BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1143|
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THIRD READING
Bill No: AB 1143
Author: Skinner (D)
Amended: 6/9/14 in Senate
Vote: 27 - Urgency
SENATE GOVERNANCE & FINANCE COMMITTEE : 7-0, 6/5/13
AYES: Wolk, Knight, Beall, DeSaulnier, Emmerson, Hernandez, Liu
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 73-0, 5/13/13 - See last page for vote
SUBJECT : Tax administration: suspension or forfeiture:
limited liability companies: check-the-box regulations:
property tax assessment
SOURCE : Franchise Tax Board
California Assessors' Association
DIGEST : This bill adds foreign limited liability companies
(LLCs) onto the list of corporations that are subject to
contract voidability, and specifies that it commences
identically to current treatment of foreign corporations. This
bill conforms state law to federal changes to "check-the-box"
regulations.
Senate Floor Amendments of 6/9/14 direct assessors when
establishing value using comparable sales to not include sales
more than 90 days after the valuation date, not the lien date as
currently required, and conform state law to federal changes to
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"check-the-box" regulations.
ANALYSIS :
Existing law:
1.Authorizes the creation of various business entities,
including corporations and LLCs. Provides that all
corporations and LLCs, which are either doing business in
California, or incorporated or registered and qualified by the
Secretary of State (SOS) to do business in California, must
file appropriate income tax returns or information returns and
pay the appropriate tax, penalties, and interest.
2.Requires every domestic and registered foreign LLC and
corporation to file a Statement of Information with the SOS,
within 90 days after the filing of its original Articles of
Organization or Application for Registration, and biennially
thereafter, during the applicable filing period. Imposes a
penalty for failure to file the Statement of Information with
the SOS by the due date.
3.Authorizes the Franchise Tax Board (FTB) to suspend a
corporation's and an LLC's powers, rights, and privileges for
non-payment of fees due or non-filing of tax returns.
4.Subjects corporations and LLCs, other than foreign
nonqualified LLCs, to contract voidability for failure to file
required tax returns or to pay taxes, penalties, fees, or
interest.
5.Allows business entities that are subject to contract
voidability to obtain relief by paying all the tax due, filing
required tax returns and following certain specified
procedures.
6.Precludes assessors from considering comparable sales within
90 days of the "lien date" when valuing a property after a
change in ownership. The term "lien date" refers to two
distinct dates: January 1st for the regular roll, and the date
of the change in ownership for the supplemental roll.
7.Provides, under United States Department of Treasury
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regulations, many business taxpayers can choose to be treated
as a corporation for tax purposes, or as a partnership if it
has more than one owner or a disregarded entity if it has only
one owner. California generally conforms to federal tax law
and regulations either automatically, or as of a specified
date, currently January 1, 2009. However, California law
explicitly conforms to federal "check-the-box" regulations as
of January1, 1997.
This bill:
1.Changes the term "lien date" to "valuation date," thereby
ensuring that assessors use appropriate comparisons, but not
ones outside a reasonable period of time to assess the market.
2.Changes the date January 1, 1997, to May 1, 2014, thereby
updating California's definition for corporations subject to
the Corporation Tax Law to account for changes made in the
intervening period.
3.Provides that a foreign nonqualified LLC is subject to
contract voidability provisions if it has failed to file a
required tax return with the FTB or pay the amount of state
tax due.
4.Clarifies the existing definition of a "taxpayer" for purposes
of the contract voidability provisions to include a business
entity that is:
A. A corporation subject to tax under this bill.
B. Organized as an LLC under a statute or law, a state or a
federally recognized Indian Tribe, or another jurisdiction;
or
C. Identified in the FTB regulations as being organized
under the laws of a foreign country as an LLC.
1.Specifies that the contract voidability provisions, with
regard to an LLC, are applicable beginning on January 1, 2014,
or the first day of the taxable years for which the taxpayer
has failed to file a return, whichever is later, and ending on
the earlier of the dates the taxpayer qualified to do business
in California or on the date the taxpayer obtained an account
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number from the FTB.
2.Makes other conforming, technical changes.
Comments
According to the author's office, in 1994, the Legislature
authorized the formation of LLCs in California by enacting the
Beverly-Killea Limited Liability Company Act. LLCs organized
within California are required to register with the SOS and to
pay taxes to the FTB. Out-of-state LLCs who do business in
California are supposed to register with the SOS and pay taxes
to the FTB. However, out-of-state LLCs do not always register
with the SOS and do not always pay taxes to the FTB. In these
cases, the penalties for not paying taxes cannot be enforced
because of a loophole in the law. AB 1143 would close this
loophole.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 6/11/14)
California Assessors' Association (co-source)
Franchise Tax Board (co-source)
California Federation of Teachers
California Tax Reform Association
SEIU California
ASSEMBLY FLOOR : 73-0, 5/13/13
AYES: Achadjian, Alejo, Atkins, Bigelow, Bloom, Blumenfield,
Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian
Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley,
Dahle, Daly, Dickinson, Eggman, Fong, Fox, Frazier, Beth
Gaines, Garcia, Gatto, Gomez, Gordon, Gorell, Gray, Grove,
Hall, Harkey, Roger Hernández, Jones, Jones-Sawyer, Levine,
Linder, Logue, Maienschein, Mansoor, Medina, Melendez,
Mitchell, Morrell, Mullin, Muratsuchi, Nazarian, Nestande,
Olsen, Pan, Patterson, Perea, V. Manuel Pérez, Quirk,
Quirk-Silva, Rendon, Salas, Skinner, Stone, Ting, Torres,
Wagner, Waldron, Weber, Wieckowski, Wilk, Williams, Yamada,
John A. Pérez
NO VOTE RECORDED: Allen, Ammiano, Donnelly, Hagman, Holden,
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Lowenthal, Vacancy
AB:e 6/11/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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