BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 1677
                                                                  Page  1

          CONCURRENCE IN SENATE AMENDMENTS
          AB 1677 (Nestande)
          As Amended  June 4, 2012
          Majority vote
           
           ----------------------------------------------------------------- 
          |ASSEMBLY:  |74-0 |(April 26,      |SENATE: |36-0 |(August 22,    |
          |           |     |2012)           |        |     |2012)          |
           ----------------------------------------------------------------- 
            
           Original Committee Reference:    REV. & TAX.  

           SUMMARY  :  Revises the annual filing requirements for certain 
          small tax-exempt organizations.  

           The Senate amendments  make technical nonsubstantive changes.   

           EXISTING STATE LAW  :  

          1)Conforms to provisions of the Internal Revenue Code (IRC) on 
            the taxability of exempt organizations by providing that an 
            organization organized and operated for nonprofit purposes 
            shall be exempt for California purposes upon submission to the 
            Franchise Tax Board (FTB) a copy of the notice issued by the 
            Internal Revenue Service (IRS) approving the organization's 
            tax-exempt status under IRC Section 501(c)(3).

          2)Requires the organization to notify FTB of a federal 
            revocation of tax-exempt status. 

          3)Requires the FTB to rescind the organization's tax-exempt 
            status for state tax purposes, upon receipt of the federal 
            revocation.  

          4)Specifies that the California approval of tax-exempt status 
            based upon notification of federal approval does not prevent 
            FTB from revoking the exemption of an organization that is not 
            operated in accordance with California or federal laws.

          5)Requires an exempt organization to file a two-page annual 
            information return and pay a $10 filing fee, unless the 
            organization's gross receipts for the taxable year are less 
            than $25,000.  Provides that the exempt organization, instead, 
            must submit certain basic information to the FTB 
            electronically, by filing a California e-Postcard. 








                                                                  AB 1677
                                                                  Page  2


          6)Exempts from the annual filing requirements, in conformity 
            with the federal law, churches, their integrated auxiliaries, 
            conventions or associations of churches, the exclusive 
            religious activity of any religious order, and certain 
            governmental and political organizations. 

           AS PASSED BY THE ASSEMBLY  , this bill:  

          1)Expanded the current exemption from the annual informational 
            return filing requirement for small tax-exempt organizations, 
            by increasing the gross-receipt threshold for filing from 
            $25,000 of average gross receipts to $50,000. 

          2)Would become effective on January 1, 2013, but would apply to 
            taxable years beginning on or after January 1, 2012. 

           FISCAL EFFECT  :  The FTB staff estimates that this bill will 
          result in annual loss of $90,000 in the fiscal year (FY) 
          2012-13, $100,000 in FY 2013-14, and $100,000 in FY 2014-15. 


           Analysis Prepared by  :    Oksana Jaffe / REV. & TAX. / (916) 
          319-2098 


                                                                FN: 0005122