BILL NUMBER: SB 1244 CHAPTERED
BILL TEXT
CHAPTER 522
FILED WITH SECRETARY OF STATE SEPTEMBER 29, 2010
APPROVED BY GOVERNOR SEPTEMBER 29, 2010
PASSED THE SENATE MAY 24, 2010
PASSED THE ASSEMBLY AUGUST 12, 2010
AMENDED IN SENATE MAY 17, 2010
AMENDED IN SENATE MAY 4, 2010
AMENDED IN SENATE APRIL 21, 2010
AMENDED IN SENATE APRIL 5, 2010
INTRODUCED BY Senator Walters
FEBRUARY 19, 2010
An act to amend Sections 621 and 13009 of, and to add Sections 623
and 928.7 to, the Unemployment Insurance Code, relating to
employment taxes, and making an appropriation therefor.
LEGISLATIVE COUNSEL'S DIGEST
SB 1244, Walters. Employment: taxes and contributions: limited
liability company.
Existing law requires employers to withhold tax and make
contribution amounts with respect to unemployment insurance,
disability insurance, employee training funding, and personal income
tax from the wages paid to their employees. Existing law, with
specified exceptions, requires that the determination of the
employer-employee relationship be made pursuant to common law
principles.
Existing law defines "employee" for those purposes to include,
among other individuals, any officer of a corporation.
This bill would additionally include any member of a limited
liability company that is treated as a corporation for federal income
tax purposes within that definition of "employee" for those
purposes. However, the bill would specify that definition of
"employee" does not include any member of a limited liability company
that is treated as a partnership for federal income tax purposes.
Existing law also defines "wages" for those purposes, and exempts
from that definition certain remuneration.
This bill would provide that wages include compensation, as
defined, paid to a member of a limited liability company filing a
federal corporate income tax return.
By expanding the base of wages subject to unemployment insurance
taxes, this bill would deposit additional moneys into the
Unemployment Fund, a continuously appropriated fund, and would make
an appropriation.
Appropriation: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 621 of the Unemployment Insurance Code is
amended to read:
621. "Employee" means all of the following:
(a) Any officer of a corporation.
(b) Any individual who, under the usual common law rules
applicable in determining the employer-employee relationship, has the
status of an employee.
(c) (1) Any individual, other than an individual who is an
employee under subdivision (a) or (b), who performs services for
remuneration for any employing unit if the contract of service
contemplates that substantially all of those services are to be
performed personally by that individual either:
(A) As an agent-driver or commission-driver engaged in
distributing meat products, vegetable products, fruit products,
bakery products, beverages (other than milk), or laundry or
drycleaning services, for his or her principal.
(B) As a traveling or city salesperson, other than as an
agent-driver or commission-driver, engaged upon a full-time basis in
the solicitation on behalf of, and the transmission to, his or her
principal (except for sideline sales activities on behalf of some
other person) of orders from wholesalers, retailers, contractors, or
operators of hotels, restaurants, or other similar establishments for
merchandise for resale or supplies for use in their business
operations.
(C) As a home worker performing work, according to specifications
furnished by the person for whom the services are performed, on
materials or goods furnished by that person that are required to be
returned to that person or a person designated by him or her.
(2) An individual shall not be included in the term "employee"
under the provisions of this subdivision if that individual has a
substantial investment in facilities used in connection with the
performance of those services, other than in facilities for
transportation, or if the services are in the nature of a single
transaction not part of a continuing relationship with the employing
unit for whom the services are performed.
(d) Any individual who is an employee pursuant to Section 601.5 or
686.
(e) Any individual whose services are in subject employment
pursuant to an election for coverage under any provision of Article 4
(commencing with Section 701) of this chapter.
(f) Any member of a limited liability company that is treated as a
corporation for federal income tax purposes.
SEC. 2. Section 623 is added to the Unemployment Insurance Code,
to read:
623. "Employee" does not include any member of a limited
liability company that is treated as a partnership for federal income
tax purposes.
SEC. 3. Section 928.7 is added to the Unemployment Insurance Code,
to read:
928.7. "Wages" includes compensation, that is deductible under
Section 162 of the Internal Revenue Code, paid to a member of a
limited liability company filing a federal corporate income tax
return.
SEC. 4. Section 13009 of the Unemployment Insurance Code is
amended to read:
13009. "Wages" means all remuneration, other than fees paid to a
public official, for services performed by an employee for his or her
employer, including all remuneration paid to a nonresident employee
for services performed in this state, and the cash value of all
remuneration paid in any medium other than cash, except as provided
by this section. "Wages" includes tips received by an employee in the
course of his or her employment. The wages shall be deemed to be
paid at the time a written statement including tips is furnished to
the employer pursuant to Section 13055 or, if no statement including
those tips is so furnished, at the time received. "Wages" includes
compensation, that is deductible under Section 162 of the Internal
Revenue Code, paid to a member of a limited liability company filing
a federal corporate income tax return.
