Bill Text: CA AB2086 | 2013-2014 | Regular Session | Amended
Bill Title: Business entities: annual tax: minimum franchise tax: fees.
Spectrum: Partisan Bill (Democrat 2-0)
Status: (Introduced - Dead) 2014-05-23 - Joint Rule 62(a), file notice suspended. (Page 5065.) In committee: Set, second hearing. Held under submission. [AB2086 Detail]
Download: California-2013-AB2086-Amended.html
BILL NUMBER: AB 2086 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MAY 7, 2014
AMENDED IN ASSEMBLY APRIL 21, 2014
AMENDED IN ASSEMBLY MARCH 28, 2014
INTRODUCED BY Assembly Member Ian Calderon
(Principal coauthor: Assembly Member Dababneh)
FEBRUARY 20, 2014
An act to amend Sections 17941 , 17942, and
19025 of the Revenue and Taxation Code, relating to taxation.
LEGISLATIVE COUNSEL'S DIGEST
AB 2086, as amended, Ian Calderon. Business entities: annual tax:
minimum franchise tax: fees.
Existing law imposes an annual tax in an amount equal to the
minimum franchise tax on every limited liability company doing
business in this state. In addition, existing law requires every
limited liability company, if the articles of organization have been
accepted by, or a certificate of registration has been issued by, the
Secretary of State, to pay an annual tax in an amount equal to the
minimum franchise tax. Existing law requires the tax assessed under
these provisions to be due and payable on or before the 15th day of
the 4th month of the taxable year. Existing law requires
every limited liability company subject to that annual tax to pay
annually to this state a fee equal to specified amounts based upon
total income from all sources attributable to this state. Existing
law makes this fee due and payable on the date the return of the
limited liability company is required to be filed.
Existing law imposes an annual minimum franchise tax, except as
provided, on every corporation incorporated in this state, qualified
to transact intrastate business in this state, or doing business in
this state. Existing law exempts a corporation that incorporates or
qualifies to do business in this state from the payment of the
minimum franchise tax in its first taxable year. Existing law
requires corporations subject to the minimum franchise tax to pay
annually to the state a minimum franchise tax of $800 and provides
that the estimated tax shall not be less than the minimum tax. If the
amount of estimated tax does not exceed the minimum franchise tax,
existing law requires the entire amount of the estimated tax to be
due and payable on or before the 15th day of the 4th month of the
taxable year.
This bill would also provide for that annual tax , fee,
and minimum franchise tax to be due and payable in 2 or 3
equal installments, on or before specified dates.
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) (1) The tax assessed under this section
shall be due and payable according to one of the following:
(1)
(A) On or before the 15th day of the fourth month of
the taxable year.
(2)
(B) In three equal installments on or before the 15th
day of the 4th, 8th, and 12th months of the taxable year.
(3)
(C) In two equal installments, with the first
installment on or before the 15th day of the fourth month of the
taxable year and the second installment on or before 12 months of
that date.
(2) The Franchise Tax Board shall develop procedures for taxpayers
to notify the Franchise Tax Board of the payment option used under
this subdivision.
(3) Penalties and interest shall not be imposed on a taxpayer for
electing to use an alternative payment option under this subdivision.
(d) For purposes of this section, "limited liability company"
means an organization, other than 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.
(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 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. Section 17942 of the Revenue and
Taxation Code is amended to read:
17942. (a) In addition to the tax imposed under Section 17941,
every limited liability company subject to tax under Section 17941
shall pay annually to this state a fee equal to:
(1) Nine hundred dollars ($900), if the total income from all
sources derived from or attributable to this state for the taxable
year is two hundred fifty thousand dollars ($250,000) or more, but
less than five hundred thousand dollars ($500,000).
(2) Two thousand five hundred dollars ($2,500), if the total
income from all sources derived from or attributable to this state
for the taxable year is five hundred thousand dollars ($500,000) or
more, but less than one million dollars ($1,000,000).
(3) Six thousand dollars ($6,000), if the total income from all
sources derived from or attributable to this state for the taxable
year is one million dollars ($1,000,000) or more, but less than five
million dollars ($5,000,000).
(4) Eleven thousand seven hundred ninety dollars ($11,790), if the
total income from all sources derived from or attributable to this
state for the taxable year is five million dollars ($5,000,000) or
more.
(b) (1) (A) For purposes of this section, "total income from all
sources derived from or attributable to this state" means gross
income, as defined in Section 24271, plus the cost of goods sold that
are paid or incurred in connection with the trade or business of the
taxpayer. However, "total income from all sources derived from or
attributable to this state" shall not include allocation or
attribution of income or gain or distributions made to a limited
liability company in its capacity as a member of, or holder of an
economic interest in, another limited liability company if the
allocation or attribution of income or gain or distributions are
directly or indirectly attributable to income that is subject to the
payment of the fee described in this section.
