BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 318| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 318 Author: Skinner (D) Amended: 8/14/12 in Senate Vote: 21 SENATE GOVERNANCE & FINANCE COMMITTEE : 8-0, 6/13/12 AYES: Wolk, Dutton, DeSaulnier, Fuller, Hernandez, Kehoe, La Malfa, Liu SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8 ASSEMBLY FLOOR : 75-0, 1/26/12 (Consent) - See last page for vote SUBJECT : Franchise Tax Board: administration SOURCE : Franchise Tax Board DIGEST : This bill conforms Californias income tax laws to the federal income tax law regarding the definition of a legal holiday for tax purposes. Senate Floor Amendments of 8/14/12 subject limited liability company's (LLC) to the same filing penalties currently imposed on other corporations. ANALYSIS : Federal law requires calendar year tax filers to file their taxes by April 15th. If the deadline falls on a Saturday, Sunday, or legal holiday, returns and payments may be filed or mailed on the next succeeding day. CONTINUED AB 318 Page 2 "Legal holiday" means a legal holiday in the District of Columbia or in a state where an Internal Revenue Service (IRS) office is located. State law sets due dates for income tax returns and payments. The Franchise Tax Board (FTB) is required to design tax forms that build on federal income tax returns. In California, taxes are still due on April 15th, resulting in different state and federal tax filing days in some years. Existing law also provides that a foreign corporation that fails to qualify to do business in California, or any corporation whose powers, rights or privileges have been forfeited or suspended, and which is doing business in California, may be subject to a $2,000 penalty for failure to file a return (unless the failure to file is due to reasonable cause). This penalty only applies to corporations, including S corporations and domestic corporations, but not LLCs. This bill expands the definition of a legal holiday to include legal holidays recognized by the IRS for personal income and corporate income tax purposes. This bill makes the existing $2,000 corporate failure penalty apply to foreign LLCs and domestic LLCs unless there is reasonable cause and not willful neglect. This bill provides that the penalty shall be imposed if the return is not filed within 60 days after FTB sends the LLC a notice and demand to file the required return. Comments California tax filers are sometimes confused when the FTB's forms and instructions require taxpayers to use federal tax return information, but the due date for federal returns is later than the due date for California returns. To avoid confusion, the FTB administratively changes the due date for each affected year to match the IRS's due date. However, this process is time-consuming and cumbersome, requiring the FTB's forms staff to get approval from its internal departments to change the due date each year this is necessary. By codifying the IRS's definition of a legal CONTINUED AB 318 Page 3 holiday in California's statutes, the FTB will (1) have statutory authority to automatically change the due date for each affected tax year, thereby streamlining what is a multi-step administrative process; and (2) eliminate taxpayers' confusion when there is a federally recognized holiday. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No SUPPORT : (Verified 8/17/12) Franchise Tax Board (source) AFSCME ASSEMBLY FLOOR : 75-0, 1/26/12 AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall, Bill Berryhill, Block, Blumenfield, Bonilla, Bradford, Brownley, Buchanan, Butler, Charles Calderon, Campos, Carter, Cedillo, Chesbro, Conway, Cook, Dickinson, Donnelly, Eng, Feuer, Fletcher, Fong, Fuentes, Furutani, Beth Gaines, Galgiani, Garrick, Gatto, Gordon, Grove, Hagman, Hall, Hayashi, Roger Hernández, Hill, Huber, Hueso, Huffman, Jeffries, Jones, Knight, Lara, Logue, Bonnie Lowenthal, Ma, Mansoor, Mendoza, Miller, Mitchell, Monning, Morrell, Nestande, Nielsen, Norby, Olsen, Pan, Perea, V. Manuel Pérez, Portantino, Silva, Skinner, Solorio, Swanson, Torres, Valadao, Wagner, Wieckowski, Williams, Yamada, John A. Pérez NO VOTE RECORDED: Davis, Gorell, Halderman, Harkey, Smyth AGB:d 8/17/12 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED