BILL NUMBER: ABX4 6 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY NOVEMBER 25, 2008
INTRODUCED BY Assembly Member Laird
NOVEMBER 20, 2008
An act relating to the Budget Act of 2008.
An act to amend Sections 10752, 10752.1, 17041, 17062, and 17077 of,
and to add Section 17054.8 to, the Revenue and Taxation Code,
relating to taxation, and declaring the urgency thereof,
to take effect immediately.
LEGISLATIVE COUNSEL'S DIGEST
AB 6, as amended, Laird. Budget Act of 2008.
Personal income tax rates: vehicle license fee: corporation
reorganizations.
Under the Personal Income Tax Law, taxes are imposed at specified
rates, up to a maximum of 9.3%, based on the amount of the taxpayer's
taxable income and a maximum of 7% based on the taxpayer's
alternative minimum taxable income.
This bill would, for taxable years beginning on or after January
1, 2008, modify those rates, as specified. This bill would also
suspend inflationary adjustments for return filing requirements and
specified income taxes, credits, exemptions, and deductions, as
provided.
The Vehicle License Fee Law establishes, in lieu of any ad valorem
property tax upon vehicles, an annual license fee for any vehicle
subject to registration in this state in the amount of 0.65% of the
market value of that vehicle, as provided.
This bill would increase that rate to 2% on and after March 1,
2009, and require that the revenues derived from the increase be
deposited into the General Fund.
The Corporation Tax Law, in specified conformity to federal income
tax laws, imposes certain limitations on the use of built-in losses
in conjunction with corporate reorganizations.
This bill would clarify that a specified federal administrative
notice relating to those limitations does not apply for purposes of
California law.
This bill would become operative only if other specified bills are
chaptered.
This bill would declare that it is to take effect immediately as
an urgency statute.
This bill would express the intent of the Legislature to enact
statutory changes relating to the Budget Act of 2008.
Vote: majority 2/3 . Appropriation:
no. Fiscal committee: no yes .
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. It is the intent of the Legislature
to enact statutory changes relating to the Budget Act of 2008.
SECTION 1. (a) The Legislature finds and declares
the following:
(1) The Personal Income Tax Law (Part 10 (commencing with Section
17001) of Division 2 of the Revenue and Taxation Code) and the
Corporation Tax Law (Part 11 (commencing with Section 23001) of
Division 2 of the Revenue and Taxation Code) provide for specified
conformity to various referenced provisions of the federal Internal
Revenue Code, as enacted as of a specified date.
(2) Those laws provide that for taxable years beginning on or
after January 1, 2005, the conformity date specified in California
law for those referenced Internal Revenue Code sections is January 1,
2005, except as otherwise specifically provided.
(3) Included among the federal provisions conformed to as enacted
as of January 1, 2005, are the provisions of Section 382 of the
Internal Revenue Code, relating to limitations on net operating loss
carryforwards and certain built-in losses following ownership change.
(4) As enacted as of January 1, 2005, Section 382 of the Internal
Revenue Code applied to financial institutions, and Section 382
included no specific authority for regulatory actions by the Internal
Revenue Service or the Department of the Treasury to exempt banks or
other financial institutions from its provisions.
(5) On October 20, 2008, the Internal Revenue Service issued
Notice 2008-83, 2008-42 I.R.B. 905, stating that "(f)or purposes of
section 382(h), any deduction properly allowed after an ownership
change (as defined in section 382(g)) to a bank with respect to
losses on loans for bad debts (including any deduction for a
reasonable addition to a reserve for bad debts) shall not be treated
as a built-in loss or a deduction that is attributable to periods
before the change date."
(6) Notice 2008-83, which precludes the application of provisions
of Section 382 of the Internal Revenue Code to financial
institutions, constitutes a substantive change to the application of
Section 382 of the Internal Revenue Code, as enacted as of January 1,
2005.
(7) This state conformed to Section 382 of the Internal Revenue
Code, as enacted as of January 1, 2005, but the Legislature's action
in conforming to Section 382 of the Internal Revenue Code did not
contemplate the substantive change in application of these provisions
set forth in Notice 2008-83.
