BILL NUMBER: ABX3 3	ENROLLED
	BILL TEXT

	PASSED THE SENATE  FEBRUARY 19, 2009
	PASSED THE ASSEMBLY  FEBRUARY 19, 2009
	AMENDED IN SENATE  FEBRUARY 19, 2009
	AMENDED IN SENATE  FEBRUARY 14, 2009
	AMENDED IN ASSEMBLY  JANUARY 7, 2009

INTRODUCED BY   Assembly Member Evans

                        JANUARY 5, 2009

   An act to add Section 99040 to the Government Code, to amend
Sections 17041, 17054, and 17062 of, to amend and add Sections 10752
and 10752.1 of, and to add Sections 6051.7, 6201.7, and 10752.2 to,
the Revenue and Taxation Code, relating to taxation, making an
appropriation therefor, and declaring the urgency thereof, to take
effect immediately.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 3, Evans. Income taxes: sales and use taxes: vehicle license
fees.
   The Personal Income Tax Law imposes taxes based upon taxable
income. That law also allows credits for personal exemptions, and
imposes an alternative minimum tax, as specified.
   This bill would, for taxable years beginning on or after January
1, 2009, until either January 1, 2011, or January 1, 2013, as
applicable, decrease the amount allowable as a credit for personal
exemption for dependents.
   This bill would, for taxable years beginning on or after January
1, 2009, and before January 1, 2013, increase the tax rate applicable
to taxable income, and increase the alternative minimum tax rate, 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, on and after May 19, 2009, and until July 1,
2013, increase that rate to 1%, for specified vehicles and require
that the revenues derived from the increase be deposited into the
General Fund.
   This bill would also, on and after May 19, 2009, and until July 1,
2013, add a sum equal to 0.15% of the market value of specified
vehicles, as determined by the Department of Motor Vehicles, to the
vehicle license fee, to be deposited in the General Fund and
transferred to the Local Safety and Protection Account, which this
bill would create in the Transportation Tax Fund. This bill would
continuously appropriate all moneys in the account to the Controller
for allocation for, specified purposes. This bill would require the
Director of Finance to make written determinations, as specified, of
whether any moneys derived from that fee are being allocated for any
purpose other than the specified purpose, and to immediately submit
his or her written determination to the Director of the Department of
Motor Vehicles and specified legislative committees, as provided.
   The bill would further provide that if the Director of Finance
determines that moneys are being allocated by the state for an
unauthorized purpose, the Director of the Department of Motor
Vehicles shall, upon receipt of the written determination,
immediately stop collection of the fee, and shall resume collection
only upon his or her receipt of a written determination by the
Director of Finance that none of the moneys are being allocated for
an unauthorized purpose.
   Existing law imposes a state sales and use tax on retailers and on
the storage, use, or other consumption of tangible personal property
in this state at the rate of 61/4% of the gross receipts from the
retail sale of tangible personal property in this state and of the
sales price of tangible personal property purchased from any retailer
for storage, use, or other consumption in this state.
   This bill would increase the state sales and use tax rate on the
sale of, and on the storage, use, or other consumption of, tangible
personal property, by 1% to a rate of 71/4% from April 1, 2009, until
July 1, 2012.
   This bill would reduce the operative periods for the increases
proposed by this bill in specified income, sales and use, and vehicle
license fees, if specified conditions occur.
   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
December 19, 2008.
   This bill would state that it addresses the fiscal emergency
declared by the Governor by proclamation issued on December 19, 2008,
pursuant to the California Constitution.
   This bill would declare that it is to take effect immediately as
an urgency statute.
   Appropriation: yes.


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

  SECTION 1.  Section 99040 is added to the Government Code, to read:

