BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 1173
                                                                  Page  1

          (  Without Reference to File  )
           
          CONCURRENCE IN SENATE AMENDMENTS
          AB 1173 (Bocanegra)
          As Amended  September 6, 2013
           Majority vote
           
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          |ASSEMBLY:  |78-0 |(May 29, 2013)  |SENATE: |35-0 |(September 12, |
          |           |     |                |        |     |2013)          |
           ----------------------------------------------------------------- 
            
           Original Committee Reference:   REV. & TAX.  

           SUMMARY  :  Reduces the excise tax penalty from 20% to 5% for  
          payments that do not comply with Section 409A of the Internal  
          Revenue Code, clarifies the scope of the California Motion  
          Picture Tax Credit and its utilization by taxpayers, and  
          simplifies the process by which certain nonprofit organizations  
          may obtain tax-exempt status in California.

           The Senate amendments  :

          1)Clarify that taxpayers may use the film tax credit to offset  
            their "regular" income tax beyond the tentative minimum tax.

          2)Allow organizations that are tax-exempt for federal tax  
            purposes to be treated as tax-exempt for California tax  
            purposes, without approval by the Franchise Tax Board.    

           AS PASSED BY THE ASSEMBLY  , this bill reduced the excise tax  
          penalty from 20% to 5% on an amount deferred under a  
          nonqualified deferred compensation plan that is not subject to a  
          substantial risk of forfeiture and does not meet the  
          requirements of Internal Revenue Code Section 409A.  

           Fiscal Effect  :  The Franchise Tax Board (FTB) estimates that the  
          reduction in excise tax penalty will result in a revenue losses  
          of $4.7 million in fiscal year (FY) 2013-14, $3.2 million in FY  
          2014-15, and $3.4 million in FY 2015-16.  

          Although the FTB has not analyzed the latest version of this  
          bill, the FTB has provided revenue estimates for the two  
          provisions added in the Senate, which are identical to the  
          contents of AB 1413 (Revenue and Taxation Committee) of the  








                                                                  AB 1173
                                                                  Page  2

          current legislative session.  According to the FTB, the  
          provision clarifying the scope of the film tax credit  
          utilization would result in an annual general fund (GF) revenue  
          loss of $9.3 million in FY 2012-13, $800,000 in FY 2013-14, $1.3  
          million in FY 2014-15, and $600,000 in FY 2016-17, and would  
          result in a GF revenue gain of $10,000 in FY 2015-16.  

          The FTB staff also estimates that the provision simplifying the  
          process by which certain nonprofit organizations may obtain  
          tax-exempt status in California would result in an annual GF  
          revenue loss of $9,000 in fiscal year (FY) 2014-15, $20,000 in  
          FY 2015-16, $20,000 in FY 2015-16, and $20,000 in every FY  
          thereafter.  

           Comments  :  The provisions added in the Senate are identical to  
          the provisions found in AB 1413, which were heard by the  
          Assembly Arts, Entertainment, Sports, Tourism, and Internet  
          Media Committee, and by the Assembly Revenue and Taxation  
          Committee.  The Senate amendments also provided that the  
          reduction in excise tax penalty would apply beginning on or  
          after January 1, 2013.  Because the Senate amendments eliminated  
          the tax levy designation, the "January 1, 2013" amendment was  
          necessary to ensure that the reduction in the excise tax penalty  
          would apply to taxable year 2013.


           Analysis Prepared by  :    Carlos Anguiano / REV. & TAX. / (916)  
          319-2098


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