BILL NUMBER: AB 897 CHAPTERED
BILL TEXT
CHAPTER 238
FILED WITH SECRETARY OF STATE SEPTEMBER 26, 2007
APPROVED BY GOVERNOR SEPTEMBER 26, 2007
PASSED THE SENATE AUGUST 30, 2007
PASSED THE ASSEMBLY SEPTEMBER 4, 2007
AMENDED IN SENATE AUGUST 1, 2007
AMENDED IN SENATE JULY 3, 2007
AMENDED IN ASSEMBLY MAY 3, 2007
AMENDED IN ASSEMBLY MARCH 29, 2007
INTRODUCED BY Assembly Member Houston
FEBRUARY 22, 2007
An act to amend Section 23701d of the Revenue and Taxation Code,
relating to taxation.
LEGISLATIVE COUNSEL'S DIGEST
AB 897, Houston. Taxation: tax-exempt organizations:
administration.
The Corporation Tax Law, in modified conformity to federal income
tax laws, exempts various types of organizations from the taxes
imposed by that law, provided that those organizations satisfy
certain specified requirements, including a requirement to apply for
tax-exempt status with, and be approved by, the Franchise Tax Board
and to pay a filing fee, as provided.
This bill would delete that requirement as it applies to certain
specified organizations, and instead, would provide that an
organization, as defined, shall be exempt from state taxes, as
provided, upon its submission, on or after January 1, 2008, to the
Franchise Tax Board of a copy of the notification issued by the
Internal Revenue Service approving the organization's tax-exempt
status pursuant to Section 501(c)(3) of the Internal Revenue Code, as
specified.
This bill would make a legislative finding and declaration
relating to the public purpose served by specified provisions of the
bill.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 23701d of the Revenue and Taxation Code is
amended to read:
23701d. (a) A corporation, community chest or trust, organized
and operated exclusively for religious, charitable, scientific,
testing for public safety, literary, or educational purposes, or to
foster national or international amateur sports competition (but only
if no part of its activities involved the provision of athletic
facilities or equipment), or for the prevention of cruelty to
children or animals, no part of the net earnings of which inures to
the benefit of any private shareholder or individual, no substantial
part of the activities of which is carrying on propaganda or
otherwise attempting to influence legislation, (except as otherwise
provided in Section 23704.5), and which does not participate in, or
intervene in (including the publishing or distribution of
statements), any political campaign on behalf of (or in opposition
to) any candidate for public office. An organization is not organized
exclusively for exempt purposes listed above unless its assets are
irrevocably dedicated to one or more purposes listed in this section.
Dedication of assets requires that in the event of dissolution of an
organization or the impossibility of performing the specific
organizational purposes the assets would continue to be devoted to
exempt purposes. Assets shall be deemed irrevocably dedicated to
exempt purposes if the articles of organization provide that upon
dissolution the assets will be distributed to an organization which
is exempt under this section or Section 501(c)(3) of the Internal
Revenue Code or to the federal government, or to a state or local
government for public purposes; or by a provision in the articles of
organization, satisfactory to the Franchise Tax Board; that the
property will be distributed in trust for exempt purposes; or by
establishing that the assets are irrevocably dedicated to exempt
purposes by operation of law. The irrevocable dedication requirement
shall not be a sole basis for revocation of an exempt determination
made by the Franchise Tax Board prior to the effective date of this
amendment.
(b) (1) In the case of a qualified amateur sports organization--
(A) The requirement of subdivision (a) that no part of its
activities involves the provision of athletic facilities or equipment
shall not apply.
(B) That organization shall not fail to meet the requirements of
subdivision (a) merely because its membership is local or regional in
nature.
(2) For purposes of this subdivision, "qualified amateur sports
organization" means any organization organized and operated
exclusively to foster national or international amateur sports
competition if that organization is also organized and operated
primarily to conduct national or international competition in sports
or to support and develop amateur athletes for national or
international competition in sports.
(c) (1) Notwithstanding subdivisions (a), (b), and (c) of Section
23701, an organization organized and operated for nonprofit purposes
in accordance with this section shall be exempt from taxes imposed by
this part, except as provided in this article or in Article 2
(commencing with Section 23731), upon its submission to the Franchise
Tax Board of a copy of the notification issued by the Internal
Revenue Service approving the organization's tax-exempt status
pursuant to Section 501(c)(3) of the Internal Revenue Code. The
effective date of an organization's tax-exempt status for state
income tax purposes pursuant to this subdivision shall be no later
than the effective date of the organization's tax-exempt status,
under Section 501(c)(3) of the Internal Revenue Code, for federal
income tax purposes.
(2) If, for federal income tax purposes, an organization's
tax-exempt status under Section 501(c)(3) of the Internal Revenue
Code is suspended or revoked, the organization shall notify the
Franchise Tax Board of the suspension or revocation, in the form and
manner prescribed by the Franchise Tax Board. Upon notification, the
board shall suspend or revoke, whichever is applicable, for state
income tax purposes, an organization's tax-exempt status granted
pursuant to paragraph (1) of this subdivision.
(3) This subdivision shall not be construed to prevent the
Franchise Tax Board from revoking the exemption of an organization
that is not organized or operated in accordance with this chapter or
Section 501(c)(3) of the Internal Revenue Code.
(d) The Franchise Tax Board may prescribe rules and regulations to
implement this section.
SEC. 2. This act shall apply to requests for tax-exempt status in
California filed by organizations with the Franchise Tax Board on or
after January 1, 2008.
SEC. 3. The Legislature finds and declares that the enactment of
this act and the retroactive application provided by Section 1 of
this act are necessary for the public purpose of providing relief
under California law to certain nonprofit organizations that qualify
as tax-exempt for federal income tax purposes and are seeking to
obtain tax-exempt status in California by eliminating the requirement
to file a separate application with the Franchise Tax Board for
those organizations that have received a federal determination
letter, and thus, streamlining the process of obtaining the
tax-exempt status for state income tax purposes, and ensuring that
every eligible organization qualifies for this new process regardless
of whether the organization receives a federal determination letter
before or after January 1, 2008.