Bill Text: CA AB799 | 2015-2016 | Regular Session | Amended

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Bill Title: Income taxes: limited liability company: qualified investment partnership.

Spectrum: Slight Partisan Bill (Republican 4-2)

Status: (Failed) 2016-02-01 - From committee: Filed with the Chief Clerk pursuant to Joint Rule 56. [AB799 Detail]

Download: California-2015-AB799-Amended.html

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BILL NUMBER: AB 799	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  JUNE 19, 2015
	AMENDED IN ASSEMBLY  MARCH 26, 2015

INTRODUCED BY   Assembly  Member   Travis
Allen   Members   Travis Allen   and
Quirk 
    (   Coauthors:   Assembly Members 
 Chang,   Mullin,   and Obernolte   )

   (   Coauthor:   Senator   Runner
  ) 

                        FEBRUARY 26, 2015

   An act to amend  Section 23102   Section
  17941  of the Revenue and Taxation Code, relating to
taxation, to take effect immediately, tax levy.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 799, as amended, Travis Allen. Income taxes:  annual
tax:  limited liability  company.  
company: qualified investment partnership. 
   Existing  law,   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, as defined, in this state, and an
annual tax in an amount equal to the minimum franchise tax on every
limited liability company registered, qualified to transact business,
or doing business in this state, as specified.  Existing law
provides that certain corporations, the activities of which are
limited to the receipt and disbursement of dividends and interest on
securities, are not considered as doing business in this state.
  Existing law requires every limited liability company
subject to that annual tax to pay annually to this state a fee equal
to specified amounts based upon total income from all sources
attributable to this state. Existing law requires every partnership
to file a return that includes specified information, verified by a
written declaration made under the penalty of p   erjury and
signed by one of the partners, within a specified time period. 

   This bill, under those same circumstances related to the receipt
and disbursement of dividends and interest on securities, would
additionally provide that such a limited liability company is not
considered as doing business in this state.  
   This bill would exempt a limited liability company that is a
qualified investment partnership, as defined, from that annual tax
and fee by excluding it from the definition of a limited liability
company. The bill would require that entity to submit a return under
the conditions applicable to a partnership. 
   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 23102 of the Revenue and
Taxation Code is amended to read:
   23102.  Any corporation or limited liability company holding or
organized to hold stock or bonds of any other corporation or
corporations, and not trading in stock or bonds or other securities
held, and engaging in no activities other than the receipt and
disbursement of dividends from stock or interest from bonds, and no
activities other than those exempted under subdivision (c) of Section
191 of the Corporations Code, is not a corporation or limited
liability company doing business in this State for the purposes of
this chapter or Chapter 10.6. 
   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   state, as  defined in Section 
23101)   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   (1)     Except
as provided in paragraph (2), for  purposes of this section,
 a  "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,   organization  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.

   (2) Notwithstanding subdivisions (a) and (b), a limited liability
company is not subject to the tax imposed under this section if it is
either of the following:  
   (A) The limited liability company is exempt from the tax and fees
imposed under this chapter pursuant to Section 23701h or 23701x.
 
   (B) (i) The limited liability company is a qualified investment
partnership.  
   (ii) For purposes of this subparagraph, a qualified investment
partnership means a limited liability company that meets all of the
following requirements:  
   (I) It is classified as a partnership for California income tax
purposes.  
   (II) No less than 90 percent of the costs of its total assets
consist of qualifying investment securities, deposits at banks or
other financial institutions, interest or investments in a
partnership, or office space and equipment reasonably necessary to
carry on its activities as a qualified investment partnership. 

   (III) No less than 90 percent of its gross income consists of
interest, dividends, and gains from the sale or exchange of
qualifying investment securities or investments in a partnership.
 
   (iii) For purposes of this subparagraph, "qualifying investment
securities" has the same meaning as that term is described in
subparagraph (A) of paragraph (3) of subdivision (c) of Section
17955.  
   (iv) Notwithstanding Section 18633.5, the following rules shall
apply with respect to the filing requirements of a qualified
investment partnership.  
   (I) A qualified investment partnership required to file a federal
return pursuant to Section 6031 of the Internal Revenue Code,
relating to return of partnership income, shall file a partnership
return pursuant to Section 18633 for that taxable year.  
   (II) A qualified investment partnership that is not required to
file a federal return pursuant to Section 6031 of the Internal
Revenue Code, relating to return of partnership income, shall file an
information return as prescribed by the Franchise Tax Board for that
taxable year. 
   (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.
  SEC. 2.  This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.