(B) For purposes of this section, "total income from all sources
derived from or attributable to this state" shall be determined using
the rules for assigning sales under Sections 25135 and 25136 and the
regulations thereunder, as modified by regulations under Section
25137, other than those provisions that exclude receipts from the
sales factor.
(2) In the event a taxpayer is a commonly controlled limited
liability company, the total income from all sources derived from or
attributable to this state, taking into account any election under
Section 25110, may be determined by the Franchise Tax Board to be the
total income of all the commonly controlled limited liability
company members if it determines that multiple limited liability
companies were formed for the primary purpose of reducing fees
payable under this section. A determination by the Franchise Tax
Board under this subdivision may only be made with respect to one
limited liability company in a commonly controlled group. However,
each commonly controlled limited liability company shall be jointly
and severally liable for the fee. For purposes of this section,
commonly controlled limited liability companies shall include the
taxpayer and any other partnership or limited liability company doing
business (as defined in Section 23101) in this state and required to
file a return under Section 18633 or 18633.5, in which the same
persons own, directly or indirectly, more than 50 percent of the
capital interests or profits interests.
(c) The fee assessed under this section shall be collected and
refunded in the same manner as the taxes imposed by this part, shall
be subject to interest and applicable penalties, and shall be due and
payable according to one of the following:
(1) On the date the return of the limited liability company is
required to be filed under Section 18633.5.
(2) In three equal installments on or before the 15th day of the
4th, 8th, and 12th months from the date the return of the limited
liability company is required to be filed under Section 18633.5.
(3) In two equal installments, with the first installment on or
before the 15th day of the fourth month from the date the return of
the limited liability company is required to be filed under Section
18633.5 and the second installment on or before 12 months of that
date.
(d) (1) The fee imposed by this section shall be estimated and
paid on or before the 15th day of the sixth month of the current
taxable year.
(2) A penalty of 10 percent of the amount of any underpayment
shall be added to the fee. The underpayment amount shall be equal to
the difference between the total amount of the fee imposed by this
section for the taxable year less the amount paid under paragraph (1)
by the date specified in that paragraph. A penalty shall not be
imposed with respect to any fee estimated and paid under this section
if the amount paid by the date prescribed in this subdivision is
equal to or greater than the total amount of the fee of the limited
liability company for the preceding taxable year.
SEC. 3. SEC. 2. Section 19025 of the
Revenue and Taxation Code is amended to read:
19025. (a) (1) If the amount of estimated
tax does not exceed the minimum tax specified by Section 23153, the
entire amount of the estimated tax shall be due and payable according
to one of the following:
(1)
(A) On or before the 15th day of the fourth month of
the taxable year.
(2)
(B) In three equal installments on or before the 15th
day of the 4th, 8th, and 12th months of the taxable year.
(3)
(C) In two equal installments, with the first
installment on or before the 15th day of the fourth month of the
taxable year and the second installment on or before 12 months of
that date.
(2) The Franchise Tax Board shall develop procedures for taxpayers
to notify the Franchise Tax Board of the payment option used under
this subdivision.
(3) Penalties and interest shall not be imposed on a taxpayer for
electing to use an alternative payment option under this subdivision.
(b) Except as provided in subdivision (c), if the amount of
estimated tax exceeds the minimum tax specified by Section 23153, the
amount payable shall be paid in installments as follows:
The following percentages of the
estimated tax
If the shall be paid on the 15th day of
the--
requirements ----------------------------------
+ + +
of this
subdivision 4th 6th 9th 12th
are first met-- month month month month
Before the 1st 30 (but 40 0 30
day of the 4th not less
month of the than the
taxable year ... minimum
tax
provided
in
Section
23153 and
any tax
under
Section
23800.5)
After the last
day of the 3rd
month and
before the 1st
day of the 6th
month of the
taxable year ... __ 60 0 40
After the last
day of the 5th
month and
before the 1st
day of the 9th
month of the
taxable year ... __ __ 70 30
After the last
day of the 8th
month and
before the 1st
day of the 12th
month of the
taxable year ... __ __ __ 100
(c) If a wholly owned subsidiary is first subject to tax under
Section 23800.5 after the last day of the third month of the taxable
year of owner, the amount of the next installment of estimated tax
under subdivision (b) after the wholly owned subsidiary is subject to
tax under Section 23800.5 shall not be less than the amount of the
tax of the wholly owned subsidiary under Section 23800.5 and an
amount equal to that amount shall be due and payable on the date the
installment is required to be paid. For purposes of determining which
installment is the next installment of estimated tax under
subdivision (b), subdivision (b) shall be modified by substituting
"includes the tax of a wholly owned subsidiary under Section 23800.5"
for "exceeds the minimum tax specified by Section 23153."
(d) The amendments made to this section by Section 1 of Chapter 1
of the First Extraordinary Session of the Statutes of 2008 shall
apply to installments due for each taxable year beginning on or after
January 1, 2009, and before January 1, 2010.
(e) The amendments made to this section by the act adding this
subdivision shall apply to installments due for each taxable year
beginning on or after January 1, 2010.