   99040.  The Director of Finance shall immediately notify the Joint
Legislative Budget Committee, the Executive Officer of the Franchise
Tax Board, the Executive Director of the State Board of
Equalization, and the Director of the Department of Motor Vehicles
when and if an amendment to the California Constitution is approved
at a statewide election held during the 2009 calendar year, that
limits the total amount that, under Section 20 of Article XVI of the
California Constitution, may be transferred by statute from the
Budget Stabilization Account, or any successor to that account, to
the General Fund.
  SEC. 2.  Section 6051.7 is added to the Revenue and Taxation Code,
to read:
   6051.7.  (a) In addition to the taxes imposed by Section 6051 and
any other provision of this part, for the privilege of selling
tangible personal property at retail, a tax is hereby imposed upon
all retailers at the rate of 1 percent of the gross receipts of any
retailer from the sale of all tangible personal property sold at
retail in this state, on and after April 1, 2009.
   (b) This section shall cease to be operative on July 1, 2011,
unless the Director of Finance makes the notification pursuant to
Section 99040 of the Government Code, in which case this section
shall cease to be operative on July 1, 2012.
  SEC. 3.  Section 6201.7 is added to the Revenue and Taxation Code,
to read:
   6201.7.  (a) In addition to the taxes imposed by Section 6201 and
any other provision of this part, an excise tax is hereby imposed on
the storage, use, or other consumption in this state of tangible
personal property purchased from any retailer for storage, use, or
other consumption in this state, at the rate of 1 percent of the
sales price of the property, on and after April 1, 2009.
   (b) This section shall cease to be operative on July 1, 2011,
unless the Director of Finance makes the notification pursuant to
Section 99040 of the Government Code, in which case this section
shall cease to be operative on July 1, 2012.
  SEC. 4.  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 commercial motor vehicle
described in Section 9400.1 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 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 May 19, 2009.
   (2) One percent on and after May 19, 2009.
   (b) The annual amount of the license fee for any commercial
vehicle as described in Section 9400.1 of the Vehicle Code, shall be
a sum equal to 0.65 percent of the market value of the vehicle as
determined by the department.
   (c) 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
pursuant to this section in excess of 0.65 percent shall be deposited
into the General Fund.
   (d) This section shall cease to be operative on July 1, 2011,
unless the Director of Finance makes the notification pursuant to
Section 99040 of the Government Code, in which case the section shall
cease to be operative on July 1, 2013.
  SEC. 5.  Section 10752 is added to the Revenue and Taxation Code,
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 0.65 percent of the market
value of the vehicle as determined by the department.
   (b) This section shall become operative on July 1, 2011, unless
the Director of Finance makes the notification pursuant to Section
99040 of the Government Code, in which case this section shall become
operative on July 1, 2013.
  SEC. 6.  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 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 May 19, 2009.
   (2) One percent on and after May 19, 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
pursuant to this section in excess of 0.65 percent shall be deposited
in the General Fund.
   (c) This section shall cease to be operative on July 1, 2011,
unless the Director of Finance makes the notification pursuant to
Section 99040 of the Government Code, in which case this section
shall cease to be operative on July 1, 2013.
  SEC. 7.  Section 10752.1 is added to the Revenue and Taxation Code,
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 0.65
percent of the market value of the vehicle as determined by the
department.
   (b) This section shall become operative on July 1, 2011, unless
the Director of Finance makes the notification pursuant to Section
99040 of the Government Code, in which case this section shall become
operative on July 1, 2013.
  SEC. 8.  Section 10752.2 is added to the Revenue and Taxation Code,
to read:
   10752.2.  (a) On and after May 19, 2009, in addition to the annual
license fee for a vehicle, other than a commercial motor vehicle
described in Section 9400.1 of the Vehicle Code, imposed pursuant to
Sections 10752 and 10752.1, a sum equal to 0.15 percent of the market
value of the vehicle as determined by the department, shall be added
to that annual fee.
   (b) Notwithstanding Chapter 5 (commencing with Section 11001) or
any other law to the contrary, all revenues (including penalties),
less refunds, derived from fees collected pursuant to subdivision (a)
shall be deposited in the General Fund and transferred to the Local
Safety and Protection Account, which is hereby established in the
Transportation Tax Fund. Notwithstanding Section 13340 of the
Government Code, all moneys in the account are hereby continuously
appropriated, without regard to fiscal year, to the Controller for
allocation pursuant to Sections 29553, 30061, and 30070 of the
Government Code, Section 13821 of the Penal Code, and Sections 18220
and 18220.1 of the Welfare and Institutions Code.
   (c) (1) In 2010 and each calendar year thereafter, the Director of
Finance shall, no later than January 10 and upon the enactment of
the Budget Act during the calendar year, make a written determination
of whether any of the moneys derived from fees collected pursuant to
subdivision (a) are being allocated by the state for any purpose not
authorized by subdivision (b), and shall immediately submit his or
her written determination to all of the following:
   (A) The Director of the Department of Motor Vehicles.
   (B) The Joint Legislative Budget Committee.
   (C) The Senate and Assembly Appropriations Committees.
   (D) The Senate and Assembly Revenue and Taxation Committees.
   (2) If the Director of Finance determines that any moneys derived
from fees collected pursuant to subdivision (a) are being allocated
by the state for a purpose not authorized by subdivision (b), the
Director of the Department of Motor Vehicles shall, upon receipt of
the written determination, immediately cease collection of the fees
imposed by subdivision (a), and shall resume collection of those fees
only upon his or her receipt of written determination provided under
paragraph (1) that specifies that none of the moneys derived from
fees collected pursuant to subdivision (a) are being allocated by the
state for a purpose not authorized by subdivision (a).
   (d) This section shall cease to be operative on July 1, 2011,
unless the Director of Finance makes the notification pursuant to
Section 99040 of the Government Code, in which case this section
shall cease to be operative on July 1, 2013.
  SEC. 9.  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      The tax is:
is:
Not over $3,650........ 1% of the taxable income
Over $3,650 but         $36.50 plus 2% of the
not                     excess
over $8,650............ over $3,650
Over $8,650 but         $136.50 plus 4% of the
not                     excess
over $13,650........... over $8,650
Over $13,650 but        $336.50 plus 6% of the
not                     excess
over $18,950........... over $13,650
Over $18,950 but        $654.50 plus 8%       of
not                     the
over $23,950........... excess
                         over $18,950
                         $1,054.50 plus 9.3% of
Over $23,950........... the
                         excess
                         over $23,950


