Bill Text: CA SB500 | 2015-2016 | Regular Session | Amended
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-Amended.html
BILL NUMBER: SB 500 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY AUGUST 1, 2016
AMENDED IN ASSEMBLY AUGUST 18, 2015
INTRODUCED BY Senator Hertzberg
FEBRUARY 26, 2015
An act to add and repeal Sections 17952.7 and 18501.5 of the
Revenue and Taxation Code, and to add and repeal Section
13020.5 amend Section 13006 of the Unemployment
Insurance Code, relating to taxation.
LEGISLATIVE COUNSEL'S DIGEST
SB 500, as amended, 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 resident taxpayer subject to that law, and
provides for a specified treatment of the income of nonresidents.
For purposes of computing the taxable income, 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
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
9 calendar days during the taxable year in which
the compensation is received, if the compensation is received on or
after January 1, 2016, 2017, 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 personal
income tax liability and is not required to file a return. The bill
would repeal these provisions on January 1, 2021.
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, the amount of
specified income taxes. taxes
reasonably estimated to be due from the inclusion of those wages in
the employee's gross income.
This bill bill, until January 1, 2021,
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 provide, for those tax withholding
purposes, that gross income excludes de minimis income excluded from
a nonresident's income subject to tax pursuant to the
aforementioned provisions. The bill would repeal these
provisions on January 1, 2021.
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,
2017, 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 otherwise
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,
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 9 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) 416(I)(1)
(A)(i) of the Internal Revenue Code, for the taxable year
immediately preceding the current taxable year.
(d) This section shall remain in effect only until January 1,
2021, and as of that date is repealed.
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 information 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.
(d) This section shall remain in effect only until January 1,
2021, and as of that date is repealed.
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.
(d) This section shall remain in effect only until January 1,
2021.
SEC. 3. Section 13006 of the
Unemployment Insurance Code is amended to read:
13006. "Gross income" means all compensation for services
including fees, commissions, and similar items, except as otherwise
provided by this division. "Gross income" shall specifically include
those items relating to compensation specified by Article 2
(commencing with Section 17081) of, and shall specifically exclude
those items relating to compensation specified by Article 3
(commencing with Section 17131) of, Chapter 3 of Part 10 of Division
2 of the Revenue and Taxation Code. Until January 1, 2021,
"gross income" shall also exclude de minimis income excluded from the
gross income of a nonresident under Section 17952.7 of the Revenue
and Taxation Code.
