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