   (2) (A) For taxable years beginning on or after January 1, 2009,
and before January 1, 2011, or January 1, 2013, as applicable, the
percentages specified in the table in paragraph (1) shall be
increased by adding 0.25 percent to each percentage. This
subparagraph shall become operative only if the Director of Finance
does not provide notification to the Joint Legislative Budget
Committee on or before April 1, 2009, pursuant to Section 99030 of
the Government Code. This subparagraph shall cease to be operative
for taxable years beginning on or after January 1, 2011, unless the
Director of Finance makes the notification pursuant to Section 99040
of the Government Code, in which case this subparagraph shall cease
to be operative for taxable years beginning on or after January 1,
2013.
   (B) For taxable years beginning on or after January 1, 2009, and
before January 1, 2011, or January 1, 2013, as applicable, the
percentages specified in the table in paragraph (1) shall be
increased by adding 0.125 percent to each percentage. This
subparagraph shall become operative only if the Director of Finance
provides notification to the Joint Legislative Budget Committee on or
before April 1, 2009, pursuant to Section 99030 of the Government
Code. This subparagraph shall cease to be operative for taxable years
beginning on or after January 1, 2011, unless the Director of
Finance makes the notification pursuant to Section 99040 of the
Government Code, in which case this subparagraph shall cease to be
operative for taxable years beginning on or after January 1, 2013.
   (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       The tax is:
is:
Not over $7,300......... 1% of the taxable income
Over $7,300 but          $73 plus 2% of the
not                      excess
over $17,300............ over $7,300
Over $17,300 but         $273 plus 4% of the
not                      excess
over $22,300............ over $17,300
Over $22,300 but         $473 plus 6% of the
not                      excess
over $27,600............ over $22,300
Over $27,600 but         $791 plus 8% of the
not                      excess
over $32,600............ over $27,600
                          $1,191 plus 9.3% of the
Over $32,600............ excess
                          over $32,600


