BILL NUMBER: AB 1240 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 15, 2011
AMENDED IN ASSEMBLY MARCH 31, 2011
INTRODUCED BY Assembly Member Logue
FEBRUARY 18, 2011
An act to amend Section 17941 repeal
Section 17942 of the Revenue and Taxation Code, relating to
taxation, to take effect immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
AB 1240, as amended, Logue. Minimum franchise tax: small
businesses. Income taxes: limited liability company:
annual fee.
Existing law, generally, imposes a minimum franchise tax of $800,
except as provided, on every limited liability company
registered, qualified to transact business, or doing business in this
state, as specified corporation incorporated in this
state, qualified to transact intrastate business in this state, or
doing business in this state, and an annual tax in an amount equal to
the minimum franchise tax on every limited liability company
registered, qualified to transact business, or doing business in this
state, as specified. Existing law requires every limited liability
company subject to that annual tax to pay annually to this state a
fee equal to specified amounts based upon total income from all
sources reportable to this state .
This bill would , instead, for a limited liability
company that is a small business, as defined, impose a minimum
franchise tax of $100 repeal that fee .
This bill would take effect immediately as a tax levy.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 17942 of the Revenue
and Taxation Code is repealed.
17942. (a) In addition to the tax imposed under Section 17941,
every limited liability company subject to tax under Section 17941
shall pay annually to this state a fee equal to:
(1) Nine hundred dollars ($900), if the total income from all
sources derived from or attributable to this state for the taxable
year is two hundred fifty thousand dollars ($250,000) or more, but
less than five hundred thousand dollars ($500,000).
(2) Two thousand five hundred dollars ($2,500), if the total
income from all sources derived from or attributable to this state
for the taxable year is five hundred thousand dollars ($500,000) or
more, but less than one million dollars ($1,000,000).
(3) Six thousand dollars ($6,000), if the total income from all
sources derived from or attributable to this state for the taxable
year is one million dollars ($1,000,000) or more, but less than five
million dollars ($5,000,000).
(4) Eleven thousand seven hundred ninety dollars ($11,790), if the
total income from all sources derived from or attributable to this
state for the taxable year is five million dollars ($5,000,000) or
more.
(b) (1) (A) For purposes of this section, "total income from all
sources derived from or attributable to this state" means gross
income, as defined in Section 24271, plus the cost of goods sold that
are paid or incurred in connection with the trade or business of the
taxpayer. However, "total income from all sources derived from or
attributable to this state" shall not include allocation or
attribution of income or gain or distributions made to a limited
liability company in its capacity as a member of, or holder of an
economic interest in, another limited liability company if the
allocation or attribution of income or gain or distributions are
directly or indirectly attributable to income that is subject to the
payment of the fee described in this section.
(B) For purposes of this section, "total income from all sources
derived from or attributable to this state" shall be determined using
the rules for assigning sales under Sections 25135 and 25136 and the
regulations thereunder, as modified by regulations under Section
25137, other than those provisions that exclude receipts from the
sales factor.
(2) In the event a taxpayer is a commonly controlled limited
liability company, the total income from all sources derived from or
attributable to this state, taking into account any election under
Section 25110, may be determined by the Franchise Tax Board to be the
total income of all the commonly controlled limited liability
company members if it determines that multiple limited liability
companies were formed for the primary purpose of reducing fees
payable under this section. A determination by the Franchise Tax
Board under this subdivision may only be made with respect to one
limited liability company in a commonly controlled group. However,
each commonly controlled limited liability company shall be jointly
and severally liable for the fee. For purposes of this section,
commonly controlled limited liability companies shall include the
taxpayer and any other partnership or limited liability company doing
business (as defined in Section 23101) in this state and required to
file a return under Section 18633 or 18633.5, in which the same
persons own, directly or indirectly, more than 50 percent of the
capital interests or profits interests.
(c) The fee assessed under this section shall be due and payable
on the date the return of the limited liability company is required
to be filed under Section 18633.5, shall be collected and refunded in
the same manner as the taxes imposed by this part, and shall be
subject to interest and applicable penalties.