(b) Inasmuch as the Legislature has determined that the changes
set forth in Notice 2008-83 are inconsistent with, and in conflict
with, the intent of the Legislature in conforming with Section 382 of
the Internal Revenue Code, the Legislature makes the following
finding and directs the Franchise Tax Board to apply it for purposes
of the Personal Income Tax Law and the Corporation Tax Law:
(1) Notice 2008-83, relating to application of Section 382(h) of
the Internal Revenue Code to banks, and any other administrative
guidance issued by the Internal Revenue Service after October 20,
2008, and any federal Treasury regulations promulgated after October
20, 2008, which have the same or similar effect regarding the
application of Section 382 of the Internal Revenue Code to banks,
shall not apply for purposes of the Personal Income Tax Law and the
Corporation Tax Law.
(2) Paragraph (1) shall apply to the same taxable periods to which
any federal guidance described in that subdivision is applicable.
SEC. 2. Section 10752 of the Revenue and
Taxation Code is amended to read:
10752. (a) The annual amount of the license
fee for any vehicle, other than a trailer or semitrailer, as
described in subdivision (a) of Section 5014.1 of the Vehicle Code,
or a trailer coach that is required to be moved under permit as
authorized in Section 35790 of the Vehicle Code, shall be a sum equal
to 2 percent, and on and after January 1, 2005, 0.65
percent, the following percentage of the market
value of the vehicle as determined by the department .
:
(1) Sixty-five hundredths of 1 percent on and after January 1,
2005, and before March 1, 2009.
(2) Two percent on and after March 1, 2009.
(b) Notwithstanding Chapter 5 (commencing with Section 11001) or
any other law to the contrary, all revenues (including penalties),
less refunds, attributable to that portion of the rate imposed on and
after March 1, 2009, that is in excess of 0.65 percent shall be
deposited into the General Fund.
SEC. 3. Section 10752.1 of the Revenue
and Taxation Code is amended to read:
10752.1. (a) The annual amount of the
license fee for a trailer coach which is required to be moved under
permit as authorized in Section 35790 of the Vehicle Code shall be a
sum equal to 2 percent, and on and after January 1, 2005,
0.65 percent, the following percentage of the
market value of the vehicle as determined by the department
. :
(1) Sixty-five hundredths of 1 percent on and after January 1,
2005, and before March 1, 2009.
(2) Two percent on and after March 1, 2009.
(b) Notwithstanding Chapter 5 (commencing with Section 11001) or
any other law to the contrary, all revenues (including penalties),
less refunds, attributable to that portion of the rate imposed on and
after March 1, 2009, that exceeds 0.65 percent shall be deposited in
the General Fund.
SEC. 4. Section 17041 of the Revenue
and Taxation Code is amended to read:
17041. (a) (1) There shall be imposed for
each taxable year upon the entire taxable income of every resident of
this state who is not a part-year resident, except the head of a
household as defined in Section 17042, taxes in the following amounts
and at the following rates upon the amount of taxable income
computed for the taxable year as if the resident were a resident of
this state for the entire taxable year and for all prior taxable
years for any carryover items, deferred income, suspended losses, or
suspended deductions:
If the taxable income is: The tax is:
Not over $3,650........... 1% of the taxable
income
Over $3,650 but not $36.50 plus 2% of the
over $8,650........ excess
over $3,650
$136.50 plus 4% of
Over $8,650 but not the
over $13,650....... excess
over $8,650
$336.50 plus 6% of
Over $13,650 but not the
over $18,950....... excess
over $13,650
$654.50 plus 8% of
Over $18,950 but not the
over $23,950....... excess
over $18,950
$1,054.50 plus 9.3%
Over $23,950.............. of the
excess
over $23,950
(2) For taxable years beginning on or after January 1, 2008, and
before January 1, 2012, the following tax brackets shall apply:
If the taxable income is:
Over But not Tax is of amount
over over
$0 $6,827 $0.00 Plus 1% $0.00
$6,827 $16,185 $69.27 Plus 2% $6,827
$16,185 $25,544 $255.43 Plus 4% $16,185
$25,544 $35,460 $629.79 Plus 6% $25,544
$35,460 $44,814 $1,224.75 Plus 8% $35,460
$44,814 And Over $1,973.07 Plus $44,814
9.3%
(3) For taxable years beginning on or after January 1, 2012,
paragraph (2) shall become inoperative.
(b) (1) There shall be imposed for each taxable year upon the
taxable income of every nonresident or part-year resident, except the
head of a household as defined in Section 17042, a tax as calculated
in paragraph (2).
