BILL NUMBER: SBX1 28 CHAPTERED
BILL TEXT
CHAPTER 1
FILED WITH SECRETARY OF STATE OCTOBER 1, 2008
APPROVED BY GOVERNOR OCTOBER 1, 2008
PASSED THE SENATE SEPTEMBER 19, 2008
PASSED THE ASSEMBLY SEPTEMBER 19, 2008
INTRODUCED BY Committee on Budget and Fiscal Review
SEPTEMBER 19, 2008
An act to amend Section 19025 of, to add Sections 19136.1,
19136.3, and 19138 to, to repeal Section 19137 of, and to repeal
Chapter 9.2 (commencing with Section 19740) of Part 10.2 of Division
2 of, the Revenue and Taxation Code, and to amend Section 35.20 as
added to the Budget Act of 2008 by Assembly Bill 88 of the 2007-2008
Regular Session, relating to taxation.
LEGISLATIVE COUNSEL'S DIGEST
SB 28, Committee on Budget and Fiscal Review. Taxation.
Existing income tax laws require specified individuals to pay
estimated income taxes in installments and impose additional
liability for underpayments.
This bill would adjust the amount of those installments under
specified circumstances.
Existing corporation tax laws provide, with a specified exception,
that if the amount of estimated tax exceeds the minimum franchise
tax imposed on corporations, the amount payable shall be payable in
installments.
This bill would modify the percentages of the estimated taxes
payable pursuant to those installment payments.
The Personal Income Tax Law and the Corporation Tax Law impose a
penalty on a taxpayer who underpays an estimated income tax. Those
laws also specify that a penalty may not be imposed for an
underpayment in specified taxable years if the underpayment was
created or increased by specified changes in law.
This bill would impose a penalty on a taxpayer subject to the
Corporation Tax Law with a specified understatement of tax, as
defined, in an amount equal to 20% of that understatement. This bill
would specify that the penalty shall not be imposed if the
understatement is attributable to specified changes in law.
This bill would also repeal certain provisions added by AB 1452 of
the 2007-08 Regular Session relating to a tax amnesty program.
This bill would revise the requirement that the Department of
Finance provide guidance with regard to the methodology employed in
determining tax accruals and the timing of implementing any changes
in tax accrual treatment.
This bill would also make changes regarding sections of the
Revenue and Taxation Code added by AB 1452 of the 2007-08 Regular
Session, relating to credits against taxes imposed by the Corporation
Tax Law and fees required under the Personal Income Tax Law.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 19025 of the Revenue and Taxation Code is
amended to read:
19025. (a) If the amount of estimated tax does not exceed the
minimum tax specified by Section 23153, the entire amount of the
estimated tax shall be due and payable on or before the 15th day of
the fourth month of the taxable year.
(b) Except as provided in subdivision (c), if the amount of
estimated tax exceeds the minimum tax specified by Section 23153, the
amount payable shall be paid in installments as follows:
The following percentages of the
If the estimated tax
requirements shall be paid on the 15th day of the--
of this ---------------------------------------
subdivision + + +
are first 4th 6th 9th 12th
met-- month month month month
Before the 30 (but 30 20 20
1st day of
the 4th not less
month of the than the
taxable year. minimum
tax pro-
vided in
Section
23153
and any
tax
under
Section
23800.5)
After the
last day of
the 3rd
month and
before the
1st day of
the 6th
month of the
taxable year. __ 40 30 30
After the
last day of
the 5th
month and
before the
1st day of
the 9th
month of the
taxable year. __ __ 50 50
After the
last day of
the 8th
month and
before the
1st day of
the 12th
month of the
taxable year. __ __ __ 100
(c) If a wholly owned subsidiary is first subject to tax under
Section 23800.5 after the last day of the third month of the taxable
year of owner, the amount of the next installment of estimated tax
under subdivision (b) after the wholly owned subsidiary is subject to
tax under Section 23800.5 shall not be less than the amount of the
tax of the wholly owned subsidiary under Section 23800.5 and an
amount equal to that amount shall be due and payable on the date the
installment is required to be paid. For purposes of determining which
installment is the next installment of estimated tax under
subdivision (b), subdivision (b) shall be modified by substituting
"includes the tax of a wholly owned subsidiary under Section 23800.5"
for "exceeds the minimum tax specified by Section 23153."
(d) The amendments made to this section by the act adding this
subdivision shall apply to installments due for each taxable year
beginning on or after January 1, 2009.
SEC. 2. Section 19136.1 is added to the Revenue and Taxation Code,
to read:
19136.1. (a) Section 6654(d)(1)(A) of the Internal Revenue Code
is modified to provide that in lieu of the required installments
specified in that section, the amount of required installments shall
instead be as follows:
(1) For the 1st and 2nd required installments, 30 percent of the
required annual payment.
(2) For the 3rd and 4th required installments, 20 percent of the
required annual payment.
(b) This section shall apply to installments due for each taxable
year beginning on or after January 1, 2009.