(d) (1) The fee imposed by this section shall be estimated and
paid on or before the 15th day of the sixth month of the current
taxable year.
(2) A penalty of 10 percent of the amount of any underpayment
shall be added to the fee. The underpayment amount shall be equal to
the difference between the total amount of the fee imposed by this
section for the taxable year less the amount paid under paragraph (1)
by the date specified in that paragraph. A penalty shall not be
imposed with respect to any fee estimated and paid under this section
if the amount paid by the date prescribed in this subdivision is
equal to or greater than the total amount of the fee of the limited
liability company for the preceding taxable year.
SECTION 1. Section 17941 of the Revenue and
Taxation Code is amended to read:
17941. (a) For each taxable year beginning on or after January 1,
1997, a limited liability company doing business in this state (as
defined in Section 23101) shall pay annually to this state a tax for
the privilege of doing business in this state in an amount equal to
the applicable amount specified in paragraph (1) of subdivision (d)
of Section 23153 for the taxable year.
(b) (1) In addition to any limited liability company that is doing
business in this state and is therefore subject to the tax imposed
by subdivision (a), for each taxable year beginning on or after
January 1, 1997, a limited liability company shall pay annually the
tax prescribed in subdivision (a) if articles of organization have
been accepted, or a certificate of registration has been issued, by
the office of the Secretary of State. The tax shall be paid for each
taxable year, or part thereof, until a certificate of cancellation of
registration or of articles of organization is filed on behalf of
the limited liability company with the office of the Secretary of
State.
(2) If a taxpayer files a return with the Franchise Tax Board that
is designated as its final return, the Franchise Tax Board shall
notify the taxpayer that the annual tax shall continue to be due
annually until a certificate of cancellation is filed with the
Secretary of State pursuant to Section 17356 or 17455 of the
Corporations Code.
(c) The tax assessed under this section shall be due and payable
on or before the 15th day of the fourth month of the taxable year.
(d) For purposes of this section, "limited liability company"
means an organization, other than a limited liability company that is
exempt from the tax and fees imposed under this chapter pursuant to
Section 23701h or Section 23701x, that is formed by one or more
persons under the law of this state, any other country, or any other
state, as a "limited liability company" and that is not taxable as a
corporation for California tax purposes.
(e) Notwithstanding anything in this section to the contrary, if
the office of the Secretary of State files a certificate of
cancellation pursuant to Section 17350.5 of the Corporations Code for
any limited liability company, then paragraph (1) of subdivision (f)
of Section 23153 shall apply to that limited liability company as if
the limited liability company were properly treated as a corporation
for that limited purpose only, and paragraph (2) of subdivision (f)
of Section 23153 shall not apply. Nothing in this subdivision
entitles a limited liability company to receive a reimbursement for
any annual taxes or fees already paid.
(f) (1) Notwithstanding any provision of this section to the
contrary, a limited liability company that is a small business solely
owned by a deployed member of the United States Armed Forces shall
not be subject to the tax imposed under this section for any taxable
year the owner is deployed and the limited liability company operates
at a loss or ceases operation.
(2) The Franchise Tax Board may promulgate regulations as
necessary or appropriate to carry out the purposes of this
subdivision, including a definition for "ceases operation."
(3) For the purposes of this subdivision, all of the following
definitions apply:
(A) "Deployed" means being called to active duty or active service
during a period when a Presidential Executive order specifies that
the United States is engaged in combat or homeland defense. "Deployed"
does not include either of the following:
(i) Temporary duty for the sole purpose of training or processing.
(ii) A permanent change of station.
(B) "Operates at a loss" means a limited liability company's
expenses exceed its receipts.
(C) "Small business" means a limited liability company with total
income from all sources derived from, or attributable, to the state
of two hundred fifty thousand dollars ($250,000) or less.
(4) This subdivision shall become inoperative for taxable years
beginning on or after January 1, 2018.
(g) Notwithstanding any other law, for each taxable year beginning
on or after January 1, 2011, a small business as defined in
subparagraph (C) of paragraph (3) of subdivision (f) shall pay a
minimum franchise tax of one hundred dollars ($100).
SEC. 2. This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.