Bill Text: CA AB2495 | 2013-2014 | Regular Session | Amended
Bill Title: Minimum franchise tax: annual tax: exemption.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2014-05-13 - In committee: Set, second hearing. Held under submission. [AB2495 Detail]
Download: California-2013-AB2495-Amended.html
BILL NUMBER: AB 2495 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 28, 2014
INTRODUCED BY Assembly Member Melendez
FEBRUARY 21, 2014
An act to amend Sections 17935, 17941, 17948, and 23153 of the
Revenue and Taxation Code, relating to taxation, to take effect
immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
AB 2495, as amended, Melendez. Taxation: minimum
Minimum franchise tax: exemptions.
annual tax: exemption.
Existing law generally imposes a minimum franchise tax of $800,
except as provided, on every corporation incorporated in this state,
qualified to transact intrastate business in this state, or doing
business in this state, and an annual tax in an amount equal to the
minimum franchise tax on every limited partnership, limited liability
partnership, and limited liability company registered, qualified to
transact business, or doing business in this state, as specified.
Existing law exempts a corporation from payment of minimum franchise
tax in its first taxable year.
This bill would exempt from the minimum franchise tax every
qualified new corporation incorporated or qualified to do
business in this state on or after January 1, 2015, for
the its first 5 consecutive taxable
years during which the corporation does business within this
state . This bill would also exempt from the annual tax
every foreign or domestic limited partnership, limited liability
partnership, and limited liability company that files its organizing
document, or if a foreign entity its registration document, with the
Secretary of State on or after January 1, 2015, as specified, for
the its first 5 consecutive taxable
years during which that entity does business within the
state .
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 17935 of the Revenue and Taxation Code is
amended to read:
17935. (a) For each taxable year beginning on or after January 1,
1997, every limited partnership doing business in this state, as
defined by Section 23101, and required to file a return under Section
18633 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 paragraph (1) of subdivision (d) of
Section 23153.
(b) (1) In addition to any limited partnership that is doing
business in this state and therefore is subject to the tax imposed by
subdivision (a), for each taxable year beginning on or after January
1, 1997, every limited partnership that has executed, acknowledged,
and filed a certificate of limited partnership with the Secretary of
State pursuant to Section 15621 or 15902.01 of the Corporations Code,
and every foreign limited partnership that has registered with the
Secretary of State pursuant to Section 15692 or 15909.01 of the
Corporations Code, shall pay annually the tax prescribed in
subdivision (a). The tax shall be paid for each taxable year, or part
thereof, until a certificate of cancellation is filed on behalf of
the limited partnership with the office of the Secretary of State
pursuant to Section 15623, 15696, 15902.03,
15902.03 or 15909.07 of the Corporations Code.
(2) If a taxpayer files a return with the Franchise Tax Board that
is designated its final return, that board shall notify the taxpayer
that the tax imposed by this chapter is due annually until a
certificate of cancellation is filed with the Secretary of State
pursuant to Section 15623, 15696, 15902.03,
15902.03 or 15909.07 of the Corporations Code.
(c) The tax imposed by this chapter shall be due and payable on
the date the return is required to be filed under former Section
18432 or Section 18633.
(d) For purposes of this section, "limited partnership" means any
partnership formed by two or more persons under the laws of this
state or any other jurisdiction and having one or more general
partners and one or more limited partners.
(e) Notwithstanding subdivision (b), any limited partnership that
ceased doing business prior to January 1, 1997, filed a final return
with the Franchise Tax Board for a taxable year ending before January
1, 1997, and filed a certificate of dissolution with the Secretary
of State pursuant to Section 15623 of the Corporations Code prior to
January 1, 1997, shall not be subject to the tax imposed by this
chapter for any period following the date the certificate of
dissolution was filed with the Secretary of State, but only if the
limited partnership files a certificate of cancellation with the
Secretary of State pursuant to Section 15623 of the Corporations
Code. In the case where a notice of proposed deficiency assessment of
tax or a notice of tax due (whichever is applicable) is mailed after
January 1, 2001, the first sentence of this subdivision shall not
apply unless the certificate of cancellation is filed with the
Secretary of State not later than 60 days after the date of the
mailing of the notice.
