Bill Text: CA SB500 | 2015-2016 | Regular Session | Introduced

California Senate Bill 500 (Prior Session Legislation)

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

Bill Title: Personal income taxes: nonresident de minimis income.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Failed) 2016-11-30 - From Assembly without further action. [SB500 Detail]

Download: California-2015-SB500-Introduced.html

BILL NUMBER: SB 500	INTRODUCED
	BILL TEXT


INTRODUCED BY   Senator Hertzberg

                        FEBRUARY 26, 2015

   An act to add Sections 17952.7 and 18501.5 to the Revenue and
Taxation Code, and to add Section 13020.5 to the Unemployment
Insurance Code, relating to taxation.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 500, as introduced, Hertzberg. Personal income taxes:
nonresident de minimis income.
   Existing law, the Personal Income Tax Law, imposes a tax on the
entire taxable income of a taxpayer subject to that law, but provides
for a specified treatment of the income of nonresidents. For
purposes of computing the taxable income of a nonresident, the gross
income of a nonresident includes only the gross income from sources
within this state. Existing law requires every taxpayer subject to
tax under the Personal Income Tax Law to file a return with the
Franchise Tax Board, stating specifically the items of the gross
income from all sources and the deductions and credits allowable, as
provided.
   This bill would provide, for purposes of computing the taxable
income of a nonresident that the gross income of a nonresident from
sources within this state does not include "de minimis income,"
defined as compensation subject to specified withholding if the
nonresident has no other income from sources within this state, is
present in this state to perform employment duties on behalf of an
employer and any other related person for not more than 20 calendar
days during the taxable year in which the compensation is received,
compensation is received on or after January 1, 2016, for any part of
the taxable year during which the taxpayer was not a resident of
this state, and the nonresident's state of residence provides a
substantially similar exclusion or does not impose an individual
income tax. Except as specified, the bill would provide that a
nonresident whose only income from sources in this state is
compensation excluded pursuant to these provisions has no tax
liability and is not required to file a return.
   Existing law requires every employer who pays wages to a
nonresident employee for services performed in this state to deduct
and withhold from those wages, except as provided, specified income
taxes.
   This bill would provide that no amount is required to be deducted
or withheld from compensation paid to a nonresident for employment
duties performed in this state if that compensation is excluded from
income subject to tax pursuant to the aforementioned provisions.


