Bill Text: CA AB2278 | 2009-2010 | Regular Session | Amended
Bill Title: Income and corporation tax credits: research and
Spectrum: Partisan Bill (Republican 2-0)
Status: (Introduced - Dead) 2010-05-12 - Re-referred to Com. on REV. & TAX. [AB2278 Detail]
Download: California-2009-AB2278-Amended.html
BILL NUMBER: AB 2278 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MAY 11, 2010
AMENDED IN ASSEMBLY APRIL 14, 2010
INTRODUCED BY Assembly Member Anderson
(Coauthor: Senator Dutton)
FEBRUARY 18, 2010
An act to amend Sections 17052.12 and 23609 of the Revenue and
Taxation Code, relating to taxation, to take effect immediately, tax
levy.
LEGISLATIVE COUNSEL'S DIGEST
AB 2278, as amended, Anderson. Income and corporation tax credits:
research and development.
The Personal Income Tax Law and the Corporation Tax Law, by
reference to a specified federal statute, allow a credit against
taxes imposed by those laws for increasing research expenses, as
defined. In general, the amount of the credit under both laws is
equal to 15% of the excess of the qualified research expenses, as
defined, for the taxable year over the base amount, as defined, and,
in addition, for purposes of the Corporation Tax Law, 24% of the
basic research payments, as defined. The term "base amount" means the
product of the average annual gross receipts of the taxpayer for
each of the specified years preceding the taxable year and the
fixed-base percentage, as defined, but in no event less than 50% of
the qualified research expenses for the taxable year. A taxpayer may
elect an alternative incremental credit for increasing research
expenses in modified conformity to federal income tax laws.
This bill would increase the credit for increasing research
expenses to 20% of the excess of the qualified research expenses.
This bill would also provide complete conformity to the alternative
incremental simplified credit provided
under those federal income tax laws , and eliminate the
conformity to the alternative incremental credit .
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 17052.12 of the Revenue and Taxation Code is
amended to read:
17052.12. For each taxable year beginning on or after January 1,
1987, there shall be allowed as a credit against the "net tax" (as
defined by Section 17039) for the taxable year an amount determined
in accordance with Section 41 of the Internal Revenue Code, except as
follows:
(a) For each taxable year beginning before January 1, 1997, the
reference to "20 percent" in Section 41(a)(1) of the Internal Revenue
Code is modified to read "8 percent."
(b) (1) For each taxable year beginning on or after January 1,
1997, and before January 1, 1999, the reference to "20 percent" in
Section 41(a)(1) of the Internal Revenue Code is modified to read "11
percent."
(2) For each taxable year beginning on or after January 1, 1999,
and before January 1, 2000, the reference to "20 percent" in Section
41(a)(1) of the Internal Revenue Code is modified to read "12
percent."
(3) For each taxable year beginning on or after January 1, 2000,
and before January 1, 2010, the reference to "20 percent" in Section
41(a)(1) of the Internal Revenue Code is modified to read "15
percent."
(4) For each taxable year beginning on or after January 1, 2010,
the reference to "20 percent" in Section 41(a)(1) of the Internal
Revenue Code shall apply.
(c) Section 41(a)(2) of the Internal Revenue Code, relating to
basic research payments, shall not apply.
(d) "Qualified research" shall include only research conducted in
California.
(e) In the case where the credit allowed under this section
exceeds the "net tax," the excess may be carried over to reduce the
"net tax" in the following year, and succeeding years if necessary,
until the credit has been exhausted.
(f) (1) With respect to any expense paid or incurred after the
operative date of Section 6378, Section 41(b)(1) of the Internal
Revenue Code is modified to exclude from the definition of "qualified
research expense" any amount paid or incurred for tangible personal
property that is eligible for the exemption from sales or use tax
provided by Section 6378.
(2) For each taxable year beginning on or after January 1, 1998,
the reference to "Section 501(a)" in Section 41(b)(3)(C) of the
Internal Revenue Code, relating to contract research expenses, is
modified to read "this part or Part 11 (commencing with Section
23001)."
(g) (1) For each taxable year beginning on or after January 1,
2000, and before January 1, 2010:
(A) The reference to "2.65 "3
percent" in Section 41(c)(4)(A)(i) of the Internal Revenue Code is
modified to read "one and forty-nine hundredths of one percent."
(B) The reference to "3.2 "4 percent"
in Section 41(c)(4)(A)(ii) of the Internal Revenue Code is modified
to read "one and ninety-eight hundredths of one percent."
