Bill Text: CA AB558 | 2011-2012 | Regular Session | Amended

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Bill Title: Taxation: retirement plan distributions: penalties.

Sponsorship: Partisan Bill (Democrat 1)

Status: (Introduced - Dead) 2012-02-01 - Died pursuant to Art. IV, Sec. 10(c) of the Constitution. From committee: Filed with the Chief Clerk pursuant to Joint Rule 56. [AB558 Detail]

Download: California-2011-AB558-Amended.html

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BILL NUMBER: AB 558	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  MAY 18, 2011

INTRODUCED BY   Assembly Member Portantino

                        FEBRUARY 16, 2011

   An act to  amend, repeal, and add   repeal,
add, and repeal  Section 17085 of the Revenue and Taxation Code,
relating to taxation, to take effect immediately, tax levy.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 558, as amended, Portantino. Taxation: retirement plan
distributions: penalties.
   The Personal Income Tax Law, in modified conformity to federal
income tax laws, imposes a  penalty  tax upon early
distributions from qualified pension plans, as provided.
   This bill would, for taxable years beginning on or after January
1, 2011, and before January 1, 2013, waive that  penalty
 tax for any early distribution, of up to 
 the first  $25,000  per taxable year, on 
 , distributed to  individuals who have  either
 exhausted  or are ineligible for  
their  unemployment insurance benefits.
   This bill would take effect immediately as a tax levy  ,
but its operative date would depend on its effective date  .

