BILL NUMBER: ABX3 9 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MARCH 12, 2008
AMENDED IN ASSEMBLY MARCH 11, 2008
AMENDED IN ASSEMBLY MARCH 10, 2008
AMENDED IN ASSEMBLY FEBRUARY 7, 2008
INTRODUCED BY Assembly Members Nunez, Arambula, Bass, Beall, Berg,
Brownley, Caballero, Charles Calderon, Carter, Coto,
Davis, De La Torre, De Leon, DeSaulnier, Dymally, Eng, Evans, Feuer,
Fuentes, Furutani, Hancock, Hayashi, Hernandez, Huffman, Jones,
Karnette, Krekorian, Laird, Leno, Levine, Lieber, Lieu, Ma, Mendoza,
Mullin, Nava, Portantino, Price, Ruskin, Salas, Saldana, Swanson, and
Torrico
FEBRUARY 4, 2008
An act to add Section 17044 to, to add Chapter 3.3 (commencing
with Section 23580) to Part 11 of Division 2 of, and to add Part 21
(commencing with Section 42001) to Division 2 of, the Revenue and
Taxation Code, relating to taxation, to take effect
immediately, tax levy making an appropriation
therefor, and declaring the urgency thereof, to take effect
immediately .
LEGISLATIVE COUNSEL'S DIGEST
AB 9, as amended, Nunez. Income taxes: corporation taxes:
petroleum industry.
The Personal Income Tax Law imposes a tax upon taxable income at
various rates depending on the amount of that income. The Corporation
Tax Law, in general, imposes an income tax and a franchise tax
measured by the taxable or net income from California sources of the
preceding taxable year.
This bill would, for taxable years beginning on or after January
1, 2008, impose a tax, subject to specified guidelines, at the rate
of 2% on that portion of taxable income or net income, respectively,
in excess of $10,000,000, on a taxpayer engaged in business
activities in the petroleum industry, as defined, where the taxpayer
has more than 50% of its gross business receipts derived from
conducting one or more qualified business activities, as defined.
This bill would also impose an oil severance tax on and after July
1, 2008, upon any producer for the privilege of severing oil from
the earth or water in this state for sale, transport, consumption,
storage, profit, or use, as provided at the rate of 6% of the gross
value of each barrel of oil severed.
This bill would require appropriate
all revenues from the taxes imposed by the bill to be
appropriated only the Superintendent of Public
Instruction for education purposes for the 2008-
09 fiscal year , as specified.
This bill would result in a change in state taxes for the purpose
of increasing state revenues within the meaning of Section 3 of
Article XIII A of the California Constitution, and thus would require
for passage the approval of 2/3 of the membership of each house of
the Legislature.
The California Constitution authorizes the Governor to declare a
fiscal emergency and to call the Legislature into special session for
that purpose. The Governor issued a proclamation declaring a fiscal
emergency, and calling a special session for this purpose, on January
10, 2008.
This bill would state that it addresses the fiscal emergency
declared by the Governor by proclamation issued on January 10, 2008,
pursuant to the California Constitution.
This bill would take effect immediately as a tax levy.
This bill would declare that it is to take effect immediately as
an urgency statute.
Vote: 2/3. Appropriation: no yes .
Fiscal committee: yes. State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 17044 is added to the Revenue and Taxation
Code, to read:
17044. (a) For each taxable year beginning on or after January 1,
2008, there is hereby imposed, in addition to any other tax imposed
by this part, a tax at the rate of 2 percent on that portion of
taxable income in excess of ten million dollars ($10,000,000) of a
taxpayer engaged in business activities in the petroleum industry.
(b) For purposes of this section:
(1) "Gross business receipts" means gross receipts described in
subdivision (e) of Section 25120, including those gross business
receipts separately stated to an investor by a pass-through entity as
required by paragraph (1) of subdivision (d).
(2) "Qualified business activities" means those lines of business
described in Codes 211, 32411, 4247, and 447 of the North American
Industry Classification System Manual published by the United States
Office of Management and Budget, 2007 Edition.
