California Legislature—2013–14 Regular Session

Assembly Bill No. 1304

Introduced by Assembly Member Waldron

February 22, 2013

An act to amend Section 23036 of the Revenue and Taxation Code, relating to taxation.

LEGISLATIVE COUNSEL’S DIGEST

AB 1304, as introduced, Waldron. Taxation: corporation taxes: credits.

The Corporation Tax Law imposes a tax according to, or measured by, income derived from or attributable to sources within this state and authorizes various credits against the taxes imposed by that law. That law provides that, in the case of a taxpayer that is eligible for more than one credit, the credits are allowable in a specified order.

This bill would make technical, nonsubstantive changes to the provision that provides for the ordering of tax credits.

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 23036 of the Revenue and Taxation Code
is amended to read:

23036.  

(a) (1) The term “tax” includes any of the following:

(A) The tax imposed under Chapter 2 (commencing with Section
23101).

(B) The tax imposed under Chapter 3 (commencing with Section
23501).

(C) The tax on unrelated business taxable income, imposed
under Section 23731.

(D) The tax on begin delete S corporations end delete begin insert an “S” corporation end insert imposed
under Section 23802.

(2) The term “tax” does not include any amount imposed under
paragraph (1) of subdivision (e) of Section 24667 or paragraph (2)
of subdivision (f) of Section 24667.

(b) For purposes of Article 5 (commencing with Section 18661)
of Chapter 2, Article 3 (commencing with Section 19031) of
Chapter 4, Article 6 (commencing with Section 19101) of Chapter
4, and Chapter 7 (commencing with Section 19501) of Part 10.2,
and for purposes of Sections 18601, 19001, and 19005, the term
“tax” also includes all of the following:

(1) The tax on limited partnerships, imposed under Section
17935, the tax on limited liability companies, imposed under
Section 17941, and the tax on registered limited liability
partnerships and foreign limited liability partnerships imposed
under Section 17948.

(2) The alternative minimum tax imposed under Chapter 2.5
(commencing with Section 23400).

(3) The tax on built-in gains of begin delete S corporations end delete begin insert an “S”
corporation end insert , imposed under Section 23809.

(4) The tax on excess passive investment income of begin delete S
corporations, end delete begin insert an “S” corporation, end insert imposed under Section 23811.

(c) Notwithstanding any other provision of this part, credits are
allowed against the “tax” in the following order:

(1) Credits that do not contain carryover provisions.

(2) Credits that, when the credit exceeds the “tax,” allow the
excess to be carried over to offset the “tax” in succeeding taxable
years, except for those credits that are allowed to reduce the “tax”
below the tentative minimum tax, as defined by Section 23455.
The order of credits within this paragraph shall be determined by
the Franchise Tax Board.

(3) The minimum tax credit allowed by Section 23453.

(4) Credits that are allowed to reduce the “tax” below the
tentative minimum tax, as defined by Section 23455.

(5) Credits for taxes withheld under Section 18662.

(d) Notwithstanding any other provision of this part, each of
the following applies:

(1) No credit may reduce the “tax” below the tentative minimum
tax (as defined by paragraph (1) of subdivision (a) of Section
23455), except the following credits:

(A) The credit allowed by former Section 23601 (relating to
solar energy).

(B) The credit allowed by former Section 23601.4 (relating to
solar energy).

(C) The credit allowed by former Section 23601.5 (relating to
solar energy).

(D) The credit allowed by Section 23609 (relating to research
expenditures).

(E) The credit allowed by former Section 23609.5 (relating to
clinical testing expenses).

(F) The credit allowed by Section 23610.5 (relating to
low-income housing).

(G) The credit allowed by former Section 23612 (relating to
sales and use tax credit).

(H) The credit allowed by Section 23612.2 (relating to enterprise
zone sales or use tax credit).

(I) The credit allowed by former Section 23612.6 (relating to
Los Angeles Revitalization Zone sales tax credit).

(J) The credit allowed by former Section 23622 (relating to
enterprise zone hiring credit).

