second taxable year under this
subdivision, but in its second taxable year, the corporation's gross
receipts, as determined under paragraphs (1) and (2), exceed one
million dollars ($1,000,000), an additional tax in the amount equal
to three hundred dollars ($300) for the second taxable year shall be
due and payable by the corporation on the due date of its return,
without regard to extension, for that year.
(f) (1) Notwithstanding subdivision (a), every corporation that
incorporates or qualifies to do business in this state on or after
January 1, 2000, shall not be subject to the minimum franchise tax
for its first taxable year.
(2) This subdivision shall not apply to limited partnerships, as
defined in Section 17935, limited liability companies, as defined in
Section 17941, limited liability partnerships, as defined in Section
17948, charitable organizations, as described in Section 23703,
regulated investment companies, as defined in Section 851 of the
Internal Revenue Code, real estate investment trusts, as defined in
Section 856 of the Internal Revenue Code, real estate mortgage
investment conduits, as defined in Section 860D of the Internal
Revenue Code, and qualified Subchapter S subsidiaries, as defined in
Section 1361(b)(3) of the Internal Revenue Code, to the extent
applicable.
(3) This subdivision shall not apply to any corporation that
reorganizes solely for the purpose of avoiding payment of its minimum
franchise tax.
(g) Notwithstanding subdivision (a), a domestic corporation, as
defined in Section 167 of the Corporations Code, that files a
certificate of dissolution in the office of the Secretary of State
pursuant to subdivision (b) of Section 1905 of the Corporations Code,
prior to its amendment by the act amending this subdivision, and
that does not thereafter do business shall not be subject to the
minimum franchise tax for taxable years beginning on or after the
date of that filing.
(h) The minimum franchise tax imposed by paragraph (1) of
subdivision (d) shall not be increased by the Legislature by more
than 10 percent during any calendar year.
(i) (1) Notwithstanding subdivision (a), a corporation that is a
small business solely owned by a deployed member of the United States
Armed Forces shall not be subject to the minimum franchise tax for
any taxable year the owner is deployed and the corporation operates
at a loss or ceases operation.
(2) The Franchise Tax Board may promulgate regulations as
necessary or appropriate to carry out the purposes of this
subdivision, including a definition for "ceases operation."
(3) For the purposes of this subdivision, all of the following
definitions apply:
(A) "Deployed" means being called to active duty or active service
during a period when a Presidential Executive order specifies that
the United States is engaged in combat or homeland defense. "Deployed"
does not include either of the following:
(i) Temporary duty for the sole purpose of training or processing.
(ii) A permanent change of station.
(B) "Operates at a loss" means negative net income as defined in
Section 24341.
(C) "Small business" means a corporation with total income from
all sources derived from, or attributable, to the state of two
hundred fifty thousand dollars ($250,000) or less.
(4) This subdivision shall become inoperative for taxable years
beginning on or after January 1, 2018.
(j) This section shall remain in effect until January 1, 2011, and
as of that date is repealed.
SEC. 5. Section 23221 of the Revenue and Taxation Code is amended
to read:
23221. (a) Any credit union that incorporates under the laws of
this state or qualifies to transact intrastate business in this state
shall thereupon prepay a tax of twenty-five dollars ($25) as
provided in Section 23153. The prepayment shall be made to the
Secretary of State with the filing of the articles of incorporation
or the statement and designation by a foreign corporation. The
Secretary of State shall transmit the amount of the prepayment to the
Franchise Tax Board. The Franchise Tax Board shall certify to the
Secretary of State on an individual or class basis those domestic or
foreign corporations that are exempt from prepayment or for which
prepayment to the Secretary of State is waived.
(b) This section shall become operative and apply beginning on or
after January 1, 2001.
(c) This section shall remain in effect until January 1, 2011, and
as of that date is repealed.
SEC. 6. Section 23282 of the Revenue and Taxation Code is amended
to read:
23282. (a) The tax imposed upon any taxpayer which has suffered
the suspension or forfeiture provided in Section 23301, and which
revives in any taxable year other than the taxable year in which
suspension or forfeiture occurred, shall be computed in the same
manner as provided in Sections 23222 to 23224, inclusive, relative to
the computation of taxes upon taxpayers commencing to do business
for the first time after incorporation or qualification. In addition
to the taxes, penalties, and interest specified in Section 23305,
such taxpayer shall prepay a tax in an amount equal to the minimum
tax provided for in Section 23153 as a condition precedent to the
issuance of a certificate of revivor.
(b) After December 31, 1971, and before January 1, 2000, the tax
imposed upon any taxpayer which has suffered the suspension or
forfeiture provided in Section 23301, and which revives in any
taxable year other than the taxable year in which suspension or
forfeiture occurred, shall be--
(1) In the case of a taxpayer which was doing business in the year
next preceding the year in which revivor took place, computed upon
the basis of the net income for that next preceding income year,
(2) In the case of a taxpayer which resumed doing business in the
year of revivor, computed upon the basis of the net income for the
year in which it ceased doing business, unless such income is or has
otherwise been subject to tax, tax.
(3) In the case of a taxpayer which first commences to do business
in the year of revivor, the minimum tax provided in Section 23153,
(4) In no event less than the minimum tax provided in Section
23153.
In addition to the taxes, penalties, and interest specified in
Section 23305, such taxpayer shall prepay the minimum tax imposed by
this subdivision as a condition precedent to the issuance of a
certificate of revivor.
(c) After December 31, 1999, the tax imposed upon any taxpayer
that has suffered the suspension or forfeiture provided in Section
23301, and that revives in any taxable year other than the taxable
year in which suspension or forfeiture occurred, shall be computed
upon the basis of the net income for the taxable year in which it
revives, but in no event less than the minimum tax provided in
Section 23153.
SEC. 7. This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.
