Bill Text: CA AB364 | 2019-2020 | Regular Session | Introduced

California Assembly Bill 364 (Prior Session Legislation)

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

Bill Title: Annual tax: exemption.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Failed) 2020-02-03 - From committee: Filed with the Chief Clerk pursuant to Joint Rule 56. [AB364 Detail]

Download: California-2019-AB364-Introduced.html

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill

No. 364

Introduced by Assembly Member Calderon

February 04, 2019

An act to amend Sections 17935 and 17941 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.

LEGISLATIVE COUNSEL'S DIGEST

AB 364, as introduced, Calderon. Minimum annual tax: exemption.

Existing law 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 a minimum annual tax on every limited partnership and limited liability company qualified to transact business or doing business in this state, as specified. 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.

This bill would, for taxable years beginning on or after January 1, 2020, exempt a limited partnership that is a new limited partnership and a limited liability company that is a new limited liability company and is a small business in its first year from payment of the minimum annual tax for its first taxable year.

This bill would take effect immediately as a tax levy.

Vote: MAJORITY Appropriation: NO Fiscal Committee: YES 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, 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, 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 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) (1) Notwithstanding subdivision (a), for taxable years beginning on or after January 1, 2020, a limited partnership that is a new limited partnership and is a small business in its first taxable year shall not be subject to the minimum annual tax for its first taxable year.
(2) For purposes of this subdivision:
(A) “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.
(B) “New limited partnership” means a limited partnership that is formed on or after January 1, 2020. “New limited partnership” does not include any limited partnership that began business operations as, or acquired its business operations from, a sole proprietorship, a limited liability partnership, or any other form of business entity prior to beginning business operations or any limited partnership that acquired its business operations from a limited partnership.
(C) “Small business” means a limited partnership that has gross receipts, less returns and allowances, reportable to this state for the taxable year of fifty thousand dollars ($50,000) or less.
(3) (A) This subdivision shall not apply to any limited partnership that reorganizes solely for the purpose of reducing its minimum tax.
(B) This subdivision shall not apply to a limited partnership that does not file a timely return.

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) (1) Notwithstanding subdivision (a), for taxable years beginning on or after January 1, 2020, a limited liability company that is a new limited liability company and is a small business in its first taxable year shall not be subject to the minimum annual tax for its first taxable year.
(2) For purposes of this subdivision:
(A) “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.
(B) “New limited liability company” means a limited liability company that is formed on or after January 1, 2020. “New limited liability company” does not include any limited liability company that began business operations as, or acquired its business operations from, a sole proprietorship, a limited liability partnership, or any other form of business entity prior to beginning business operations or any limited liability company that acquired its business operations from a limited liability company.
(C) “Small business” means a limited liability company that has gross receipts, less returns and allowances, reportable to this state for the taxable year of fifty thousand dollars ($50,000) or less.
(3) (A) This subdivision shall not apply to any limited liability company that reorganizes solely for the purpose of reducing its minimum tax.
(B) This subdivision shall not apply to a limited liability company that does not file a timely return.