(3) A "taxpayer engaged in business activities in the petroleum
industry" means a taxpayer that has more than 50 percent of its gross
business receipts derived from conducting one or more qualified
business activities.
(c) The following shall not apply to the tax imposed by this
section:
(1) The provisions of Section 17041 relating to filing status and
recomputation of the income tax brackets.
(2) The provisions of Section 17045 relating to joint returns.
(d) In the case of any investor in a pass-through entity, the
following shall apply:
(1) The determination of whether a taxpayer meets the more than 50
percent requirement described in paragraph (3) of subdivision (b)
shall be made at both the entity level and at the investor level. A
taxpayer shall be treated as engaged in business activities in the
petroleum industry if this test is satisfied at either the entity or
investor level. A pass-through entity engaged in a qualified business
activity shall separately state the gross business receipts of that
qualified business activity.
(2) Any distributive or pro rata share of income subject to the
additional tax imposed under subdivision (a) based on a determination
that the net income of the pass-through entity exceeds ten million
dollars ($10,000,000) shall be separately stated.
(3) Any distributive or pro rata share of income from a
pass-through entity primarily engaged in business activities in the
petroleum industry that is not described in paragraph (2) shall be
separately stated and aggregated at the investor level for purposes
of applying the ten million dollar ($10,000,000) threshold.
(4) For purposes of this subdivision:
(A) "Pass-through entity" means any partnership, or any "S"
corporation.
(B) "Investor" means a partner or shareholder of a pass-through
entity.
(e) For purposes of this part and Part 10.2 (commencing with
Section 18401), the tax imposed under this section shall be treated
as if it was imposed under Section 17041.
(f) The Franchise Tax Board may prescribe appropriate rules and
regulations to implement this section.
SEC. 2. Chapter 3.3 (commencing with Section 23580) is added to
Part 11 of Division 2 of the Revenue and Taxation Code, to read:
CHAPTER 3.3. PETROLEUM SURTAX
23580. (a) For each taxable year beginning on or after January 1,
2008, there is hereby imposed, in addition to any other tax imposed
by Chapter 2 (commencing with Section 23101) and Chapter 3
(commencing with Section 23501), a tax at the rate of 2 percent on
that portion of net income in excess of ten million dollars
($10,000,000) of a corporation engaged in business activities in the
petroleum industry.
(b) For purposes of this section:
(1) "Apportioning trade or business" means a distinct trade or
business whose business income is required to be apportioned under
Sections 25101 and 25120, limited, if applicable, by Section 25110,
using the same denominator for each of the applicable payroll,
property, and sales factors.
(2) "Gross business receipts" means gross receipts described in
subdivision (e) of Section 25120, including those gross business
receipts separately stated to an investor by a pass-through entity as
required by paragraph (1) of subdivision (d), other than gross
receipts from sales or other transactions within an apportioning
trade or business between members of a group of corporations whose
income and apportionment factors are required to be included in a
combined report under Section 25101, limited, if applicable, by
Section 25110, regardless of whether the receipts are excluded from
the sales factor by Section 25137.
(3) "Qualified business activities" means those lines of business
described in Codes 211, 32411, 4247, and 447 of the North American
Industry Classification System Manual published by the United States
Office of Management and Budget, 2007 Edition.
(4) A "taxpayer engaged in business activities in the petroleum
industry" means a taxpayer that has more than 50 percent of its gross
business receipts derived from conducting one or more qualified
business activities.
(c) In the case where the income and apportionment factors of two
or more corporations are required to be included in a combined report
under Section 25101, limited, if applicable, by Section 25110, the
application of the more than 50 percent test of paragraph (4) of
subdivision (b) shall be made with respect to the "gross business
receipts" of the entire apportioning trade or business group.
(d) In the case of any investor in a pass-through entity, the
following shall apply:
(1) The determination of whether a taxpayer meets more than 50
percent requirement described in paragraph (4) of subdivision (b)
shall be made at both the entity level and at the investor level. A
taxpayer shall be treated as engaged in business activities in the
petroleum industry if this test is satisfied at either the entity or
investor level. A pass-through entity engaged in a qualified business
activity shall separately state the gross business receipts of that
qualified business activity.
