Bill Text: CA AB308 | 2019-2020 | Regular Session | Amended
NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Taxation: corporations: minimum franchise tax: limited liability companies: annual tax.
Spectrum: Slight Partisan Bill (Democrat 2-1)
Status: (Passed) 2019-10-02 - Chaptered by Secretary of State - Chapter 421, Statutes of 2019. [AB308 Detail]
Download: California-2019-AB308-Amended.html
year, except as otherwise provided in this section. year.
Bill Title: Taxation: corporations: minimum franchise tax: limited liability companies: annual tax.
Spectrum: Slight Partisan Bill (Democrat 2-1)
Status: (Passed) 2019-10-02 - Chaptered by Secretary of State - Chapter 421, Statutes of 2019. [AB308 Detail]
Download: California-2019-AB308-Amended.html
|
Amended
IN
Assembly
March 25, 2019 |
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Amended
IN
Assembly
March 18, 2019 |
CALIFORNIA LEGISLATURE—
2019–2020 REGULAR SESSION
| Assembly Bill | No. 308 |
| Introduced by Assembly Members Muratsuchi and Smith |
January 29, 2019 |
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 308, as amended, Muratsuchi.
Taxation: corporations: minimum franchise tax: limited liability companies: annual tax: small businesses: microbusinesses.
The Corporation Tax Law imposes a tax according to or measured by net income, computed at a specified rate upon the basis of the net income for that taxable year, on every corporation, except as provided. Existing law, generally, also 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, for taxable years beginning before January 1, 2018, a corporation and a limited liability company that are small businesses solely owned by a deployed member of the United States Armed Forces
from paying the minimum franchise tax or the annual tax for any taxable year the owner is deployed and the limited liability company operates at a loss or ceases operation.
This bill, for taxable years beginning on and after January 1, 2019, and beginning before January 1, 2024, would reduce to $400 the annual tax for a limited liability company that is a small business, and would reduce to $100 the annual tax for microbusinesses. The bill would extend the minimum franchise tax and annual tax exemptions for a corporation and a limited liability company that are small businesses solely owned by a deployed member of the United States Armed Forces for taxable years beginning before January 1, 2029.
This bill would take effect immediately as a tax levy.
Digest Key
Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: NOBill Text
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(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, 2029.
(g)(1)Except as otherwise provided in subdivision (f), for taxable years beginning on or after January 1, 2019, and before January 1, 2024, a limited liability company that is a microbusiness shall pay to the state an annual tax of one hundred dollars ($100).
(2)“Microbusiness” means a limited liability company with a total income from all
sources derived from, or attributable to, the state of one hundred fifty thousand dollars ($150,000) or less.
(h)(1)Except as otherwise provided in subdivision (f), for taxable years beginning on or after January 1, 2019, and before January 1, 2024, a limited liability company that is a small business shall pay to the state an
annual tax of four hundred dollars ($400).
(2)“Small business” means a limited liability company with a total income from all sources derived from, or attributable to, the state of more than one hundred fifty thousand dollars ($150,000) but no more than two hundred fifty thousand dollars ($250,000).
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 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) 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 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 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, 2029.
SEC. 3.
(a) It is the intent of the Legislature to apply the requirements of Section 41 of the Revenue and Taxation Code to this act.(b) With respect to Sections 17941 and 23153 of the Revenue and Taxation Code, as amended by this act, the Legislature finds and declares as follows:
(1)The goal of this act is to help small businesses and microbusinesses succeed by suspending or decreasing the burden of the minimum franchise tax
and the annual tax. By decreasing this tax, the hope is that fewer businesses will struggle to stay open, and for their employment to remain stable and potentially grow over time.
(2)Performance indicators for this act shall include annual data on the number of small businesses and microbusinesses in the state, the number of individuals employed by small businesses and microbusinesses, and the number of these businesses that close or go out of business.
(1) The goal of this act is to help corporations and limited liability companies that are small businesses solely owned by a deployed member of the United
States Armed Forces to succeed by decreasing the burden of the minimum franchise tax and the annual tax. By decreasing these taxes, the hope is that fewer businesses will struggle to stay open and their employment will remain stable and potentially grow over time.
(2) Performance indicators for this act shall include annual data on the number of corporations and limited liability companies that are small businesses solely owned by a deployed member of the United States Armed Forces in the state, the number of individuals employed by those businesses, and the number of these businesses that close.
(3) On or before January 1, 2021, and on
or before January 1 each year thereafter through and including January 1, 2031, the Franchise Tax Board shall submit an annual report to the Legislature on the performance of small businesses and microbusinesses corporations and limited liability companies that are small businesses solely owned by a deployed member of the United States Armed Forces in the state using the data in paragraph (2).
