BILL NUMBER: AB 1778 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MAY 20, 2014
AMENDED IN ASSEMBLY APRIL 1, 2014
INTRODUCED BY Assembly Member Allen
( Coauthor: Assembly Member
Ian Calderon )
( Coauthor: Senator Gaines
)
FEBRUARY 18, 2014
An act to amend Section 17941 of the Revenue and Taxation Code,
relating to taxation, to take effect immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
AB 1778, as amended, Allen. Corporation
Income taxes: minimum annual tax: limited
liability company: exemption.
Existing law generally imposes an annual
minimum franchise tax of $800
in an amount equal to the minimum franchise tax , except
as provided, on every limited liability company doing business in
this state or registered in this state, as specified. Existing law
defines the term "limited liability company," for purposes of the
payment of the annual minimum franchise tax, to
exclude a limited liability company that is exempt from the payment
of the tax and certain fees under other existing law.
This bill would also exclude from that definition a limited
liability company that is formed for the exclusive purpose of
acquiring and holding title to intangible personal property
constituting equity or debt interests, or both, in a single other
corporation, limited liability company, or partnership, collecting
income therefrom, and turning over the entire amount thereof, less
expenses, to its members, thereby exempting such an entity from that
minimum annual tax.
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. Section 17941 of the Revenue and Taxation Code is
amended to read:
17941. (a) For each taxable year beginning on or after January 1,
1997, a limited liability company doing business in this state, as
defined in Section 23101, shall pay annually to this state a tax for
the privilege of doing business in this state in an amount equal to
the applicable amount specified in subdivision (d) of Section 23153
for the taxable year.
(b) (1) In addition to any limited liability company that is doing
business in this state and is therefore subject to the tax imposed
by subdivision (a), for each taxable year beginning on or after
January 1, 1997, a limited liability company shall pay annually the
tax prescribed in subdivision (a) if articles of organization have
been accepted, or a certificate of registration has been issued, by
the office of the Secretary of State. The tax shall be paid for each
taxable year, or part thereof, until a certificate of cancellation of
registration or of articles of organization is filed on behalf of
the limited liability company with the office of the Secretary of
State.
(2) If a taxpayer files a return with the Franchise Tax Board that
is designated as its final return, the Franchise Tax Board shall
notify the taxpayer that the annual tax shall continue to be due
annually until a certificate of dissolution is filed with the
Secretary of State pursuant to Section 17707.08 of the Corporations
Code or a certificate of cancellation is filed with the Secretary of
State pursuant to Section 17708.06 of the Corporations Code.
(c) The tax assessed under this section shall be due and payable
on or before the 15th day of the fourth month of the taxable year.
(d) For purposes of this section, "limited liability company"
means an organization, other than the following:
(1) A limited liability company that is exempt from the tax and
fees imposed under this chapter pursuant to Section 23701h or Section
23701x, that is formed by one or more persons under the law of this
state, any other country, or any other state, as a "limited liability
company" and that is not taxable as a corporation for California tax
purposes.
(2) A limited liability company that is formed for the exclusive
purpose of acquiring and holding title to intangible personal
property constituting equity or debt interests, or both, in a single
other corporation, limited liability company, or partnership,
collecting income therefrom, and turning over the entire amount
thereof, less expenses, to its members.
(e) Notwithstanding anything in this section to the contrary, if
the office of the Secretary of State files a certificate of
cancellation pursuant to Section 17707.02 of the Corporations Code
for any limited liability company, then paragraph (1) of subdivision
(f) of Section 23153 shall apply to that limited liability company as
if the limited liability company were properly treated as a
corporation for that limited purpose only, and paragraph (2) of
subdivision (f) of Section 23153 shall not apply. Nothing in this
subdivision entitles a limited liability company to receive a
reimbursement for any annual taxes or fees already paid.
(f) (1) Notwithstanding any provision of this section to the
contrary, a limited liability company that is a small business solely
owned by a deployed member of the United States Armed Forces shall
not be subject to the tax imposed under this section for any taxable
year the owner is deployed and the limited liability company 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 a limited liability company's
expenses exceed its receipts.
(C) "Small business" means a limited liability company with total
income from all sources derived from, or attributable, to
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.
SEC. 2. This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.