"Wages" shall not include remuneration paid under any of the
following conditions:
(a) For agricultural labor, as defined in subdivision (g) of
Section 3121 of the Internal Revenue Code.
(b) For domestic service in a private home, local college club, or
local chapter of a college fraternity or sorority.
(c) For service not in the course of the employer's trade or
business performed in any calendar quarter by an employee, unless the
cash remuneration paid for that service is fifty dollars ($50) or
more and the service is performed by an individual who is regularly
employed by the employer to perform the service. For purposes of this
subdivision, an individual shall be deemed to be regularly employed
by an employer during a calendar quarter only if either of the
following conditions is met:
(1) On each of some 24 days during the quarter, the individual
performs for the employer for some portion of the day service not in
the course of the employer's trade or business.
(2) The individual was regularly employed, as determined under
paragraph (1), by the employer in the performance of the service
during the preceding calendar quarter.
(d) For services by a citizen or resident of the United States for
a foreign government or an international organization.
(e) For services performed by a nonresident alien individual as
designated by regulations prescribed by the department.
(f) For services performed by a duly ordained, commissioned, or
licensed minister of a church in the exercise of his or her ministry
or by a member of a religious order in the exercise of duties
required by the order.
(g) (1) For services performed by an individual under the age of
18 years in delivery or distribution of newspapers or shopping news,
not including delivery or distribution to any point for subsequent
delivery or distribution.
(2) For services performed by an individual in, and at the time
of, the sale of newspapers or magazines to ultimate consumers, under
an arrangement under which the newspapers or magazines are to be sold
by him or her at a fixed price, his or her compensation being based
on the retention of the excess of the price over the amount at which
the newspapers or magazines are charged to him or her whether or not
he or she is guaranteed a minimum amount of compensation for the
services, or is entitled to be credited with the unsold newspapers or
magazines turned back.
(h) For services not in the course of the employer's trade or
business, to the extent paid in any medium other than cash.
(i) To, or on behalf of, an employee or his or her beneficiary
under any of the following situations:
(1) From or to a trust which is exempt from tax under Section
17631 of the Revenue and Taxation Code at the time of payment, unless
the payment is made to an employee of the trust as remuneration for
services rendered as an employee and not as a beneficiary of the
trust.
(2) Under or to an annuity plan which, at the time of payment, is
a plan qualified pursuant to Chapter 5 (commencing with Section
17501) of Part 10 of Division 2 of the Revenue and Taxation Code.
(3) Under or to a bond purchase plan which, at the time of
payment, is a bond purchase plan qualified pursuant to Chapter 5
(commencing with Section 17501) of Part 10 of Division 2 of the
Revenue and Taxation Code.
(4) For a payment which qualifies for deduction by an employee
pursuant to Section 219 of the Internal Revenue Code if, at the time
of payment, it is reasonable to believe that the employee will be
entitled to a deduction under that section for payment.
(5) Under a cafeteria plan (within the meaning of Section 125 of
the Internal Revenue Code).
(j) To a master, officer, or any other seaman who is a member of a
crew on a vessel engaged in foreign, coastwise, intercoastal,
interstate, or noncontiguous trade.
(k) Pursuant to any provision of law other than Section 5(c) or 6(
l ) of the Peace Corps Act, for service performed as a
volunteer or volunteer leader within the meaning of that act.
( l ) In the form of group-term life insurance on the
life of an employee.
(m) To or on behalf of an employee, and to the extent that, at the
time of the payment of remuneration it is reasonable to believe that
a corresponding deduction is allowable for moving expenses pursuant
to Article 6 (commencing with Section 17201) of Chapter 3 of Part 10
of Division 2 of the Revenue and Taxation Code.
(n) (1) As tips in any medium other than cash.
(2) As cash tips to an employee in any calendar month in the
course of his or her employment by an employer, unless the amount of
the cash tips is twenty dollars ($20) or more.
(o) For service performed by an individual on a boat engaged in
catching fish or other forms of aquatic animal life under an
arrangement with the owner or operator of the boat pursuant to which
all of the following apply:
(1) The individual does not receive any cash remuneration, other
than as provided in paragraph (2).
(2) The individual receives a share of the boat's (or the boats'
in the case of a fishing operation involving more than one boat)
catch of fish or other forms of aquatic animal life or a share of the
proceeds from the sale of the catch.
(3) The amount of the individual's share depends on the amount of
the boat's (or the boats' in the case of a fishing operation
involving more than one boat) catch of fish or other forms of aquatic
animal life.
This subdivision shall apply only where the operating crew of the
boat (or each boat from which the individual receives a share in the
case of a fishing operation involving more than one boat) is normally
made up of fewer than 10 individuals.
(p) For any medical care reimbursement made to, or for the benefit
of, an employee under a self-insured medical reimbursement plan
pursuant to Section 105(h)(6) of the Internal Revenue Code.
(q) To, or on behalf of, an employee to the extent not includable
in gross income pursuant to Section 13006.
(r) For services to which Section 633 applies.