(2) Any distributive or pro rata share of income subject to the
additional tax imposed under subdivision (a) based on a determination
that the net income of the pass-through entity exceeds ten million
dollars ($10,000,000) shall be separately stated.
(3) Any distributive or pro rata share of income from a
pass-through entity primarily engaged in business activities in the
petroleum industry that is not described in paragraph (2) shall be
separately stated and aggregated at the investor level for purposes
of applying the ten million dollar ($10,000,000) threshold.
(4) For purposes of this subdivision:
(A) "Pass-through entity" means any partnership, or any "S"
corporation.
(B) "Investor" means a partner or shareholder of a pass-through
entity.
(e) For purposes of this part and Part 10.2 (commencing with
Section 18401), the tax imposed under this section shall be treated
as if it was imposed under Chapter 2 (commencing with Section 23101)
or Chapter 3 (commencing with Section 23501).
(f) The Franchise Tax Board may prescribe appropriate rules and
regulations to implement this section.
SEC. 3. Part 21 (commencing with Section 42001) is added to
Division 2 of the Revenue and Taxation Code, to read:
PART 21. Oil Severance Tax
42001. This part shall be known and may be cited as the Oil
Severance Tax Law.
42002. For purposes of this part, the following definitions shall
apply:
(a) "Oil" means petroleum, or other crude oil, condensate, casing
head gasoline, or other mineral oil that is mined, produced, or
withdrawn from below the surface of the soil or water in this state.
(b) "Producer" means any person or entity who takes oil from the
earth or water in this state in any manner; any person who owns,
controls, manages, or leases any oil well in the earth or water of
this state; any person who produces or extracts in any manner any oil
by taking it from the earth or water in this state; any person who
acquires the severed oil from a person or agency exempt from property
taxation under the United States Constitution or other laws of the
United States or under the California Constitution or other laws of
the State of California; and any person who owns an interest,
including a royalty interest, in oil or its value, whether the oil is
produced by the person owning the interest or by another on his,
her, or its behalf by lease, contract, or other arrangement.
(c) "Production" means the total gross amount of oil produced,
including the gross amount thereof attributable to a royalty or other
interest.
(d) "Severed" or "severing" means the extraction or withdrawing
from below the surface of the earth or water of any oil, regardless
of whether the extraction or withdrawal shall be by natural flow,
mechanical flow, forced flow, pumping, or any other means employed to
get the oil from below the surface of the earth or water, and shall
include the extraction or withdrawal by any means whatsoever of oil
upon which the tax has not been paid, from any surface reservoir,
natural or artificial, or from a water surface.
(e) "Gross value" means the sale price at the mouth of the well in
the case of oil, including any bonus, premium, or other thing of
value paid for the oil. If oil is exchanged for something other than
cash, or if there is no sale at the time of severance, or if the
relation between the buyer and the seller is such that the
consideration paid, if any, is not indicative of the true value or
market price, then the board shall determine the value of the oil
subject to the tax based on the cash price paid to producers for like
quality oil in the vicinity of the well.
(f) "Barrel of oil" means 42 United States gallons of 231 cubic
inches per gallon computed at a temperature of 60 degrees Fahrenheit.
(g) "Stripper well" means a well that has been certified by the
board as an oil well incapable of producing an average of more than
10 barrels of oil per day during the entire taxable month. Once a
well has been certified as a stripper well, that stripper well shall
remain certified as a stripper well until the well produces an
average of more than 10 barrels of oil per day during an entire
taxable month.
(h) "Board" means the State Board of Equalization.
42010. On and after July 1, 2008, there is hereby imposed an oil
severance tax upon any producer for the privilege of severing oil
from the earth or water in this state for sale, transport,
consumption, storage, profit, or use. The tax shall be applied
equally to all portions of the gross value of each barrel of oil
severed, and shall be imposed at the rate of 6 percent.
42011. Except as otherwise provided in this part, the tax shall
be upon the entire production in this state, regardless of the place
of sale or to whom sold or by whom used, or the fact that the
delivery may be made to points outside the state.
