BILL NUMBER: ABX4 17 CHAPTERED
BILL TEXT
CHAPTER 15
FILED WITH SECRETARY OF STATE JULY 28, 2009
APPROVED BY GOVERNOR JULY 28, 2009
PASSED THE SENATE JULY 23, 2009
PASSED THE ASSEMBLY JULY 23, 2009
AMENDED IN SENATE JULY 23, 2009
INTRODUCED BY Committee on Budget
JULY 2, 2009
An act to amend Sections 18663, 19025, 19136, and 19136.1 of the
Revenue and Taxation Code, and to amend Section 13020 of the
Unemployment Insurance Code, relating to taxation.
LEGISLATIVE COUNSEL'S DIGEST
AB 17, Committee on Budget. Taxation.
Existing law requires the Franchise Tax Board to prepare wage
withholding tables to be used by employers for purposes of
withholding taxes on wages paid. Existing law allows, in lieu of the
withholding tables, withholding at a rate of 6% with respect to
supplemental wages and at a rate of 9.3% with respect to stock
options and bonus payments.
This bill would, for wages paid on or after November 1, 2009,
require the wage withholding tables to produce a sum that is equal to
10% more than the sum specified for purposes of the withholding
tables. This bill would, also increase the withholding rates to 6.6%
for supplemental wages and to 10.23% for stock options and bonus
payments paid on or after November 1, 2009.
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.
The Personal Income Tax Law and the Corporation Tax Law impose a
penalty for underpayment of estimated tax. Existing law provides for
a credit based on taxes withheld on wages, in modified conformity
with federal income tax laws, against the estimated tax payments,
including a provision that "an equal part" of that amount is deemed
paid on each due date for a taxable year.
This bill would substitute "the applicable percentage," as
defined, for "an equal part" under this provision, as provided.
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 July 1,
2009.
This bill would state that it addresses the fiscal emergency
declared by the Governor by proclamation issued on July 1, 2009,
pursuant to the California Constitution.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 18663 of the Revenue and Taxation Code is
amended to read:
18663. (a) (1) The Franchise Tax Board shall annually (or more
often if necessary) prepare and make available to the Employment
Development Department, wage withholding tables that shall be used by
every employer making payment of any wages to a resident employee
for services performed either within or without this state; or to a
nonresident employee for services performed in this state, to deduct
and withhold from those wages for each payroll period, a tax computed
in a manner as to produce, so far as practicable, with due regard to
the credits for personal exemptions allowable under Section 17054, a
sum that is substantially equivalent to the amount of tax reasonably
estimated to be due under Part 10 (commencing with Section 17001)
resulting from the inclusion in the gross income of the employee the
wages which were subject to withholding.
(2) For wages paid on or after November 1, 2009, wage withholding
tables prepared by the Franchise Tax Board pursuant to this
subdivision shall produce, so far as practicable, with due regard to
the credits for personal exemptions allowable under Section 17054, a
sum that will significantly prevent underwithholding by using an
amount equal to 10 percent more than the sum described in paragraph
(1).
(b) (1) (A) For supplemental wages paid on or after January 1,
1992, the rate of withholding that may be applied to supplemental
wages in lieu of the wage withholding tables specified in subdivision
(a) shall be 6 percent.
(B) For supplemental wages paid on or after November 1, 2009, the
rate of withholding shall be 6.6 percent.
(2) For purposes of this subdivision, "supplemental wages"
includes, but is not limited to, bonus payments, overtime payments,
commissions, sales awards, back pay including retroactive wage
increases, and reimbursements for nondeductible moving expenses that
are paid for the same or a different period, or without regard to a
particular period.
(c) (1) For stock options and bonus payments that constitute wages
paid on or after January 1, 2002, the rate of withholding that may
be applied to those stock options and bonus payments in lieu of the
wage withholding tables specified in subdivision (a) shall,
notwithstanding subdivision (b), be 9.3 percent.
(2) For stock options and bonus payments that constitute wages
paid on or after November 1, 2009, the rate of withholding shall be
10.23 percent.
SEC. 2. 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
estimated
If tax
the shall be paid on the 15th day of
requirements the--
of this ---------------------------------------
subdivision + + +
are first 4th 6th 9th 12th
met-- month month month month
Before the 30 40 0 30
1st day of (but
the 4th not less
month of the than the
taxable year. minimum
tax
provided
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. __ 60 0 40
After the
last day of
the 5th
month and
before the
1st day of
the 9th
month of the
taxable year. __ __ 70 30
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 Section 1 of Chapter 1
of the First Extraordinary Session of the Statutes of 2008 shall
apply to installments due for each taxable year beginning on or after
January 1, 2009, and before January 1, 2010.
(e) 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, 2010.
SEC. 3. Section 19136 of the Revenue and Taxation Code is amended
to read:
19136. (a) Section 6654 of the Internal Revenue Code, relating to
failure by an individual to pay estimated income tax, shall apply,
except as otherwise provided.
(b) Section 6654(a)(1) of the Internal Revenue Code is modified to
refer to the rate determined under Section 19521 in lieu of Section
6621 of the Internal Revenue Code.