   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 17085 of the Revenue and
Taxation Code is amended to read:
   17085.  Section 72 of the Internal Revenue Code, relating to
annuities; certain proceeds of endowment and life insurance
contracts, is modified as follows:
   (a) The amendments and transitional rules made by Public Law
99-514 shall be applicable to this part for the same transactions and
the same years as they are applicable for federal purposes, except
that the repeal of Section 72(d) of the Internal Revenue Code,
relating to repeal of special rule for employees' annuities, shall
apply only to the following:
   (1) Any individual whose annuity starting date is after December
31, 1986.
   (2) At the election of the taxpayer, any individual whose annuity
starting date is after July 1, 1986, and before January 1, 1987.
   (b) The amount of a distribution from an individual retirement
account or annuity or employee trust or employee annuity that is
includable in gross income for federal purposes shall be reduced for
purposes of this part by the lesser of either of the following:
   (1) An amount equal to the amount includable in federal gross
income for the taxable year.
   (2) An amount equal to the basis in the account or annuity allowed
by Section 17507 (relating to individual retirement accounts and
simplified employee pensions), the increased basis allowed by
Sections 17504 and 17506 (relating to plans of self-employed
individuals), the increased basis allowed by Section 17501, or the
increased basis allowed by Section 17551 that is remaining after
adjustment for reductions in gross income under this provision in
prior taxable years.
   (c) (1) Except as provided in paragraphs (2) and (3), the amount
of the penalty imposed under this part shall be computed in
accordance with Sections 72(m), (q), (t), and (v) of the Internal
Revenue Code, as applicable for federal income tax purposes for the
same taxable year, using a rate of 21/2 percent, in lieu of the rate
provided in those sections.
   (2) In the case where Section 72(t)(6) of the Internal Revenue
Code, relating to special rules for simple retirement accounts, as
applicable for federal income tax purposes for the same taxable year,
applies, the rate in paragraph (1) shall be 6 percent in lieu of the
21/2 percent rate specified therein.
   (3) For taxable years beginning on or after January 1, 2011, and
before January 1, 2013, the penalty imposed by this subdivision shall
not apply to any distribution, not to exceed twenty-five thousand
dollars ($25,000) per taxable year, from a qualified pension,
profit-sharing, or stock bonus plan (within the meaning of Section
401 of the Internal Revenue Code) of an individual who has either
exhausted his or her unemployment benefits or who is ineligible for
unemployment benefits.
   (d) Section 72(f)(2) of the Internal Revenue Code shall be
applicable without applying the exceptions which immediately follow
that paragraph.
   (e) The amendments made by Section 844 of the Pension Protection
Act of 2006 (Public Law 109-280) to Section 72(e) of the Internal
Revenue Code, shall not apply.
   (f) This section shall remain in effect only until December 1,
2013, and as of that date is repealed.
   SECTION 1.    Section 17085 of the   Revenue
and Taxation Code   is repealed.  
   17085.  Section 72 of the Internal Revenue Code, relating to
annuities; certain proceeds of endowment and life insurance
contracts, is modified as follows:
   (a) The amendments and transitional rules made by Public Law
99-514 shall be applicable to this part for the same transactions and
the same years as they are applicable for federal purposes, except
that the repeal of Section 72(d) of the Internal Revenue Code,
relating to repeal of special rule for employees' annuities, shall
apply only to the following:
   (1) Any individual whose annuity starting date is after December
31, 1986.
   (2) At the election of the taxpayer, any individual whose annuity
starting date is after July 1, 1986, and before January 1, 1987.
   (b) The amount of a distribution from an individual retirement
account or annuity or employee trust or employee annuity that is
includable in gross income for federal purposes shall be reduced for
purposes of this part by the lesser of either of the following:
   (1) An amount equal to the amount includable in federal gross
income for the taxable year.
   (2) An amount equal to the basis in the account or annuity allowed
by Section 17507 (relating to individual retirement accounts and
simplified employee pensions), the increased basis allowed by
Sections 17504 and 17506 (relating to plans of self-employed
individuals), the increased basis allowed by Section 17501, or the
increased basis allowed by Section 17551 that is remaining after
adjustment for reductions in gross income under this provision in
prior taxable years.
   (c) (1) Except as provided in paragraph (2), the amount of the
penalty imposed under this part shall be computed in accordance with
Sections 72(m), (q), (t), and (v) of the Internal Revenue Code, as
applicable for federal income tax purposes for the same taxable year,
using a rate of 21/2 percent, in lieu of the rate provided in those
sections.
   (2) In the case where Section 72(t)(6) of the Internal Revenue
Code, relating to special rules for simple retirement accounts, as
applicable for federal income tax purposes for the same taxable year,
applies, the rate in paragraph (1) shall be 6 percent in lieu of the
21/2 percent rate specified therein.
   (d) Section 72(f)(2) of the Internal Revenue Code shall be
applicable without applying the exceptions which immediately follow
that paragraph.
   (e) The amendments made by Section 844 of the Pension Protection
Act of 2006 (Public Law 109-280) to Section 72(e) of the Internal
Revenue Code, shall not apply. 