(K) The credit allowed by Section 23622.7 (relating to enterprise
zone hiring credit).

(L) The credit allowed by former Section 23623 (relating to
program area hiring credit).

(M) The credit allowed by former Section 23623.5 (relating to
Los Angeles Revitalization Zone hiring credit).

(N) The credit allowed by former Section 23625 (relating to
Los Angeles Revitalization Zone hiring credit).

(O) The credit allowed by Section 23633 (relating to targeted
tax area sales or use tax credit).

(P) The credit allowed by Section 23634 (relating to targeted
tax area hiring credit).

(Q) The credit allowed by Section 23649 (relating to qualified
property).

(2) No credit against the tax may reduce the minimum franchise
tax imposed under Chapter 2 (commencing with Section 23101).

(e) Any credit which is partially or totally denied under
subdivision (d) is allowed to be carried over to reduce the “tax”
in the following year, and succeeding years if necessary, if the
provisions relating to that credit include a provision to allow a
carryover of the unused portion of that credit.

(f) Unless otherwise provided, any remaining carryover from a
credit that has been repealed or made inoperative is allowed to be
carried over under the provisions of that section as it read
immediately prior to being repealed or becoming inoperative.

(g) Unless otherwise provided, if two or more taxpayers share
in costs that would be eligible for a tax credit allowed under this
part, each taxpayer is eligible to receive the tax credit in proportion
to his or her respective share of the costs paid or incurred.

(h) Unless otherwise provided, in the case of an begin delete S end delete begin insert “S” end insert
corporation, any credit allowed by this part is computed at the begin delete S end delete
begin insert “S” end insert corporation level, and any limitation on the expenses
qualifying for the credit or limitation upon the amount of the credit
applies to the begin delete S end delete begin insert “S” end insert corporation and to each shareholder.

(i) (1) With respect to any taxpayer that directly or indirectly
owns an interest in a business entity that is disregarded for tax
purposes pursuant to Section 23038 and any regulations thereunder,
the amount of any credit or credit carryforward allowable for any
taxable year attributable to the disregarded business entity is limited
in accordance with paragraphs (2) and (3).

(2) The amount of any credit otherwise allowed under this part,
including any credit carryover from prior years, that may be applied
to reduce the taxpayer’s “tax,” as defined in subdivision (a), for
the taxable year is limited to an amount equal to the excess of the
taxpayer’s regular tax (as defined in Section 23455), determined
by including income attributable to the disregarded business entity
that generated the credit or credit carryover, over the taxpayer’s
regular tax (as defined in Section 23455), determined by excluding
the income attributable to that disregarded business entity. No
credit is allowed if the taxpayer’s regular tax (as defined in Section
23455), determined by including the income attributable to the
disregarded business entity is less than the taxpayer’s regular tax
(as defined in Section 23455), determined by excluding the income
attributable to the disregarded business entity.

(3) If the amount of a credit allowed pursuant to the section
establishing the credit exceeds the amount allowable under this
subdivision in any taxable year, the excess amount may be carried
over to subsequent taxable years pursuant to subdivisions (d), (e),
and (f).

(j) (1) Unless otherwise specifically provided, in the case of a
taxpayer that is a partner or shareholder of an eligible begin delete pass-through end delete
begin insert pass-thru end insert entity described in paragraph (2), any credit passed
through to the taxpayer in the taxpayer’s first taxable year
beginning on or after the date the credit is no longer operative may
be claimed by the taxpayer in that taxable year, notwithstanding
the repeal of the statute authorizing the credit prior to the close of
that taxable year.

(2) For purposes of this subdivision, “eligible begin delete pass-through end delete
begin insert pass-thru end insert entity” means any partnership or begin delete S end delete begin insert “S” end insert corporation that
files its return on a fiscal year basis pursuant to Section 18566,
and that is entitled to a credit pursuant to this part for the taxable
year that begins during the last year a credit is operative.

(3) This subdivision applies to credits that become inoperative
on or after the operative date of the act adding this subdivision.