(2) The tax imposed under paragraph (1) shall be calculated by
multiplying the "taxable income of a nonresident or part-year
resident," as defined in subdivision (i), by a rate (expressed as a
percentage) equal to the tax computed under subdivision (a) on the
entire taxable income of the nonresident or part-year resident as if
the nonresident or part-year resident were a resident of this state
for the taxable year and as if the nonresident or part-year resident
were a resident of this state for all prior taxable years for any
carryover items, deferred income, suspended losses, or suspended
deductions, divided by the amount of that income.
(c) (1) There shall be imposed for each
taxable year upon the entire taxable income of every resident of this
state who is not a part-year resident for that taxable year, when
the resident is the head of a household, as defined in Section 17042,
taxes in the following amounts and at the following rates upon the
amount of taxable income computed for the taxable year as if the
resident were a resident of the state for the entire taxable year and
for all prior taxable years for carryover items, deferred income,
suspended losses, or suspended deductions:
If the taxable income is: The tax is:
Not over $7,300............ 1% of the taxable
income
Over $7,300 but not $73 plus 2% of the
over $17,300........ excess
over $7,300
Over $17,300 but not $273 plus 4% of the
over $22,300........ excess
over $17,300
Over $22,300 but not $473 plus 6% of the
over $27,600........ excess
over $22,300
Over $27,600 but not $791 plus 8% of the
over $32,600........ excess
over $27,600
$1,191 plus 9.3% of
Over $32,600............... the
excess
over $32,600
(2) For taxable years beginning on or after January 1, 2008, and
before January 1, 2012, the following tax brackets shall apply:
If the taxable income is:
Over But not Tax is of amount
over over
$0 $13,662 $0.00 Plus 1% $0.00
$13,662 $32,370 $136.62 Plus 2% $13,662
$32,370 $41,728 $510.78 Plus 4% $32,370
$41,728 $51,643 $885.10 Plus 6% $41,728
$51,643 $61,000 $1,480.00 Plus 8% $51,643
$61,000 And Over $2,228.56 Plus $61,000
9.3%
(3) For taxable years beginning on or after January 1, 2012,
paragraph (2) shall become inoperative.
(d) (1) There shall be imposed for each taxable year upon the
taxable income of every nonresident or part-year resident when the
nonresident or part-year resident is the head of a household, as
defined in Section 17042, a tax as calculated in paragraph (2).
(2) The tax imposed under paragraph (1) shall be calculated by
multiplying the "taxable income of a nonresident or part-year
resident," as defined in subdivision (i), by a rate (expressed as a
percentage) equal to the tax computed under subdivision (c) on the
entire taxable income of the nonresident or part-year resident as if
the nonresident or part-year resident were a resident of this state
for the taxable year and as if the nonresident or part-year resident
were a resident of this state for all prior taxable years for any
carryover items, deferred income, suspended losses, or suspended
deductions, divided by the amount of that income.
(e) There shall be imposed for each taxable year upon the taxable
income of every estate, trust, or common trust fund taxes equal to
the amount computed under subdivision (a) for an individual having
the same amount of taxable income.
(f) The tax imposed by this part is not a surtax.
(g) (1) Section 1(g) of the Internal Revenue Code, relating to
certain unearned income of minor children taxed as if the parent's
income, shall apply, except as otherwise provided.
(2) Section 1(g)(7)(B)(ii)(II) of the Internal Revenue Code,
relating to income included on parent's return, is modified, for
purposes of this part, by substituting "1 percent" for "15 percent."
(h) For each taxable year beginning on or after January 1, 1988,
the Franchise Tax Board shall recompute the income tax brackets
prescribed in subdivisions (a) and (c). That computation shall be
made as follows:
(1) The California Department of Industrial Relations shall
transmit annually to the Franchise Tax Board the percentage change in
the California Consumer Price Index for all items from June of the
prior calendar year to June of the current calendar year, no later
than August 1 of the current calendar year.
(2) The Franchise Tax Board shall do both of the following:
(A) Compute an inflation adjustment factor by adding 100 percent
to the percentage change figure that is furnished pursuant to
paragraph (1) and dividing the result by 100.
(B) Multiply the preceding taxable year income tax brackets by the
inflation adjustment factor determined in subparagraph (A) and round
off the resulting products to the nearest one dollar ($1).