(C) The reference to "3.75 "5
percent" in Section 41(c)(4)(A)(iii) of the Internal Revenue Code is
modified to read "two and forty-eight hundredths of one percent."
(2) For each taxable year beginning on or after January 1, 2010,
Section 41(c)(4) of the Internal Revenue Code, as amended by Section
104(b) of Public Law 109-432, relating to election of alternative
incremental credit, shall apply, except as otherwise provided.
(3)
(2) Section 41(c)(4)(B) shall not apply and in lieu
thereof an election under Section 41(c)(4)(A) of the Internal Revenue
Code may be made for any taxable year of the taxpayer beginning on
or after January 1, 1998. That election shall apply to the taxable
year for which made and all succeeding taxable years unless revoked
with the consent of the Franchise Tax Board.
(3) For each taxable year beginning on or after January 1, 2010,
Section 41(c)(5) of the Internal Revenue Code, as it read on January
1, 2010, relating to election of alternative simplified credit, shall
apply, except as otherwise provided.
(4) Section 41(c)(6) 41(c)(7) of
the Internal Revenue Code, relating to gross receipts, is modified to
take into account only those gross receipts from the sale of
property held primarily for sale to customers in the ordinary course
of the taxpayer's trade or business that is delivered or shipped to a
purchaser within this state, regardless of f.o.b. point or any other
condition of the sale.
(h) Section 41(h) of the Internal Revenue Code, relating to
termination, shall not apply.
(i) Section 41(g) of the Internal Revenue Code, relating to
special rule for passthrough of credit, is modified by each of the
following:
(1) The last sentence shall not apply.
(2) If the amount determined under Section 41(a) of the Internal
Revenue Code for any taxable year exceeds the limitation of Section
41(g) of the Internal Revenue Code, that amount may be carried over
to other taxable years under the rules of subdivision (e); except
that the limitation of Section 41(g) of the Internal Revenue Code
shall be taken into account in each subsequent taxable year.
SEC. 2. Section 23609 of the Revenue and Taxation Code is amended
to read:
23609. For each taxable year beginning on or after January 1,
1987, there shall be allowed as a credit against the "tax" (as
defined by Section 23036) an amount determined in accordance with
Section 41 of the Internal Revenue Code, except as follows:
(a) For each taxable year beginning before January 1, 1997, both
of the following modifications shall apply:
(1) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code is modified to read "8 percent."
(2) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "12 percent."
(b) (1) For each taxable year beginning on or after January 1,
1997, and before January 1, 1999, both of the following modifications
shall apply:
(A) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code is modified to read "11 percent."
(B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "24 percent."
(2) For each taxable year beginning on or after January 1, 1999,
and before January 1, 2000, both of the following shall apply:
(A) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code is modified to read "12 percent."
(B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "24 percent."
(3) For each taxable year beginning on or after January 1, 2000,
and before January 1, 2010, both of the following shall apply:
(A) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code is modified to read "15 percent."
(B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "24 percent."
(4) For each taxable year beginning on or after January 1, 2010,
both of the following shall apply:
(A) The reference to "20 percent" in Section 41(a)(1) of the
Internal Revenue Code shall apply.
(B) The reference to "20 percent" in Section 41(a)(2) of the
Internal Revenue Code is modified to read "24 percent."
(c) (1) With respect to any expense paid or incurred after the
operative date of Section 6378, Section 41(b)(1) of the Internal
Revenue Code is modified to exclude from the definition of "qualified
research expense" any amount paid or incurred for tangible personal
property that is eligible for the exemption from sales or use tax
provided by Section 6378.
(2) "Qualified research" and "basic research" shall include only
research conducted in California.
(d) The provisions of Section 41(e)(7)(A) of the Internal Revenue
Code, shall be modified so that "basic research," for purposes of
this section, includes any basic or applied research including
scientific inquiry or original investigation for the advancement of
scientific or engineering knowledge or the improved effectiveness of
commercial products, except that the term does not include any of the
following:
(1) Basic research conducted outside California.
(2) Basic research in the social sciences, arts, or humanities.
(3) Basic research for the purpose of improving a commercial
product if the improvements relate to style, taste, cosmetic, or
seasonal design factors.
(4) Any expenditure paid or incurred for the purpose of
ascertaining the existence, location, extent, or quality of any
deposit of ore or other mineral (including oil and gas).