(f) Notwithstanding subdivisions (a) and (b), every limited
partnership that files a certificate of limited partnership or
a certificate of registration an application
for registration with the Secretary of State on or after
January 1, 2015, shall not be subject to the tax imposed by this
chapter for the first five consecutive taxable years that it
is doing business within this state, as defined by Section 23101
chapter for its first five consecutive taxable years.
This subdivision shall not apply to any limited partnership that
reorganizes solely for the purpose of avoiding payment of its annual
tax .
SEC. 2. 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 paragraph (1) of
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 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.
(g) Notwithstanding any provision of this section to the contrary,
a limited liability company that files articles of organization or a
certificate of registration with the Secretary of State on or after
January 1, 2015, shall not be subject to the tax imposed under this
section for the first five consecutive taxable years that it
is doing business within this state, as defined by Section 23101
section for its first five consecutive taxable years.
This subdivision shall not apply to any limited liability company
that reorganizes solely for the purpose of avoiding payment of its
annual tax .
SEC. 3. Section 17948 of the Revenue and Taxation Code is amended
to read:
17948. (a) For each taxable year beginning on or after January 1,
1997, every limited liability partnership doing business in this
state, as defined in Section 23101, and required to file a return
under Section 18633 shall pay annually to the Franchise Tax Board a
tax for the privilege of doing business in this state in an amount
equal to the applicable amount specified in paragraph (1) of
subdivision (d) of Section 23153 for the taxable year.
(b) In addition to any limited liability partnership that is doing
business in this state and therefore is subject to the tax imposed
by subdivision (a), for each taxable year beginning on or after
January 1, 1997, every registered limited liability partnership that
has registered with the Secretary of State pursuant to Section 16953
of the Corporations Code and every foreign limited liability
partnership that has registered with the Secretary of State pursuant
to Section 16959 of the Corporations Code shall pay annually the tax
prescribed in subdivision (a). The tax shall be paid for each taxable
year, or part thereof, until any of the following occurs:
(1) A notice of cessation is filed with the Secretary of State
pursuant to subdivision (b) of Section 16954 or 16960 of the
Corporations Code.
(2) A foreign limited liability partnership withdraws its
registration pursuant to subdivision (a) of Section 16960 of the
Corporations Code.
(3) The registered limited liability partnership or foreign
limited liability partnership has been dissolved and finally wound
up.
(c) The tax assessed under this section shall be due and payable
on the date the return is required to be filed under Section 18633.
(d) 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 cancellation is filed with the
Secretary of State pursuant to Section 16954 or 16960 of the
Corporations Code.
(e) Notwithstanding subdivisions (a) and (b), a limited liability
partnership that registers as a limited liability partnership with
the Secretary of State on or after January 1, 2015, shall not be
subject to the tax imposed under this section for the
its first five consecutive taxable
years that it is doing business within this state, as defined by
Section 23101 consecutive taxable years. This
subdivision shall not apply to any limited liability partnership that
reorganizes solely for the purpose of avoiding payment of its annual
tax .
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 business 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 described 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) (A) 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.
(B) (i) Notwithstanding subdivision (a),
for taxable years beginning on or after January 1, 2015,
every corporation that incorporates or qualifies to do
business in this state on or after January 1, 2015,
that is a qualified new corporation shall not be subject to the
minimum franchise tax for its first five consecutive taxable years.
(ii) For purposes of this subparagraph, a "qualified new
corporation" means a corporation that is incorporated under the laws
of this state or has qualified to transact business in this state on
or after January 1, 2015, and that begins business operations at or
after the time of its incorporation. "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.
(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 described 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
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. 5. This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.