(i) (1) For purposes of this part, the term "taxable income of a
nonresident or part-year resident" includes each of the following:
(A) For any part of the taxable year during which the taxpayer was
a resident of this state (as defined by Section 17014), all items of
gross income and all deductions, regardless of source.
(B) For any part of the taxable year during which the taxpayer was
not a resident of this state, gross income and deductions derived
from sources within this state, determined in accordance with Article
9 of Chapter 3 (commencing with Section 17301) and Chapter 11
(commencing with Section 17951).
(2) For purposes of computing "taxable income of a nonresident or
part-year resident" under paragraph (1), the amount of any net
operating loss sustained in any taxable year during any part of which
the taxpayer was not a resident of this state shall be limited to
the sum of the following:
(A) The amount of the loss attributable to the part of the taxable
year in which the taxpayer was a resident.
(B) The amount of the loss which, during the part of the taxable
year the taxpayer is not a resident, is attributable to California
source income and deductions allowable in arriving at taxable income
of a nonresident or part-year resident.
(3) For purposes of computing "taxable income of a nonresident or
part-year resident" under paragraph (1), any carryover items,
deferred income, suspended losses, or suspended deductions shall only
be includable or allowable to the extent that the carryover item,
deferred income, suspended loss, or suspended deduction was derived
from sources within this state, calculated as if the nonresident or
part-year resident, for the portion of the year he or she was a
nonresident, had been a nonresident for all prior years.
(j) (1) For taxable years beginning on or after January 1, 2009,
and before January 1, 2012, subdivision (h) shall be applied by
substituting "January 1, 2008" for "January 1, 1988."
(2) For taxable years beginning on or after January 1, 2012, this
subdivision shall become inoperative.
SEC. 5. Section 17054.8 is added to the
Revenue and Taxation Code , to read:
17054.8. (a) Notwithstanding any other law to the contrary, for
taxable years beginning on or after January 1, 2008, and before
January 1, 2009, the following indexing provisions shall not apply:
(1) Subdivision (j) of Section 17053.5, relating to renter's
credit.
(2) Subdivision (i) of Section 17054, relating to credit for
personal and dependent exemptions.
(3) Subdivision (f) of Section 17054.1, relating to reductions of
exemption credit.
(4) Subdivision (b) of Section 17054.5, relating to joint custody
head of household and care of dependent parent credit.
(5) Subdivision (b) of Section 17054.7, relating to senior head of
household credit.
(6) Subdivision (d) of Section 17073.5, relating to standard
deduction.
(7) Subdivision (d) of Section 18501, relating to return filing
requirements.
(b) For taxable years beginning on or after January 1, 2008, and
before January 1, 2009, in applying Section 17304, relating to
itemized and standard deductions for nonresidents and part-year
residents, the indexing provisions in subdivision (d) of Section
17073.5 shall not apply.
(c) For taxable years beginning on or after January 1, 2009, and
before January 1, 2012, the following indexing provisions shall be
applied in the following manner:
(1) Subdivision (j) of Section 17053.5, relating to renter's
credit, shall be applied by substituting "January 1, 2008" for
"January 1, 1999."
(2) Subdivision (i) of Section 17054, relating to credit for
personal and dependent exemptions, shall be applied by substituting
"January 1, 2008" for "January 1, 1989."
(3) Subdivision (f) of Section 17054.1, relating to reductions of
exemption credit, shall be applied by substituting "January 1, 2008"
for "January 1, 1992."
(4) Subdivision (b) of Section 17054.5, relating to joint custody
head of household and care of dependent parent credit, shall be
applied by substituting "January 1, 2008" for "January 1, 1988."
(5) Subdivision (b) of Section 17054.7, relating to the senior
head of household credit, shall be applied by substituting "January
1, 2008" for "January 1, 1991."
(6) Subdivision (d) of Section 17073.5, relating to standard
deduction, shall be applied by substituting "January 1, 2008" for
"January 1, 1988."
(7) Subdivision (d) of Section 18501, relating to return filing
requirements, shall be applied by substituting "January 1, 2008" for
"January 1, 1996."
(d) For taxable years beginning on or after January 1, 2009, and
before January 1, 2012, in applying Section 17304, relating to
itemized and standard deductions for nonresidents and part-year
residents, the indexing provisions in subdivision (d) of Section
17073.5 shall be applied by substituting "January 1, 2008" for
"January 1, 1988."