   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 17952.7 is added to the Revenue and Taxation
Code, to read:
   17952.7.  (a) For purposes of computing "taxable income of a
nonresident or part-year resident" under paragraph (1) of subdivision
(i) of Section 17041, gross income of a nonresident, as defined in
Section 17015, from sources within this state shall not include "de
minimis income" received on or after January 1, 2016, for any part of
the taxable year during which the taxpayer was not a resident of
this state.
   (b) For purposes of this section, the following definitions shall
apply:
    (1) "De minimis income" means compensation subject to withholding
under Chapter 2 (commencing with Section 13020) of Division 6 of the
Unemployment Insurance Code, without regard to Section 13020.5 of
the Unemployment Insurance Code, that is received by a nonresident if
the following apply:
   (A) The nonresident has no other income from sources within this
state for the taxable year in which the compensation was received.
   (B) The nonresident is present in this state to perform employment
duties on behalf of an employer and any other related person for not
more than 20 calendar days during the taxable year in which the
compensation is received. For purposes of this subparagraph, presence
in this state for any part of a day constitutes presence in this
state for that day unless such presence is solely for purposes of
transit through the state.
   (C) The nonresident's state of residence provides a substantially
similar exclusion or does not impose an individual income tax.
   (2) "Related person" means a person that, with respect to the
employer during all or any portion of the taxable year, is one of the
following:
   (A) A related entity.
   (B) A member of a commonly controlled group, within the meaning of
Section 25105.
   (C) A person to or from whom there is attribution of stock
ownership in accordance with subdivision (e) of Section 25105.
   (D) A person that, notwithstanding its form of organization, bears
the same relationship to the employer as a person described in
subparagraphs (A), (B), or (C), inclusive.
   (3) "Related entity" means any of the following:
   (A) A stockholder who is an individual, or a member of the
stockholder's family set forth in Section 318 of the Internal Revenue
Code, relating to constructive ownership of stock, if the
stockholder and the members of the stockholder's family own,
directly, indirectly, beneficially, or constructively, in the
aggregate, at least 50 percent of the value of the employer's
outstanding stock.
   (B) A stockholder, or a stockholder's partnership, limited
liability company, estate, trust, or corporation, if the stockholder
and the stockholder's partnerships, limited liability companies,
estates, trusts, and corporations own directly, indirectly,
beneficially, or constructively, in the aggregate, at least 50
percent of the value of the employer's outstanding stock.
   (C) A corporation, or a party related to the corporation in a
manner that would require an attribution of stock from the
corporation to the party or from the party to the corporation under
the attribution rules of the Internal Revenue Code if the employer
owns, directly, indirectly, beneficially, or constructively, at least
50 percent of the value of the corporation's outstanding stock. The
attribution rules of the Internal Revenue Code shall apply for
purposes of determining whether the ownership requirement of this
definition has been met.
   (c) This section shall not apply to compensation received by any
of the following:
   (1) An individual who is a professional athlete or member of a
professional athletic team.
   (2) An individual who is a professional entertainer who performs
services in the professional performing arts.
   (3) An individual of prominence who performs services for
compensation on a per-event basis.
   (4) An individual who is identified as a key employee, within the
meaning of Section 416(i)(1)(A)(i) of the Internal Revenue Code, for
the taxable year immediately preceding the current taxable year.
  SEC. 2.  Section 18501.5 is added to the Revenue and Taxation Code,
to read:
   18501.5.  (a) (1) Notwithstanding Section 18501 and except as
provided in paragraph (2), a nonresident whose only income from
sources in this state is compensation that is excluded pursuant to
Section 17952.7 has no tax liability under Section 17041 and is not
required to file a return.
   (2) Upon request by the Franchise Tax Board, a nonresident may be
required to file an informational return.
   (b) This section is applicable to the determination of an
individual income taxpayer's filing requirement and has no
application to the imposition of, or jurisdiction to impose, a tax
under Part 10 (commencing with Section 17001) or any other tax on any
taxpayer.
   (c) Nothing contained in this section is intended to have any
bearing on the sourcing rules for determining the taxability by this
state of deferred compensation earned by performing services in this
state during any portion of the applicable vesting period, whether by
stock option, restricted stock units, or any other means, based on a
formula comparing the number of working days in this state to the
number of working days elsewhere, and no de minimis period, as
described in Section 17952.7, applies to those determinations.
  SEC. 3.  Section 13020.5 is added to the Unemployment Insurance
Code, to read:
   13020.5.  (a) Notwithstanding Section 13020, no amount is required
to be deducted or withheld from compensation paid to a nonresident
for employment duties performed in this state if that compensation is
excluded from income subject to tax pursuant to Section 17952.7 of
the Revenue and Taxation Code. The number of days a nonresident
employee is present in this state for purposes of Section 17952.7 of
the Revenue and Taxation Code shall include all such days the
nonresident employee is present and performing employment duties in
the state on behalf of the employer and any other related person, as
defined in subdivision (b) of Section 17952.7 of the Revenue and
Taxation Code. For purposes of this subdivision, presence in this
state for any part of a day constitutes presence in this state for
that day unless such presence is solely for purposes of transit
through the state.
   (b) An employer that has erroneously applied the exception
provided by this section solely as a result of miscalculating the
number of days a nonresident employee is present in this state to
perform employment duties shall not be subject to a penalty resulting
from the erroneous application of the exception provided in this
section if one of the following applies:
   (1) The employer relied on a regularly maintained time and
attendance system that satisfies both of the following conditions:
   (A) The system requires the employee to record, on a
contemporaneous basis, his or her work location each day the employee
is present in a state other than the state of residence or the state
where services are considered performed under the Unemployment
Insurance Code.
   (B) The system is used by the employer to allocate the employee's
wages between all taxing jurisdictions in which the employee performs
duties.
   (2) The employer does not maintain a time and attendance system
described in paragraph (1) and relied on employee travel records that
the employer requires the employee to maintain and record on a
regular and contemporaneous basis.
   (3) The employer does not maintain a time and attendance system
described in paragraph (1), does not require the maintenance of
employee records described in paragraph (2), and relied on travel
expense reimbursement records that the employer requires the employee
to submit on a regular and contemporaneous basis.
   (c) This section establishes an exception to withholding and
deduction requirements and has no application to the imposition of,
or jurisdiction to impose, this or any other tax on any employee.