BILL NUMBER: SB 1977	CHAPTERED  09/29/02

	CHAPTER  1108
	FILED WITH SECRETARY OF STATE  SEPTEMBER 29, 2002
	APPROVED BY GOVERNOR  SEPTEMBER 29, 2002
	PASSED THE SENATE  AUGUST 29, 2002
	PASSED THE ASSEMBLY  AUGUST 25, 2002
	AMENDED IN ASSEMBLY  JUNE 26, 2002

INTRODUCED BY   Senator Johannessen

                        FEBRUARY 22, 2002

   An act to add Section 24473 to the Revenue and Taxation Code,
relating to taxation, to take effect immediately, tax levy.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 1977, Johannessen.  Bank and corporation taxes:
reorganizations.
   The Bank and Corporation Tax Law provides that certain provisions
of federal law, relating to corporate distributions and adjustments,
including distributions, liquidations, and reorganizations, apply for
purposes of determining the tax under the state law, except as
otherwise specified.
   This bill would provide that the contribution or other transfer of
assets from a mutual water company that is federally tax exempt, but
that is a taxable entity under California law, to a community
service district is not a transfer subject to tax under that law.
   This bill would take effect immediately as a tax levy.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 24473 is added to the Revenue and Taxation
Code, to read:
   24473.  Notwithstanding any other provision of law, the
contribution or other transfer of the assets of a mutual water
company established prior to September 26, 1977, that is tax exempt
under Section 501(c)(12) of the Internal Revenue Code, but is a
taxable entity under California Law, including its lands, easements,
rights, and obligations to act as sole agent of the stockholders in
exercising the riparian rights of the stockholders, and rights
relating to the ownership, operation, and maintenance of a water
system and facilities serving the customers of the company, to a
community services district formed pursuant to Part 1 (commencing
with Section 61100) of Division 3 of Title 6 of the Government Code,
is not a transfer subject to taxes imposed by this part if all of the
following requirements are met:
   (a) The consideration for the transfer of all or substantially all
of the assets is the assumption by the district of the company's
liability to provide service to the company's stockholders.
   (b) The legal or beneficial title to all or substantially all of
the company's assets is vested in the district on or before January
1, 2008.
   (c) For the one-year period immediately prior to commencement of
the transfer and continuing until the transfer is completed, 85
percent or more of the company's income consists of amounts collected
from stockholders for the sole purpose of meeting losses and
expenses.
  SEC. 2.  This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.