(e) For taxable years beginning on or after January 1, 2012, this
section shall become inoperative.
SEC. 6. Section 17062 of the Revenue
and Taxation Code is amended to read:
17062. (a) In addition to the other taxes imposed by this part,
there is hereby imposed for each taxable year, a tax equal to the
excess, if any, of--
(1) The tentative minimum tax for the taxable year, over
(2) The regular tax for the taxable year.
(b) For purposes of this chapter, each of the following shall
apply:
(1) The tentative minimum tax shall be computed in accordance with
Sections 55 to 59, inclusive, of the Internal Revenue Code, except
as otherwise provided in this part.
(2) The regular tax shall be the amount of tax imposed by Section
17041 or 17048, before reduction for any credits against the tax,
less any amount imposed under paragraph (1) of subdivision (d) and
paragraph (1) of subdivision (e) of Section 17560.
(3) (A) The provisions of Section 55(b)(1) of the Internal Revenue
Code shall be modified to provide that the tentative minimum tax for
the taxable year shall be equal to the following percent of so much
of the alternative minimum taxable income for the taxable year as
exceeds the exemption amount, before reduction for any credits
against the tax:
(i) For any taxable year beginning on or after January 1, 1991,
and before January 1, 1996, 8.5 percent.
(ii) For any taxable year beginning on or after January 1, 1996, 7
percent.
(B) In the case of a nonresident or part-year resident, the
tentative minimum tax shall be computed by multiplying the
alternative minimum taxable income of the nonresident or part-year
resident, as defined in subparagraph (C), by a rate (expressed as a
percentage) equal to the tax computed under subdivision (b) on the
alternative minimum taxable income of the nonresident or part-year
resident as if the nonresident or part-year resident were a resident
of this state for the taxable year and as if the nonresident or
part-year resident were a resident of this state for all prior
taxable years for any carryover items, deferred income, suspended
losses, or suspended deductions, divided by the amount of that
income.
(C) For purposes of this section, the term "alternative minimum
taxable income of a nonresident or part-year resident" includes each
of the following:
(i) For any period during which the taxpayer was a resident of
this state (as defined by Section 17014), all items of alternative
minimum taxable income (as modified for purposes of this chapter),
regardless of source.
(ii) For any period during which the taxpayer was not a resident
of this state, alternative minimum taxable income (as modified for
purposes of this chapter) which were derived from sources within this
state, determined in accordance with Article 9 of Chapter 3
(commencing with Section 17301) and Chapter 11 (commencing with
Section 17951).
(iii) For purposes of computing "alternative minimum taxable
income of a nonresident or part-year resident," any carryover items,
deferred income, suspended losses, or suspended deductions shall only
be allowable to the extent that the carryover item, suspended loss,
or suspended deduction was derived from sources within this state.
(4) The provisions of Section 55(b)(2) of the Internal Revenue
Code, relating to alternative minimum taxable income, shall be
modified to provide that alternative minimum taxable income shall not
include the income, adjustments, and items of tax preference
attributable to any trade or business of a qualified taxpayer.
(A) For purposes of this paragraph, "qualified taxpayer" means a
taxpayer who meets both of the following:
(i) Is the owner of, or has an ownership interest in, a trade or
business.
(ii) Has aggregate gross receipts, less returns and allowances, of
less than one million dollars ($1,000,000) during the taxable year
from all trades or businesses of which the taxpayer is the owner or
has an ownership interest, in the amount of that taxpayer's
proportionate interest in each trade or business.
(B) For purposes of this paragraph, "aggregate gross receipts,
less returns and allowances" means the sum of the gross receipts of
the trades or businesses that the taxpayer owns and the proportionate
interest of the gross receipts of the trades or businesses that the
taxpayer owns and of pass-through entities in which the taxpayer
holds an interest.
(C) For purposes of this paragraph, "gross receipts, less returns
and allowances" means the sum of the gross receipts from the
production of business income, as defined in subdivision (a) of
Section 25120, and the gross receipts from the production of
nonbusiness income, as defined in subdivision (d) of Section 25120.
(D) For purposes of this paragraph, "proportionate interest"
means:
(i) In the case of a pass-through entity that reports a profit for
the taxable year, the taxpayer's profit interest in the entity at
the end of the taxpayer's taxable year.
