BILL NUMBER: AB 2271 AMENDED BILL TEXT AMENDED IN ASSEMBLY MARCH 29, 2012 INTRODUCED BY Assembly MemberWilliamsPerea FEBRUARY 24, 2012 An act to amendSection 23032Sections 6055 and 6203.5 of the Revenue and Taxation Code, relating to taxation. LEGISLATIVE COUNSEL'S DIGEST AB 2271, as amended,WilliamsPerea .Corporation Tax Law.Sales and Use Taxes: worthless accounts. Existing sales and use tax laws authorize a deduction or refund of tax in the case of worthless and written-off accounts held by a retailer or lender under specified circumstances, which include preparing and retaining a proper election before claiming the deduction or refund. This bill would instead authorize a proper election to be established when the retailer and lender prepare and retain an election form, as provided. This would provide that a deduction or refund claimed shall not be disallowed solely on the ground that a proper election was not established prior to claiming a refund or deduction, as specified.The Corporation Tax Law defines fiscal year to mean an accounting period of twelve months or less ending on the last day of any month other than December.This bill would make a technical, nonsubstantive change to that provision.Vote: majority. Appropriation: no. Fiscal committee:noyes . State-mandated local program: no. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 6055 of the Revenue and Taxation Code is amended to read: 6055. (a) A retailer is relieved from liability for sales tax that became due and payable, insofar as the measure of the tax is represented by accounts that have been found to be worthless and charged off for income tax purposes by the retailer or, if the retailer is not required to file income tax returns, charged off in accordance with generally accepted accounting principles. A retailer that has previously paid the tax may, under rules and regulations prescribed by the board, take as a deduction the amount found worthless and charged off by the retailer. If these accounts are thereafter in whole or in part collected by the retailer, the amount collected shall be included in the first return filed after the collection and the tax shall be paid with the return. For purposes of this subdivision, the term "retailer" shall include any entity affiliated with the retailer under Section 1504 of Title 26 of the United States Code. (b) (1) In the case of accounts held by a lender, a retailer or a lenderwhothat makes a proper election under paragraph (4) shall be entitled to a deduction or refund of the tax that the retailer has previously reported and paid if all of the following conditions are met: (A) A deduction was not previously claimed or allowed on any portion of the accounts. (B) The accounts have been found worthless and written off by the lender in accordance with the requirements of subdivision (a). (C) The contract between the retailer and the lender contains an irrevocable relinquishment of all rights to the account from the retailer to the lender. (D) The retailer remitted the tax on or after January 1, 2000. (E) The party electing to claim the deduction or refund under paragraph (4) files a claim in a manner prescribed by the board. (2) If the retailer or the lender thereafter collects in whole or in part any accounts, one of the following shall apply: (A) If the retailer is entitled to the deduction or refund under the election specified in paragraph (4), the retailer shall include the amount collected in its first return filed after the collection and pay tax on that amount with the return. (B) If the lender is entitled to the deduction or refund under the election specified in paragraph (4), the lender shall pay the tax to the board in accordance with Section 6451. (3) For purposes of this subdivision, the term "lender" means any of the following: (A)AnyA personwhothat holds a retail accountwhichthat the person purchased directly from a retailerwhothat reported the tax. (B)AnyA personwhothat holds a retail account pursuant to that person's contract directly with the retailerwhothat reported the tax. (C)AnyA personwhothat is either an affiliated entity, under Section 1504 of Title 26 of the United States Code, of a person described in subparagraph (A) or (B), or an assignee of a person described in subparagraph (A) or (B). (4) (A)Prior to claiming any deduction or refund under this subdivision,For purposes of this section, a "proper election" shall be established if the retailerwhothat reported the tax and the lendershallprepare and retain an election form , signed by both parties, designating which party is entitled to claim the deduction or refund. This election may not be amended or revoked unless a new election, signed by both parties, is prepared and retained by the retailer and the lender. (B) A deduction or refund under this section shall not be disallowed solely on the ground that a proper election was not established prior to claiming the deduction or refund if a proper election was established after claiming the deduction or refund. SEC. 2. Section 6203.5 of the Revenue and Taxation Code is amended to read: 6203.5. (a) A retailer is relieved from liability to collect use tax that became due and payable, insofar as the measure of the tax is represented by accounts that have been found to be worthless and charged off for income tax purposes by the retailer or, if the retailer is not required to file income tax returns, charged off in accordance with generally accepted accounting principles. A retailer that has previously paid the amount of the tax may, under rules and regulations prescribed by the board, take as a deduction the amount found worthless and charged off by the retailer. If these accounts are thereafter in whole or in part collected by the retailer, the amount collected shall be included in the first return filed after the collection and the amount of the tax shall be paid with the return. For purposes of this subdivision, the term "retailer" shall include any entity affiliated with the retailer under Section 1504 of Title 26 of the United States Code. (b) (1) In the case of accounts held by a lender, a retailer or a lenderwhothat makes a proper election under paragraph (4) shall be entitled to a deduction or refund of the tax that the retailer has previously reported and paid if all of the following conditions are met: (A) A deduction was not previously claimed or allowed on any portion of the accounts. (B) The accounts have been found worthless and written off by the lender in accordance with the requirements of subdivision (a). (C) The contract between the retailer and the lender contains an irrevocable relinquishment of all rights to the account from the retailer to the lender. (D) The retailer remitted the tax on or after January 1, 2000. (E) The party electing to claim the deduction or refund under paragraph (4) files a claim in a manner prescribed by the board. (2) If the retailer or the lender thereafter collects in whole or in part any accounts, one of the following shall apply: (A) If the retailer is entitled to the deduction or refund under the election specified in paragraph (4), the retailer shall include the amount collected in its first return filed after the collection and pay tax on that amount with the return. (B) If the lender is entitled to the deduction or refund under the election specified in paragraph (4), the lender shall pay the tax to the board in accordance with Section 6451. (3) For purposes of this subdivision, the term "lender" means any of the following: (A)AnyA personwhothat holds a retail accountwhichthat the person purchased directly from a retailerwhothat reported the tax. (B)AnyA personwhothat holds a retail account pursuant to that person's contract directly with the retailerwhothat reported the tax. (C)AnyA personwhothat is either an affiliated entity, under Section 1504 of Title 26 of the United States Code, of a person described in subparagraph (A) or (B), or an assignee of a person described in subparagraph (A) or (B). (4)Prior to claiming any deduction or refund under this subdivision,(A) For purposes of this section, a "proper election" shall be established if the retailerwhothat reported the tax and the lendershallprepare and retain an election form , signed by both parties, designating which party is entitled to claim the deduction or refund. This election may not be amended or revoked unless a new election, signed by both parties, is prepared and retained by the retailer and the lender. (B) A deduction or refund under this section shall not be disallowed solely on the ground that a proper election was not established prior to claiming the deduction or refund if a proper election was established after claiming the deduction or refund.SECTION 1.Section 23032 of the Revenue and Taxation Code is amended to read: 23032. "Fiscal year" means an accounting period of 12 months or less ending on the last day of a month other than December.