42012. The tax imposed by this part shall be in addition to any
ad valorem taxes imposed by the state, or any of its political
subdivisions, or any local business license taxes which may be
incurred as a privilege of severing oil from the earth or water or
doing business in that locality. No equipment, material, or property
shall be exempt from payment of ad valorem tax by reason of the
payment of the gross severance tax pursuant to this part.
42013. The tax imposed by this part shall not be passed through
to consumers by way of higher prices for oil, gasoline, or diesel
fuel. The board shall monitor and, if necessary, investigate any
instance where producers or purchasers of the oil have attempted to
gouge consumers by using the tax as a pretext to materially raise the
price of oil, gasoline, or diesel fuel.
42014. Two or more producers that are corporations and are owned
or controlled directly or indirectly, as defined in Section 25105, by
the same interests shall be considered as a single producer for
purposes of application of the tax prescribed in Section 42010.
42015. There shall be exempted from the imposition of the oil
severance tax imposed pursuant to this part oil produced by a
stripper well in which the average value of oil as of January 1 of
the prior year is less than fifty dollars ($50) per barrel.
42016. There shall be exempted from the imposition of the oil
severance tax imposed pursuant to this part all oil owned or produced
by any political subdivision of this state, including that political
subdivision's proprietary share of oil produced under any unit,
cooperative, or other pooling agreement.
42020. The tax imposed by this part shall be due and payable
monthly on or before the 15th day of the month following each monthly
period. The payments shall be accompanied by a return in the form as
prescribed by the board, which may include electronic media. The
board may require the payment of the tax and the filing of returns
for other than monthly periods.
42022. The board may prescribe those forms and reporting
requirements as necessary to implement the tax, including, but not
limited to, information regarding the location of the well by county,
the gross amount of oil produced, the price paid therefor, the
prevailing market price of oil, and the amount of tax due.
42112. In all proceedings under this part, the board may act on
behalf of the people of the State of California.
42145. The board shall administer and collect the tax imposed by
this part pursuant to the Fee Collections Procedures Law (Part 30
(commencing with Section 55001) of Division 2). For purposes of this
part, the reference in the Fee Collection Procedures Law to "feepayer"
shall include a person required to pay the oil severance tax.
42146. The board shall, upon appropriation, be reimbursed for
expenses incurred in the administration and collection of the tax
imposed by this part.
42167. With the exception of payments of refunds and
reimbursement to the board for expenses incurred in the
administration and collection of the tax imposed by this part, all
taxes, interest, penalties, and other amounts collected pursuant to
this part shall be deposited in the General Fund.
SEC. 4. The revenues derived from the taxes
levied pursuant to this act shall only be appropriated to the
Superintendent of Public Instruction for allocation to school
districts and county offices of education for the 2008-09 fiscal
year, and each subsequent fiscal year for which the revenues are
received, for the purpose of mitigating the impact of the 2008-09
budget reductions on layoffs of school employees.
SEC. 5. This act provides for a tax levy within
the meaning of Article IV of the Constitution and shall go into
immediate effect.
SEC. 4. The revenues derived from the taxes levied
pursuant to this act are hereby appropriated from the General Fund
to the Superintendent of Public Instruction for allocation to school
districts and county offices of education for the 2008--09 fiscal
year exclusively for the purpose of mitigating the impact of the
2008--09 budget reductions on layoffs of school employees. The
Superintendent of Public Instruction shall allocate the funds
appropriated by this section pursuant to an allocation plan which
shall be approved by the Director of Finance.
SEC. 5. This act addresses the fiscal emergency
declared by the Governor by proclamation of January 10, 2008,
pursuant to subdivision (f) of Section 10 of Article IV of the
California Constitution.
SEC. 6. This act is an urgency statute necessary
for the immediate preservation of the public peace, health, or safety
within the meaning of Article IV of the Constitution and shall go
into immediate effect. The facts constituting the necessary are:
In order to provide immediate and essential funding for public
education, it is necessary that this act take effect immediately.