(ii) In the case of a pass-through entity that reports a loss for
the taxable year, the taxpayer's loss interest in the entity at the
end of the taxpayer's taxable year.
(iii) In the case of a pass-through entity that is sold or
liquidates during the taxable year, the taxpayer's capital account
interest in the entity at the time of the sale or liquidation.
(E) (i) For purposes of this paragraph, "proportionate interest"
includes an interest in a pass-through entity.
(ii) For purposes of this paragraph, "pass-through entity" means
any of the following:
(I) A partnership, as defined by Section 17008.
(II) An "S corporation," as provided in Chapter 4.5 (commencing
with Section 23800) of Part 11.
(III) A regulated investment company, as provided in Section
24871.
(IV) A real estate investment trust, as provided in Section 24872.
(V) A real estate mortgage investment conduit, as provided in
Section 24874.
(5) For taxable years beginning on or after January 1, 1998,
Section 55(d)(1) of the Internal Revenue Code, relating to exemption
amount for taxpayers other than corporations is modified, for
purposes of this part, to provide the following exemption amounts in
lieu of those contained therein:
(A) Fifty-seven thousand two hundred sixty dollars ($57,260) in
the case of either of the following:
(i) A joint return.
(ii) A surviving spouse.
(B) Forty-two thousand nine hundred forty-five dollars ($42,945)
in the case of an individual who is both of the following:
(i) Not a married individual.
(ii) Not a surviving spouse.
(C) Twenty-eight thousand six hundred thirty dollars ($28,630) in
the case of either of the following:
(i) A married individual who files a separate return.
(ii) An estate or trust.
(D) For taxable years beginning on or after January 1, 2008, and
before January 1, 2012, the following exemption amounts shall apply:
t
Filing status Exemption Amount
Married filing joint or $76,207
surviving spouse
Single or unmarried $57,156
Married filing separate $38,102
or an estate or trust
(E) For taxable years beginning on or after January 1, 2012,
subparagraph (D) shall become inoperative.
(6) For taxable years beginning on or after January 1, 1998,
Section 55(d)(3) of the Internal Revenue Code, relating to the
phaseout of exemption amount for taxpayers other than corporations is
modified, for purposes of this part, to provide the following
phaseout of exemption amounts in lieu of those contained therein:
(A) Two hundred fourteen thousand seven hundred twenty-five
dollars ($214,725) in the case of a taxpayer described in
subparagraph (A) of paragraph (5).
(B) One hundred sixty-one thousand forty-four dollars ($161,044)
in the case of a taxpayer described in subparagraph (B) of paragraph
(5).
(C) One hundred seven thousand three hundred sixty-two dollars
($107,362) in the case of a taxpayer described in subparagraph (C) of
paragraph (5).
(D) For taxable years beginning on or after January 1, 2008, and
before January 1, 2012, the following alternative minimum tax
exemption phase-out amounts shall apply:
Filing status Exemption Phase-Out
Amount
Married filing joint or $285,776
surviving spouse
Single or unmarried $214,333
Married filing separate $142,887
or an estate or trust
(E) For taxable years beginning on or after January 1, 2012,
subparagraph (D) shall become inoperative.
(7) For each taxable year beginning on or after January 1, 1999,
the Franchise Tax Board shall recompute the exemption amounts
prescribed in paragraph (5) and the phaseout of exemption amounts
prescribed in paragraph (6). Those computations shall be made as
follows:
(A) The California Department of Industrial Relations shall
transmit annually to the Franchise Tax Board the percentage change in
the California Consumer Price Index for all items from June of the
prior calendar year to June of the current calendar year, no later
than August 1 of the current calendar year.
(B) The Franchise Tax Board shall do both of the following:
(i) Compute an inflation adjustment factor by adding 100 percent
to the percentage change figure that is furnished pursuant to
subparagraph (A) and dividing the result by 100.
(ii) Multiply the preceding taxable year exemption amounts and the
phaseout of exemption amounts by the inflation adjustment factor
determined in clause (i) and round off the resulting products to the
nearest one dollar ($1).
(8) (A) For taxable years beginning on or after January 1, 2009,
and before January 1, 2012, paragraph (7) shall be applied by
substituting "January 1, 2008" for "January 1, 1999."