   (2) (A) For taxable years beginning on or after January 1, 2009,
and before January 1, 2011, or January 1, 2013, as applicable, the
percentages specified in the table in paragraph (1) shall be
increased by adding 0.25 percent to each percentage. This
subparagraph shall become operative only if the Director of Finance
does not provide notification to the Joint Legislative Budget
Committee on or before April 1, 2009, pursuant to Section 99030 of
the Government Code. This subparagraph shall cease to be operative
for taxable years beginning on or after January 1, 2011, unless the
Director of Finance makes the notification pursuant to Section 99040
of the Government Code, in which case this subparagraph shall cease
to be operative for taxable years beginning on or after January 1,
2013.
   (B) For taxable years beginning on or after January 1, 2009, and
before January 1, 2011, or January 1, 2013, as applicable, the
percentages specified in the table in paragraph (1) shall be
increased by adding 0.125 percent to each percentage. This
subparagraph shall become operative only if the Director of Finance
provides notification to the Joint Legislative Budget Committee on or
before April 1, 2009, pursuant to Section 99030 of the Government
Code. This subparagraph shall cease to be operative for taxable years
beginning on or after January 1, 2011, unless the Director of
Finance makes the notification pursuant to Section 99040 of the
Government Code, in which case this subparagraph shall cease to be
operative for taxable years beginning on or after January 1, 2013.
   (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.
  SEC. 10.  Section 17054 of the Revenue and Taxation Code is amended
to read:
   17054.  In the case of individuals, the following credits for
personal exemption may be deducted from the tax imposed under Section
17041 or 17048, less any increases imposed under paragraph (1) of
subdivision (d) or paragraph (1) of subdivision (e), or both, of
Section 17560.
   (a) In the case of a single individual, a head of household, or a
married individual making a separate return, a credit of fifty-two
dollars ($52).
   (b) In the case of a surviving spouse (as defined in Section
17046), or a husband and wife making a joint return, a credit of one
hundred four dollars ($104). If one spouse was a resident for the
entire taxable year and the other spouse was a nonresident for all or
any portion of the taxable year, the personal exemption shall be
divided equally.
   (c) In addition to any other credit provided in this section, in
the case of an individual who is 65 years of age or over by the end
of the taxable year, a credit of fifty-two dollars ($52).
   (d) (1) A credit of two hundred twenty-seven dollars ($227) for
each dependent (as defined in Section 17056) for whom an exemption is
allowable under Section 151(c) of the Internal Revenue Code,
relating to additional exemption for dependents. The credit allowed
under this subdivision for taxable years beginning on or after
January 1, 1999, shall not be adjusted pursuant to subdivision (i)
for any taxable year beginning before January 1, 2000.
   (2) The credit allowed under paragraph (1) may not be denied on
the basis that the identification number of the dependent, as defined
in Section 17056, for whom an exemption is allowable under Section
151(c) of the Internal Revenue Code, relating to additional exemption
for dependents, is not included on the return claiming the credit.
   (3) (A) For taxable years beginning on or after January 1, 2009,
the credit allowed under paragraph (1) for each dependent shall be
equal to the credit allowed under subdivision (a). This subparagraph
shall cease to be operative on January 1, 2011, unless the Director
of Finance makes the notification pursuant to Section 99040 of the
Government Code, in which case this subparagraph shall cease to be
operative on January 1, 2013.
   (B) Commencing on the date that subparagraph (A) ceases to be
operative, the credit allowed under paragraph (1) for each dependent
shall be equal to the amount that would be allowed if subparagraph
(A) had never been operative.
   (e) A credit for personal exemption of fifty-two dollars ($52) for
the taxpayer if he or she is blind at the end of his or her taxable
year.
   (f) A credit for personal exemption of fifty-two dollars ($52) for
the spouse of the taxpayer if a separate return is made by the
taxpayer, and if the spouse is blind and, for the calendar year in
which the taxable year of the taxpayer begins, has no gross income
and is not the dependent of another taxpayer.
   (g) For the purposes of this section, an individual is blind only
if either (1) his or her central visual acuity does not exceed 20/200
in the better eye with correcting lenses, or (2) his or her visual
acuity is greater than 20/200 but is accompanied by a limitation in
the fields of vision such that the widest diameter of the visual
field subtends an angle no greater than 20 degrees.
   (h) In the case of an individual with respect to whom a credit
under this section is allowable to another taxpayer for a taxable
year beginning in the calendar year in which the individual's taxable
year begins, the credit amount applicable to that individual for
that individual's taxable year is zero.
   (i) For each taxable year beginning on or after January 1, 1989,
the Franchise Tax Board shall compute the credits prescribed in this
section. 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 add 100 percent to the
percentage change figure which is furnished to them pursuant to
paragraph (1), and divide the result by 100.
   (3) The Franchise Tax Board shall multiply the immediately
preceding taxable year credits by the inflation adjustment factor
determined in paragraph (2), and round off the resulting products to
the nearest one dollar ($1).
   (4) In computing the credits pursuant to this subdivision, the
credit provided in subdivision (b) shall be twice the credit provided
in subdivision (a).
  SEC. 11.  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,
and before January 1, 2009, 7 percent.
   (iii) For taxable years beginning on and after January 1, 2009,
and before January 1, 2011, or January 1, 2013, as applicable, 7.25
percent. This clause shall become operative only if the Director of
Finance does not provide notification to the Joint Legislative Budget
Committee on or before April 1, 2009, pursuant to Section 99030 of
the Government Code. This clause shall cease to be operative for
taxable years beginning on or after January 1, 2011, unless the
Director of Finance makes the notification pursuant to Section 99040
of the Government Code, in which case this clause shall cease to be
operative for taxable years beginning on or after January 1, 2013.
   (iv) For taxable years beginning on and after January 1, 2009, and
before January 1, 2011, or January 1, 2013, as applicable, 7.125
percent. This clause shall become operative only if the Director of
Finance provides notification to the Joint Legislative Budget
Committee on or before April 1, 2009, pursuant to Section 99030 of
the Government Code. This clause shall cease to be operative for
taxable years beginning on or after January 1, 2011, unless
                                the Director of Finance makes the
notification pursuant to Section 99040 of the Government Code, in
which case this clause shall cease to be operative for taxable years
beginning on or after January 1, 2013.
   (v) For any taxable year beginning on or after January 1, 2011, or
January 1, 2013, as applicable, for which clause (iii) or (iv)
ceases to be operative, 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.
   (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).
   (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).
   (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. 12.  This act addresses the fiscal emergency declared by the
Governor by proclamation on December 19, 2008, pursuant to
subdivision (f) of Section 10 of Article IV of the California
Constitution.
  SEC. 13.  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:
   In order to properly address the current fiscal emergency, it is
necessary that this act go into immediate effect.