   SEC. 2.    Section 17085 is added to the  
Revenue and Taxation Code   , to read:  
   17085.  Section 72 of the Internal Revenue Code, relating to
annuities; certain proceeds of endowment and life insurance
contracts, is modified as follows:
   (a) The amendments and transitional rules made by Public Law
99-514 shall be applicable to this part for the same transactions and
the same years as they are applicable for federal purposes, except
that the repeal of Section 72(d) of the Internal Revenue Code,
relating to repeal of special rule for employees' annuities, shall
apply only to the following:
   (1) Any individual whose annuity starting date is after December
31, 1986.
   (2) At the election of the taxpayer, any individual whose annuity
starting date is after July 1, 1986, and before January 1, 1987.
   (b) The amount of a distribution from an individual retirement
account or annuity or employee trust or employee annuity that is
includable in gross income for federal purposes shall be reduced for
purposes of this part by the lesser of either of the following:
   (1) An amount equal to the amount includable in federal gross
income for the taxable year.
   (2) An amount equal to the basis in the account or annuity allowed
by Section 17507 (relating to individual retirement accounts and
simplified employee pensions), the increased basis allowed by
Sections 17504 and 17506 (relating to plans of self-employed
individuals), the increased basis allowed by Section 17501, or the
increased basis allowed by Section 17551 that is remaining after
adjustment for reductions in gross income under this provision in
prior taxable years.
   (c) (1) Except as provided in paragraphs (2) and (3), the amount
of the penalty imposed under this part shall be computed in
accordance with Sections 72(m), (q), (t), and (v) of the Internal
Revenue Code, as applicable for federal income tax purposes for the
same taxable year, using a rate of 21/2 percent, in lieu of the rate
provided in those sections.
   (2) In the case where Section 72(t)(6) of the Internal Revenue
Code, relating to special rules for simple retirement accounts, as
applicable for federal income tax purposes for the same taxable year,
applies, the rate in paragraph (1) shall be 6 percent in lieu of the
21/2 percent rate specified therein.
   (3) For taxable years beginning on or after January 1, 2011, and
before January 1, 2013, the penalty imposed by this subdivision shall
not apply to the first twenty-five thousand dollars ($25,000)
distributed to an individual who has exhausted  his or her
unemployment benefits.
   (d) Section 72(f)(2) of the Internal Revenue Code shall be
applicable without applying the exceptions which immediately follow
that paragraph.
   (e) The amendments made by Section 844 of the Pension Protection
Act of 2006 (Public Law 109-280) to Section 72(e) of the Internal
Revenue Code, shall not apply.
   (f) This section shall remain in effect only until December 1,
2013, and as of that date is repealed. 
   SEC. 2.   SEC. 3.   Section 17085 is
added to the Revenue and Taxation Code, to read:
   17085.  Section 72 of the Internal Revenue Code, relating to
annuities; certain proceeds of endowment and life insurance
contracts, is modified as follows:
   (a) The amendments and transitional rules made by Public Law
99-514 shall be applicable to this part for the same transactions and
the same years as they are applicable for federal purposes, except
that the repeal of Section 72(d) of the Internal Revenue Code,
relating to repeal of special rule for employees' annuities, shall
apply only to the following:
   (1) Any individual whose annuity starting date is after December
31, 1986.
   (2) At the election of the taxpayer, any individual whose annuity
starting date is after July 1, 1986, and before January 1, 1987.
   (b) The amount of a distribution from an individual retirement
account or annuity or employee trust or employee annuity that is
includable in gross income for federal purposes shall be reduced for
purposes of this part by the lesser of either of the following:
   (1) An amount equal to the amount includable in federal gross
income for the taxable year.
   (2) An amount equal to the basis in the account or annuity allowed
by Section 17507 (relating to individual retirement accounts and
simplified employee pensions), the increased basis allowed by
Sections 17504 and 17506 (relating to plans of self-employed
individuals), the increased basis allowed by Section 17501, or the
increased basis allowed by Section 17551 that is remaining after
adjustment for reductions in gross income under this provision in
prior taxable years.
   (c) (1) Except as provided in paragraph (2), the amount of the
penalty imposed under this part shall be computed in accordance with
Sections 72(m), (q), (t), and (v) of the Internal Revenue Code, as
applicable for federal income tax purposes for the same taxable year,
using a rate of 21/2 percent, in lieu of the rate provided in those
sections.
   (2) In the case where Section 72(t)(6) of the Internal Revenue
Code, relating to special rules for simple retirement accounts, as
applicable for federal income tax purposes for the same taxable year,
applies, the rate in paragraph (1) shall be 6 percent in lieu of the
21/2 percent rate specified therein.
   (d) Section 72(f)(2) of the Internal Revenue Code shall be
applicable without applying the exceptions which immediately follow
that paragraph.
   (e) The amendments made by Section 844 of the Pension Protection
Act of 2006 (Public Law 109-280) to Section 72(e) of the Internal
Revenue Code, shall not apply.
   (f) This section shall  become operative on  
be operative for taxable years beginning on or after  January
1, 2013.
   SEC. 3.   SEC. 4.   This act provides
for a tax levy within the meaning of Article IV of the Constitution
and shall go into immediate effect.