(B) For taxable years beginning on or after January 1, 2012, this
paragraph shall become inoperative.
(c) (1) (A) Section 56(a)(6) of the Internal Revenue Code as in
effect on January 1, 1997, relating to installment sales of certain
property, shall not apply to payments received in taxable years
beginning on or after January 1, 1997, with respect to dispositions
occurring in taxable years beginning after December 31, 1987.
(B) This paragraph shall not apply to taxable years beginning on
or after January 1, 1998.
(2) Section 56(b)(1)(E) of the Internal Revenue Code, relating to
standard deduction and deduction for personal exemptions not allowed,
is modified, for purposes of this part, to deny the standard
deduction allowed by Section 17073.5.
(3) Section 56(b)(3) of the Internal Revenue Code, relating to
treatment of incentive stock options, shall be modified to
additionally provide the following:
(A) Section 421 of the Internal Revenue Code shall not apply to
the transfer of stock acquired pursuant to the exercise of a
California qualified stock option under Section 17502.
(B) Section 422(c)(2) of the Internal Revenue Code shall apply in
any case where the disposition and inclusion of a California
qualified stock option for purposes of this chapter are within the
same taxable year and that section shall not apply in any other case.
(C) The adjusted basis of any stock acquired by the exercise of a
California qualified stock option shall be determined on the basis of
the treatment prescribed by this paragraph.
(d) The provisions of Section 57(a)(5) of the Internal Revenue
Code, relating to tax-exempt interest shall not apply.
(e) Section 57(a) of the Internal Revenue Code, relating to items
of tax preference, is modified to include as an item of tax
preference an amount equal to one-half of the amount excluded from
gross income for the taxable year under Section 18152.5.
(f) The provisions of Section 59(a) of the Internal Revenue Code,
relating to the alternative minimum tax foreign tax credit, shall not
apply.
SEC. 7. Section 17077 of the Revenue
and Taxation Code is amended to read:
17077. Section 68 of the Internal Revenue Code, relating to
overall limitation on itemized deductions, shall apply, except as
otherwise provided.
(a) "Six percent" shall be substituted for "3 percent" in Section
68(a)(1) of the Internal Revenue Code.
(b) Section 68(b)(1) of the Internal Revenue Code shall not apply
and in lieu thereof the term "applicable amount" in each place it
appears in Section 68(a) of the Internal Revenue Code means one
hundred thousand dollars ($100,000) in the case of a single
individual or a married individual filing a separate return, one
hundred fifty thousand dollars ($150,000) in the case of a head of
household, and two hundred thousand dollars ($200,000) in the case of
a surviving spouse or a husband and wife filing a joint return.
(c) Section 68(b)(2) of the Internal Revenue Code, relating to
inflation adjustments, shall not apply. However, for any taxable year
beginning on or after January 1, 1992, the applicable amounts
specified in subdivision (b) shall be recomputed annually in the same
manner as the recomputation of income tax brackets under subdivision
(h) of Section 17041.
(d) Section 68(f) of the Internal Revenue Code, relating to
phaseout of limitation, shall not apply.
(e) Section 68(g) of the Internal Revenue Code, relating to
termination, shall not apply.
(f) (1) For taxable years beginning on or after January 1, 2008,
and before January 1, 2009, the second sentence of subdivison (c)
shall not apply and instead the following threshold amounts shall
apply:
Filing status Threshold Amount
Single or married filing $155,416
separate
Head of household $233,139
Married filing joint or $310,837
surviving spouse
(2) For taxable years beginning on or after January 1, 2009, and
before January 1, 2012, the second sentence of subdivision (c) shall
be applied by substituting "January 1, 2008" for "January 1, 1992."
(3) For taxable years beginning on or after January 1, 2012, this
subdivision shall become inoperative.
SEC. 8. This act shall become operative only if
the following bills of the 2007-08 Fourth Extraordinary Session of
the Legislature are all chaptered:
(a) Assembly Bill 7 or Senate Bill 7.
(b) Assembly Bill 8 or Senate Bill 8.
(c) Assembly Bill 9 or Senate Bill 9.
(d) Assembly Bill 10 or Senate Bill 10.
(e) Assembly Bill 11 or Senate Bill 11.
SEC. 9. 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 necessity are:
To alleviate the current fiscal crisis it is necessary that this
act go into immediate effect.