(c) (1) Section 6654(e)(1) of the Internal Revenue Code, relating
to exceptions where the tax is a small amount, does not apply.
(2) No addition to the tax shall be imposed under this section if
the tax imposed under Section 17041 or 17048 and the tax imposed
under Section 17062 for the preceding taxable year, minus the sum of
any credits against the tax provided by Part 10 (commencing with
Section 17001) or this part, or the tax computed under Section 17041
or 17048 upon the estimated income for the taxable year, minus the
sum of any credits against the tax provided by Part 10 (commencing
with Section 17001) or this part, is less than five hundred dollars
($500), except in the case of a separate return filed by a married
person the amount shall be less than two hundred fifty dollars
($250).
(d) Section 6654(f) of the Internal Revenue Code does not apply
and for purposes of this section the term "tax" means the tax imposed
under Section 17041 or 17048 and the tax imposed under Section 17062
less any credits against the tax provided by Part 10 (commencing
with Section 17001) or this part, other than the credit provided by
subdivision (a) of Section 19002.
(e) (1) The credit for tax withheld on wages, as specified in
Section 6654(g) of the Internal Revenue Code, shall be the credit
allowed under subdivision (a) of Section 19002.
(2) (A) Section 6654(g)(1) of the Internal Revenue Code is
modified by substituting the phrase "the applicable percentage" for
the phrase "an equal part."
(B) For purposes of this paragraph, "applicable percentage" means
the percentage amount prescribed under Section 6654(d)(1)(A) of the
Internal Revenue Code, as modified by subdivision (a) of Section
19136.1.
(f) This section shall apply to a nonresident individual.
(g) (1) No addition to tax shall be imposed under this section to
the extent that the underpayment was created or increased by any
provision of law that is chaptered during and operative for the
taxable year of the underpayment.
(2) Notwithstanding Section 18415, this section applies to
penalties imposed under this section on and after January 1, 2005.
(h) The amendments made to this section by Section 5 of Chapter
305 of the Statutes of 2008 shall apply to taxable years beginning on
or after January 1, 2009.
(i) The amendments made to this section by the act adding this
subdivision shall apply to amounts withheld on wages beginning or
after January 1, 2009.
SEC. 4. Section 19136.1 of the Revenue and Taxation Code is
amended 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 each taxable year beginning on or after January 1, 2009,
and before January 1, 2010, the amount of required installments shall
be:
(A) For the 1st and 2nd required installments, 30 percent of the
required annual payment.
(B) For the 3rd and 4th required installments, 20 percent of the
required annual payment.
(2) For each taxable year beginning on or after January 1, 2010,
the amount of required installments shall be:
(A) For the 1st required installment, 30 percent of the required
annual payment.
(B) For the 2nd required installment, 40 percent of the required
annual payment.
(C) The amount of the 3rd required installment shall be zero.
(D) For the 4th required installment, 30 percent of the required
annual payment.
(b) Section 6654(d)(2)(C)(ii) of the Internal Revenue Code,
relating to applicable percentage, is modified as follows:
(1) For each taxable year beginning on or after January 1, 2009,
and before January 1, 2010, by substituting "27" for "22.5," "54" for
"45," and "72" for "67.5."
(2) For each taxable year beginning on or after January 1, 2010,
by substituting "27" for "22.5," "63" for "45," and "63" for "67.5."
SEC. 5. Section 13020 of the Unemployment Insurance Code is
amended to read:
13020. (a) (1) Every employer who pays wages to a resident
employee for services performed either within or without this state,
or to a nonresident employee for services performed in this state,
shall deduct and withhold from those wages, except as provided in
subdivision (c) and Sections 13025 and 13026, for each payroll
period, a tax computed in that manner as to produce, so far as
practicable, with due regard to the credits for personal exemptions
allowable under Section 17054 of the Revenue and Taxation Code, a sum
which is substantially equivalent to the amount of tax reasonably
estimated to be due under Part 10 (commencing with Section 17001) of
Division 2 of the Revenue and Taxation Code resulting from the
inclusion in the gross income of the employee of the wages which were
subject to withholding. The method of determining the amount to be
withheld shall be prescribed by the Franchise Tax Board pursuant to
Section 18663 of the Revenue and Taxation Code.
(2) For each payroll period ending on or after November 1, 2009,
the sum shall comport with the changes made to Section 18663 of the
Revenue and Taxation Code, by the act adding this paragraph.
(b) The department upon request may permit the use of accounting
machines to calculate the proper amount to be deducted and withheld
from wages, if the calculation produces an amount substantially
equivalent to the amount of tax required to be withheld under
subdivision (a).
(c) Withholding shall not be required by this section with respect
to wages, salaries, fees, or other compensation paid by a
corporation for services performed in California for that corporation
to a nonresident corporate director for director services, including
attendance at a board of directors' meeting.
SEC. 6. The provisions of this measure are severable. If any
provision of this measure or its application is held invalid, that
invalidity shall not affect other provisions or applications that can
be given effect without the invalid provision or application.
SEC. 7. This act addresses the fiscal emergency declared by the
Governor by proclamation on July 1, 2009, pursuant to subdivision (f)
of Section 10 of Article IV of the California Constitution.