SEC. 3. Section 19136.3 is added to the Revenue and Taxation Code,
to read:
19136.3. (a) Section 6654(d)(1)(B) of the Internal Revenue Code
is modified to additionally provide that clause (ii) shall not apply
if the adjusted gross income shown on the return of the individual
for the taxable year is equal to or greater than $1 million ($500,000
in the case of a married individual filing a separate return).
(b) This section shall apply to taxable years beginning on or
after January 1, 2009.
SEC. 4. Section 19137 of to the Revenue and Taxation Code, as
added by Assembly Bill 1452 of the 2007-08 Regular Session, is
repealed.
SEC. 5. Section 19138 is added to the Revenue and Taxation Code,
to read:
19138. (a) (1) A taxpayer subject to the tax imposed under Part
11 (commencing with Section 23001) with an understatement of tax in
excess of one million dollars ($1,000,000) for any taxable year shall
be subject to the penalty imposed under this section.
(2) For taxpayers that are required to be included in a combined
report under Section 25101 or authorized to be included in a combined
report under Section 25101.15, the threshold amount prescribed in
paragraph (1) shall apply to the aggregate amount of tax liability
under Part 11 (commencing with Section 23001) for all taxpayers that
are required to be or authorized to be included in a combined report.
(b) The penalty under this section shall be an amount equal to 20
percent of any understatement of tax. For purposes of this section,
"understatement of tax" means the amount by which the tax imposed by
Part 11 (commencing with Section 23001) exceeds the amount of tax
shown on an original return or shown on an amended return filed on or
before the original or extended due date of the return for the
taxable year. For any taxable year beginning before January 1, 2008,
the amount of tax paid on or before May 31, 2009, and shown on an
amended return filed on or before May 31, 2009, shall be treated as
the amount of tax shown on an original return for purposes of this
section.
(c) The penalty imposed by this section shall be in addition to
any other penalty imposed under Part 11 (commencing with Section
23001) or this part.
(d) Article 3 (commencing with Section 19031), relating to
deficiency assessments, shall not apply with respect to the
assessment or collection of any penalty imposed by subdivision (a).
(e) A refund or credit for any amounts paid to satisfy a penalty
imposed under this section may be allowed only on the grounds that
the amount of the penalty was not properly computed by the Franchise
Tax Board.
(f) (1) No penalty shall be imposed under this section on any
understatement to the extent that the understatement is attributable
to a change in law that is enacted, promulgated, issued, or becomes
final after the earlier of either of the following dates:
(A) The date the taxpayer files the return for the taxable year
for which the change is operative.
(B) The extended due date for the return of the taxpayer for the
taxable year for which the change is operative.
(2) For purposes of this subdivision, a "change of law" means a
statutory change or an interpretation of law or rule of law by
regulation, legal ruling of counsel, within the meaning of
subdivision (b) of Section 11340.9 of the Government Code, or a
published federal or California court decision.
(3) The Franchise Tax Board shall implement this subdivision in a
reasonable manner.
(g) No penalty shall be imposed under this section to the extent
that a taxpayer's understatement is attributable to the taxpayer's
reasonable reliance on written advice of the Franchise Tax Board, but
only if the written advice was a legal ruling by the Chief Counsel,
within the meaning of paragraph (1) of subdivision (a) of Section
21012.
(h) This section shall apply to each taxable year beginning on or
after January 1, 2003, for which the statute of limitations on
assessment has not expired.
SEC. 6. Chapter 9.2 (commencing with Section 19740) of Part 10.2
of Division 2 of the Revenue and Taxation Code, as added by Assembly
Bill 1452 of the 2007-08 Regular Session, is repealed.
SEC. 7. Section 35.20, as added to the Budget Act of 2008 by
Assembly Bill 88 of the 2007-08 Regular Session, is amended to read:
Sec. 35.20. If legislation is enacted amending Section 13302 of
the Government Code to allow the accrual of tax payments due more
than two months after the close of the fiscal year for transactions
occurring in the prior fiscal year, the Department of Finance shall
provide guidance pursuant to Section 13310 of the Government Code
with respect to the methodology to be employed in determining
accruals and the timing of implementation of any changes in tax
accrual practices. Sixty percent of the change to accrual treatment
of corporation income and franchise tax payments shall apply to the
2007-08 fiscal year and the balance of the accrual change to
corporation income and franchise tax payments and all of the accrual
change to personal income tax payments shall be applied to the
2008-09 fiscal year and subsequent fiscal years.
SEC. 8. (a) For purposes of applying Section 23663 of the Revenue
and Taxation Code, as added by Assembly Bill 1452 of the 2007-08
Regular Session, any limitations on allowance of any credit against
the "tax" that would apply to the assigning taxpayer in the absence
of an assignment shall also apply to the same extent to the allowance
of that assigned credit against the "tax" of the eligible assignee.
(b) Subdivision (d) of Section 17942 of the Revenue and Taxation
Code, as added by Assembly Bill 1452 of the 2007-08 Regular Session,
only applies to taxable years beginning on or after January 1, 2009.
(c) The Legislature finds and declares that this section makes
clarifying changes for purposes of the proper implementation of
Sections 17942 and 23663 of the Revenue and Taxation Code, as added
by Assembly Bill 1452 of the 2007-2008 Regular Session.