BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 404
                                                                  Page  1

          Date of Hearing:   May 13, 2009

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Kevin De Leon, Chair

                     AB 404 (Eng) - As Amended:  April 14, 2009 

          Policy Committee:                              Revenue and  
          Taxation     Vote:                            8-0

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              

           SUMMARY  

          This bill facilitates a streamlined documentation process for  
          specified nonprofit organizations to receive an exemption from  
          state corporation income taxes. Key provisions of the bill  
          specify that:

          1)An organization (including a subordinate within a group of  
            organizations) can receive the exemption upon submission of a  
            copy of the relevant IRS determination letter or ruling  
            recognizing the organization's exemption from federal income  
            tax as an Internal Revenue Code (IRC) Section 501(c)(3)  
            organization.

          2)The effective date of an organization's exemption from state  
            income tax shall be no later than the effective date of the  
            organization's recognition of exemption from federal income  
            tax.

          3)If the FTB suspends or revokes an organization's exemption,  
            the exemption shall only be reinstated upon a more detailed  
            determination by FTB, regardless of whether the organization  
            can establish exemption under the streamlined documentation  
            process set forth above.  

           FISCAL EFFECT  

          Negligible effect on state corporation income tax revenues.  
          Minor administrative savings to FTB.

           COMMENTS  









                                                                  AB 404
                                                                  Page  2

           Rationale  . This bill is largely a "clean up" measure to  
          legislation passed in the 2007-08 session, AB 897 (Houston),  
          Chapter 238/2007, which was intended to provide a streamlined  
          method by which a non-profit organization could seek and receive  
          an exemption from state corporate income taxes.

           Analysis Prepared by  :    Brad Williams / APPR. / (916) 319-2081