(e) (1) In the case of a taxpayer engaged in any biopharmaceutical
research activities that are described in codes 2833 to 2836,
inclusive, or any research activities that are described in codes
3826, 3829, or 3841 to 3845, inclusive, of the Standard Industrial
Classification (SIC) Manual published by the United States Office of
Management and Budget, 1987 edition, or any other biotechnology
research and development activities, the provisions of Section 41(e)
(6) of the Internal Revenue Code shall be modified to include both of
the following:
(A) A qualified organization as described in Section 170(b)(1)(A)
(iii) of the Internal Revenue Code and owned by an institution of
higher education as described in Section 3304(f) of the Internal
Revenue Code.
(B) A charitable research hospital owned by an organization that
is described in Section 501(c)(3) of the Internal Revenue Code, is
exempt from taxation under Section 501(a) of the Internal Revenue
Code, is not a private foundation, is designated a "specialized
laboratory cancer center," and has received Clinical Cancer Research
Center status from the National Cancer Institute.
(2) For purposes of this subdivision:
(A) "Biopharmaceutical research activities" means those activities
that use organisms or materials derived from organisms, and their
cellular, subcellular, or molecular components, in order to provide
pharmaceutical products for human or animal therapeutics and
diagnostics. Biopharmaceutical activities make use of living
organisms to make commercial products, as opposed to pharmaceutical
activities that make use of chemical compounds to produce commercial
products.
(B) "Other biotechnology research and development activities"
means research and development activities consisting of the
application of recombinant DNA technology to produce commercial
products, as well as research and development activities regarding
pharmaceutical delivery systems designed to provide a measure of
control over the rate, duration, and site of pharmaceutical delivery.
(f) In the case where the credit allowed by this section exceeds
the "tax," the excess may be carried over to reduce the "tax" in the
following year, and succeeding years if necessary, until the credit
has been exhausted.
(g) For each taxable year beginning on or after January 1, 1998,
the reference to "Section 501(a)" in Section 41(b)(3)(C) of the
Internal Revenue Code, relating to contract research expenses, is
modified to read "this part or Part 10 (commencing with Section
17001)."
(h) (1) For each taxable year beginning on or after January 1,
2000, and before January 1, 2010:
(A) The reference to "2.65 "3 percent"
in Section 41(c)(4)(A)(i) of the Internal Revenue Code is modified
to read "one and forty-nine hundredths of one percent."
(B) The reference to "3.2 "4 percent"
in Section 41(c)(4)(A)(ii) of the Internal Revenue Code is modified
to read "one and ninety-eight hundredths of one percent."
(C) The reference to "3.75 "5
percent" in Section 41(c)(4)(A)(iii) of the Internal Revenue Code is
modified to read "two and forty-eight hundredths of one percent."
(2) For each taxable year beginning on or after January 1, 2010,
Section 41(c)(4) of the Internal Revenue Code, as amended by Section
104(b) of Public Law 109-432, relating to election of alternative
incremental credit, shall apply, except as otherwise provided.
(3)
(2) Section 41(c)(4)(B) shall not apply and in lieu
thereof an election under Section 41(c)(4)(A) of the Internal Revenue
Code may be made for any taxable year of the taxpayer beginning on
or after January 1, 1998. That election shall apply to the taxable
year for which made and all succeeding taxable years unless revoked
with the consent of the Franchise Tax Board.
(3) For each taxable year beginning on or after January 1, 2010,
Section 41(c)(5) of the Internal Revenue Code, as it read on January
1, 2010, relating to election of alternative simplified credit, shall
apply, except as otherwise provided.
(4) Section 41(c)(6) 41(c)(7) of
the Internal Revenue Code, relating to gross receipts, is modified to
take into account only those gross receipts from the sale of
property held primarily for sale to customers in the ordinary course
of the taxpayer's trade or business that is delivered or shipped to a
purchaser within this state, regardless of f.o.b. point or any other
condition of the sale.
(i) Section 41(h) of the Internal Revenue Code, relating to
termination, shall not apply.
(j) Section 41(g) of the Internal Revenue Code, relating to
special rule for passthrough of credit, is modified by each of the
following:
(1) The last sentence shall not apply.
(2) If the amount determined under Section 41(a) of the Internal
Revenue Code for any taxable year exceeds the limitation of Section
41(g) of the Internal Revenue Code, that amount may be carried over
to other taxable years under the rules of subdivision (f), except
that the limitation of Section 41(g) of the Internal Revenue Code
shall be taken into account in each subsequent taxable year.
SEC. 3. This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.
