Bill Text: CA AB2671 | 2009-2010 | Regular Session | Enrolled

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Taxes: corporations: LLCs minimum franchise tax:

Spectrum: Partisan Bill (Republican 3-0)

Status: (Passed) 2010-09-27 - Chaptered by Secretary of State - Chapter 394, Statutes of 2010. [AB2671 Detail]

Download: California-2009-AB2671-Enrolled.html

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BILL NUMBER: AB 2671	ENROLLED
	BILL TEXT

	PASSED THE SENATE  AUGUST 24, 2010
	PASSED THE ASSEMBLY  AUGUST 25, 2010
	AMENDED IN SENATE  JULY 15, 2010
	AMENDED IN SENATE  JUNE 30, 2010
	AMENDED IN SENATE  JUNE 16, 2010
	AMENDED IN ASSEMBLY  MAY 17, 2010
	AMENDED IN ASSEMBLY  APRIL 27, 2010

INTRODUCED BY   Assembly Member Cook
   (Coauthors: Assembly Members DeVore and Nestande)

                        FEBRUARY 19, 2010

   An act to amend Sections 17941 and 23153 of the Revenue and
Taxation Code, relating to taxation, to take effect immediately, tax
levy.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 2671, Cook. Taxes: corporations: LLCs minimum franchise tax:
exemption: Armed Forces.
   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.
   This bill would, until taxable years beginning on or after January
1, 2018, exempt a corporation and a limited liability company that
are small businesses solely owned by a deployed member of the United
States Armed Forces, as specified, from paying the minimum franchise
tax, or the annual tax, for the privilege of doing business in this
state if the corporation or limited liability company ceases
operation or operates at a loss, as defined.
   This bill would take effect immediately as a tax levy.


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 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 cancellation is filed with the
Secretary of State pursuant to Section 17356 or 17455 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 17350.5 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 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.
  SEC. 3.  This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.